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Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-Q(Mark.
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-Q (Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30,2025 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number:000-22339 RAMBUS INC.(Exact name of registrant as specified in its charter)Delaware 94-3112828(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)4453 North First Street Suite 100 San Jose,California 95134(Address of principal executive offices)(ZIP Code)Registrants telephone number,including area code:(408)462-8000 Securities registered pursuant to Section 12(b)of the Act:Title of Each ClassTrading SymbolName of Each Exchange on Which RegisteredCommon Stock,$0.001 Par ValueRMBSThe Nasdaq Stock Market LLC (The Nasdaq Global Select Market)Securities registered pursuant to Section 12(g)of the Act:None Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes 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 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 filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new 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 The number of shares outstanding of the registrants Common Stock,par value$0.001 per share,was 107,650,133 as of September 30,2025.2RAMBUS INC.TABLE OF CONTENTS PAGENote Regarding Forward-Looking Statements3PART I.FINANCIAL INFORMATION5Item 1.Financial Statements(Unaudited):5Condensed Consolidated Balance Sheets as of September 30,2025 and December 31,20245Condensed Consolidated Statements of Income for the three and nine months ended September 30,2025 and 20246Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30,2025 and 2024 7Condensed Consolidated Statements of Stockholders Equity for the three and nine months ended September 30,2025 and 20248Condensed Consolidated Statements of Cash Flows for the nine months ended September 30,2025 and 202410Notes to Unaudited Condensed Consolidated Financial Statements11Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations24Item 3.Quantitative and Qualitative Disclosures About Market Risk36Item 4.Controls and Procedures37PART II.OTHER INFORMATION38Item 1.Legal Proceedings38Item 1A.Risk Factors38Item 2.Unregistered Sales of Equity Securities and Use of Proceeds63Item 3.Defaults Upon Senior Securities63Item 4.Mine Safety Disclosures63Item 5.Other Information63Item 6.Exhibits64Signature65 3NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Quarterly Report on Form 10-Q(“Quarterly Report”)contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.These forward-looking statements include,without limitation,predictions regarding the following aspects of our future:Success in the markets of our products and services or our customers products;Sources of competition;Research and development costs and improvements in technology;Sources,amounts and concentration of revenue,including royalties;Success in signing and renewing customer agreements,including license agreements;The timing of completing engineering deliverables and the changes to work required;Success in obtaining new technology development contracts booked in the future;Success in adding and maintaining new customers;Success in obtaining orders from our customers,and our ability to accurately anticipate and meet our customers demands;Success in entering and growth in new markets;Levels of variation in our customers shipment volumes,sales prices and product mix;Variation in contract and other revenue,based on varying revenue recognized from contract and other revenue;Implications of short-term or long-term increases in our research and development expenses;Short-term increases in cost of product revenue;Variation in our sales,general and administrative expenses;Terms of our licenses and amounts owed under license agreements;Technology product development;Perceived or actual changes in the quality of our products;Dispositions,acquisitions,mergers or strategic transactions and our related integration efforts;Impairment of goodwill and long-lived assets;Pricing policies of our customers;Changes in our strategy and business model,including the expansion of our portfolio of products,software,services,inventions and solutions to address additional markets in memory,chip and security;Deterioration of financial health of commercial counterparties and their ability to meet their obligations to us;Effects of security breaches or failures in our or our customers products,systems and services on our business;Engineering,sales,legal,advertising,marketing,general and administration,and other expenses;Contract revenue;Operating results;Continued product revenue growth,specifically in connection with the growth in sales of our memory interface chips;International licenses,operations and expansion;Effects of changes in the economy and credit market on our industry and business;Effects of natural disasters,climate change and extreme weather events on our supply chain;Ability to identify,attract,motivate and retain qualified personnel;Effects of government regulations on our industry and business;4Manufacturing,shipping and supply partners,supply chain availability and/or sale and distribution channels;Growth in our business;Methods,estimates and judgments in accounting policies;Adoption of new accounting pronouncements;Effective tax rates,including as a result of recent U.S.tax legislation;Restructurings and plans of termination;Realization of deferred tax assets/release of deferred tax valuation allowance;Trading price of our common stock;Internal control environment;Protection of intellectual property(“IP”);Any changes in laws,agency actions and judicial rulings that may impact the ability to enforce our IP rights;Indemnification and technical support obligations;Equity repurchase programs;Issuances of debt or equity securities,which could involve restrictive covenants or be dilutive to our existing stockholders;Effects of fluctuations in interest rates and currency exchange rates;Effects of a varying rate of inflation;Effects of U.S.government restrictions on exports,including with China;Effects of current and future uncertainty in the worldwide economy,including major central bank policies and worldwide changes in credit markets;Effects of changes in macroeconomic conditions,increased risk of recession and geopolitical issues;Management of supply chain risks;andOutcome and effect of potential future IP litigation and other significant litigation.You can identify these and other forward-looking statements by the use of words such as“may,”“future,”“shall,”“should,”“expects,”“plans,”“anticipates,”“believes,”“estimates,”“predicts,”“intends,”“potential,”“continue,”“projecting”or the negative of such terms,or other comparable terminology.Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements.Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors,including those set forth under Part II,Item 1A,“Risk Factors.”All forward-looking statements included in this document are based on our assessment of information available to us at this time.We assume no obligation to update any forward-looking statements.5PART IFINANCIAL INFORMATIONItem 1.Financial StatementsRAMBUS INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)(In thousands,except shares and par value)September 30,2025 December 31,2024 ASSETS Current assets:Cash and cash equivalents$79,200$99,775 Marketable securities 594,103 382,023 Accounts receivable 105,377 122,813 Unbilled receivables 25,882 25,070 Inventories 44,606 44,634 Prepaids and other current assets 19,563 15,942 Total current assets 868,731 690,257 Intangible assets,net 11,891 17,059 Goodwill 286,812 286,812 Property and equipment,net 100,424 75,509 Operating lease right-of-use assets 18,215 21,454 Deferred tax assets 112,643 136,466 Income taxes receivable 2,946 109,947 Other assets 4,710 5,632 Total assets$1,406,372$1,343,136 LIABILITIES&STOCKHOLDERS EQUITY Current liabilities:Accounts payable$12,776$18,522 Accrued salaries and benefits 16,372 19,193 Deferred revenue 23,809 19,903 EDA tools software licenses liability 11,883 8,438 Operating lease liabilities 6,135 5,617 Other current liabilities 3,855 10,139 Total current liabilities 74,830 81,812 Long-term operating lease liabilities 20,301 24,534 Long-term income taxes payable 1,329 109,383 Long-term EDA tools software licenses liability 17,522 1,588 Other long-term liabilities 3,892 5,127 Total liabilities 117,874 222,444 Commitments and contingencies(Notes 9,10 and 14)Stockholders equity:Convertible preferred stock,$0.001 par value:Authorized:5,000,000 shares;issued and outstanding:no shares as of September 30,2025 and December 31,2024 Common stock,$0.001 par value:Authorized:500,000,000 shares;issued and outstanding:107,650,133 shares as of September 30,2025 and 106,843,112 shares as of December 31,2024 108 107 Additional paid-in capital 1,275,619 1,275,505 Retained earnings(accumulated deficit)12,955 (153,660)Accumulated other comprehensive loss (184)(1,260)Total stockholders equity 1,288,498 1,120,692 Total liabilities and stockholders equity$1,406,372$1,343,136 Refer to Notes to Unaudited Condensed Consolidated Financial Statements 6RAMBUS INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30,(In thousands,except per share amounts)2025 2024 2025 2024 Revenue:Product revenue$93,342$66,394$250,976$173,446 Royalties 65,120 64,105 207,702 167,961 Contract and other revenue 20,051 15,014 58,708 54,115 Total revenue 178,513 145,513 517,386 395,522 Cost of revenue:Cost of product revenue 34,337 24,554 97,338 67,381 Cost of contract and other revenue 531 752 1,708 2,307 Amortization of acquired intangible assets 1,724 2,796 5,158 8,904 Total cost of revenue 36,592 28,102 104,204 78,592 Gross profit 141,921 117,411 413,182 316,930 Operating expenses:Research and development 49,511 41,299 138,462 119,183 Sales,general and administrative 29,155 25,867 85,328 76,096 Amortization of acquired intangible assets 94 476 Impairment of assets 1,071 Change in fair value of earn-out liability (4,544)(5,044)Total operating expenses 78,666 62,716 223,790 191,782 Operating income 63,255 54,695 189,392 125,148 Interest income and other income(expense),net 6,327 4,667 16,411 13,654 Interest expense (294)(327)(1,053)(1,064)Interest and other income(expense),net 6,033 4,340 15,358 12,590 Income before income taxes 69,288 59,035 204,750 137,738 Provision for income taxes 20,911 10,370 38,135 20,119 Net income$48,377$48,665$166,615$117,619 Net income per share:Basic$0.45$0.45$1.55$1.09 Diluted$0.44$0.45$1.53$1.08 Weighted-average shares used in per share calculation:Basic 107,622 107,235 107,483 107,681 Diluted 109,304 108,474 108,962 109,318 Refer to Notes to Unaudited Condensed Consolidated Financial Statements 7RAMBUS INC.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30,(In thousands)2025 2024 2025 2024 Net income$48,377$48,665$166,615$117,619 Other comprehensive income(loss):Foreign currency translation adjustment 135 97 660 (51)Unrealized gain on marketable securities,net of tax 443 1,426 416 877 Total comprehensive income$48,955$50,188$167,691$118,445 Refer to Notes to Unaudited Condensed Consolidated Financial Statements 8 RAMBUS INC.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(Unaudited)For the Three Months Ended September 30,2025 Common Stock AdditionalPaid-in Retained Earnings(Accumulated AccumulatedOtherComprehensive (In thousands)Shares Amount Capital Deficit)Gain(Loss)Total Balances as of June 30,2025 107,594$108$1,264,056$(35,422)$(762)$1,227,980 Net income 48,377 48,377 Foreign currency translation adjustment 135 135 Unrealized gain on marketable securities,net of tax 443 443 Common stock issued under employee stock plans,net of withholding taxes 56 (2,643)(2,643)Stock-based compensation 14,206 14,206 Balances as of September 30,2025 107,650$108$1,275,619$12,955$(184)$1,288,498 For the Three Months Ended September 30,2024 Common Stock AdditionalPaid-in Accumulated AccumulatedOtherComprehensive (In thousands)Shares Amount Capital Deficit Gain(Loss)Total Balances as of June 30,2024 107,680$108$1,295,277$(264,527)$(1,966)$1,028,892 Net income 48,665 48,665 Foreign currency translation adjustment 97 97 Unrealized gain on marketable securities,net of tax 1,426 1,426 Common stock issued under employee stock plans,net of withholding taxes 68 (1,623)(1,623)Repurchase and retirement of common stock under repurchase program (1,173)(1)(50,469)(50,470)Stock-based compensation 11,998 11,998 Balances as of September 30,2024 106,575$107$1,255,183$(215,862)$(443)$1,038,985 9 For the Nine Months Ended September 30,2025 Common Stock AdditionalPaid-in Retained Earnings(Accumulated AccumulatedOtherComprehensive (In thousands)Shares Amount Capital Deficit)Gain(Loss)Total Balances as of December 31,2024 106,843$107$1,275,505$(153,660)$(1,260)$1,120,692 Net income 166,615 166,615 Foreign currency translation adjustment 660 660 Unrealized gain on marketable securities,net of tax 416 416 Common stock issued under employee stock plans,net of withholding taxes 913 1 (33,898)(33,897)Repurchase and retirement of common stock under repurchase program (106)(5,810)(5,810)Stock-based compensation 39,822 39,822 Balances as of September 30,2025 107,650$108$1,275,619$12,955$(184)$1,288,498 For the Nine Months Ended September 30,2024 Common Stock AdditionalPaid-in Accumulated AccumulatedOtherComprehensive (In thousands)Shares Amount Capital Deficit Gain(Loss)Total Balances as of December 31,2023 107,854$108$1,324,796$(285,534)$(1,269)$1,038,101 Net income 117,619 117,619 Foreign currency translation adjustment (51)(51)Unrealized gain on marketable securities,net of tax 877 877 Common stock issued under employee stock plans,net of withholding taxes 932 1 (36,866)(36,865)Repurchase and retirement of common stock under repurchase program (2,211)(2)(65,892)(47,947)(113,841)Stock-based compensation 33,145 33,145 Balances as of September 30,2024 106,575$107$1,255,183$(215,862)$(443)$1,038,985 Refer to Notes to Unaudited Condensed Consolidated Financial Statements 10RAMBUS INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)Nine Months EndedSeptember 30,(In thousands)2025 2024 Cash flows from operating activities:Net income$166,615$117,619 Adjustments to reconcile net income to net cash provided by operating activities:Stock-based compensation 39,822 33,145 Depreciation 25,654 23,000 Amortization of intangible assets 5,158 9,380 Deferred income taxes 22,888 (2,217)Impairment of assets 1,071 Change in fair value of earn-out liability (5,044)Other 1 19 Change in operating assets and liabilities:Accounts receivable 17,466 (4,279)Unbilled receivables 66 20,938 Prepaids and other current assets (3,595)(1,694)Inventories 28 (12,751)Income taxes receivable (11,944)(15,502)Accounts payable (5,153)2,295 Accrued salaries and benefits and other liabilities (6,502)(9,666)Income taxes payable 10,213 17,890 Deferred revenue 3,583 1,259 Operating lease liabilities (4,098)(3,848)Net cash provided by operating activities 260,202 171,615 Cash flows from investing activities:Purchases of property and equipment (20,325)(24,208)Purchases of marketable securities (498,171)(278,158)Maturities of marketable securities 287,055 206,861 Proceeds from sales of marketable securities 85,722 Proceeds from sale of non-marketable equity security 22,796 Net cash provided by(used in)investing activities (231,441)13,013 Cash flows from financing activities:Proceeds from issuance of common stock under employee stock plans 3,743 3,447 Payments of taxes on restricted stock units (37,640)(40,312)Payments under installment payment arrangements (10,163)(12,699)Payment of deferred purchase consideration from acquisition (2,450)Repurchase and retirement of common stock (5,810)(113,312)Net cash used in financing activities (49,870)(165,326)Effect of exchange rate changes on cash and cash equivalents 534 (89)Net increase(decrease)in cash and cash equivalents (20,575)19,213 Cash and cash equivalents at beginning of period 99,775 94,767 Cash and cash equivalents at end of period$79,200$113,980 Non-cash investing and financing activities:Property and equipment received and accrued in accounts payable and other liabilities$713$1,510 Operating lease right-of-use assets obtained in exchange for operating lease obligations$3,331 (1)Excludes non-cash write-down of income taxes receivable and release of income taxes payable of$118.9 million,including interest,related to South Korea withholding taxes.Refer to Note 13,“Income Taxes.”Refer to Notes to Unaudited Condensed Consolidated Financial Statements(1)(1)11RAMBUS INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS1.Basis of Presentation The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of Rambus Inc.(“Rambus”or the“Company”)and its wholly owned subsidiaries.All intercompany accounts and transactions have been eliminated in the accompanying Unaudited Condensed Consolidated Financial Statements.In the opinion of management,the Unaudited Condensed Consolidated Financial Statements include all adjustments(consisting only of normal recurring items)necessary to state fairly the financial position and results of operations for each interim period presented.Interim results are not necessarily indicative of results for a full year.Financial Statement PreparationThe Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission(the“SEC”)applicable to interim financial information.Certain information and note disclosures included in the financial statements prepared in accordance with generally accepted accounting principles(“GAAP”)have been omitted in these interim statements pursuant to such SEC rules and regulations.The information included in this Form 10-Q should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto in Form 10-K for the year ended December 31,2024.Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.Actual results could differ materially from those estimates.ReclassificationsCertain prior-year balances were reclassified to conform to the current years presentation.None of these reclassifications had an impact on reported net income or cash flows for any of the periods presented.Significant Accounting PoliciesThere were no material changes to Rambus significant accounting policies disclosed in Note 2,“Summary of Significant Accounting Policies,”of Notes to Consolidated Financial Statements included in the Companys Annual Report on Form 10-K for the year ended December 31,2024.2.Recent Accounting PronouncementsRecent Accounting Pronouncements Not Yet AdoptedIn December 2023,the Financial Accounting Standards Board(“FASB”)issued Accounting Standards Update(“ASU”)No.2023-09,“Income Taxes(Topic 740):Improvements to Income Tax Disclosures.”This guidance requires additional disclosures related to rate reconciliation,income taxes paid and other disclosures.For each annual period presented,public business entities are required to 1)disclose specific categories in the rate reconciliation and 2)provide additional information for reconciling items that meet a quantitative threshold.In addition,this ASU requires all reporting entities to disclose on an annual basis the amount of income taxes paid disaggregated by federal,state and foreign taxes,as well as the amount of income taxes paid disaggregated by individual jurisdictions which meet a quantitative threshold.This ASU is effective for annual reporting periods beginning after December 15,2024,with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance.The amendments in this ASU should be applied on a prospective basis,with 12retrospective application permitted.The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.In November 2024,the FASB issued ASU No.2024-03,“Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures(Subtopic 220-40):Disaggregation of Income Statement Expenses(“ASU 2024-03”).”This guidance requires public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods,including amounts of inventory purchases,employee compensation,and depreciation and amortization included in each income statement expense caption,as applicable.The ASU also requires a qualitative description of the amounts remaining in expense captions that are not separately disaggregated quantitatively,as well as disclosure of the total amount of selling expenses and,in annual reporting periods,the entitys definition of selling expenses.This ASU is effective for annual reporting periods beginning after December 15,2026 and interim reporting periods beginning after December 15,2027.Early adoption is permitted.The amendments in this ASU may be applied either on a prospective or retrospective basis.The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.In July 2025,the FASB issued ASU No.2025-05,“Financial InstrumentsCredit Losses(Topic 326):Measurement of Credit Losses for Accounts Receivable and Contract Assets.”This guidance provides public business entities with a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606.The practical expedient allows entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset.This ASU is effective for annual reporting periods beginning after December 15,2025,and interim reporting periods within those annual reporting periods.The amendments in this ASU should be applied on a prospective basis.The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.3.Revenue RecognitionContract BalancesThe contract assets are primarily related to the Companys fixed fee intellectual property(“IP”)licensing arrangements and rights to consideration for performance obligations delivered but not billed as of September 30,2025.The Companys contract balances were as follows:As of(In thousands)September 30,2025 December 31,2024 Unbilled receivables$29,038$29,104 Deferred revenue$25,439$21,852 During the nine months ended September 30,2025,the Company recognized$18.5 million of revenue that was included in deferred revenue as of December 31,2024.During the nine months ended September 30,2024,the Company recognized$16.4 million of revenue that was included in deferred revenue as of December 31,2023.Remaining Performance Obligations Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied,or partially unsatisfied,which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods.Contracted but unsatisfied performance obligations were approximately$23.9 million as of September 30,2025,which the Company primarily expects to recognize over the next two years.4.Earnings Per ShareBasic earnings per share is calculated by dividing the net income by the weighted-average number of common shares outstanding during the period.Diluted earnings per share is calculated by dividing the earnings by the weighted-average number of common shares and potentially dilutive securities outstanding during the period.Potentially dilutive common shares 13consist of restricted stock units,incremental common shares issuable upon exercise of stock options and employee stock purchases.The dilutive effect of outstanding shares is reflected in diluted earnings per share using the treasury stock method,as applicable.This method includes consideration of the amounts to be paid by the employees,the amount of excess tax benefits that would be recognized in equity if the instrument was exercised and the amount of unrecognized stock-based compensation related to future services.No potential dilutive common shares are included in the computation of any diluted per share amount when a net loss is reported.The following table sets forth the computation of basic and diluted net income per share:Three Months EndedSeptember 30,Nine Months EndedSeptember 30,(In thousands,except per share amounts)2025 2024 2025 2024 Net income per share:Numerator:Net income$48,377$48,665$166,615$117,619 Denominator:Weighted-average shares outstanding-basic 107,622 107,235 107,483 107,681 Effect of potentially dilutive common shares 1,682 1,239 1,479 1,637 Weighted-average shares outstanding-diluted 109,304 108,474 108,962 109,318 Basic net income per share$0.45$0.45$1.55$1.09 Diluted net income per share$0.44$0.45$1.53$1.08 5.Intangible Assets,Net The components of the Companys intangible assets as of September 30,2025 and December 31,2024 were as follows:As of September 30,2025(In thousands,except useful life)Useful Life Gross CarryingAmount AccumulatedAmortization Net CarryingAmount Existing technology 3 to 10 years$288,001$(276,110)$11,891 Customer contracts and contractual relationships 0.5 to 10 years 37,496 (37,496)Non-compete agreements and trademarks 3 years 300 (300)Total intangible assets$325,797$(313,906)$11,891 As of December 31,2024(In thousands,except useful life)Useful Life Gross CarryingAmount AccumulatedAmortization Net CarryingAmount Existing technology 3 to 10 years$288,001$(270,954)$17,047 Customer contracts and contractual relationships 0.5 to 10 years 37,496 (37,484)12 Non-compete agreements and trademarks 3 years 300 (300)Total intangible assets$325,797$(308,738)$17,059 Amortization expense for intangible assets for the three and nine months ended September 30,2025 was$1.7 million and$5.2 million,respectively.Amortization expense for intangible assets for the three and nine months ended September 30,2024 was$2.9 million and$9.4 million,respectively.14The estimated future amortization of intangible assets as of September 30,2025 was as follows(in thousands):Years Ending December 31:Amount 2025(remaining three months)$2,034 2026 5,208 2027 1,936 2028 1,480 2029 1,233 Total intangible assets$11,891 6.Segments and Major CustomersOperating segments are based upon the Companys internal organization structure,the manner in which its operations are managed,the criteria used by its Chief Operating Decision Maker(“CODM”)to evaluate segment performance and availability of separate financial information regularly reviewed for resource allocation and performance assessment.The Company has determined its CODM to be the Chief Executive Officer(“CEO”).The CEO reviews financial information presented on a consolidated basis for purposes of managing the business,allocating resources,making operating decisions and assessing financial performance.On this basis,the Company is organized and operates as a single segment within the semiconductor space.As of September 30,2025,the Company has a single operating and reportable segment.The CODM uses net income to assess segment performance,allocate resources and manage the business on a consolidated basis.The significant expenses for the segment exclude certain non-cash adjustments and non-recurring items,and are used to monitor budget versus actual results and to analyze the period-over-period comparisons.The significant expenses that are regularly provided to the CODM and reconciliations to the consolidated net income for the three and nine months ended September 30,2025 and 2024,respectively,were as follows:Three Months Ended September 30,Nine Months Ended September 30,(In thousands)2025 2024 2025 2024 Total revenue$178,513$145,513$517,386$395,522 Adjusted cost of revenue (34,688)(25,189)(98,477)(69,325)Adjusted research and development (44,477)(37,050)(123,457)(107,215)Adjusted sales,general and administrative (20,163)(18,218)(60,975)(55,143)Other segment items:Stock-based compensation expenses (14,206)(11,998)(39,822)(33,145)Amortization of acquired intangible assets (1,724)(2,890)(5,158)(9,380)Acquisition-related costs (17)(105)(139)Impairment of assets (1,071)Change in fair value of earn-out liability 4,544 5,044 Interest and other income(expense),net 6,033 4,340 15,358 12,590 Provision for income taxes (20,911)(10,370)(38,135)(20,119)Net income$48,377$48,665$166,615$117,619 Excludes stock-based compensation expenses and amortization of acquisition-related intangible assets.Excludes stock-based compensation expenses and retention bonus expense related to acquisitions.Excludes stock-based compensation expenses,acquisition-related costs and retention bonus expense related to acquisitions.The Company excludes these expenses from its adjusted cost of revenue and operating expenses primarily because such expenses are non-cash expenses that the Company does not believe are reflective of ongoing operating results.The Company excludes these expenses in order to provide better comparability between periods as they are related to acquisitions and have no direct correlation to the Companys ongoing operating results.(1)(2)(3)(4)(4)(5)(1)(2)(3)(4)(5)15The following represents the Companys significant expenses related to research and development expenses and sales,general and administrative expenses,as shown above,for the three and nine months ended September 30,2025 and 2024,respectively.Three Months Ended September 30,Nine Months Ended September 30,(In thousands)2025 2024 2025 2024 Payroll and benefits$38,866$31,264$115,706$95,065 Variable research and development expenses 8,780 7,559 18,943 19,886 Professional fees 5,096 4,447 14,756 14,020 Facilities costs 3,174 2,959 9,394 8,654 Temporary labor services and consulting expenses 3,063 3,952 9,230 10,397 Amortization and depreciation 3,035 2,619 8,826 7,316 Other expenses 2,626 2,468 7,577 7,020 Total adjusted operating expenses$64,640$55,268$184,432$162,358 Includes primarily software tools,software licenses and prototyping costs.The measure of segment assets is reported on the Companys Unaudited Condensed Consolidated Balance Sheets as total consolidated assets.Accounts receivable from the Companys major customers representing 10%or more of total accounts receivable as of September 30,2025 and December 31,2024,respectively,was as follows:As of Customer September 30,2025 December 31,2024 Customer 1 379%Customer 2 26%Revenue from the Companys major customers representing 10%or more of total revenue for the three and nine months ended September 30,2025 and 2024,respectively,was as follows:Three Months EndedSeptember 30,Nine Months EndedSeptember 30,Customer 2025 2024 2025 2024 Customer A 25!#%Customer B 17!%Customer C*10%*11%Customer D*14%*Customer accounted for less than 10%of total revenue in the period.Revenue from customers in the geographic regions based on the location of contracting parties was as follows:Three Months EndedSeptember 30,Nine Months EndedSeptember 30,(In thousands)2025 2024 2025 2024 South Korea$91,712$56,129$238,544$134,931 Singapore 37,561 21,082 127,328 45,406 United States 26,508 46,315 87,630 153,915 Other 22,732 21,987 63,884 61,270 Total$178,513$145,513$517,386$395,522 (1)(1)167.Marketable SecuritiesRambus invests its excess cash and cash equivalents primarily in U.S.government-sponsored obligations,non-U.S.government-sponsored obligations,corporate bonds,commercial paper and notes,time deposits and money market funds that mature within three years.All cash equivalents and marketable securities are classified as available-for-sale.Total cash,cash equivalents and marketable securities are summarized as follows:As of September 30,2025(In thousands)Fair Value AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Cash$64,003$64,003$Cash equivalents:Money market funds 9,175 9,175 Corporate bonds,commercial paper and notes 6,022 6,022 Total cash equivalents 15,197 15,197 Total cash and cash equivalents 79,200 79,200 Marketable securities:Time deposits 15,820 15,820 U.S.Government bonds and notes 203,729 203,611 185 (67)Non-U.S.Government bonds and notes 3,968 3,963 5 Corporate bonds,commercial paper and notes 370,586 370,258 358 (30)Total marketable securities 594,103 593,652 548 (97)Total cash,cash equivalents and marketable securities$673,303$672,852$548$(97)As of December 31,2024(In thousands)Fair Value AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Cash$87,415$87,415$Cash equivalents:Money market funds 6,025 6,025 Corporate bonds,commercial paper and notes 6,335 6,334 1 Total cash equivalents 12,360 12,359 1 Total cash and cash equivalents 99,775 99,774 1 Marketable securities:Time deposits 12,870 12,870 U.S.Government bonds and notes 220,056 220,034 184 (162)Corporate bonds,commercial paper and notes 149,097 149,085 121 (109)Total marketable securities 382,023 381,989 305 (271)Total cash,cash equivalents and marketable securities$481,798$481,763$306$(271)Available-for-sale securities are reported at fair value on the balance sheets and classified along with cash as follows:As of(In thousands)September 30,2025 December 31,2024 Cash$64,003$87,415 Cash equivalents 15,197 12,360 Total cash and cash equivalents 79,200 99,775 Marketable securities 594,103 382,023 Total cash,cash equivalents and marketable securities$673,303$481,798 17 The Company continues to invest in highly rated,liquid debt securities.The Company holds all of its marketable securities as available-for-sale,marks them to market,and regularly reviews its portfolio to ensure adherence to its investment policy and to monitor individual investments for risk analysis,proper valuation,and impairment.The estimated fair value and gross unrealized losses of cash equivalents and marketable securities classified by the length of time that the securities have been in a continuous unrealized loss position as of September 30,2025 and December 31,2024 were as follows:Fair Value Gross Unrealized Losses(In thousands)September 30,2025 December 31,2024 September 30,2025 December 31,2024 Less than 12 months U.S.Government bonds and notes$65,396$83,162$(64)$(162)Corporate bonds,commercial paper and notes 74,776 48,360 (26)(109)Total cash equivalents and marketable securities in a continuous unrealized loss position for less than 12 months 140,172 131,522 (90)(271)12 months or greater U.S.Government bonds and notes 1,689 (3)Corporate bonds,commercial paper and notes 1,654 (4)Total marketable securities in a continuous unrealized loss position for 12 months or greater 3,343 (7)Total cash equivalents and marketable securities in a continuous unrealized loss position$143,515$131,522$(97)$(271)The gross unrealized losses as of September 30,2025 and December 31,2024 were not material in relation to the Companys total available-for-sale portfolio.The gross unrealized losses can be primarily attributed to a combination of market conditions,as well as the demand for and duration of the U.S.government-sponsored obligations and corporate bonds,commercial paper and notes.The Company reasonably believes that there is no need to sell these investments and that it can recover the amortized cost of these investments.The Company has found no evidence of impairment due to credit losses in its portfolio.Therefore,these unrealized losses were recorded in other comprehensive income(loss).The Company cannot provide any assurance that its portfolio of cash,cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets,which may require the Company in the future to record an impairment charge for credit losses which could adversely impact its financial results.The contractual maturities of cash equivalents(excluding money market funds which have no maturity)and marketable securities are summarized as follows:(In thousands)September 30,2025 Due in less than one year$470,313 Due from one year through three years 129,812 Total$600,125 Refer to Note 8,“Fair Value of Financial Instruments,”for a discussion regarding the fair value of the Companys cash equivalents and marketable securities.188.Fair Value of Financial InstrumentsThe following table presents the financial instruments that are carried at fair value and summarizes their valuation by the respective pricing levels as of September 30,2025 and December 31,2024:As of September 30,2025(In thousands)Total QuotedMarketPrices inActive Markets(Level 1)SignificantOtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)Assets carried at fair value Money market funds$9,175$9,175$Time deposits 15,820 15,820 U.S.Government bonds and notes 203,729 203,729 Non-U.S.Government bonds and notes 3,968 3,968 Corporate bonds,commercial paper and notes 376,608 376,608 Total assets carried at fair value$609,300$9,175$600,125$As of December 31,2024(In thousands)Total QuotedMarketPrices inActive Markets(Level 1)SignificantOtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)Assets carried at fair value Money market funds$6,025$6,025$Time deposits 12,870 12,870 U.S.Government bonds and notes 220,056 220,056 Corporate bonds,commercial paper and notes 155,432 155,432 Total assets carried at fair value$394,383$6,025$388,358$The following table presents additional information about liabilities measured at fair value for which the Company utilized Level 3 inputs to determine fair value,as of September 30,2024.Three Months EndedSeptember 30,Nine Months EndedSeptember 30,(In thousands)2024 2024 Balance as of beginning of period$12,000$12,500 Change in fair value of earn-out liability due to remeasurement (4,544)(5,044)Change in fair value of earn-out liability due to achievement of revenue target (7,456)(7,456)Balance as of end of period$For the three and nine months ended September 30,2024,the change in the fair value of the earn-out liability related to the 2021 acquisition of PLDA Group(“PLDA”),which was subject to certain revenue targets of the acquired business for a period of three years from the date of acquisition,and was settled annually in shares of the Companys common stock based on the fair value of that common stock fixed at the time the Company acquired PLDA.The fair value of the earn-out liability was remeasured each quarter,depending on the acquired businesss revenue performance relative to target over the applicable period,and adjusted to reflect changes in the per share value of the Companys common stock.The Company classified its earn-out liability within Level 3 of the fair value hierarchy because the fair value calculation included significant unobservable inputs,such as revenue forecast,revenue volatility,equity volatility and weighted-average cost of capital.During the three and nine months ended September 30,2024,the Company remeasured the fair value of the earn-out liability,which resulted in reductions of$4.5 million and$5.0 million,respectively,in the Companys Unaudited Condensed Consolidated Statements of Income.The final earn-out was achieved in the third quarter of 2024 and fully paid during the fourth quarter of 2024.19The Company monitors its investments for impairment and records appropriate reductions in carrying value when necessary.During the nine months ended September 30,2025 and 2024,the Company recorded no other-than-temporary impairment charges on its investments.During the nine months ended September 30,2025 and 2024,there were no transfers of financial instruments between different categories of fair value.9.LeasesThe Company leases office space,domestically and internationally,under operating leases.The Companys leases have remaining lease terms generally between one year and seven years.Operating leases are included in operating lease right-of-use(“ROU”)assets,operating lease liabilities and long-term operating lease liabilities on the Companys Unaudited Condensed Consolidated Balance Sheets.The Company does not have any finance leases.The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded in the Unaudited Condensed Consolidated Balance Sheet as of September 30,2025(in thousands):Years ending December 31,Amount 2025(remaining three months)$1,791 2026 7,511 2027 6,004 2028 4,869 2029 4,871 Thereafter 4,918 Total minimum lease payments 29,964 Less:amount of lease payments representing interest (3,528)Present value of future minimum lease payments 26,436 Less:current obligations under leases (6,135)Long-term lease obligations$20,301 As of September 30,2025,the weighted-average remaining lease term for the Companys operating leases was 4.7 years and the weighted-average discount rate used to determine the present value of the Companys operating leases was 7.6%.Operating lease costs included in research and development and selling,general and administrative costs in the Unaudited Condensed Consolidated Statements of Income were$1.5 million and$1.4 million for the three months ended September 30,2025 and 2024,respectively.Operating lease costs included in research and development and selling,general and administrative costs in the Unaudited Condensed Consolidated Statements of Income were$4.4 million and$4.0 million for the nine months ended September 30,2025 and 2024,respectively.Cash paid for amounts included in the measurement of operating lease liabilities was$5.4 million and$4.5 million for the nine months ended September 30,2025 and 2024,respectively.2010.Commitments and ContingenciesAs of September 30,2025,the Companys material contractual obligations were as follows:(In thousands)Total Remainder of2025 2026 2027 2028 Contractual obligations Software licenses$33,246$2,297$13,605$12,997$4,347 Other contractual obligations 171 33 138 Total$33,417$2,330$13,743$12,997$4,347 The above table does not reflect possible payments in connection with unrecognized tax benefits of approximately$25.2 million,including$23.9 million recorded as a reduction of long-term deferred tax assets and$1.3 million in long-term income taxes payable as of September 30,2025.As noted below in Note 13,“Income Taxes,”although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months,the Company cannot reasonably estimate the timing of the outcome at this time.For the Companys lease commitments as of September 30,2025,refer to Note 9,“Leases.”The Company has commitments with various software vendors for agreements generally having terms longer than one year.From time to time,the Company indemnifies certain customers as a necessary means of doing business.Indemnification covers customers for losses suffered or incurred by them as a result of any patent,copyright,or other IP infringement or any other claim by any third party arising as a result of the applicable agreement with the Company.The Company generally attempts to limit the maximum amount of indemnification that the Company could be required to make under these agreements to the amount of fees received by the Company,however this may not always be possible.The fair value of the liability as of September 30,2025 and December 31,2024,respectively,was not material.11.Equity Incentive Plans and Stock-Based CompensationA summary of shares available for grant under the Companys plans is as follows:Shares Availablefor Grant Total shares available for grant as of December 31,2024 10,889,878 Nonvested equity stock and stock units granted (1,467,381)Nonvested equity stock and stock units forfeited 218,996 Total shares available for grant as of September 30,2025 9,641,493 For purposes of determining the number of shares available for grant under the 2015 Equity Incentive Plan against the maximum number of shares authorized,each restricted stock unit granted prior to April 27,2023 reduces the number of shares available for grant by 1.5 shares and each restricted stock unit forfeited increases shares available for grant by 1.5 shares.Each restricted stock unit granted on or after April 27,2023 reduces the number of shares available for grant by 1.0 share and each restricted stock unit forfeited increases shares available for grant by 1.0 share.Amount includes approximately 0.2 million shares that have been reserved for potential future issuance related to certain performance unit awards granted in the second quarter of 2025 and discussed under the section titled“Nonvested Equity Stock and Stock Units”below.Employee Stock Purchase PlanUnder the 2015 Employee Stock Purchase Plan(“2015 ESPP”),the Company issued 91,827 shares at a price of$40.76 and 69,828 shares at a price of$44.84 per share during the nine months ended September 30,2025 and 2024,respectively.As of September 30,2025,approximately 2.2 million shares under the 2015 ESPP remained available for issuance.(1)(2)(3)(1)(2)(3)(1)(2)(1)(1)(2)21Stock-Based CompensationFor the nine months ended September 30,2025 and 2024,the Company maintained stock plans covering a broad range of potential equity grants,including stock options,nonvested equity stock and equity stock units and performance-based instruments.In addition,the Company sponsors the 2015 ESPP,whereby eligible employees are entitled to purchase common stock semi-annually,by means of limited payroll deductions,at a 15%discount from the fair market value of the common stock as of specific dates.Stock-based compensation expense recorded in the Unaudited Condensed Consolidated Statements of Income was as follows:Three Months EndedSeptember 30,Nine Months EndedSeptember 30,(In thousands)2025 2024 2025 2024 Cost of revenue$180$117$569$363 Research and development 5,034 4,235 14,942 11,883 Sales,general and administrative 8,992 7,646 24,311 20,899 Total$14,206$11,998$39,822$33,145 Nonvested Equity Stock and Stock UnitsThe Company grants nonvested equity stock units to officers,employees and directors.These awards have a service condition,generally a service period of four years,except in the case of grants to directors,for which the service period is one year.The Company also grants performance unit awards to certain company executive officers with vesting subject to the achievement of certain performance and/or market conditions.The ultimate number of performance units that can be earned can range from 0%to 200%of target depending on performance relative to target over the applicable period.The shares earned will vest on the third or fourth anniversary of the date of grant.The Companys shares available for grant have been reduced to reflect the shares that could be earned at the maximum target.Unrecognized stock-based compensation related to all nonvested equity stock grants,net of estimated forfeitures,was approximately$100.3 million as of September 30,2025.This amount is expected to be recognized over a weighted-average period of 2.2 years.The following table reflects the activity related to nonvested equity stock and stock units for the nine months ended September 30,2025:Nonvested Equity Stock and Stock Units Shares Weighted-AverageGrant-DateFair Value Nonvested as of December 31,2024 3,150,161$44.72 Granted 1,239,905$54.35 Vested (1,187,717)$37.42 Forfeited (152,955)$50.59 Nonvested as of September 30,2025 3,049,394$51.18 12.Stockholders Equity Share Repurchase ProgramOn October 29,2020,the Companys board of directors(the“Board”)approved a share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares(the“2020 Repurchase Program”).Share repurchases under the 2020 Repurchase Program may be made through the open market,established plans or privately negotiated transactions in accordance with all applicable securities laws,rules and regulations.There is no expiration date applicable to the 2020 Repurchase Program.22During the nine months ended September 30,2025,the Company entered into share repurchase plans(the“Buying Plans”)with Mizuho Securities USA,LLC(“Mizuho”),pursuant to which Mizuho will repurchase shares of the Companys common stock from February 6,2025 through December 31,2025,with provisions to terminate sooner.The Buying Plans are part of the 2020 Repurchase Program.The execution of share repurchases is dependent on the Companys stock price reaching certain levels.During the nine months ended September 30,2025,the Company repurchased 0.1 million shares for approximately$5.8 million as part of the Buying Plans,which were retired and recorded as a reduction to stockholders equity.During the nine months ended September 30,2024,the Company repurchased approximately 2.2 million shares for approximately$113.8 million(includes excise tax)under the 2020 Repurchase Program,which were retired and recorded as a reduction to stockholders equity.As of September 30,2025,there remained an outstanding authorization to repurchase approximately 5.6 million shares of the Companys outstanding common stock under the 2020 Repurchase Program.The Company records share repurchases as a reduction to stockholders equity.The Company records a portion of the purchase price of the repurchased shares as a decrease(increase)to retained earnings(accumulated deficit)when the price of the shares repurchased exceeds the average original proceeds per share received from the issuance of common stock in accordance with its accounting policy.13.Income TaxesThe Company recorded a provision for income taxes of$20.9 million and$10.4 million for the three months ended September 30,2025 and 2024,respectively,and a provision for income taxes of$38.1 million and$20.1 million for the nine months ended September 30,2025 and 2024,respectively.The provisions for income taxes for the three and nine months ended September 30,2025 and 2024 were primarily driven by the statutory tax expense for domestic and foreign jurisdictions for the respective fiscal years,offset by tax benefits from excess stock-based compensation deductions.The provision for income taxes for the three and nine months ended September 30,2025 includes the impact from the tax legislation,referred to as the One Big Beautiful Bill Act(“OBBBA”),which was enacted in the third quarter of 2025 and is further discussed below.During both the three months ended September 30,2025 and 2024,the Company paid foreign withholding taxes of$5.1 million.During the nine months ended September 30,2025 and 2024,the Company paid foreign withholding taxes of$16.1 million and$15.5 million,respectively.As of December 31,2024,the Company had$203.8 million of unrecognized tax benefits,before interest accrual,including$22.8 million recorded as a reduction of long-term deferred tax assets,$74.8 million recorded as a reduction of other assets associated with refundable withholding taxes previously withheld from licensees in South Korea,and$106.2 million recorded to long-term income taxes payable,primarily comprised of$105.1 million in income taxes payable related to withholding taxes previously withheld from licensees in South Korea.As of September 30,2025,the Company had approximately$107.6 million of unrecognized tax benefits,before interest accrual,including$23.9 million recorded as a reduction of long-term deferred tax assets,$82.7 million recorded as a reduction of other assets associated with refundable withholding taxes previously withheld from licensees in South Korea,and$1.0 million recorded to long-term income taxes payable.On September 18,2025,the South Korean Supreme Court ruled that the use of any patents in South Korea constitutes domestic source income under the South KoreaU.S.Tax Treaty,even if such patents are not registered with the patent office in South Korea.Based on this ruling,patent license royalties are subject to South Korean withholding tax if the patents are used in South Korea.As a result of this ruling,Rambus determined that it is not more likely than not that withholding taxes paid in South Korea are recoverable.The Company previously filed refund claims for withholding taxes paid in South Korea in the amount of$82.7 million related to the period from the fourth quarter of 2018 through the third quarter of 2023.The Company previously intended to file additional refund claims in the future for$32.2 million of withholding taxes paid from the fourth quarter of 2023 through the 23second quarter of 2025.The Company had previously recorded long-term tax receivables of$114.9 million and$105.1 million,before interest accrual,related to these refund claims as of June 30,2025,and December 31,2024,respectively.If the South Korea withholding taxes are recovered through the refund claim process,the U.S.foreign tax credit claimed for these withholding taxes on historical federal tax returns will be forfeited.Therefore,the Company had also recorded a long-term tax payable of$114.9 million and$105.1 million as of June 30,2025,and December 31,2024,respectively.These amounts excluded interest and reflected the future U.S.federal tax liability in the event of filing amended federal tax returns to revise the foreign tax credit amounts.The recovery of South Korea withholding taxes paid before the fourth quarter of 2018 of$74.8 million was uncertain due to the statute of limitations for filing a refund claim.Thus,the Company did not previously record a long-term tax receivable and included this amount in the uncertain tax benefit.As a result of the September 2025 ruling,the Company recorded an uncertain tax position reserve on the$82.7 million of outstanding refund claims,reducing the previously recorded long-term tax receivable for these refund claims to zero,as it determined it is not more likely than not that the withholding taxes paid in South Korea are recoverable.The Company also removed the$32.2 million long-term tax receivable previously recorded for withholding taxes paid during the fourth quarter of 2023 through the second quarter of 2025.As a result,the total long-term tax receivable balance of$114.9 million,excluding interest,was reduced to zero in the current period.The related long-term tax payable of$114.9 million,excluding interest,was also reduced to zero,resulting in zero tax expense impact.Additionally,the Companys future effective tax rates could be adversely affected by earnings being higher than anticipated in countries where the Company has higher statutory rates or lower than anticipated in countries where it has lower statutory rates,by changes in valuation of its deferred tax assets and liabilities or by changes in tax laws or interpretations of those laws.On July 4,2025,the United States enacted federal tax legislation commonly referred to as the OBBBA.Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses,immediate expensing of certain capital expenditures,and other changes to the U.S.taxation of profits derived from foreign operations.As a result of the enactment of the legislation,there was an increase to tax expense,primarily related to changes in the taxation of profits derived from foreign operations,and more specifically,the foreign-derived intangible income deduction.14.Litigation and Contingent LiabilityRambus is not currently a party to any material pending legal proceeding;however,from time to time,Rambus may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business.Although the results of litigation and claims cannot be predicted with certainty,the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business,operating results,financial position or cash flows.Regardless of the outcome,litigation can have an adverse impact on the Company because of defense and settlement costs,diversion of management attention and resources and other factors.The Company records a contingent liability when it is probable that a loss has been incurred and the amount is reasonably estimable in accordance with accounting for contingencies.24Item 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsThis report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 as described in more detail under“Note Regarding Forward-Looking Statements.”Our forward-looking statements are based on current expectations,forecasts and assumptions and are subject to risks,uncertainties and changes in condition,significance,value and effect.As a result of the factors described herein,and in the documents incorporated herein by reference,including,in particular,those factors described under“Risk Factors,”we undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission.The following discussion and analysis should be read in conjunction with(1)our Unaudited Condensed Consolidated Financial Statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q,and(2)our audited consolidated financial statements and the related notes and the discussion under the heading“Managements Discussion and Analysis of Financial Condition and Results of Operations”for the fiscal year ended December 31,2024 included in the Annual Report on Form 10-K filed with the U.S.Securities and Exchange Commission(“SEC”)on February 24,2025.Rambus is a trademark of Rambus Inc.Other trademarks that may be mentioned in this quarterly report on Form 10-Q are the property of their respective owners.Business OverviewRambus is a provider of industry-leading chips and silicon IP making data faster and safer.With 35 years of advanced semiconductor experience,we are a pioneer in high-performance memory solutions that solve the bottleneck between memory and processing for data-intensive systems.Whether in the cloud,at the edge or in your hand,real-time and immersive applications depend on data throughput and integrity.Rambus products and innovations deliver the increased bandwidth,capacity and security required to meet the worlds data needs and drive ever-greater end-user experiences.For more information,visit .The explosion of data-intensive workloads,driven by the proliferation of generative artificial intelligence(“AI”),large language models(“LLMs”)and high-performance computing(“HPC”),is placing unprecedented demands on computing infrastructure.This surge in data processing is exacerbating the performance gap between processors and memory,creating a critical bottleneckthe“memory wall”that limits overall system efficiency.As processors and accelerators rapidly increase in speed and core count,memory bandwidth and latency must keep pace to unlock their full potential.Rambus is uniquely positioned to address this challenge.Our deep expertise in memory technologies and innovative architectures enables us to deliver solutions that break through the memory wall.We provide industry-leading memory interface chips that enable the highest bandwidth and capacity server memory modules,maximizing memory performance for the most demanding data-intensive workloads.These solutions are essential for supporting the training and inference of increasingly complex AI models,including those used in generative AI applications.Our strategic objectives include focusing our product portfolio and research around our core strength in semiconductors,optimizing operational efficiency and leveraging strong cash generation to reinvest for growth.We continue to maximize synergies across our businesses and customer base,leveraging the significant overlap in our ecosystem of customers,partners and influencers.Our product and technology roadmap,as well as our go-to-market strategy,are driven by the application-specific requirements of our focus markets.Executive SummaryOur continued execution delivered strong results during the third quarter of 2025,driven primarily by increasing demand for our memory interface chips.Key third quarter 2025 financial results included:Revenue of$178.5 million;Operating expenses of$78.7 million;and 25Net cash provided by operating activities of$88.4 million.We achieved record quarterly product revenue of$93.3 million in the third quarter of 2025,which increased by approximately 41%as compared to the same period in 2024.Our chip business continues to be a key growth engine for us.Operational HighlightsRevenue SourcesOur consolidated revenue is comprised of product revenue,royalties and contract and other revenue.Product revenue consists primarily of memory interface chips and is increasing in strategic significance.Our memory interface chips are sold to major DRAM manufacturers,Micron,Samsung and SK hynix,as well as directly to system manufacturers and cloud providers,for integration into server and client memory modules.Product revenue accounted for 52%and 49%of our consolidated revenue for the three and nine months ended September 30,2025,respectively,as compared to 46%and 44%for the three and nine months ended September 30,2024,respectively.Royalties revenue is derived from our patent licenses and Silicon IP,through which we provide our customers certain rights to our broad worldwide portfolio of patented inventions,as well as royalties from IP licenses.Our patent licenses enable our customers to use a portion of our patent portfolio in their own digital electronics products.The licenses typically range in duration up to ten years and may define the specific field of use where our customers may utilize our inventions in their products.Royalties may be structured as fixed,variable or a hybrid of fixed and variable royalty payments.Leading semiconductor and electronic system companies such as AMD,Amlogic,Broadcom,CXMT,IBM,Infineon,Kioxia,Marvell,MediaTek,Micron,Nanya,Nuvoton,NVIDIA,Phison,Qualcomm,Samsung,Silicon Motion,SK hynix,Socionext,STMicroelectronics,Toshiba,Western Digital,Winbond,and YMTC have licensed our patents.The vast majority of our patents originate from our internal research and development efforts.Additionally,from time to time,we enter into agreements to sell certain patent assets under agreements which may also include subsequent profit-sharing.The sale of these patents,as well as the subsequent profit-sharing,are included as part of our royalties revenue.Revenue from royalties accounted for 37%and 40%of our consolidated revenue for the three and nine months ended September 30,2025,respectively,as compared to 44%and 42%for the three and nine months ended September 30,2024,respectively.Contract and other revenue consists primarily of Silicon IP,which is comprised of our high-speed interface and security IP.Revenue sources under contract and other revenue include our IP core licenses,software licenses and related implementation,support and maintenance fees and engineering services fees.The timing and amounts invoiced to customers can vary significantly depending on specific contract terms and can therefore have a significant impact on deferred revenue or accounts receivable in any given period.Contract and other revenue accounted for 11%of our consolidated revenue for each of the three and nine months ended September 30,2025,as compared to 10%and 14%of our consolidated revenue for the three and nine months ended September 30,2024,respectively.Costs and ExpensesCost of product revenue mainly includes costs attributable to the sale of memory interface chip products.Cost of product revenue increased approximately$9.7 million and$29.9 million for the three and nine months ended September 30,2025,respectively,as compared to the same periods in 2024.The increases were primarily due to higher sales volumes of our memory interface chips.Cost of contract and other revenue reflects the portion of the total engineering costs which are specifically devoted to individual customer development and support services.Cost of contract and other revenue decreased$0.3 million and$0.6 million for the three and nine months ended September 30,2025,respectively,as compared to the same periods in 2024.The decreases were primarily due to lower engineering services associated with the contracts.Total research and development expenses for the three months ended September 30,2025 increased approximately$8.2 million as compared to the same period in 2024,primarily due to increases in payroll-related expenses of$5.2 million and stock-based compensation expenses of$0.8 million,both driven primarily by headcount growth,as well as an increase in 26depreciation expense of$0.9 million.Total research and development expenses for the nine months ended September 30,2025 increased approximately$19.3 million as compared to the same period in 2024,primarily due to increases in payroll-related expenses of$15.0 million and stock-based compensation expenses of$3.0 million,both driven primarily by headcount growth,and an increase in depreciation expense of$1.5 million,partially offset by a decrease in prototyping costs of$2.4 million.Total sales,general and administrative expenses for the three months ended September 30,2025 increased approximately$3.3 million as compared to the same period in 2024,primarily due to increases in payroll-related expenses of$2.2 million and stock-based compensation expenses of$1.3 million,both driven primarily by headcount growth,as well as an increase in sales and marketing activities of$0.7 million,partially offset by a decrease in consulting expense of$1.0 million.Total sales,general and administrative expenses for the nine months ended September 30,2025 increased approximately$9.2 million as compared to the same period in 2024,primarily due to increases in payroll-related expenses of$5.4 million and stock-based compensation expenses of$3.4 million,both driven primarily by headcount growth,as well as increases in depreciation expense of$0.9 million and sales and marketing activities of$0.8 million,partially offset by a decrease in consulting expense of$1.5 million.Intellectual PropertyAs of September 30,2025,our semiconductor,security and other technologies are covered by 2,080 U.S.and foreign patents.Additionally,we have 475 patent applications pending in various countries.Some of the patents and pending patent applications are derived from a common parent patent application or are foreign counterpart patent applications.We file applications for and obtain patents in the United States and in selected foreign countries where we believe filing for such protection is appropriate and would further our overall business strategy and objectives.In some instances,obtaining appropriate levels of protection may involve prosecuting continuation and counterpart patent applications based on a common parent application.We believe our patented innovations provide our customers with the ability to achieve improved performance,lower risk,greater cost-effectiveness,and other benefits in their products and services.Trends There are a number of trends that may have a material impact on us in the future,including but not limited to,the evolution of memory technology,adoption of security solutions,the use and adoption of our inventions or technologies generally,industry consolidation and global economic conditions with the resulting impact on sales of consumer electronic systems.Additionally,there is ongoing uncertainty and volatility in future revenue and costs due to various macroeconomic events,such as tariffs and global inflation,which could have a significant impact on our business and operating results.We have a high degree of revenue concentration.Our top five customers represented approximately 67%of our consolidated revenue for each of the three and nine months ended September 30,2025,as compared to 69%and 64%for the three and nine months ended September 30,2024,respectively.The level of concentration and particular customers which account for this concentration have varied in the past and may vary in the future as a result of demand for our semiconductor products,timing of new contracts,expiration of existing contracts,as well as timing of contract expirations and renewals,industry consolidation and the volumes and prices at which the customers have recently sold to their customers.These variations are expected to continue in the foreseeable future.Our revenue from companies headquartered outside of the United States accounted for approximately 85%and 83%of our consolidated revenue for the three and nine months ended September 30,2025,as compared to 68%and 61%for the three and nine months ended September 30,2024.We expect that revenue derived from international customers will continue to represent a significant portion of our total revenue in the future.Currently,our revenue from international customers is predominantly denominated in U.S.dollars.For additional information concerning international revenue,refer to Note 6,“Segments and Major Customers,”of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q.The royalties we receive from our semiconductor customers are partly a function of the adoption of our technologies by system companies.Many system companies purchase semiconductors containing our technologies from our customers and do not have a direct contractual relationship with us.Our customers generally do not provide us with details as to the identity or 27volume of licensed semiconductors purchased by particular system companies.As a result,we face difficulty in analyzing the extent to which our future revenue will be dependent upon particular system companies.As a part of our overall business strategy,from time to time we evaluate businesses and technologies for potential acquisitions that are aligned with our core business and designed to supplement our growth.Similarly,we evaluate our current businesses and technologies that are not aligned with our core business for potential divestitures.We expect to continue to evaluate and potentially enter into strategic acquisitions or divestitures which will impact our business and operating results.Results of OperationsThe following table sets forth,for the periods indicated,the percentage of total revenue represented by certain items reflected on our Unaudited Condensed Consolidated Statements of Income:Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2025 2024 2025 2024 Revenue:Product revenue 52.3E.6H.6C.9%Royalties 36.5D.1.1B.5%Contract and other revenue 11.2.3.3.6%Total revenue 100.00.00.00.0%Cost of revenue:Cost of product revenue 19.2.9.8.0%Cost of contract and other revenue 0.3%0.5%0.3%0.6%Amortization of acquired intangible assets 1.0%1.9%1.0%2.3%Total cost of revenue 20.5.3 .1.9%Gross profit 79.5.7y.9.1%Operating expenses:Research and development 27.7(.4&.80.1%Sales,general and administrative 16.3.8.5.2%Amortization of acquired intangible assets%0.1%0.1%Impairment of assets%0.3%Change in fair value of earn-out liability%(3.1)%(1.3)%Total operating expenses 44.0C.2C.3H.4%Operating income 35.57.56.61.7%Interest income and other income(expense),net 3.5%3.2%3.2%3.4%Interest expense (0.2)%(0.2)%(0.2)%(0.3)%Interest and other income(expense),net 3.3%3.0%3.0%3.1%Income before income taxes 38.8.59.64.8%Provision for income taxes 11.7%7.1%7.4%5.1%Net income 27.13.42.2).7%Three Months EndedSeptember 30,Change in Nine Months EndedSeptember 30,Change in(Dollars in millions)2025 2024 Percentage 2025 2024 Percentage Total revenue:Product revenue$93.3$66.4 40.6%$251.0$173.4 44.7%Royalties 65.1 64.1 1.6 7.7 168.0 23.7%Contract and other revenue 20.1 15.0 33.5X.7 54.1 8.5%Total revenue$178.5$145.5 22.7%$517.4$395.5 30.8(Product RevenueProduct revenue consists primarily of revenue from the sale of memory products.Product revenue increased approximately$26.9 million and$77.6 million for the three and nine months ended September 30,2025,respectively,as compared to the same periods in 2024.The increases were due to higher sales of memory interface chips,as well as contributions from new products.Growth in our product revenue is dependent on,among other things,our ability to continue to obtain orders from customers,develop and sell new products,maintain adequate supply in order to meet our customers demand and mitigate any supply chain and economic disruption.RoyaltiesRoyalties revenue,which includes patent and technology license royalties,increased approximately$1.0 million and$39.7 million for the three and nine months ended September 30,2025,respectively,as compared to the same periods in 2024.The increases were primarily due to the timing and structure of license agreements and renewals.We are continuously in negotiations for licenses with prospective customers.We expect royalties revenue will continue to vary from period to period based on our success in adding new customers,renewing or extending existing agreements,as well as the level of variation in our customers reported shipment volumes,sales price and product mix,offset in part by the proportion of customer payments that are fixed or hybrid in nature.Contract and Other RevenueContract and other revenue consists of revenue from technology development projects.Contract and other revenue increased approximately$5.1 million and$4.6 million for the three and nine months ended September 30,2025,respectively,as compared to the same periods in 2024.The increases were due to higher revenue associated with our Silicon IP offerings.We believe that contract and other revenue will fluctuate over time based on our ongoing technology development contractual requirements,the amount of work performed,the timing of completing engineering deliverables and the changes to work required,as well as new technology development contracts booked in the future.Cost of Product Revenue Three Months EndedSeptember 30,Change in Nine Months EndedSeptember 30,Change in(Dollars in millions)2025 2024 Percentage 2025 2024 Percentage Cost of product revenue$34.3$24.6 39.8%$97.3$67.4 44.5%Cost of product revenue mainly includes costs attributable to the sale of memory interface chip products.Cost of product revenue increased approximately$9.7 million and$29.9 million for the three and nine months ended September 30,2025,respectively,as compared to the same periods in 2024.The increases were primarily due to higher sales volumes of our memory interface chips.In the near term,we expect costs of product revenue to fluctuate due to changes in product mix and the timing of orders.Cost of Contract and Other Revenue Three Months EndedSeptember 30,Change in Nine Months EndedSeptember 30,Change in(Dollars in millions)2025 2024 Percentage 2025 2024 Percentage Cost of contract and other revenue$0.5$0.8 (29.4)%$1.7$2.3 (26.0) Cost of contract and other revenue reflects the portion of the total engineering costs which are specifically devoted to individual customer development and support services.Cost of contract and other revenue decreased$0.3 million and$0.6 million for the three and nine months ended September 30,2025,respectively,as compared to the same periods in 2024.The decreases in both periods were primarily due to lower engineering services associated with the contracts.In the near term,we expect costs of contract and other revenue to vary from period to period based on varying revenue recognized from contract and other revenue.Research and Development Expenses Three Months EndedSeptember 30,Change in Nine Months EndedSeptember 30,Change in(Dollars in millions)2025 2024 Percentage 2025 2024 Percentage Research and development expenses:Research and development expenses,excluding stock-based compensation$44.5$37.1 20.0%$123.6$107.3 15.1%Stock-based compensation 5.0 4.2 18.9.9 11.9 25.7%Total research and development expenses$49.5$41.3 19.9%$138.5$119.2 16.2%Research and development expenses are those expenses incurred for the development of applicable technologies.Total research and development expenses for the three months ended September 30,2025 increased approximately$8.2 million as compared to the same period in 2024,primarily due to increases in payroll-related expenses of$5.2 million and stock-based compensation expenses of$0.8 million,both driven primarily by headcount growth,as well as an increase in depreciation expense of$0.9 million.Total research and development expenses for the nine months ended September 30,2025 increased approximately$19.3 million as compared to the same period in 2024,primarily due to increases in payroll-related expenses of$15.0 million and stock-based compensation expenses of$3.0 million,both driven primarily by headcount growth,and an increase in depreciation expense of$1.5 million,partially offset by a decrease in prototyping costs of$2.4 million.We will continue to make investments in the infrastructure and technologies required to maintain our product innovation in semiconductor,security and other technologies.Sales,General and Administrative Expenses Three Months EndedSeptember 30,Change in Nine Months EndedSeptember 30,Change in(Dollars in millions)2025 2024 Percentage 2025 2024 Percentage Sales,general and administrative expenses:Sales,general and administrative expenses,excluding stock-based compensation$20.2$18.2 10.7%$61.0$55.2 10.5%Stock-based compensation 9.0 7.7 17.6$.3 20.9 16.3%Total sales,general and administrative expenses$29.2$25.9 12.7%$85.3$76.1 12.1%Sales,general and administrative expenses include expenses and costs associated with trade shows,public relations,advertising,litigation,general legal,insurance and other sales,marketing and administrative efforts.Consistent with our business model,our licensing,sales,and marketing activities aim to develop or strengthen relationships with potential new and current customers.In addition,we work with current customers through marketing,sales and technical efforts to drive adoption of their products that use our innovations and solutions,by their customers.Due to the long business development cycles we 30face and the semi-fixed nature of sales,general and administrative expenses in a given period,these expenses generally do not correlate to the level of revenue in that period or in comparable recent or future periods.Total sales,general and administrative expenses for the three months ended September 30,2025 increased approximately$3.3 million as compared to the same period in 2024,primarily due to increases in payroll-related expenses of$2.2 million and stock-based compensation expenses of$1.3 million,both driven primarily by headcount growth,as well as an increase in sales and marketing activities of$0.7 million,partially offset by a decrease in consulting expense of$1.0 million.Total sales,general and administrative expenses for the nine months ended September 30,2025 increased approximately$9.2 million as compared to the same period in 2024,primarily due to increases in payroll-related expenses of$5.4 million and stock-based compensation expenses of$3.4 million,both driven primarily by headcount growth,as well as increases in depreciation expense of$0.9 million and sales and marketing activities of$0.8 million,partially offset by a decrease in consulting expense of$1.5 million.In the future,sales,general and administrative expenses will vary from period to period based on the trade shows,advertising,legal,acquisition,and other sales,marketing and administrative activities undertaken,and the change in sales,marketing and administrative headcount in any given period.Amortization of Acquired Intangible Assets Three Months EndedSeptember 30,Change in Nine Months EndedSeptember 30,Change in(Dollars in millions)2025 2024 Percentage 2025 2024 Percentage Amortization of acquired intangible assets:Amortization of acquired intangible assets included in total cost of revenue$1.7$2.8 (38.3)%$5.2$8.9 (42.1)%Amortization of acquired intangible assets included in total operating expenses 0.1 (100.0)%0.5 (100.0)%Total amortization of acquired intangible assets$1.7$2.9 (40.3)%$5.2$9.4 (45.0)%Amortization expense is related to various acquired IP.Amortization of acquired intangible assets recognized in cost of revenue and operating expenses for the three and nine months ended September 30,2025 decreased by approximately$1.2 million and$4.2 million,respectively,as compared to the same periods in 2024.The decreases in both periods were due to intangible assets which became fully amortized.Impairment of Assets Three Months EndedSeptember 30,Change in Nine Months EndedSeptember 30,Change in(Dollars in millions)2025 2024 Percentage 2025 2024 Percentage Impairment of assets$%$1.1 (100.0)%During the nine months ended September 30,2024,we recorded a charge of approximately$1.1 million in our Unaudited Condensed Consolidated Statements of Income of this Form 10-Q,related to the write-off of certain fixed assets no longer in use and for which we determined they had no alternate economic use.Change in Fair Value of Earn-Out Liability Three Months EndedSeptember 30,Change in Nine Months EndedSeptember 30,Change in(Dollars in millions)2025 2024 Percentage 2025 2024 Percentage Change in fair value of earn-out liability$(4.5)(100.0)%$(5.0)(100.0)1 The changes in the fair value of the earn-out liability related to the 2021 acquisition of the PLDA Group(“PLDA”),which was subject to certain revenue targets of the acquired business for a period of three years from the date of acquisition,and was settled annually in shares of our common stock based on the fair value of that common stock fixed at the time we acquired PLDA.The fair value of the earn-out liability was remeasured each quarter,depending on the acquired businesss revenue performance relative to target over the applicable period,and adjusted to reflect changes in the per share value of our common stock.During the three and nine months ended September 30,2024,we remeasured the fair value of the earn-out liability,which resulted in reductions of$4.5 million and$5.0 million,respectively,in our Unaudited Condensed Consolidated Statements of Income of this Form 10-Q.The final earn-out was achieved in the third quarter of 2024 and fully paid during the fourth quarter of 2024.Interest and Other Income(Expense),Net Three Months EndedSeptember 30,Change in Nine Months EndedSeptember 30,Change in(Dollars in millions)2025 2024 Percentage 2025 2024 Percentage Interest income and other income(expense),net$6.3$4.7 35.6%$16.4$13.7 20.2%Interest expense (0.3)(0.3)(10.1)%(1.1)(1.1)(1.0)%Interest and other income(expense),net$6.0$4.4 39.0%$15.4$12.6 22.0%Interest income and other income(expense),net,includes interest income from our investment portfolio and from the significant financing component of licensing agreements,as well as any gains or losses from the re-measurement of our monetary assets or liabilities denominated in foreign currencies.For the three months ended September 30,2025 and 2024,interest income and other income(expense),net,consisted primarily of interest income of$6.5 million and$4.8 million,respectively,generated from our investment portfolio.For the nine months ended September 30,2025 and 2024,interest income and other income(expense),net,consisted primarily of interest income of$17.1 million and$13.6 million,respectively,generated from our investment portfolio.Interest income increased during the three and nine months ended September 30,2025 as compared to the same periods in 2024 due to an increase in our investment portfolio,partially offset by a decline in interest rates on our investments.Interest expense is primarily associated with long-term software licenses.Interest expense remained flat for the three and nine months ended September 30,2025 as compared to the same periods in 2024.Provision for Income Taxes Three Months EndedSeptember 30,Change in Nine Months EndedSeptember 30,Change in(Dollars in millions)2025 2024 Percentage 2025 2024 Percentage Provision for income taxes$20.9$10.4 101.6%$38.1$20.1 89.5fective tax rate 30.2.6.6.6%Our provision for income taxes for the three and nine months ended September 30,2025 was primarily driven by the statutory tax expense for domestic and foreign jurisdictions for 2025,offset by tax benefits from excess stock-based compensation deductions.Our provision for income taxes for the three and nine months ended September 30,2025 reflected effective tax rates of 30.2%and 18.6%,respectively,and includes the impact from the tax legislation,referred to as the One Big Beautiful Bill Act(“OBBBA”),which was enacted in the third quarter of 2025 and is further discussed below.Our provision for income taxes for the three and nine months ended September 30,2024 was primarily driven by the statutory tax expense for domestic and foreign jurisdictions for 2024,offset by tax benefits from excess stock-based compensation deductions.Our provision for income taxes for the three and nine months ended September 30,2024 reflected effective tax rates of 17.6%and 3214.6%,respectively.For both 2025 and 2024,our effective tax rates differed from the U.S.statutory rate primarily due to tax benefits from excess stock-based compensation deductions.During each of the three months ended September 30,2025 and 2024,we paid foreign withholding taxes of$5.1 million.During the nine months ended September 30,2025 and 2024,we paid foreign withholding taxes of$16.1 million and$15.5 million,respectively.On July 4,2025,the United States enacted federal tax legislation commonly referred to as the OBBBA.Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses,immediate expensing of certain capital expenditures,and other changes to the U.S.taxation of profits derived from foreign operations.As a result of the enactment of the legislation,there was an increase to our tax expense,primarily related to changes in the taxation of profits derived from foreign operations,and more specifically,the foreign-derived intangible income deduction.We project our effective tax rate to increase in 2025 due to the impact from the new tax legislation,particularly related to the foreign-derived intangible income deduction.On September 18,2025,the South Korean Supreme Court ruled that the use of any patents in South Korea constitutes domestic source income under the South KoreaU.S.Tax Treaty,even if such patents are not registered with the patent office in South Korea.Based on this ruling,patent license royalties are subject to South Korean withholding tax if the patents are used in South Korea.As a result of this ruling,we determined that it is not more likely than not that withholding taxes paid in South Korea are recoverable.Consequently,we recorded an uncertain tax position reserve on the$82.7 million of outstanding refund claims relating to the period from the fourth quarter of 2018 through the third quarter of 2023,reducing the previously recorded long-term tax receivable for these refund claims to zero,as we determined it is not more likely than not that the withholding taxes paid in South Korea are recoverable.We also removed the$32.2 million long-term tax receivable previously recorded for withholding taxes paid during the fourth quarter of 2023 through the second quarter of 2025.As a result,the total long-term tax receivable balance of$114.9 million,excluding interest,was reduced to zero in the third quarter of 2025.The related long-term tax payable of$114.9 million,excluding interest,was also reduced to zero,resulting in zero tax expense impact.Liquidity and Capital Resources As of(In millions)September 30,2025 December 31,2024 Cash and cash equivalents$79.2$99.8 Marketable securities 594.1 382.0 Total cash,cash equivalents and marketable securities$673.3$481.8 Nine Months EndedSeptember 30,(In millions)2025 2024 Net cash provided by operating activities$260.2$171.6 Net cash provided by(used in)investing activities$(231.4)$13.0 Net cash used in financing activities$(49.9)$(165.3)LiquidityWe currently anticipate that existing cash,cash equivalents and marketable securities balances and cash flows from operations will be adequate to meet our cash needs for at least the next 12 months.Additionally,the majority of our cash and cash equivalents are in the United States.Our cash needs for the nine months ended September 30,2025,were funded primarily from cash collected from our customers.33We do not anticipate any liquidity constraints as a result of either the current credit environment or investment fair value fluctuations.Additionally,we have the intent and we believe we have the ability to hold our debt investments that have unrealized losses in accumulated other comprehensive gain(loss)for a sufficient period of time to allow for recovery of the principal amounts invested.We continually monitor the credit risk in our portfolio and mitigate our credit risk exposures in accordance with our policies.As a part of our overall business strategy,from time to time we evaluate businesses and technologies for potential acquisitions that are aligned with our core business and designed to supplement our growth.To provide us with more flexibility in returning capital to our stockholders,on October 29,2020,our Board approved a share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares(the“2020 Repurchase Program”).Share repurchases under the 2020 Repurchase Program may be made through the open market,established plans or privately negotiated transactions in accordance with all applicable securities laws,rules and regulations.There is no expiration date applicable to the 2020 Repurchase Program.During the nine months ended September 30,2025,we repurchased shares of our common stock under the 2020 Repurchase Program as discussed in the“Share Repurchase Program”section below.Operating ActivitiesCash provided by operating activities of$260.2 million for the nine months ended September 30,2025,was primarily attributable to the cash generated from product sales,customer licensing and engineering services fees.Changes in operating assets and liabilities for the nine months ended September 30,2025 primarily included a decrease in accounts receivable and an increase in deferred revenue,offset by an increase in prepaid expenses and other current assets,as well as decreases in accounts payable,accrued salaries and benefits and other current liabilities.Additionally,changes in operating assets and liabilities excludes the impact of the non-cash write-down of income taxes receivable and offsetting income taxes payable of$118.9 million(including interest)related to South Korea withholding taxes as discussed in“Provision for Income Taxes”section above.Cash provided by operating activities of$171.6 million for the nine months ended September 30,2024,was primarily attributable to the cash generated from customer licensing,product sales and engineering services fees.Changes in operating assets and liabilities for the nine months ended September 30,2024 primarily included decreases in unbilled receivables and prepaids and other current assets and an increase in income taxes payable,offset by increases in income taxes receivable,inventories and accounts receivable,and a decrease in accrued salaries and benefits.Investing ActivitiesCash used in investing activities of$231.4 million for the nine months ended September 30,2025,consisted of purchases of available-for-sale marketable securities of$498.2 million and$20.3 million paid to acquire property and equipment,offset by proceeds from the maturities of available-for-sale marketable securities of$287.1 million.Cash provided by investing activities of$13.0 million for the nine months ended September 30,2024,consisted of proceeds from the maturities and sales of available-for-sale marketable securities of$206.9 million and$85.7 million,respectively,and net proceeds from the sale of a non-marketable equity security of$22.8 million,offset by purchases of available-for-sale marketable securities of$278.2 million,and$24.2 million paid to acquire property and equipment.Financing ActivitiesCash used in financing activities of$49.9 million for the nine months ended September 30,2025,was primarily due to$37.6 million in payments of taxes on restricted stock units,$10.2 million paid under installment payment arrangements to acquire fixed assets and an aggregate payment of$5.8 million as part of our share repurchases in 2025,offset by$3.7 million in proceeds from the issuance of common stock under equity incentive plans.Cash used in financing activities of$165.3 million for the nine months ended September 30,2024,was primarily due to an aggregate payment of$113.3 million as part of our share repurchases in 2024(includes$0.2 million in fees related to an ASR program),$40.3 million in payments of taxes on restricted stock units,and$12.7 million paid under installment payment 34arrangements to acquire fixed assets,offset by$3.4 million in proceeds from the issuance of common stock under equity incentive plans.Contractual ObligationsAs of September 30,2025,our material contractual obligations were as follows:(In thousands)Total Remainder of2025 2026 2027 2028 Contractual obligations Software licenses$33,246$2,297$13,605$12,997$4,347 Other contractual obligations 171 33 138 Total$33,417$2,330$13,743$12,997$4,347 The above table does not reflect possible payments in connection with unrecognized tax benefits of approximately$25.2 million,including$23.9 million recorded as a reduction of long-term deferred tax assets and$1.3 million in long-term income taxes payable as of September 30,2025.As noted in Note 13,“Income Taxes,”of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q,although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months,we cannot reasonably estimate the timing of the outcome at this time.For our lease commitments as of September 30,2025,refer to Note 9,“Leases,”of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q.We have commitments with various software vendors for agreements generally having terms longer than one year.Share Repurchase ProgramOn October 29,2020,our Board approved the 2020 Repurchase Program authorizing the repurchase of up to an aggregate of 20.0 million shares.Share repurchases under the 2020 Repurchase Program may be made through the open market,established plans or privately negotiated transactions in accordance with all applicable securities laws,rules and regulations.There is no expiration date applicable to the 2020 Repurchase Program.During the nine months ended September 30,2025,we entered into share repurchase plans(the“Buying Plans”)with Mizuho Securities USA,LLC(“Mizuho”),pursuant to which Mizuho will repurchase shares of our common stock from February 6,2025 through December 31,2025,with provisions to terminate sooner.The Buying Plans are part of the 2020 Repurchase Program.The execution of share repurchases is dependent on our stock price reaching certain levels.During the nine months ended September 30,2025,we repurchased 0.1 million shares for approximately$5.8 million as part of the Buying Plans,which were retired and recorded as a reduction to stockholders equity.During the nine months ended September 30,2024,we repurchased approximately 2.2 million shares for approximately$113.8 million(includes excise tax)under the 2020 Repurchase Program,which were retired and recorded as a reduction to stockholders equity.As of September 30,2025,there remained an outstanding authorization to repurchase approximately 5.6 million shares of our outstanding common stock under the 2020 Repurchase Program.(1)(2)(3)(1)(2)(3)35Critical Accounting Policies and EstimatesThe discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements,which have been prepared in accordance with accounting principles generally accepted in the United States.The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets,liabilities,revenue and expenses,and related disclosure of contingent assets and liabilities.On an ongoing basis,we evaluate our estimates,including those related to revenue recognition,investments,income taxes,litigation and other contingencies.We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances,the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.Actual results may differ from these estimates under different assumptions or conditions.Our critical accounting estimates include those regarding(1)revenue recognition,(2)goodwill,(3)intangible assets,(4)income taxes,and(5)business combinations.For a discussion of our critical accounting estimates,see“Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies and Estimates”in our Annual Report on Form 10-K for the year ended December 31,2024.Recent Accounting PronouncementsRefer to Note 2,“Recent Accounting Pronouncements,”of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for a discussion of recent accounting pronouncements,including the respective expected dates of ad
2025-10-29
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PayPal Reports Third Quarter 2025 ResultsDelivers strong results and raises full year guidanceInitiates dividend,demonstrating ability to invest in growth and return capital to shareholdersSAN JOSE,Calif.,(October 28,2025)PayPal Holdings,Inc.(NASDAQ:PYPL)today reported results for the third quarter ending September 30,2025.“PayPal delivered another strong quarter and we are raising guidance,with broad-based profitable growth across branded experiences,PSP,and Venmo.We have returned the company to growth and are on pace for 6%to 7%transaction margin dollar growth in 2025 when excluding interest on customer balances.We are also building for an agentic future,partnering with leaders such as Google,OpenAI,and Perplexity.This is a stronger company today than we were two years ago.With differentiated competitive advantages,clear strategic direction and building execution momentum,we believe we are exceptionally well-placed to win into the future.”Alex ChrissPresident and CEO3Q25 Financial Results Net revenues increased 7%to$8.4 billion;6%currency-neutral(“FXN”).Transaction margin dollars1(“TM$”)increased 6%to$3.9 billion;TM$excluding interest on customer balances1,2 increased 7%to$3.6 billion.GAAP operating income increased 9%to$1.5 billion;non-GAAP operating income increased 6%to$1.6 billion.GAAP operating margin expanded 33 basis points to 18.1%;non-GAAP operating margin contracted 19 basis points to 18.6%.GAAP EPS increased 32%to$1.303;non-GAAP EPS increased 12%to$1.34.3Q25 Operating Results Total payment volume(“TPV”)increased 8%to$458.1 billion;7%FXN.Payment transactions decreased 5%to 6.3 billion.Excluding payment service provider transactions4(“PSP”),payment transactions increased 7%.Payment transactions per active account(“TPA”)on a trailing 12-month basis decreased 6%to 57.6.TPA ex-PSP4 increased 5%.Active accounts increased 1%to 438 million.On a sequential basis,active accounts increased by 0.1%,or by 0.3 million.Cash Flow Cash flow from operations of$2.0 billion and free cash flow of$1.7 billion.Adjusted free cash flow of$2.3 billion,which excludes the net timing impact between originating buy now,pay later(“BNPL”)receivables as held for sale and the subsequent sale of receivables.Balance Sheet and Liquidity Cash,cash equivalents,and investments totaled$14.4 billion as of September 30,2025.Debt totaled$11.4 billion as of September 30,2025.Returned$1.5 billion to stockholders by repurchasing approximately 21 million shares of common stock in 3Q25.On a trailing 12-month basis,returned$5.7 billion to stockholders by repurchasing approximately 78 million shares of common stock.Implementation of Dividend Program Today,PayPal announced that its Board of Directors(the“Board”)approved the initiation of a quarterly cash dividend program and declared a cash dividend of$0.14 per share on the Companys common stock,payable on December 10,2025,to stockholders of record as of the close of business on November 19,2025.This represents a targeted payout ratio of 10%of non-GAAP net income.The Company intends to pay a cash dividend on its common stock on a quarterly basis going forward,subject to and contingent upon market conditions and approval by the Board in its sole discretion.1.TM$,TM$excluding interest on customer balances,non-GAAP operating income,non-GAAP operating margin,non-GAAP EPS,free cash flow,and adjusted free cash flow are non-GAAP financial measures.“Non-GAAP Measures of Financial Performance”and subsequent tables at the end of this press release provide reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures.2.Interest on customer balances is reported within other value added services(“OVAS”)revenue and primarily comprises interest and revenue earned on customer assets.3.3Q25 GAAP EPS includes$0.01 positive impact from PayPals strategic investment portfolio and crypto assets held for investment,compared to a$0.14 negative impact in 3Q24.4.Payment transactions ex-PSP and TPA ex-PSP exclude unbranded card processing transactions and accounts.3Q 2025 Results1 3Q25 Financial ResultsPresented in millions,except per share data and percentages3Q253Q24YoY GrowthFXNYoY GrowthTotal payment volume$458,088$422,6418%7%GAAPNet revenues$8,417$7,8477%Operating income$1,520$1,3919%Operating margin18.1.73bpsEffective tax rate18.6#.0%(4.4pts)Net income(loss)$1,248$1,01024rnings per diluted share$1.30$0.9932%Net cash provided by operating activities$1,974$1,61422%Non-GAAPNet revenues$8,417$7,8477%6%Transaction margin dollars$3,871$3,6546%Transaction margin dollars excluding interest on customer balances$3,550$3,3157%Operating income$1,568$1,4776%Operating margin18.6.8%(19bps)Effective tax rate18.1!.7%(3.6pts)Net income$1,288$1,2285rnings per diluted share$1.34$1.2012%Free cash flow$1,718$1,44519justed free cash flow$2,279$1,54048%Financial Guidance2025 Guidance:Following another strong quarter,PayPal is raising full year TM$and EPS guidance and reaffirming free cash flow guidance.Please see PayPals 3Q25 earnings presentation for more detail.October 2025 GuidanceJuly 2025 GuidancePrior year period4Q25 GAAP EPS$1.23-$1.27N/A$1.11 Non-GAAP EPS1$1.27-$1.31N/A$1.19FY25 GAAP EPS2$5.11-$5.15$4.90-$5.05$3.99Non-GAAP EPS3$5.35-$5.39$5.15-$5.30$4.65Please see“Non-GAAP Measures of Financial Performance”for reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures and important additional information.1.Estimated non-GAAP amounts for the three months ending December 31,2025 reflect adjustments of approximately$40 million.2.FY24 GAAP EPS included a negative impact of$0.23 from PayPals strategic investment portfolio.3.Estimated non-GAAP amounts for the full year ending December 31,2025 reflect adjustments of approximately$255 million.3Q 2025 Results2Conference Call&WebcastPayPal Holdings,Inc.will host a conference call to discuss third quarter 2025 results at 8:00 a.m.Eastern Time today.A live webcast of the conference call,together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their most directly comparable GAAP measures,can be accessed through the companys Investor Relations website at https:/.In addition,an archive of the webcast will be accessible for 90 days through the same link.Disclosure ChannelsPayPal Holdings,Inc.uses the following channels as means of disclosing information about the company and for complying with its disclosure obligations under Regulation FD:Investor Relations website(https:/)PayPal Newsroom(https:/newsroom.paypal- Corporate website(https:/)PayPals LinkedIn page(https:/ Facebook page(https:/ YouTube channel(https:/ Chriss LinkedIn profile(https:/ Chriss X profile(https:/ Millers LinkedIn profile(https:/ Winokers LinkedIn profile(https:/ information that is posted through these channels may be deemed material.Accordingly,investors should monitor these channels in addition to PayPals press releases,filings with the Securities and Exchange Commission(“SEC”),public conference calls,and webcasts.About PayPalPayPal has been revolutionizing commerce globally for more than 25 years.The company creates innovative experiences that make moving money,selling,and shopping simple,personalized,and secure.PayPal empowers consumers and businesses in approximately 200 markets to join and thrive in the global economy.PresentationAll growth rates represent year-over-year comparisons,except as otherwise noted.FXN results are calculated by translating the current period local currency results by the prior period exchange rate.FXN growth rates are calculated by comparing the current period FXN results with the prior period results,excluding the impact from hedging activities.All amounts in tables are presented in U.S.dollars,rounded to the nearest million,except as otherwise noted.As a result,certain amounts and rates may not sum or recalculate using the rounded dollar amounts provided.Non-GAAP Financial MeasuresThis press release includes financial measures defined as“non-GAAP financial measures”by the SEC including:non-GAAP net income,non-GAAP earnings per diluted share,non-GAAP operating income,transaction margin dollars,transaction margin dollars excluding interest on customer balances,non-GAAP operating margin,transaction margin,non-GAAP effective tax rate,free cash flow,and adjusted free cash flow.For an explanation of the foregoing non-GAAP measures,please see“Non-GAAP Measures of Financial Performance”included in this press release.These measures may be different from non-GAAP financial measures used by other companies.The presentation of this financial information,which is not prepared under any comprehensive set of accounting rules or principles,is not intended to be considered in isolation of,or as a substitute for,the financial information prepared and presented in accordance with generally accepted accounting principles(“GAAP”).For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures,see“Non-GAAP Measures of Financial Performance,”“Reconciliation of GAAP Operating Income to Non-GAAP Operating Income,Transaction Margin Dollars,and Transaction Margin Dollars Ex-Interest on Customer Balances and GAAP Operating Margin to Non-GAAP Operating Margin and Transaction Margin,”“Reconciliation of GAAP Net Income(Loss)to Non-GAAP Net Income,GAAP Diluted EPS to Non-GAAP Diluted EPS,and GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate,”and“Reconciliation of Operating Cash Flow to Free Cash Flow and Adjusted Free Cash Flow.”3Q 2025 Results3Forward-looking statementsThis press release contains forward-looking statements relating to,among other things,the future results of operations,financial condition,expectations,and plans of PayPal Holdings,Inc.and its consolidated subsidiaries(“PayPal”)that reflect PayPals current projections and forecasts.Forward-looking statements can be identified by words such as“may,”“will,”“would,”“should,”“could,”“expect,”“anticipate,”“believe,”“estimate,”“intend,”continue,“strategy,”“future,”“opportunity,”“plan,”“project,”“forecast,”and other similar expressions.Forward-looking statements may include,but are not limited to,statements regarding our guidance and projected financial and operating results for the fourth quarter and full year 2025;our capital return program,including the implementation of our dividend program and future dividend payments,if any;the timing and impact of product launches and acquisitions;and the projected future growth of PayPals businesses.Forward-looking statements are based upon various estimates and assumptions,as well as information known to PayPal as of the date of this press release,and are inherently subject to numerous risks and uncertainties.Our actual results could differ materially from those estimated or implied by forward-looking statements.Factors that could cause or contribute to such differences include,but are not limited to:our ability to compete in markets that are highly competitive and subject to rapid technological change,and to develop and deliver new or enhanced products and services on a timely basis;cyberattacks and security vulnerabilities,and associated impacts;the effect of global and regional political,economic,market and trade conditions,including military conflicts,supply chain issues,tariffs or uncertainty thereof,and related events that affect payments or commerce activity,including inflation and interest rates;the impact of catastrophic events,such as global pandemics,that may disrupt our business,as well as our customers,suppliers,vendors and other business partners;the stability,security and performance of our payments platform;the effect of extensive government regulation and oversight related to our business,products and services in a variety of areas,including,but not limited to,laws covering payments,lending and consumer protection;the impact of complex and changing laws and regulations worldwide,including,but not limited to,laws covering cybersecurity,privacy,data protection,and artificial intelligence;the impact of payment card,bank,or other network rules or practices;risks related to our credit products,including our ability to realize benefits from our agreements with third parties such as our agreements to sell our credit receivables;changes in how consumers fund transactions;our ability to effectively detect and prevent the use of our services for fraud,abusive behaviors,illegal activities,or improper purposes;our ability to manage regulatory and litigation risks,and the outcome of legal and regulatory proceedings;our reliance on third parties in many aspects of our business;damage to our reputation or brands;fluctuations in foreign currency exchange rates;changes in tax rates and exposure to additional tax liabilities;changes to our capital allocation,management of operating cash or incurrence of indebtedness;our ability to timely develop and upgrade our technology systems,infrastructure and customer service capabilities;the impact of proposed or completed acquisitions,divestitures,strategic investments,or entries into new businesses or markets;and our ability to attract,hire,and retain highly talented employees.The forward-looking statements in this release do not include the potential impact of any acquisitions or divestitures that may be announced and/or contemplated after the date hereof.More information about factors that could adversely affect PayPals results of operations,financial condition and prospects,or that could cause actual results to differ from those expressed or implied in forward-looking statements is included under the captions“Risk Factors,”“Legal Proceedings”and“Managements Discussion and Analysis of Financial Condition and Results of Operations”in PayPals most recent annual report on Form 10-K and its subsequent quarterly reports on Form 10-Q,copies of which may be obtained by visiting PayPals Investor Relations website at https:/ or the SECs website at www.sec.gov.All information in this release speaks as of October 28,2025.For the reasons discussed above,you should not place undue reliance on the forward-looking statements in this press release.PayPal assumes no obligation to update such forward-looking statements.Contacts Investor Relations Media R 2025 PayPal Holdings,Inc.All rights reserved.3Q 2025 Results4PayPal Holdings,Inc.Unaudited Condensed Consolidated Balance SheetsSeptember 30,2025December 31,2024(In millions,except par value)ASSETSCurrent assets:Cash and cash equivalents$8,995$6,662 Short-term investments 1,760 4,262 Accounts receivable,net 973 984 Loans and interest receivable,held for sale 1,404 541 Loans and interest receivable,net 6,396 6,422 Funds receivable and customer accounts 38,668 37,671 Prepaid expenses and other current assets 1,980 1,664 Total current assets 60,176 58,206 Long-term investments 3,601 4,583 Property and equipment,net 1,656 1,508 Goodwill 10,941 10,837 Intangible assets,net 226 326 Other assets 3,201 3,265 Total assets$79,801$78,725 LIABILITIES AND EQUITYCurrent liabilities:Accounts payable$208$227 Funds payable and amounts due to customers 40,668 39,671 Accrued expenses and other current liabilities 4,048 5,592 Total current liabilities 44,924 45,490 Other long-term liabilities 3,403 2,939 Long-term debt 11,276 9,879 Total liabilities 59,603 58,308 Equity:Common stock,$0.0001 par value;4,000 shares authorized;941 and 993 shares outstanding as of September 30,2025 and December 31,2024,respectively Preferred stock,$0.0001 par value;100 shares authorized,unissued Treasury stock at cost,400 and 337 shares as of September 30,2025 and December 31,2024,respectively(31,624)(27,085)Additional paid-in-capital 21,359 20,705 Retained earnings 31,163 27,347 Accumulated other comprehensive income(loss)(700)(550)Total equity 20,198 20,417 Total liabilities and equity$79,801$78,725 3Q 2025 Results5PayPal Holdings,Inc.Unaudited Condensed Consolidated Statements of Income(Loss)Three Months Ended September 30,Nine Months Ended September 30,2025202420252024(In millions,except per share amounts)Net revenues$8,417$7,847$24,496$23,431 Operating expenses:Transaction expense 4,063 3,841 11,735 11,700 Transaction and credit losses 483 352 1,330 1,008 Customer support and operations(1)447 427 1,258 1,317 Sales and marketing(1)521 508 1,592 1,375 Technology and development(1)801 746 2,299 2,206 General and administrative(1)513 519 1,477 1,553 Restructuring and other(1)69 63 251 388 Total operating expenses 6,897 6,456 19,942 19,547 Operating income 1,520 1,391 4,554 3,884 Other income(expense),net 13 (80)111 35 Income before income taxes 1,533 1,311 4,665 3,919 Income tax expense 285 301 869 893 Net income(loss)$1,248$1,010$3,796$3,026 Net income(loss)per share:Basic$1.31$1.00$3.92$2.91 Diluted$1.30$0.99$3.88$2.89 Weighted average shares:Basic 950 1,015 968 1,040 Diluted 960 1,024 978 1,048(1)Includes stock-based compensation as follows:Customer support and operations$52$50$156$173 Sales and marketing 32 30 99 108 Technology and development 124 111 371 366 General and administrative 70 81 225 257 Restructuring and other 28 88$278$300$851$992 3Q 2025 Results6PayPal Holdings,Inc.Unaudited Condensed Consolidated Statements of Cash FlowsThree Months Ended September 30,Nine Months Ended September 30,2025202420252024(In millions)Cash flows from operating activities:Net income(loss)$1,248$1,010 3,796 3,026 Adjustments to reconcile net income(loss)to net cash provided by operating activities:Transaction and credit losses 483 352 1,330 1,008 Depreciation and amortization 245 255 729 783 Stock-based compensation 257 284 792 947 Deferred income taxes 182 (21)93 8 Net(gains)losses on strategic investments(10)171 (69)226 Accretion of discounts on investments,net of amortization of premiums(20)(93)(77)(290)Adjustments to loans and interest receivable,held for sale 70 28 122 92 Other 52 (96)(245)(138)Originations of loans receivable,held for sale(9,682)(6,108)(24,040)(17,173)Proceeds from repayments and sales of loans receivable,originally classified as held for sale 9,048 5,984 23,160 17,159 Changes in assets and liabilities:Accounts receivable 126 (51)11 31 Accounts payable 44 35 (6)24 Other assets and liabilities (69)(136)(1,564)(647)Net cash provided by operating activities 1,974 1,614 4,032 5,056 Cash flows from investing activities:Purchases of reverse repurchase agreements (148)(201)(299)Maturities of reverse repurchase agreements 75 288 226 Purchases of property and equipment(256)(169)(658)(480)Proceeds from sales of property and equipment 3 Purchases and originations of loans receivable(4,414)(5,413)(15,904)(15,374)Proceeds from repayments and sales of loans receivable,originally classified as held for investment 4,735 4,945 15,945 14,705 Purchases of investments(4,387)(4,815)(15,951)(20,819)Maturities and sales of investments 7,432 6,938 19,027 21,179 Funds receivable 1,553 1,519 (1,232)152 Collateral posted related to derivative instruments,net 109 (133)(207)(58)Other (15)Net cash provided by(used in)by investing activities 4,772 2,799 1,095 (768)Cash flows from financing activities:Borrowings from repurchase agreements 2,544 466 2,949 656 Repayments of repurchase agreements(2,544)(466)(2,949)(656)Proceeds from issuance of common stock 74 55 Purchases of treasury stock(1,500)(1,776)(4,551)(4,778)Tax withholdings related to net share settlements of equity awards(68)(41)(317)(271)Borrowings under financing arrangements 746 132 2,237 1,546 Repayments under financing arrangements(747)(1,954)(411)Funds payable and amounts due to customers(250)(733)663 (771)Collateral received related to derivative instruments and reverse repurchase agreements,net(10)(71)(155)(1)Other (40)(6)(60)Net cash used in financing activities(1,829)(2,529)(4,009)(4,691)3Q 2025 Results7PayPal Holdings,Inc.Unaudited Condensed Consolidated Statements of Cash Flows(continued)Three Months Ended September 30,Nine Months Ended September 30,2025202420252024(In millions)Effect of exchange rate changes on cash,cash equivalents,and restricted cash (44)192 245 103 Net change in cash,cash equivalents,and restricted cash 4,873 2,076 1,363 (300)Cash,cash equivalents,and restricted cash at beginning of period 18,980 19,458 22,490 21,834 Cash,cash equivalents,and restricted cash at end of period$23,853$21,534$23,853$21,534 Supplemental cash flow disclosures:Cash paid for interest$19$2$210$168 Cash paid for income taxes,net$196$153$1,033$975 3Q 2025 Results8PayPal Holdings,Inc.Unaudited Summary of Consolidated Net RevenuesOur revenues are classified into the following two categories:Transaction revenues:Net transaction fees charged to merchants and consumers on a transaction basis based on the Total Payment Volume(“TPV”)completed on our payments platform.Growth in TPV is directly impacted by the number of payment transactions that we enable on our payments platform.We generate additional revenue from merchants and consumers:on transactions where we perform currency conversion,when we enable cross-border transactions(i.e.,transactions where the merchant and consumer are in different countries),to facilitate the instant transfer of funds for our customers from their PayPal or Venmo account to their bank account or debit card,to facilitate the purchase and sale of cryptocurrencies,as contractual compensation from sellers that violate our contractual terms(for example,through fraud or counterfeiting),and other miscellaneous fees.Revenues from other value added services:Net revenues derived primarily from revenue earned through partnerships,referral fees,subscription fees,gateway fees,and other services we provide to our consumers and merchants.We also earn revenues from interest and fees earned on our portfolio of loans receivable,and interest earned on certain assets underlying customer balances.Net Revenues by TypeThree Months EndedSeptember 30,2025June 30,2025March 31,2025December 31,2024September 30,2024(In millions,except percentages)Transaction revenues$7,522$7,441$7,016$7,588$7,067 Current quarter vs prior quarter 1%6%(8)%7%(1)%Current quarter vs prior year quarter 6%4%4%6%Percentage of total 89%Revenues from other value added services$895$847$775$778$780 Current quarter vs prior quarter 6%9%7%Current quarter vs prior year quarter 15%5%2%Percentage of total 11%9%Total net revenues$8,417$8,288$7,791$8,366$7,847 Current quarter vs prior quarter 2%6%(7)%7%Current quarter vs prior year quarter 7%5%1%4%6%Net Revenues by GeographyThree Months EndedSeptember 30,2025June 30,2025March 31,2025December 31,2024September 30,2024(In millions,except percentages)U.S.net revenues$4,753$4,709$4,463$4,732$4,518 Current quarter vs prior quarter 1%6%(6)%5%(1)%Current quarter vs prior year quarter 5%3%2%6%Percentage of total 56WWWX%International net revenues$3,664$3,579$3,328$3,634$3,329 Current quarter vs prior quarter 2%8%(8)%9%Current quarter vs prior year quarter 10%7%3%7%5%(FXN)Current quarter vs prior year quarter 7%7%5%7%6%Percentage of total 44CCCB%Total net revenues$8,417$8,288$7,791$8,366$7,847 Current quarter vs prior quarter 2%6%(7)%7%Current quarter vs prior year quarter 7%5%1%4%6%(FXN)Current quarter vs prior year quarter 6%5%2%4%6%3Q 2025 Results9PayPal Holdings,Inc.Unaudited Supplemental Operating DataThree Months EndedSeptember 30,2025June 30,2025March 31,2025December 31,2024September 30,2024(In millions,except percentages)Active accounts(1)438 438 436 434 432 Current quarter vs prior quarter%1%1%Current quarter vs prior year quarter 1%2%2%2%1%Number of payment transactions(2)6,331 6,226 6,045 6,619 6,631 Current quarter vs prior quarter 2%3%(9)%1%Current quarter vs prior year quarter(5)%(5)%(7)%(3)%6%Payment transactions per active account(3)57.6 58.3 59.4 60.6 61.4 Current quarter vs prior quarter(1)%(2)%(2)%(1)%1%Current quarter vs prior year quarter(6)%(4)%(1)%3%9%TPV(4)$458,088$443,547$417,208$437,836$422,641 Current quarter vs prior quarter 3%6%(5)%4%1%Current quarter vs prior year quarter 8%6%3%7%9%(FXN)Current quarter vs prior year quarter 7%5%4%7%9%Transaction Expense Rate(5)0.89%0.89%0.89%0.91%0.91%Transaction and Credit Loss Rate(6)0.11%0.11%0.09%0.10%0.08%Transaction Margin(7)46.0F.4G.7G.0F.6%Amounts in the table are rounded to the nearest million,except as otherwise noted.As a result,certain amounts may not recalculate using the rounded amounts provided.(1)An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our platform,not including gateway-exclusive transactions,within the past 12 months.A platform access partner is a third party whose customers are provided access to PayPals platform or services through such third-partys login credentials,including individuals and entities that utilize Hyperwallets payout capabilities.A user may register on our platform to access different products and may register more than one account to access a product.Accordingly,a user may have more than one active account.The number of active accounts provides management with additional perspective on the overall scale of our platform,but may not have a direct relationship to our operating results.(2)Number of payment transactions is the total number of payments,net of payment reversals,successfully completed on our payments platform or enabled by PayPal via a partner payment solution,not including gateway-exclusive transactions.(3)Number of payment transactions per active account reflects the total number of payment transactions within the previous 12-month period,divided by active accounts at the end of the period.The number of payment transactions per active account provides management with insight into the average number of times an account engages in payments activity on our payments platform in a given period.The number of times a consumer account or a merchant account transacts on our platform may vary significantly from the average number of payment transactions per active account.(4)TPV is the value of payments,net of payment reversals,successfully completed on our payments platform or enabled by PayPal via a partner payment solution,not including gateway-exclusive transactions.(5)Transaction expense rate is transaction expense divided by TPV.(6)Transaction and credit loss rate is transaction and credit losses divided by TPV.(7)Transaction margin is a non-GAAP financial measure.Transaction margin is net revenues less transaction expense and transaction and credit losses,divided by net revenues.Subsequent tables at the end of this press release provide reconciliation to the closest GAAP measure.3Q 2025 Results10PayPal Holdings,Inc.Non-GAAP Measures of Financial PerformanceTo supplement the companys condensed consolidated financial statements presented in accordance with generally accepted accounting principles,or GAAP,the company uses non-GAAP measures of certain components of financial performance.These non-GAAP measures include non-GAAP net income,non-GAAP earnings per diluted share,non-GAAP operating income,transaction margin dollars,transaction margin dollars excluding interest on customer balances,non-GAAP operating margin,transaction margin,non-GAAP effective tax rate,free cash flow,and adjusted free cash flow.These non-GAAP measures are not in accordance with,or an alternative to,measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies.In addition,these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the companys results of operations as determined in accordance with GAAP.These measures should be used to evaluate the companys results of operations only in conjunction with the corresponding GAAP measures.Reconciliation of all non-GAAP measures to the most directly comparable GAAP measures can be found in the subsequent tables included in this press release.These non-GAAP measures are provided to enhance investors overall understanding of the companys current financial performance and its prospects for the future.Specifically,the company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses,gains and losses,as the case may be,that may not be indicative of its core operating results and business outlook.In addition,because the company has historically reported certain non-GAAP results to investors,the company believes that the inclusion of non-GAAP measures provides consistency in the companys financial reporting.For its internal budgeting process,and as discussed further below,the companys management uses financial measures that do not include amortization or impairment of acquired intangible assets,impairment of goodwill,restructuring-related charges,certain other gains,losses,benefits,or charges that are not indicative of the companys core operating results,and the income taxes associated with the foregoing.In addition to the corresponding GAAP measures,the companys management also uses the foregoing non-GAAP measures in reviewing the financial results of the company.The company excludes the following items from non-GAAP net income,non-GAAP earnings per diluted share,non-GAAP operating income,non-GAAP operating margin,and non-GAAP effective tax rate:Amortization or impairment of acquired intangible assets,impairment of goodwill,and transaction expenses from the acquisition or disposal of a business.We incur amortization or impairment of acquired intangible assets and goodwill in connection with acquisitions and may incur significant gains or losses or transactional expenses from the acquisition or disposal of a business and therefore exclude these amounts from our non-GAAP measures.We exclude these items because management does not believe they are reflective of our ongoing operating results.Restructuring.These consist of expenses related to workforce reduction including employee severance and benefits costs and stock-based compensation expense,real estate and facilities charges,other asset impairments,accelerated depreciation charges,and other restructuring costs including non-recurring third-party costs.The company excludes significant restructuring charges primarily because management does not believe they are reflective of ongoing operating results as they are not normal,recurring cash operating expenses necessary to operate our business.Gains and losses on strategic investments including related crypto assets held for investment.The gains and losses we record on our strategic investments are tied to the performance of the portfolio companies.The gains and losses we record on crypto assets held for investment are influenced by factors like market sentiment including trading,regulatory changes,and underlying company performance.We exclude such gains and losses in full because we do not actively trade our strategic investments or crypto assets nor do we rely on them to fund our ongoing operations.Certain other significant gains,losses,benefits,or charges that are not indicative of the companys core operating results.These are significant gains,losses,benefits,or charges during a period that are the result of isolated events or transactions that have not occurred frequently in the past and are not expected to occur regularly in the future.The company excludes these amounts from its non-GAAP results because management does not believe they are indicative of our current or ongoing operating results.Tax effect of non-GAAP adjustments.This adjustment is made to present the amounts described above on an after-tax basis consistent with the presentation of non-GAAP net income.Transaction margin dollars represents operating income,excluding the following expenses:(i)Customer support and operations,(ii)Sales and marketing,(iii)Technology and development,(iv)General and administrative,and(v)Restructuring and other.Transaction margin dollars is a measure used by management to evaluate the economic value generated by activity on the companys platform,including the impact of transaction and credit losses.Accordingly,we believe that transaction margin dollars provides useful information to investors and others in understanding and evaluating our financial results in the same manner as management.Transaction margin dollars can also be calculated as total net revenues less transaction expense and transaction and credit losses.Transaction margin dollars excluding interest on customer balances:Interest earned on certain assets underlying customer account balances is primarily driven by the movement in interest rates and level of account balances.The company excludes interest revenue earned on customer balances from transaction margin dollars because the impact of changes in interest rates on customer balances is not within the companys control.Management uses this metric to further isolate the economic value generated by activity on the companys platform.Free cash flow represents operating cash flows less purchases of property and equipment.The company uses free cash flow as a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of property,buildings,and equipment,which can then be used to,among other things,invest in the companys business,make strategic acquisitions and investments,and repurchase stock.A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the companys cash balance for the period.3Q 2025 Results11In addition to the non-GAAP measures discussed above,the company also analyzes certain measures,including net revenues and operating expenses,on an FX-neutral basis to better measure the comparability of operating results between periods.The company believes that changes in foreign currency exchange rates are not indicative of the companys operations and evaluating growth in net revenues and operating expenses on an FX-neutral basis provides an additional meaningful and comparable assessment of these measures to both management and investors.FX-neutral results are calculated by translating the current periods local currency results with the prior periods exchange rate.FX-neutral growth rates are calculated by comparing the current periods FX-neutral results by the prior periods results,excluding the impact from hedging activities.PayPal Holdings,Inc.Reconciliation of GAAP Operating Income to Non-GAAP Operating Income,Transaction Margin Dollars,and Transaction Margin Dollars Ex-Interest on Customer Balances and GAAP Operating Margin to Non-GAAP Operating Margin and Transaction MarginThree Months Ended September 30,20252024(In millions,except percentages)(unaudited)GAAP operating income$1,520$1,391 Amortization of acquired intangible assets 47 51 Restructuring(1)1 35 Total non-GAAP operating income adjustments 48 86 Non-GAAP operating income$1,568$1,477 Transaction margin adjustments:Customer support and operations 447 427 Sales and marketing 482 468 Technology and development 800 742 General and administrative 506 512 Restructuring and other 68 28 Non transaction-related expense 2,303 2,177 Transaction margin dollars 3,871 3,654 Interest on customer balances 321 339 Transaction margin dollars ex-interest on customer balances$3,550$3,315 GAAP net revenues$8,417$7,847 GAAP operating margin 18%Non-GAAP operating margin 19%Transaction margin 46G%(1)Restructuring includes any stock-based compensation associated with the restructuring activities.The three months ended September 30,2024 includes$28 million of stock-based compensation expenses.3Q 2025 Results12PayPal Holdings,Inc.Reconciliation of GAAP Net Income(Loss)to Non-GAAP Net Income,GAAP Diluted EPS to Non-GAAP Diluted EPS,and GAAP Effective Tax Rate to Non-GAAP Effective Tax RateThree Months Ended September 30,20252024(In millions,except per share data and percentages)(unaudited)GAAP income before income taxes$1,533$1,311 GAAP income tax expense 285 301 GAAP net income(loss)1,248 1,010 Non-GAAP adjustments to net income(loss):Non-GAAP operating income adjustments(see table above)48 86 Net(gains)losses on strategic investments and crypto assets held for investment(9)171 Tax effect of non-GAAP adjustments 1 (39)Non-GAAP net income$1,288$1,228 Diluted net income(loss)per share:GAAP$1.30$0.99 Non-GAAP$1.34$1.20 Shares used in GAAP diluted share calculation 960 1,024 Shares used in non-GAAP diluted share calculation 960 1,024 GAAP effective tax rate 19#%Tax effect of non-GAAP adjustments to net income(loss)(1)%(1)%Non-GAAP effective tax rate 18%Reconciliation of Operating Cash Flow to Free Cash Flow and Adjusted Free Cash FlowThree Months Ended September 30,20252024(In millions)(unaudited)Net cash provided by operating activities$1,974$1,614 Less:Purchases of property and equipment(256)(169)Free cash flow 1,718 1,445 Net timing impact between originating credit receivables as held for sale and the subsequent sale of receivables 561 95 Adjusted free cash flow$2,279$1,540 3Q 2025 Results13
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PayPal Third Quarter 2025 PerformanceOctober28,2025Financial results&company highlights 22025 PayPal Holdings,Inc.Non-GAAP Financial MeasuresThis presentation contains non-GAAP measures relating to our performance.These measures may exclude certain expenses,gains and losses that may not be indicative of our core operating results and business outlook,and,in each case,may be different from the non-GAAP financial measures used by other companies.The presentation of this financial information,which is not prepared under any comprehensive set of accounting rules or principles,is not intended to be considered in isolation of,or as a substitute for,the financial information prepared and presented in accordance with generally accepted accounting principles.You can find the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the GAAP to non-GAAP reconciliation section of this presentation.Growth RatesAll growth rates represent year-over-year comparisons,except as otherwise noted.FX-Neutral(which we also refer to as FXN or currency-neutral)results are calculated by translating the current periods local currency results by the prior periods exchange rate.FX-Neutral growth rates are calculated by comparing the current periods FX-Neutral results with the prior periods results,excluding the impact from currency hedging activities.Forward-Looking StatementsThis presentation contains forward-looking statements relating to,among other things,the future results of operations,financial condition,expectations and plans of PayPal Holdings,Inc.and its consolidated subsidiaries(“PayPal”)that reflect current projections and forecasts.Forward-looking statements can be identified by words such as“may,”“will,”“would,”“should,”“could,”“expect,”“anticipate,”“believe,”“estimate,”“intend,”“continue,”“strategy,”“future,”opportunity,”“plan,”“project,”“forecast”and other similar expressions.Forward-looking statements may include,but are not limited to,statements regarding our guidance and projected financial and operating results for fourth quarter and full year 2025;our capital return program,including the implementation of our dividend program and future dividend payments,if any;the timing and impact of product launches and acquisitions;and the projected future growth of PayPals businesses.Forward-looking statements are based upon various estimates and assumptions,as well as information known to PayPal as of the date of this presentation and are inherently subject to numerous risks and uncertainties.Our actual results could differ materially from those estimated or implied by forward-looking statements.Factors that could cause or contribute to such differences include,but are not limited to:our ability to compete in markets that are highly competitive and subject to rapid technological change,and to develop and deliver new or enhanced products and services on a timely basis;cyberattacks and security vulnerabilities,and associated impacts;the effect of global and regional political,economic,market and trade conditions including military conflicts,supply chain issues,tariffs or uncertainty thereof,and related events that affect payments or commerce activity,including inflation and interest rates;the impact of catastrophic events,such as global pandemics,that may disrupt our business,as well as our customers,suppliers,vendors and other business partners;the stability,security and performance of our payments platform;the effect of extensive government regulation and oversight related to our business,products and services in a variety of areas,including,but not limited to,laws covering payments,lending and consumer protection;the impact of complex and changing laws and regulations worldwide,including,but not limited to,laws covering cybersecurity,privacy,data protection,and artificial intelligence;the impact of payment card,bank,or other network rules or practices;risks related to our credit products,including our ability to realize benefits from our agreements with third parties such as our agreements to sell our credit receivables;changes in how consumers fund transactions;our ability to effectively detect and prevent the use of our services for fraud,abusive behaviors,illegal activities,or improper purposes;our ability to manage regulatory and litigation risks,and the outcome of legal and regulatory proceedings;our reliance on third parties in many aspects of our business;damage to our reputation or brands;fluctuations in foreign currency exchange rates;changes in tax rates and exposure to additional tax liabilities;changes to our capital allocation,management of operating cash or incurrence of indebtedness;our ability to timely develop and upgrade our technology systems,infrastructure and customer service capabilities;the impact of proposed or completed acquisitions,divestitures,strategic investments,or entries into new businesses or markets;and our ability to attract,hire,and retain talented employees.The forward-looking statements in this presentation do not include the potential impact of any acquisitions or divestitures that may be announced and/or contemplated after the date of this presentation.More information about factors that could adversely affect PayPals results of operations,financial condition and prospects or that could cause actual results to differ from those expressed or implied in forward-looking statements is included in PayPals most recent annual report on Form 10-K,and its subsequent quarterly reports on Form 10-Q.All information in this presentation is as of October28,2025.For the reasons discussed above,you should not place undue reliance on the forward-looking statements in this presentation.PayPal assumes no obligation to update such forward-looking statements.32025 PayPal Holdings,Inc.All growth rates reference 3Q25 year-over-year growth unless otherwise noted.For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures,please see the GAAP to non-GAAP Reconciliations on slides 25-28.(1)TM$is transaction margin dollars.Interest on customer balances is reported within other value added services(OVAS)revenue and primarily comprises interest and revenue earned on customer assets.TM$and TM$ex.interest on customer balances are non-GAAP measures.Reconciliations to the most directly comparable GAAP measure on slide 26.(2)Adjusted free cash flow excludes the net impact from timing differences between originating BNPL receivables classified as held for sale and their subsequent sale.See slide 28 for more detail.(3)PayPals enterprise payments platform(formerly Braintree).Momentum driven by focus and executionTM$ex.interest on customer balances1 on pacefor 6%-7%growth in 25 with multiple drivers Reinvigorating key parts of the businessModernizing branded checkout online,offline,and agentic Venmo and PSP growth accelerating Omni and buy now,pay later(BNPL)scaling rapidly Investing for growth and returning capital to shareholders Initiative traction across the company providing confidenceto increase growth investment Strong capital return program with$6B FY25 expectedshare repurchase and dividend initiationAnother quarter of profitable growth and strong free cash flow generation 7%TM$ex.interest on customer balances1$2.3B adjusted free cash flow2 More diversified and profitable growth driversBranded experiences TPV 8%FXN and branded online checkout TPV 5%FXNVenmo revenue 20%and TPV 14%PSP TPV 6%,including Enterprise Payments3 TPV mid-single-digits Raising FY25 TM$and EPS guidanceNow expect 15%-16%non-GAAP EPS growthPayPal is a stronger company todayAccelerating momentum across strategic initiatives Accelerating growth while shaping the future of commerce 42025 PayPal Holdings,Inc.Revenue ex.interest on customer balances growth(spot)TM$ex.interest on customer balances growth(spot)6%5%FY24YTD25For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures,please see the Supplemental Information.(1)Win Checkout:PayPal branded checkout(online),Pay with Venmo,and eBay.(2)Scale Omni and Grow Venmo:P2P(PayPal and Venmo),debit and credit(PayPal and Venmo)and other consumer solutions(e.g.,remittances).(3)Drive PSP Profitability:unbranded card processing including Enterprise Payments(formerly Braintree),PayPal Complete Payments and other merchant solutions(e.g.,SMB merchant lending,payouts,invoicing,etc.).(4)Transaction loss(TL)expense does not include credit loss.Transaction loss rate as a percent of TPV has averaged 7bps over the last 8 quarters.(5)Year-to-date through the end of September.5%7%FY24YTD25Win Checkout1Consistent contribution to growthScale Omni&Grow Venmo2Faster growth from initiatives(credit,Venmo,and PayPal Everywhere)Drive PSP Profitability3Contributing to TM$growth and reaccelerating TPV growth post-resetTransaction loss impact4Higher 25 y/y expense from increased TL provisions,normalization,and August service disruption Next-gen growth vectorsInnovating for long-term growth:agentic,ads/personalization,stablecoins,and PayPal World7%5%5%6%PayPals growth is diversifyingInvestor Day strategic drivers contributing to faster TM$growth55 52025 PayPal Holdings,Inc.Online checkout and omni initiatives accelerating U.S.Branded Experiences TPV growth to 10%;starting to scale globallyU.S.Branded Experiences TPV growth3Q244Q241Q252Q253Q25%5%All growth rates reference 3Q25 year-over-year growth unless otherwise noted.(1)Branded experiences TPV includes branded checkout(online)as well as in-store payment methods,including debit(PayPal and Venmo)and tap to pay.(2)Redesigned paysheet penetration of global online branded checkout buyer-started transactions.Advancing strategic growth driversScale Omni andGrow VenmoDrive PSP ProfitabilityScale Next Gen Growth VectorsWin CheckoutBranded ExperiencesBranded Experiences TPV1 8%FXN;gaining traction online&in storeOnlineFocused on scaling redesign,improving presentment,biometricsRedesigned paysheet2 on 20%global branded trafficPaysheet biometrics increase conversion 2-5pts in testingPay with Venmo TPV grew 40%and MAA grew 25%BNPL TPV and MAA grew 20%Omni65bit and tap-to-pay TPV growthAdded 2M first time PayPal&Venmo debit card users in the U.S.40%Venmo debit card MAA growth5M contactless mobile wallet enrollments in Germany since launchPayPal debit card actives transact 6X more and generate 3X ARPA compared to checkout-only actives Launch of PayPal Everywhere in the U.S.62025 PayPal Holdings,Inc.All growth rates reference 3Q25 year-over-year growth unless otherwise noted.Scale Omni andGrow VenmoDrive PSP ProfitabilityScale Next Gen Growth VectorsWin CheckoutBranded ExperiencesBuilding the future of flexible payments at scale with buy now,pay later(BNPL)$40B20 BNPL TPV growthBNPL MAA growthExpected 2025 BNPL TPVPayPal BNPL Net Promoter ScoreIMAGERY TBUExpanding product offerings and geographiesLaunched in Canada,brought BNPL in-store in the U.S.and extended payment terms in Italy and SpainMoving upstreamAdding messaging on product pages Rewarding consumers5sh back offer on pay later purchases in the U.S.for the holiday seasonExecuting capital lightExternalized portion of U.S.BNPL receivables to Blue Owl CapitalAdvancing strategic growth drivers 72025 PayPal Holdings,Inc.All growth rates reference 3Q25 year-over-year growth unless otherwise noted.(1)Excludes interest on customer balances.(2)Excludes one-time benefit from renewal and expansion of key payment partner relationship in 2Q25.(3)P2P revenue includes fees from business profiles,crypto,goods&services P2P,instant transfer,P2P with credit card,and tap-to-pay.(4)Year-to-date through the end of September.Advancing strategic growth driversScale Omni andGrow VenmoDrive PSP ProfitabilityScale Next Gen Growth VectorsWin CheckoutBranded ExperiencesDeepening Venmo engagement and driving faster growth(TPV 14%)$1.7B20fMGrowing 7%$25Growing mid-teens3Q Venmo revenue1 growthVenmo MAA Expected 2025 Venmo revenue1,2Venmo ARPA1,245%of Venmo revenue1,2 growth from Pay with Venmo and Venmo Debit CardP2P&other3Venmo Debit CardPay with Venmo10%y/y20%y/yYTD23YTD2544 82025 PayPal Holdings,Inc.Powering BigCommerce Payments,new embedded payment solution providing merchants with a dedicated“Money”dashboard within the BigCommerce Control Panel,mirroring key capabilities of merchants PayPal dashboard,providing streamlined access to real-time balance insights,top-ups and payouts,bank and card connections,and currency management through a single portalAll growth rates reference 3Q25 year-over-year growth unless otherwise noted.(1)PayPals enterprise payments platform(formerly Braintree).Advancing strategic growth driversScale Omni andGrow VenmoDrive PSP ProfitabilityScale Next Gen Growth VectorsWin CheckoutBranded ExperiencesPSP TPV growth accelerated to 6%FXN and continues to contribute to TM$growthEnterprise Payments1 TPV growth inflected post-price-to-value transition with new services&merchant winsDeepening merchant relationships withintegrated value-added services 2Q243Q244Q241Q252Q253Q254Q25EPowering BigCommerce Payments,new embedded payment solution providing merchants with integrated payment processing,BNPL,and unified balance managementEnterprise Payments TPV growth(FXN)PayoutsRapid fund distribution in 200 countries,50 currencies,&9 payment methods with 50% payouts volume sent to PayPal branded walletsPayment optimization Intelligent transaction routing and authentication optimization improves auth rates and Smart Debit Routing reduces transaction costs by 15%FX-as-a-serviceMulti-currency settlement and foreign exchange services delivering up to 20bps in transaction cost savingsRisk&fraud Two-sided network data and machine learning to identify and prevent fraud,along with chargeback protection and dispute automationOmnichannelPhysical retail expansion launching in 4Q through Verifone partnership 92025 PayPal Holdings,Inc.AgenticIntroducing Agentic Commerce Services to help merchants sell through AI platforms Forging partnerships with industry leaders,including Google,Mastercard,OpenAI,and Perplexity 92025 PayPal Holdings,Inc.9Advancing strategic growth driversScale Omni andGrow VenmoDrive PSP ProfitabilityScale Next Gen Growth VectorsWin CheckoutBranded ExperiencesShaping the future of commercePayPal WorldNow piloting PayPal World transactions Adding more global payment partners,including e&and Ooredoo Fintech in the Middle EastAdsEnabling small businesses to generate effective campaigns and unlock ad revenue with PayPal Ads ManagerCrypto&stablecoinReimagining global money movement with Pay with Crypto and crypto integrated within PayPal P2PPYUSD now$2.5B in market cap 102025 PayPal Holdings,Inc.TPV and revenue 2pts vs.2Q,marking second consecutive quarter of accelerationAnother quarter of high single-digit TM$growth ex.interest on customer balances Raising FY25 TM$and EPS guidanceReiterating FY25$6B-$7B FCF guidance 3Q25 snapshot(in millions,except%and per share data)ResultsY/Y growthTotal payment volume(TPV)$458,0888%;7%FXNRevenue$8,4177%;6%FXNTransaction margin$(TM$)1$3,8716%TM$ex.interest on customer balances1,2$3,5507%Non-GAAP EPS1$1.3412justed free cash flow1,3$2,27948%All growth rates reference 3Q25 year-over-year growth unless otherwise noted.Additional financial detail provided in Supplemental Information.(1)For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures,please see the GAAP to non-GAAP Reconciliations on slides 25-28.(2)Interest on customer balances is reported within OVAS revenue in this presentation and in our quarterly/annual SEC filings and primarily comprises interest and revenue earned on customer assets.(3)Adjusted free cash flow excludes the net impact from timing differences between originating BNPL receivables classified as held for sale and their subsequent sale.See slide 28 for more detail.112025 PayPal Holdings,Inc.Account and activity metrics1(in millions,except%and TPA)3Q25Active accounts2438Y/Y growth1%Monthly active accounts(MAA)3227Y/Y growth2%Number of payment transactions6,331Y/Y growth(5%)Number of payment transactions ex.PSP(unbranded card processing)4,035Y/Y growth7%Transactions per active account(TPA)457.6Y/Y growth(6%)TPA ex.PSP436.2Y/Y growth5%All growth rates reference 3Q25 year-over-year growth unless otherwise noted.(1)Detailed definitions on slide 29.(2)Active accounts are accounts that have completed a transaction within the past 12 months.(3)MAA are a subset of active accounts(primarily PayPal and Venmo)that have completed a transaction at least once during the month of measurement.MAAs presented at the end of a quarter or year are the average of each months MAAs in the respective quarter or year.(4)TPA and TPA ex.PSP are trailing 12-month metrics,reflecting transactions within the previous 12-month period,divided by active accounts at the end of the period.TPA ex.PSP excludes both unbranded card processing transactions and unbranded active accounts(primarily Enterprise Payments).(5)PayPals enterprise payments platform(formerly Braintree).Active accounts2 1%and MAA3 2%,with contributions from both PayPal consumer accounts and VenmoNumber of payment transactions-5%and TPA4-6%,reflecting price-to-value actions driving lower Enterprise Payments5 transactionsNumber of payment transactions ex.PSP 7%and TPA ex.PSP4 5%,reflecting customer engagement with transaction growth in branded experiences(debit and branded checkout),Venmo,and P2P 122025 PayPal Holdings,Inc.TPV mix across PayPals platform3Q242Q253Q25Branded experiences(online&offline)1FXN GROWTH6%8%8%OF TOTAL3011%Venmo2FXN GROWTH8%OF TOTAL18%Branded checkout(online)3FXN GROWTH5%5%5%OF TOTAL29)%P2P&other consumer4FXN GROWTH7%OF TOTAL26%Payment service provider(PSP)5FXN GROWTH12%2%6%OF TOTAL45DE%Total TPVFXN GROWTH9%5%7%*Percent of total may not sum to 100%due to rounding.Additional financial detail provided in Supplemental Information and definitions on slide 30.(1)Branded experiences(online&offline):branded checkout(online)as well as in-store payment methods,including debit(PayPal and Venmo)and tap to pay.(2)Venmo:Venmo P2P,Pay with Venmo and Venmo debit.(3)Branded Checkout(online):PayPal branded checkout,Pay with Venmo and eBay.(4)P2P&Other Consumer:P2P(PayPal and Venmo),debit(PayPal and Venmo)except when used to fund a branded checkout(online)transaction and remittances.(5)PSP:unbranded card processing and other merchant solutions(e.g.,payouts,invoicing,point-of-sale solutions,etc.).(6)PayPals enterprise payments platform(formerly Braintree).Branded experiences showed momentum, 8%with U.S.accelerating to 10%Venmo continued to accelerate 14%vs. 12%in 2Q and 9%in FY24Branded checkout up mid-single-digits despite mixed global macro trendsP2P&other consumer accelerated on Venmo and debit card momentumPSP accelerated with Enterprise Payments6 mid-single-digits 132025 PayPal Holdings,Inc.All growth rates reference 3Q25 year-over-year growth unless otherwise noted.Additional financial detail provided in Supplemental Information.(1)For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures,please see the GAAP to non-GAAP Reconciliations on slides 25-28.(2)Interest on customer balances is reported within OVAS revenue in this presentation and in our quarterly/annual SEC filings and primarily comprises interest and revenue earned on customer assets.3Q25 key financial results(in millions,except%and per share data)3Q25Total revenue$8,417Y/Y growth 7%FXN Y/Y growth6%Transaction margin$1$3,871Y/Y growth6%Y/Y growth ex.int.on cust.balances1,27%Non-transaction related expenses1$2,303Y/Y growth6%Non-GAAP operating income1$1,568Y/Y growth6%Non-GAAP operating margin8.6%Y/Y change(19bps)Non-GAAP EPS1$1.34Y/Y growth12%Transaction revenue 6%,driven by growth across the portfolio,including branded experiences,PSP,and VenmoOther value-added services(OVAS)revenue 15%,driven primarily by strong performance in consumer and merchant credit TM$ex.interest on customer balances 7%from multiple sources:credit,branded checkout,PSP,and VenmoGrowth across these areas was partially offset by higher transaction loss provisions in the quarterNon-transaction opex 6%,which includes impact from U.S.BNPL externalization and investment in key growth initiatives Returned$1.5B via share repurchases,$5.7B on a trailing 12-month basis,reducing weighted average shares by 62025 PayPal Holdings,Inc.Raising FY25 TM$&EPS guidance4Q25Transaction margin$4.02B-$4.12B2%-5%growth4%-6%growth ex.interest on customer balances1Non-GAAP effective tax rate24%Non-GAAP EPS2$1.27-$1.317%-10%growthGAAP EPS$1.23-$1.27FY25October 2025 guidanceJuly 2025 guidanceTransaction margin$15.45B-$15.55B5%-6%growth$15.35B-$15.5B5%-6%growthIncludes($60M)from lower interest on customer balances16%-7%growth ex.interest on customer balances1 Includes($125M)from lower interest on customer balances16%-7%growth ex.interest on customer balances1 Non-GAAP non-transaction operating expenses3%growthLow single-digit growthNon-GAAP effective tax rate20 %Non-GAAP EPS3$5.35-$5.3915%-16%growth$5.15-$5.3011%-14%growthGAAP EPS$5.11-$5.15$4.90-$5.05Free cash flow$6B-$7B$6B-$7BShare repurchase$6B$6BCAPEX$1B$1B(1)Interest on customer balances is reported within OVAS revenue in this presentation and in our quarterly/annual SEC filings and primarily comprises interest and revenue earned on customer assets.(2)Estimated non-GAAP amounts for 4Q25 reflect adjustments of$40M.(3)Estimated non-GAAP amounts for FY25 reflect adjustments of$255M.For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures,please see the GAAP to non-GAAP Reconciliations on slides 25-28.152025 PayPal Holdings,Inc.Reinvigorated and more diversified business driving continued profitable growth across Branded Experiences,PSP,and Venmo Investing to scale adoption and amplify impact of enhanced experiences and next-gen growth vectors Strong cash flow generation enabling growth investments and capital return through continued share repurchase and dividend initiationExecution driving profitable growth across PayPals platform 152025 PayPal Holdings,Inc.16Q&APower paymentsDrive growthOperate smarterPayyour wayGet themost valuePayeverywhereOnlineIn-storeAgenticPayPal is building the next-generation commerce platform 162025 PayPal Holdings,Inc.17Supplemental information 182025 PayPal Holdings,Inc.U.S.TPV 8%,driven by Venmo,PSP,branded checkout,and debit cardsInternational TPV 5%FXN,driven by continued growth in EuropeCross-border TPV1 4%FXN,driven predominantly by intra-European corridors Transaction take rate-3bps,driven by product mix and the impact of foreign currency hedges(in millions,except%)2Q243Q244Q241Q252Q253Q25Total payment volume$416,814$422,641$437,836$417,208$443,547$458,088Y/Y growth11%9%7%3%6%8%FXN Y/Y growth11%9%7%4%5%7%U.S.TPV$265,526$265,706$275,911$269,916$276,778$285,966Y/Y growth11%9%7%4%4%8%International TPV$151,288$156,934$161,925$147,293$166,768$172,122Y/Y growth10%8%7%2%FXN Y/Y growth11%8%7%5%6%5%Cross-border TPV1$49,089$50,186$53,022$49,767$54,174$54,316Y/Y growth5%8%8%3%8%FXN Y/Y growth6%7%9%6%7%4%P2P TPV2$100,802$102,353$102,663$101,383$108,442$110,746Y/Y growth6%6%7%5%8%8%Venmo TPV$73,290$74,848$75,610$75,942$81,976$85,226Y/Y growth8%8%Total take rate1.89%1.86%1.91%1.87%1.87%1.84%Transaction take rate1.72%1.67%1.73%1.68%1.68%1.64%Total revenue$7,885$7,847$8,366$7,791$8,288$8,417Y/Y growth8%6%4%1%5%7%FXN Y/Y growth9%6%4%2%5%6%Transaction revenue$7,153$7,067$7,588$7,016$7,441$7,522Y/Y growth9%6%4%4%6%OVAS revenue$732$780$778$775$847$895Y/Y growth%2%5%US revenue Y/Y growth8%6%2%3%5%International revenue FXN Y/Y growth10%6%7%5%7%7%international42BCCCD%TPV,revenue,&take rate detailAll results&growth rates reference 3Q25 results&year-over-year growth unless otherwise noted.Definitions on slide 29-30.(1)Cross-border TPV is captured in both U.S.and international TPV and includes branded checkout and P2P,but does not include PSP TPV(unbranded processing).In a typical purchase transaction,cross-border TPV is counted in the region where the merchant is based.For example,in the case of a U.S.seller and a German buyer,the TPV is counted in the U.S.(2)P2P TPV comprises Venmo,PayPal,and Xoom P2P.192025 PayPal Holdings,Inc.(in millions,except%and TPA)2Q243Q244Q241Q252Q253Q25Active accounts1429432434436438438Y/Y growth%1%2%2%2%1%Monthly active accounts(MAA)2221222228224226227Y/Y growth3%2%2%2%2%2%Number of payment transactions6,5806,6316,6196,0456,2266,331Y/Y growth8%6%(3%)(7%)(5%)(5%)Number of payment transactions ex.PSP3,7193,7704,0523,8053,9464,035Y/Y growth6%6%7%6%6%7%Transactions per active account(TPA)360.961.460.659.458.357.6Y/Y growth11%9%3%(1%)(4%)(6%)TPA ex.PSP334.234.534.935.235.636.2Y/Y growth6%5%4%4%4%5count and activity metrics detailAll results&growth rates reference 3Q25 results&year-over-year growth unless otherwise noted.Definitions on slide 29.(1)Active accounts are accounts that have completed a transaction within the past 12 months.(2)MAA are a subset of active accounts(primarily PayPal and Venmo)that have completed a transaction at least once during the month of measurement.MAAs presented at the end of a quarter or year are the average of each months MAAs in the respective quarter or year.MAAs have been updated to exclude certain credit product accounts that are less reflective of consumer engagement on our platform.This resulted in an immaterial impact on each periods total MAAs and no change to reported growth rates.(3)TPA and TPA ex.PSP are trailing 12-month metrics,reflecting transactions within the previous 12-month period,divided by active accounts at the end of the period.TPA ex.PSP excludes both unbranded card processing transactions and unbranded active accounts(primarily Enterprise Payments,formerly Braintree).Active accounts2 1%and MAA3 2%,with contributions from both PayPal consumer accounts and VenmoNumber of payment transactions-5%and TPA3-6%,reflecting price-to-value actions driving lower Enterprise Payments transactionsNumber of payment transactions ex.PSP 7%and TPA ex.PSP3 5%,reflecting customer engagement with transaction growth in branded experiences(debit and branded checkout),Venmo,and P2P 202025 PayPal Holdings,Inc.(in millions,except%)2Q243Q244Q241Q252Q253Q25Transaction expense(TE)$3,942$3,841$3,997$3,704$3,968$4,063TE rate0.95%0.91%0.91%0.89%0.89%0.89%Transaction loss(TL)$259$264$331$278$383$397TL rate0.06%0.06%0.08%0.07%0.09%0.09%Credit loss$76$88$103$93$93$86Credit loss rate0.02%0.02%0.02%0.02%0.02%0.02%Volume-based expenses$4,277$4,193$4,431$4,075$4,444$4,546Y/Y growth9%4%2%(4%)4%8%Transaction margin$1$3,608$3,654$3,935$3,716$3,844$3,871Y/Y growth8%8%7%7%7%6%Transaction margin145.8F.6G.0G.7F.4F.0%Y/Y change(bps)(19)11512827462(58)TM$ex.interest on customer balances1,2$3,267$3,315$3,603$3,418$3,526$3,550Y/Y growth5%6%6%7%8%7%Transaction margin(TM)detailTE rate-2bps,driven by favorable product and merchant mixTL rate 3bps,driven by higher transaction loss provisions,including impact from the temporary service disruption in AugustCredit loss rate in line with 3Q24,supported by disciplined underwriting and further externalization of a portion of BNPL portfolio to Blue OwlDefinitions on slides 29-30.All results&growth rates reference 3Q25 results&year-over-year growth unless otherwise noted.(1)TM,TM$and TM$ex.interest on customer balances are non-GAAP measures.A reconciliation to the most directly comparable GAAP measure is included on slide 26.(2)TM$is transaction margin dollars.Interest on customer balances is reported within other value added services(OVAS)revenue in this presentation and in our quarterly/annual SEC filings and primarily comprises interest and revenue earned on customer assets.212025 PayPal Holdings,Inc.(1)Non-transaction related expenses,total operating expenses,non-GAAP operating income,non-GAAP operating margin,and non-GAAP EPS are non-GAAP financial measures.For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures and additional detail,please see the GAAP to non-GAAP Reconciliations on slides 25-28.(in millions,except%)2Q243Q244Q241Q252Q253Q25Customer support and operations$436$427$451$398$413$447Y/Y growth(11%)(10%)(3%)(12%)(5%)5%Sales and marketing$406$468$586$448$542$482Y/Y growth(4%)1783%3%Technology and development$713$742$772$731$767$800Y/Y growth(3%)2%1%(1%)8%8%General and administrative$563$512$587$496$454$506Y/Y growth16%3%7%9%(19%)(1%)Restructuring and other$30$28$37$27$24$68Y/Y growth(12%)6533%(27%)(20%)143%Non-transaction related expenses$2,148$2,177$2,433$2,100$2,200$2,303Y/Y growth(1%)3%2%2%6%Total operating expenses$6,425$6,370$6,864$6,175$6,644$6,849Y/Y growth5%3%5%(2%)3%8%Non-GAAP operating income$1,460$1,477$1,502$1,616$1,644$1,568Y/Y growth24%2%6%Non-GAAP operating margin.5.8.0 .7.8.6%Y/Y change(bps)231194(34)257132(19)Non-GAAP EPS$1.19$1.20$1.19$1.33$1.40$1.34Y/Y growth36%5#%Non-GAAP1 operating margin detailNon-transaction opex 6%,which includes impact from U.S.BNPL externalization as well as investment in key growth initiatives 222025 PayPal Holdings,Inc.(in millions,except%)2Q243Q244Q241Q252Q253Q25 Free cash flow$1,368$1,445$2,191$964$692$1,718Y/Y growth*31%(11%)(45%)(49%)19justed free cash flow1$1,140$1,540$2,098$1,381$656$2,279Y/Y growth31%(19%)171%(26%)(42%)48%Free cash flow(FCF)and capital allocation detail Generated 3Q adjusted FCF of$2.3B with YTD adjusted FCF of$4.3BReturned$1.5B in capital to stockholders through share repurchasesOn a trailing 12-month basis,share repurchases of$5.7B reduced weighted average shares by 6%As of 3Q,cash,cash equivalents and investments totaled$14.4B and debt totaled$11.4BAll results&growth rates reference 3Q25 results&year-over-year growth unless otherwise noted.Free cash flow and adjusted free cash flow are non-GAAP financial metrics.For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures and additional detail,please see the GAAP to non-GAAP Reconciliations on slides 25-28.(1)Adjusted free cash flow excludes the net timing impact between originating BNPL receivables as HFS and the subsequent sale of receivables.*Not meaningful.2Q23 free cash flow of($0.4B)included a$1.2B negative timing impact from European BNPL loans originated as HFS,which were sold in 4Q23.232025 PayPal Holdings,Inc.(in millions,except%)2Q243Q244Q241Q252Q253Q25Hedging Impacts(1)Favorable(unfavorable)impact to net revenues(exclusive of hedging impact)$(33)$12$(29)$(104)$111$134Hedging impact22(12)3835(70)(49)Favorable(unfavorable)impact to net revenues(11)9(69)4185Favorable(unfavorable)impact to operating expense25(10)2652(50)(69)Net favorable(unfavorable)impact to operating income$14$(10)$35$(17)$(9)$16Credit net charge-offs,reserve builds(releases)and credit lossesNet charge-offs(2)$91$81$77$78$75$90Reserve build(release)(3)(15)7261518(4)Credit Losses$76$88$103$93$93$86(1)Foreign currency movements relative to the US dollar.We calculate the year-over-year impact of foreign currency movements on our business using prior period foreign currency exchange rates applied to current period transactional currency amounts.Hedging impact is recognized in international transaction revenue.Based on exchange rates on derivative positions as of September30,2025,estimated next 12 months hedging losses are$199M.(2)Net charge-offs includes principal charge-offs partially offset by recoveries for consumer and merchant receivables.(3)Reserve build(release)represents change in allowance for principal receivables excluding foreign currency remeasurement.Hedging impacts and credit reserve builds and releases2025 PayPal Holdings,Inc.24GAAP to non-GAAP reconciliations 252025 PayPal Holdings,Inc.Reconciliation of GAAP operating expenses to non-GAAP operating expensesThree Months EndedYear Ended December 31,(In Millions/Unaudited)NoteSeptember 30,2025June 30,2025March 31,2025December 31,2024September 30,2024June 30,2024March 31,2024December 31,2023September 30,2023June 30,2023202420232022GAAP operating expenses:Transaction expense$4,063$3,968$3,704$3,997$3,841$3,942$3,917$3,958$3,603$3,541$15,697$14,385$12,173 Transaction and credit losses 483 476 371 434 352 335 321 396 446 398 1,442 1,682 1,572 Customer support and operations 447 413 398 451 427 436 454 465 474 492 1,768 1,919 2,120 Sales and marketing 521 583 488 626 508 446 421 466 442 465 2,001 1,809 2,257 Technology and development 801 767 731 773 746 718 742 770 739 743 2,979 2,973 3,253 General and administrative 513 461 503 594 519 570 464 554 507 491 2,147 2,059 2,099 Restructuring and other 69 116 66 50 63 113 212 (311)39 24 438 (84)207 Total operating expenses$6,897$6,784$6,261$6,925$6,456$6,560$6,531$6,298$6,250$6,154$26,472$24,743$23,681 Non-GAAP operating expense adjustments:Sales and marketing(a)(39)(41)(40)(40)(40)(40)(42)(41)(42)(42)(162)(166)(215)Technology and development(a)(1)(1)(4)(5)(7)(6)(9)(9)(17)(33)(232)General and administrative(a)(7)(7)(7)(7)(7)(7)(7)(7)(7)(7)(28)(28)(24)(d)(4)(4)Restructuring and other(b)(1)(92)(39)(13)(36)(83)(175)(2)(3)(307)(122)(122)(c)1 (2)(19)10 1 (58)(85)(d)(21)(21)(e)339 339 Total operating expenses$(48)$(140)$(86)$(61)$(86)$(135)$(231)$260$(84)$(48)$(513)$(93)$(678)Non-GAAP operating expenses:Transaction expense 4,063 3,968 3,704 3,997 3,841 3,942 3,917 3,958 3,603 3,541$15,697$14,385$12,173 Transaction and credit losses 483 476 371 434 352 335 321 396 446 398 1,442 1,682 1,572 Customer support and operations 447 413 398 451 427 436 454 465 474 492 1,768 1,919 2,120 Sales and marketing 482 542 448 586 468 406 379 425 400 423 1,839 1,643 2,042 Technology and development 800 767 731 772 742 713 735 764 730 734 2,962 2,940 3,021 General and administrative 506 454 496 587 512 563 457 547 496 484 2,119 2,027 2,075 Restructuring and other 68 24 27 37 28 30 37 3 17 34 132 54 Total operating expenses$6,849$6,644$6,175$6,864$6,370$6,425$6,300$6,558$6,166$6,106$25,959$24,650$23,003(a)Amortization of acquired intangible assets.(b)Restructuring.(c)Right-of-use asset impairment and other charges associated with exiting certain leased properties as well as gains and losses associated with early lease terminations and owned property held for sale or sold.(d)Fees related to credit externalization.(e)Gain on divestiture of business,net of transaction costs.262025 PayPal Holdings,Inc.Reconciliation of GAAP operating income to non-GAAP operating income,Transaction margin dollars,and Transaction margin dollars ex-interest on customer balances and GAAP operating margin to non-GAAP operating margin and Transaction marginThree Months EndedYear Ended December 31,(In Millions,Except Percentages/Unaudited)September 30,2025June 30,2025March 31,2025December 31,2024September 30,2024June 30,2024March 31,2024December 31,2023September 30,2023June 30,2023202420232022GAAP operating income$1,520$1,504$1,530$1,441$1,391$1,325$1,168$1,728$1,168$1,133$5,325$5,028$3,837 Amortization of acquired intangible assets 47 48 47 48 51 52 56 54 58 58 207 227 471 Restructuring 1 92 39 13 35 83 175 4 22 (10)306 180 207 Other (318)4 (314)Total non-GAAP operating income adjustments 48 140 86 61 86 135 231 (260)84 48 513 93 678 Non-GAAP operating income 1,568 1,644 1,616 1,502 1,477 1,460 1,399 1,468 1,252 1,181 5,838 5,121 4,515 Transaction margin adjustments:Customer support and operations 447 413 398 451 427 436 454 465 474 492 1,768 1,919 2,120 Sales and marketing 482 542 448 586 468 406 379 425 400 423 1,839 1,643 2,042 Technology and development 800 767 731 772 742 713 735 764 730 734 2,962 2,940 3,021 General and administrative 506 454 496 587 512 563 457 547 496 484 2,119 2,027 2,075 Restructuring and other 68 24 27 37 28 30 37 3 17 34 132 54 Non transaction-related expense 2,303 2,200 2,100 2,433 2,177 2,148 2,062 2,204 2,117 2,167 8,820 8,583 9,258 Transaction margin dollars 3,871 3,844 3,716 3,935 3,654 3,608 3,461 3,672 3,369 3,348 14,658 13,704 13,773 Interest on customer balances 321 318 298 332 339 341 272 286 246 226 1,284 918 268 Transaction margin dollars ex-interest on customer balances$3,550$3,526$3,418$3,603$3,315$3,267$3,189$3,386$3,123$3,122$13,374$12,786$13,505 GAAP net revenues$8,417$8,288$7,791$8,366$7,847$7,885$7,699$8,026$7,418$7,287$31,797$29,771$27,518 GAAP operating margin 18.1.1.6.2.7.8.2!.5.7.5.7.9.9%Non-GAAP operating margin 18.6.8 .7.0.8.5.2.3.9.2.4.2.4%Transaction margin 46.0F.4G.7G.0F.6E.8E.0E.8E.4E.9F.1F.0P.12025 PayPal Holdings,Inc.Reconciliation of GAAP net income to non-GAAP net income,GAAP diluted EPS to non-GAAP diluted EPS,and GAAP effective tax rate to non-GAAP effective tax rateThree Months EndedYear Ended December 31,(In Millions,Except Percentages and Per Share Amount/Unaudited)September 30,2025June 30,2025March 31,2025December 31,2024September 30,2024June 30,2024March 31,2024December 31,2023September 30,2023June 30,2023202420232022GAAP income before income taxes$1,533$1,529$1,603$1,410$1,311$1,399$1,209$1,793$1,241$1,303$5,329$5,411$3,366 GAAP income tax expense 285 268 316 289 301 271 321 391 221 274 1,182 1,165 947 GAAP net income 1,248 1,261 1,287 1,121 1,010 1,128 888 1,402 1,020 1,029 4,147 4,246 2,419 Non-GAAP adjustments to net income:Non-GAAP operating income adjustments(see table above)48 140 86 61 86 135 231 (260)84 48 513 93 678 Net(gains)losses on strategic investments and crypto assets held for investment(9)(12)(39)59 171 6 49 4 (24)(133)285 (201)304 Other certain significant gains,losses,or charges 31 21 31 39 410 Tax effect of non-GAAP adjustments 1 (19)(5)(32)(39)(26)(44)66 (3)27 (141)63 (229)Non-GAAP net income$1,288$1,370$1,329$1,209$1,228$1,243$1,155$1,233$1,077$971$4,835$4,240$3,582 Shares used in diluted share calculation:GAAP 960 977 999 1,014 1,024 1,047 1,072 1,084 1,098 1,114 1,039 1,107 1,158 Non-GAAP 960 977 999 1,014 1,024 1,047 1,072 1,084 1,098 1,114 1,039 1,107 1,158 Net income per diluted share:GAAP$1.30$1.29$1.29$1.11$0.99$1.08$0.83$1.29$0.93$0.92$3.99$3.84$2.09 Non-GAAP$1.34$1.40$1.33$1.19$1.20$1.19$1.08$1.14$0.98$0.87$4.65$3.83$3.09 GAAP effective tax rate 19 #!(%Tax effect of non-GAAP adjustments to net income(1%)(1%)(1%)1%(1%)%(5%)(2%)(1%)(1%)(1%)(2%)(10%)Non-GAAP effective tax rate 18! ! (2025 PayPal Holdings,Inc.Reconciliation of operating cash flow to free cash flow and adjusted free cash flowThree Months EndedYear Ended December 31,(In Millions/Unaudited)September 30,2025June 30,2025March 31,2025December 31,2024September 30,2024June 30,2024March 31,2024December 31,2023September 30,2023June 30,2023202420232022Net cash provided by(used in)operating activities$1,974$898$1,160$2,394$1,614$1,525$1,917$2,614$1,259$(200)$7,450$4,843$5,813 Less:Purchases of property and equipment(256)(206)(196)(203)(169)(157)(154)(145)(158)(150)(683)(623)(706)Free cash flow 1,718 692 964 2,191 1,445 1,368 1,763 2,469 1,101 (350)6,767 4,220 5,107 Net timing impact between originating credit receivables as HFS and the subsequent sale of receivables 561 (36)417 (93)95 (228)93 (1,695)810 1,219 (133)334 Adjusted free cash flow 2,279 656 1,381 2,098 1,540 1,140 1,856 774 1,911 869 6,634 4,554 5,107 292025 PayPal Holdings,Inc.Our key metrics are calculated using internal company data based on the activity we measure on our payments platform and compiled from multiple systems,including systems that are internally developed or acquired through business combinations.While the measurement of our key metrics is based on what we believe to be reasonable methodologies and estimates,there are inherent challenges and limitations in measuring our key metrics globally at scale.The methodologies used to calculate our key metrics require significant judgment.We regularly review our processes for calculating these key metrics,and from time to time we may make adjustments to improve the accuracy or relevance of our metrics.For example,we continuously apply models,processes,and practices designed to detect and prevent fraudulent account creation on our platforms,and work to improve and enhance those capabilities.When we detect a significant volume of illegitimate activity,we generally remove the activity identified from our key metrics.Although such adjustments may impact key metrics reported in prior periods,we generally do not update previously reported key metrics to reflect these subsequent adjustments unless the retrospective impact of process improvements or enhancements is determined by management to be material.Active accounts:An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our platform,not including gateway-exclusive transactions,within the past 12 months.A platform access partner is a third party whose customers are provided access to PayPals platform or services through such third partys login credentials,including individuals and entities that utilize Hyperwallets payout capabilities.A user may register on our platform to access different products and may register more than one account to access a product.Accordingly,a user may have more than one active account.The number of active accounts provides management with additional perspective on the overall scale of our platform,but may not have a direct relationship to our operating results.Monthly active accounts or“MAA”are a subset of Active Accounts(primarily PayPal and Venmo)1 that have completed a transaction on our platform at least once during the month of measurement.The number of MAAs provides management with perspective on the overall scale of our platform reflecting recent usage but may not have a direct relationship to our operating results.MAAs presented at of the end of a quarter or year are the average of each months MAAs in the respective quarter or year.Number of payment transactions is the total number of payments,net of payment reversals,successfully completed on our payments platform or enabled by PayPal via a partner payment solution,not including gateway-exclusive transactions.Number of payment transactions excluding Unbranded Card Processing2 or“transactions ex.PSP”is the total number of payments,net of reversals,successfully completed on our payments platform or enabled by PayPal via a partner payment solution,excluding all unbranded card processing transactions and gateway-exclusive transactions.Number of payment transactions per active account or“TPA”reflects the total number of payment transactions within the previous 12-month period,divided by active accounts at the end of the period.The number of payment transactions per active account provides management with insight into the average number of times an account engages in payments activity on our payments platform in a given period.The number of times a consumer account or a merchant account transacts on our platform may vary significantly from the average number of payment transactions per active account.Number of payment transactions per active account excluding unbranded card processing2 or“TPA ex.PSP”reflects the total number of payment transactions within the previous 12-month period excluding all unbranded card processing transactions,divided by active accounts at the end of the period excluding unbranded card processing accounts.This metric provides management with insight into the average number of times an account engages in payments activity on our payments platform in a given period,apart from unbranded card processing activity.Definitions(page 1 of 2)(1)MAAs exclude Enterprise Payments(formerly Braintree),Hyperwallet,Zettle,and certain other products that do not reflect engagement from a consumer perspective.(2)Unbranded Card Processing primarily comprises Enterprise Payments(formerly Braintree)full-stack transactions and does not include gateway-exclusive transactions.Unbranded processing also includes unbranded credit and debit card processing on the PayPal platform.302025 PayPal Holdings,Inc.Definitions(page 2 of 2)Total payment volume or“TPV”is the value of payments,net of payment reversals,successfully completed on our payments platform,or enabled by PayPal via a partner payment solution,not including gateway-exclusive transactions.Branded checkout(online)TPV comprises PayPal branded checkout,Pay with Venmo and eBay.P2P&other consumer TPV comprises P2P(PayPal and Venmo),debit(PayPal and Venmo)except when used to fund a branded checkout(online)transaction and remittances.PSP TPV comprises unbranded card processing as well as other merchant solutions(e.g.,payouts,invoicing,point-of-sale solutions,etc.).Branded experiences(online&offline)TPV comprises branded checkout(online),debit(PayPal and Venmo)and tap to pay.Venmo TPV comprises Venmo P2P,Pay with Venmo and Venmo debit.Total take rate is total revenue divided by TPV.Transaction take rate is transaction revenue divided by TPV.Transaction expense rate is transaction expense divided by TPV.Transaction loss rate is transaction losses divided by TPV.Credit loss rate is credit losses divided by TPV.Transaction margin or“TM”is total revenue less transaction expense and transaction and credit losses,divided by total revenue.Transaction margin dollars($)or“TM$”is total revenue less transaction expense and transaction and credit losses.Transaction margin dollars excluding interest on customer balances is total revenue excluding interest on customer balances,less transaction expense and transaction and credit losses.Interest on customer balances is captured as part of Other Value Added Services(OVAS)revenue in this presentation and in our quarterly/annual SEC filings.2025 PayPal Holdings,Inc.31Upcoming calendarFourth Quarter 2025 Earnings February 3,2026
2025-10-29
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Page 1 of 13 UnitedHealth Group Reports Third Quarter 2025 Results and Raises Full Year 2025 Earnings Outlook Third Quarter 2025 Revenues of$113.2 Billion Grew 12%Year-Over-Year Third Quarter Earnings of$2.59 Per Share,Adjusted Earnings$2.92 Per Share Cash Flows from Operations were$5.9 Billion,or 2.3x Net Income Raises Full Year 2025 Earnings Outlook to at least$14.90 Per Share;Adjusted Earnings of at least$16.25 Per Share(October 28,2025)UnitedHealth Group(NYSE:UNH)reported third quarter 2025 results,reflecting the continued execution on its performance agenda,refocus on its mission and culture,and return to sustained growth.“We remain focused on strengthening performance and positioning for durable and accelerating growth in 2026 and beyond,and our results this quarter reflect solid execution toward that goal,”said Stephen Hemsley,chief executive officer of UnitedHealth Group.UnitedHealth Group raised its 2025 earnings outlook to reflect net earnings of at least$14.90 per share and adjusted net earnings of at least$16.25 per share.Third Quarter 2025 Key Performance Metrics Consolidated revenues of$113.2 billion,up 12%year-over-year.Earnings from operations were$4.3 billion;net margin of 2.1%.Adjusted EPS of$2.92;GAAP EPS of$2.59.Medical care ratio(MCR)of 89.9%was in line with expectations outlined in the second quarter 2025.Operating cost ratio of 13.5%reflecting investments to support future growth.UnitedHealthcare revenues grew 16%year-over-year to$87.1 billion,driven by growth in Medicare&Retirement and Community&State;UnitedHealthcare served 50.1 million consumers domestically,up 795,000 year-over-year.Optum revenues grew 8%year-over-year to$69.2 billion,driven by growth in Optum Rx.September 30,2025,debt-to-capital ratio of 44.1%unchanged from the second quarter 2025 and inclusive of the impact of closing the Amedisys transaction on August 14,2025.Page 2 of 13 Quarterly Financial Performance Three Months Ended Change From September 30,2025 September 30,2024 June 30,2025 September 30,2024 June 30,2025 Revenues$113.2 billion$100.8 billion$111.6 billion 12% 1rnings from Operations$4.3 billion$8.7 billion$5.2 billion -50%-16%Net Margin 2.1%6.0%3.1%-390bps -100bps UnitedHealth Groups third quarter 2025 revenues grew$12.3 billion year-over-year to$113.2 billion.Third quarter earnings from operations were$4.3 billion and adjusted net earnings were$2.92 per share.The third quarter consolidated medical care ratio of 89.9%reflected utilization in line with expectations outlined in the second quarter 2025.The year-over-year increase of 470 basis points was primarily driven by the previously described significantly elevated cost trends,as well as the ongoing effects of the Biden-era Medicare funding reductions and changes to the Part D program from the Inflation Reduction Act.Medical reserve development was$80 million favorable in the third quarter 2025.Days claims payable of 46.2 compared to 44.5 in the second quarter 2025 and 47.4 in third quarter 2024.Days sales outstanding were flat year-over-year at 18.6 and down 1.3 days sequentially.The third quarter 2025 operating cost ratio of 13.5%compared to 13.2%in the year ago quarter.Cash flows from operations were$5.9 billion in the third quarter 2025,or 2.3x net income.Page 3 of 13 UnitedHealthcare provides health care benefits globally,serving individuals and employers,and Medicare and Medicaid beneficiaries.UnitedHealthcare is dedicated to improving the value customers and consumers receive by improving health and wellness,enhancing the quality of care received,simplifying the health care experience and reducing the total cost of care.Quarterly Financial Performance Three Months Ended Change From September 30,2025 September 30,2024 June 30,2025 September 30,2024 June 30,2025 Revenues$87.1 billion$74.9 billion$86.1 billion 16% 1rnings from Operations$1.8 billion$4.2 billion$2.1 billion -57%-13%Operating Margin 2.1%5.6%2.4%-350bps -30bps UnitedHealthcare UnitedHealthcares third quarter 2025 revenues of$87.1 billion grew$12.2 billion or 16%year-over-year.UnitedHealthcare served 50.1 million people domestically in the third quarter 2025,an increase of 795,000 year-over-year.UnitedHealthcares third quarter 2025 earnings from operations were$1.8 billion compared to$4.2 billion in third quarter 2024.Third quarter 2025 operating margin of 2.1%compared to 5.6%in third quarter 2024,primarily due to elevated medical cost trend,the effects of the Biden-era Medicare funding reductions and Part D IRA impacts.UnitedHealthcare Employer&Individual UnitedHealthcare Employer&Individual third quarter 2025 revenues were$19.9 billion compared to$19.8 billion in third quarter 2024.The number of people served domestically increased by 200,000 year-over-year,with growth in employer self-funded offerings of 660,000 partially offset by attrition in both group fully-insured and individual products.UnitedHealthcare Medicare&Retirement UnitedHealthcare Medicare&Retirement third quarter 2025 revenues of$43.4 billion grew$8.5 billion or 24%year-over-year due to growth in the number of people served and the effects of the Part D IRA impacts.People served with individual and group Medicare Advantage offerings grew 85,000 in the third quarter 2025 and 625,000 year-over-year.UnitedHealthcare Community&State UnitedHealthcare Community&State third quarter 2025 revenues of$23.8 billion grew 18%year-over-year,driven by growth in serving people with complex needs and Medicaid rate improvements.Members served contracted by 30,000 in the third quarter 2025.Page 4 of 13 The Optum health services businesses serve the global health care marketplace,including payers,care providers,employers,governments,life sciences companies and consumers.Using market-leading information,analytics and technology to yield clinical insights,Optum helps improve overall health system performance by optimizing care quality,reducing care costs and improving the consumer experience.Quarterly Financial Performance Three Months Ended Change From September 30,2025 September 30,2024 June 30,2025 September 30,2024 June 30,2025 Revenues$69.2 billion$63.9 billion$67.2 billion 8% 3rnings from Operations$2.5 billion$4.5 billion$3.1 billion -44%-18%Operating Margin 3.6%7.0%4.6%-340bps -100bps Optum Health Optum Healths third quarter 2025 revenues of$25.9 billion were flat year-over-year.Third quarter 2025 earnings from operations were$255 million,reflecting an operating margin of 1%.This compares to operating earnings of$2.2 billion and an operating margin of 8.3%in the third quarter 2024.The year-over-year decline was driven by continued reimbursement pressure due to the Medicare funding reductions and elevated utilization and costs.Optum Insight Optum Insights third quarter 2025 revenues of$4.9 billion were flat year-over-year.Third quarter 2025 earnings from operations were$706 million compared to$791 million a year ago and operating margins were 14.4%and 16.0%,respectively,due to investments to support future growth.The contract revenue backlog was$32.1 billion.Optum Rx Optum Rxs third quarter 2025 revenues of$39.7 billion increased 16%year-over-year driven by growth in script volumes from new clients and growth in existing clients,as well as growth in pharmacy services.Earnings from operations for third quarter 2025 were$1.5 billion compared to$1.5 billion a year ago and operating margins were 3.9%and 4.5%,respectively.The operating margin decline year-over-year was primarily due to the mix effects of higher cost drugs driving higher revenue growth in the third quarter 2025 but with lower margins.Adjusted scripts grew to 414 million,up from 407 million last year.Page 5 of 13 About UnitedHealth Group UnitedHealth Group(NYSE:UNH)is a health care and well-being company with a mission to help people live healthier lives and help make the health system work better for everyone through two distinct and complementary businesses.Optum delivers care aided by technology and data,empowering people,partners and providers with the guidance and tools they need to achieve better health.UnitedHealthcare offers a full range of health benefits,enabling affordable coverage,simplifying the health care experience and delivering access to high-quality care.Visit UnitedHealth Group at and follow UnitedHealth Group on LinkedIn.Earnings Conference Call As previously announced,UnitedHealth Group will discuss the companys results,strategy and future outlook on a conference call with investors at 8:00 a.m.Eastern Time today.UnitedHealth Group will host a live webcast of this conference call from the Investor Relations page of the companys website().Following the call,a webcast replay will be on the Investor Relations page through November 11,2025.This earnings release and the Form 8-K dated October 28,2025,can also be accessed from the Investor Relations page of the companys website.Non-GAAP Financial Information This news release presents non-GAAP financial information provided as a complement to the results provided in accordance with accounting principles generally accepted in the United States of America(“GAAP”).A reconciliation of the non-GAAP financial information to the most directly comparable GAAP financial measure is provided in the accompanying tables found at the end of this release.Forward-Looking Statements The statements,estimates,projections,guidance or outlook contained in this document include“forward-looking”statements which are intended to take advantage of the“safe harbor”provisions of the federal securities laws.The words“believe,”“expect,”“intend,”“estimate,”“anticipate,”“forecast,”“outlook,”“plan,”“project,”“should”and similar expressions identify forward-looking statements.These statements may contain information about financial prospects,economic conditions and trends and involve risks and uncertainties.Actual results could differ materially from those that management expects,depending on the outcome of certain factors including:our ability to effectively estimate,price for and manage medical costs;new or changes in existing health care laws or regulations,or their enforcement or application;cyberattacks,other privacy/data security incidents,or our failure to comply with related regulations;reductions in revenue or delays to cash flows received under government programs;changes in Medicare,the CMS star ratings program or the application of risk adjustment data validation audits;the DOJs legal actions concerning our participation in the Medicare program;our ability to maintain and achieve improvement in quality scores impacting revenue;failure to maintain effective and efficient information systems or if our technology products do not operate as intended;risks and uncertainties associated with our businesses providing pharmacy care services;competitive pressures,including our ability to maintain or increase our market share;changes in or challenges to our public sector contract awards;failure to achieve targeted operating cost productivity improvements;failure to develop and maintain satisfactory relationships with health care payers,physicians,hospitals and other service providers;the impact of potential changes in tax laws and regulations;increases in costs and other liabilities associated with litigation,government investigations,audits or reviews;failure to complete,manage or integrate strategic transactions;risk and uncertainties associated with the sale of our remaining operations in South America;risks associated with public health crises arising from large-scale medical emergencies,pandemics,natural disasters and other extreme events;failure to attract,develop,retain,and manage the succession of key employees and executives;our investment portfolio performance;impairment of our goodwill and intangible assets;failure to protect proprietary rights to our databases,software and related products;downgrades in our credit ratings;and our ability to obtain sufficient funds from our regulated subsidiaries or from external financings to fund our obligations,reinvest in our business,maintain our debt to total capital ratio at targeted levels,maintain our quarterly dividend payment cycle,or continue repurchasing shares of our common stock.This above list is not exhaustive.We discuss these matters,and certain risks that may affect our business operations,financial condition and results of operations,more fully in our filings with the SEC,including our reports on Forms 10-K,10-Q and 8-K.By their nature,forward-looking statements are not guarantees of future performance or results and are subject to risks,uncertainties and assumptions that are difficult to predict or quantify.Actual results may vary materially from expectations expressed or implied in this document or any of our prior communications.You should not place undue reliance on forward-looking statements,which speak only as of the date they are made.We do not undertake to update or revise any forward-looking statements,except as required by law.Investors:Media:investor_ UNITEDHEALTH GROUPEarnings Release Schedules and Supplementary InformationQuarter Ended September 30,2025 Condensed Consolidated Statements of OperationsCondensed Consolidated Balance SheetsCondensed Consolidated Statements of Cash FlowsSupplemental Financial Information-BusinessesSupplemental Financial Information-People Served and Performance MetricsReconciliation of Non-GAAP Financial MeasurePage 6 of 13UNITEDHEALTH GROUPCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in millions,except per share data;unaudited)Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2025202420252024RevenuesPremiums .$88,979$77,442$263,418$232,327Products .13,29612,63139,89636,751Services .9,7549,10427,76526,742Investment and other income .1,1321,6433,2733,651 Total revenues .113,161100,820334,352299,471Operating costsMedical costs .79,95865,957231,954197,150Operating costs .15,22313,28042,59540,519Cost of products sold .12,56611,83437,97534,230Depreciation and amortization .1,0991,0413,2443,058 Total operating costs .108,84692,112315,768274,957Earnings from operations .4,3158,70818,58424,514Interest expense .(1,003)(1,074)(3,028)(2,903)Loss on sale of subsidiary and subsidiaries held for sale.(83)(20)(139)(8,331)Earnings before income taxes .3,2297,61415,41713,280Provision for income taxes.(686)(1,356)(2,828)(3,822)Net earnings .2,5436,25812,5899,458Earnings attributable to noncontrolling interests .(195)(203)(543)(596)Net earnings attributable to UnitedHealth Group common shareholders .$2,348$6,055$12,046$8,862Diluted earnings per share attributable to UnitedHealth Group common shareholders .$2.59$6.51$13.21$9.53Adjusted earnings per share attributable to UnitedHealth Group common shareholders(a).$2.92$7.15$14.22$20.85Diluted weighted-average common shares outstanding .908930912930(a)See page 12 for a reconciliation of the non-GAAP measure.Page 7 of 13UNITEDHEALTH GROUPCONDENSED CONSOLIDATED BALANCE SHEETS(in millions;unaudited)September 30,2025December 31,2024AssetsCash and short-term investments .$30,614$29,113Accounts receivable,net .22,67222,365Other current assets .41,78134,301Total current assets .95,06785,779Long-term investments .52,99652,354Other long-term assets .167,206160,145Total assets .$315,269$298,278Liabilities,redeemable noncontrolling interests and equityMedical costs payable .$40,181$34,224Short-term borrowings and current maturities of long-term debt .7,7374,545Other current liabilities .67,60865,000Total current liabilities .115,526103,769Long-term debt,less current maturities .72,39972,359Other long-term liabilities .21,53119,559Redeemable noncontrolling interests .4,2444,323Equity .101,56998,268Total liabilities,redeemable noncontrolling interests and equity .$315,269$298,278Page 8 of 13UNITEDHEALTH GROUPCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in millions;unaudited)Nine Months Ended September 30,20252024Operating ActivitiesNet earnings .$12,589$9,458Noncash items:Depreciation and amortization .3,2443,058Deferred income taxes and other .(955)(844)Share-based compensation .795831Loss on sale of subsidiary and subsidiaries held for sale.1398,331Net changes in operating assets and liabilities .2,7771,001Cash flows from operating activities .18,58921,835Investing ActivitiesSales and maturities of investments,net of purchases .1,6571,852Purchases of property,equipment and capitalized software .(2,674)(2,587)Cash paid for acquisitions and other transactions,net .(4,436)(11,674)Loans to care providers-cyberattack .(8,904)Repayments of care provider loans-cyberattack .1,5433,189Other,net .(2,164)(1,284)Cash flows used for investing activities .(6,074)(19,408)Financing ActivitiesCommon share repurchases .(5,545)(4,028)Dividends paid .(5,914)(5,601)Net change in short-term borrowings and long-term debt .2,43815,120Other,net .(1,592)(661)Cash flows(used for)from financing activities .(10,613)4,830Effect of exchange rate changes on cash and cash equivalents .25(30)Increase in cash and cash equivalents,including cash within businesses held for sale .1,9277,227Less:net increase in cash within businesses held for sale .(29)(254)Net increase in cash and cash equivalents .1,8986,973Cash and cash equivalents,beginning of period .25,31225,427Cash and cash equivalents,end of period .$27,210$32,400Page 9 of 13UNITEDHEALTH GROUPSUPPLEMENTAL FINANCIAL INFORMATION-BUSINESSES(in millions,except percentages)(unaudited)Three Months Ended September 30,Nine Months Ended September 30,2025202420252024RevenuesUnitedHealthcare .$87,070$74,853$257,790$224,076Optum .69,17763,925200,287187,856Eliminations .(43,086)(37,958)(123,725)(112,461)Total consolidated revenues.$113,161$100,820$334,352$299,471Earnings from OperationsUnitedHealthcare .$1,805$4,212$9,106$12,611Optum(a).2,5104,4969,47811,903Total consolidated earnings from operations .$4,315$8,708$18,584$24,514Operating MarginUnitedHealthcare .2.1%5.6%3.5%5.6%Optum .3.6%7.0%4.7%6.3%Consolidated operating margin .3.8%8.6%5.6%8.2%RevenuesUnitedHealthcare Employer&Individual-Domestic .$19,049$18,985$57,065$55,470UnitedHealthcare Employer&Individual-Global.8267692,4272,892UnitedHealthcare Employer&Individual-Total.19,87519,75459,49258,362UnitedHealthcare Medicare&Retirement .43,35634,904127,684105,294UnitedHealthcare Community&State .23,83920,19570,61460,420Optum Health .$25,900$25,917$76,414$79,698Optum Insight .4,9154,93114,37313,976Optum Rx .39,67934,207113,27097,457Optum eliminations .(1,317)(1,130)(3,770)(3,275)(a)Earnings from operations for Optum for the three and nine months ended September 30,2025 included$255 and$2,505 for Optum Health;$706 and$2,665 for Optum Insight;and$1,549 and$4,308 for Optum Rx,respectively.Earnings from operations for Optum for the three and nine months ended September 30,2024 included$2,161 and$5,979 for Optum Health;$791 and$1,827 for Optum Insight;and$1,544 and$4,097 for Optum Rx,respectively.Page 10 of 13UNITEDHEALTH GROUPSUPPLEMENTAL FINANCIAL INFORMATION-PEOPLE SERVED AND PERFORMANCE METRICS(unaudited)UnitedHealthcare Customer Profile(in thousands)People ServedSeptember 30,2025June 30,2025December 31,2024September 30,2024Commercial:Risk-based .8,440 8,440 8,845 8,900 Fee-based .21,490 21,530 20,885 20,830 Total Commercial .29,930 29,970 29,730 29,730 Medicare Advantage .8,435 8,350 7,845 7,810 Medicaid .7,460 7,490 7,435 7,450 Medicare Supplement(Standardized).4,300 4,305 4,335 4,340 Total Community and Senior .20,195 20,145 19,615 19,600 Total UnitedHealthcare-Medical .50,125 50,115 49,345 49,330 Supplemental DataMedicare Part D stand-alone .2,795 2,800 3,050 3,055 South American businesses held for sale .1,160 1,165 1,330 1,335 Optum Performance MetricsSeptember 30,2025June 30,2025December 31,2024September 30,2024Optum Health Consumers Served(in millions).9698100104Optum Insight Contract Backlog(in billions).$32.1$32.1$32.8$32.8Optum Rx Quarterly Adjusted Scripts(in millions).414414422407Page 11 of 13UNITEDHEALTH GROUPRECONCILIATION OF NON-GAAP FINANCIAL MEASUREUse of Non-GAAP Financial MeasureAdjusted net earnings per share is a non-GAAP financial measure.Non-GAAP financial measures should be considered in addition to,but not as a substitute for,or superior to,financial measures prepared in accordance with GAAP.Adjustments to adjusted net earnings per share are as follows:Intangible Amortization:As amortization fluctuates based on the size and timing of the companys acquisition activity,management believes this exclusion provides a more useful comparison of the companys underlying business performance and trends from period to period.While intangible assets contribute to the Companys revenue generation,the intangible amortization is not directly related.Therefore,the related revenues are included in adjusted earnings per share.South American Impacts:The loss on the sale of our Brazilian operations completed on February 6,2024,the loss on our remaining South American operations being classified as held for sale and certain other non-recurring matters impacting our South American operations are not representative of the Companys underlying business performance and therefore management believes the exclusion presents a more useful comparison of the Companys underlying business performance and trends from period to period.Direct Response Costs-Cyberattack:Management believes the exclusion of costs incurred to investigate and remediate the attack,other direct and incremental costs incurred as a result of the cyberattack and incremental costs for accommodations to support care providers presents a more useful comparison of the Companys underlying business performance and trends from period to period.Page 12 of 13UNITEDHEALTH GROUPRECONCILIATION OF NON-GAAP FINANCIAL MEASURE(in millions,except per share data;unaudited)Adjusted Net Earnings Per ShareThree Months Ended September 30,Nine Months Ended September 30,Projected Year EndedDecember 31,20252024202520242025(e)Net earnings attributable to UnitedHealth Group common shareholders .$2,348$6,055$12,046$8,862At least$13,600Intangible amortization,net of tax(a).3023229279371,225South American impacts,net of tax(c).138,282Direct response costs-cyberattack,net of tax(d).2611,307Adjusted net earnings attributable to UnitedHealth Group common shareholders .$2,650$6,651$12,973$19,388At least$14,825Diluted earnings per share .$2.59$6.51$13.21$9.53At least$14.90Intangible amortization,net of tax,per share(b).0.330.351.011.011.35South American impacts,net of tax,per share(c).0.018.90Direct response costs-cyberattack,net of tax,per share(d).0.281.41Adjusted diluted earnings per share .$2.92$7.15$14.22$20.85At least$16.25(a)Intangible amortization for the three months ended September 30,2025 and 2024 was$401 and$426,with tax effects of$(99)and$(104),respectively.Intangible amortization for the nine months ended September 30,2025 and 2024 was$1,227 and$1,242,with tax effects of$(300)and$(305),respectively.For the projected year ended December 31,2025 intangible amortization is$1,625,with tax effects of$(400).(b)Intangible amortization per share for the three months ended September 30,2025 and 2024 was$0.44 and$0.46,with tax effects of$(0.11)and$(0.11),respectively.Intangible amortization per share for the nine months ended September 30,2025 and 2024 was$1.34 with tax effects of$(0.33).For the projected year ended December 31,2025 intangible amortization per share is$1.75,with tax effects of$(0.40).(c)South American impacts for the three months ended September 30,2024 and nine months ended September 30,2024 were$9 and$8,435,with tax effects of$4 and$(153),respectively.South American impacts per share for the three months ended September 30,2024 and nine months ended September 30,2024 were$0.01 and$9.07,with tax effects of$0.00 and$(0.17),respectively.(d)Direct response costs-cyberattack for the three months ended September 30,2024 and nine months ended September 30,2024 were$341 and$1,710,with tax effects of$(80)and$(403),respectively.Direct response costs-cyberattack per share for the three months ended September 30,2024 and nine months ended September 30,2024 were$0.37 and$1.84,with tax effects of$(0.09)and$(0.43),respectively.(e)Projected year ended December 31,2025 net earnings attributable to UnitedHealth Group common shareholders and diluted earnings per share do not contemplate the potential impacts of any actions that may occur in the fourth quarter related to our on-going business assessment plans.Page 13 of 13
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_ FORM 10-Q _ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30,2025 orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _Commission File Number:1-10864 _ UnitedHealth Group Incorporated(Exact name of registrant as specified in its charter)_ Delaware41-1321939(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)1 Health Drive55344655 New York Avenue NW20001Eden Prairie,MinnesotaWashington,DC(Address of principal executive offices)(Zip Code)(Address of principal executive offices)(Zip Code)(800)328-5979(Registrants telephone number,including area code)_ Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,$.01 par valueUNHNew 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,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act Large accelerated filerAccelerated 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 As of October 24,2025,there were 905,838,620 shares of the registrants Common Stock,$.01 par value per share,issued and outstanding.UNITEDHEALTH GROUPTable of Contents PagePart I.Financial InformationItem 1.Financial Statements(unaudited).1Condensed Consolidated Balance Sheets as of September 30,2025 and December 31,2024 .1Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30,2025 and 2024 .2Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30,2025 and 2024 .3Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30,2025 and 2024 .4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30,2025 and 2024 .6Notes to the Condensed Consolidated Financial Statements .71.Basis of Presentation .72.Investments .83.Fair Value .104.Medical Costs Payable .115.Short-Term Borrowings and Long-Term Debt .126.Dividends .127.Commitments and Contingencies .128.Held for Sale .139.Business Combinations .1410.Segment Financial Information .15Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations .17Item 3.Quantitative and Qualitative Disclosures About Market Risk .26Item 4.Controls and Procedures .26Part II.Other InformationItem 1.Legal Proceedings .27Item 1A.Risk Factors .27Item 2.Unregistered Sales of Equity Securities and Use of Proceeds .27Item 5.Other Information .27Item 6.Exhibits .28Signatures .29PART I ITEM 1.FINANCIAL STATEMENTSUnitedHealth GroupCondensed Consolidated Balance Sheets(Unaudited)(in millions,except per share data)September 30,2025December 31,2024AssetsCurrent assets:Cash and cash equivalents .$27,210$25,312 Short-term investments .3,404 3,801 Accounts receivable,net .22,672 22,365 Other current receivables,net .32,762 26,089 Prepaid expenses and other current assets .9,019 8,212 Total current assets .95,067 85,779 Long-term investments .52,996 52,354 Property,equipment and capitalized software,net .11,104 10,553 Goodwill .110,340 106,734 Other intangible assets,net .22,785 23,268 Other assets .22,977 19,590 Total assets .$315,269$298,278 Liabilities,redeemable noncontrolling interests and equityCurrent liabilities:Medical costs payable .$40,181$34,224 Accounts payable and accrued liabilities .36,033 34,337 Short-term borrowings and current maturities of long-term debt .7,737 4,545 Unearned revenues .3,366 3,317 Other current liabilities .28,209 27,346 Total current liabilities .115,526 103,769 Long-term debt,less current maturities .72,399 72,359 Deferred income taxes .3,162 3,620 Other liabilities .18,369 15,939 Total liabilities .209,456 195,687 Commitments and contingencies(Note 7)Redeemable noncontrolling interests .4,244 4,323 Equity:Preferred stock,$0.001 par value-10 shares authorized;no shares issued or outstanding .Common stock,$0.01 par value-3,000 shares authorized;906 and 915 issued and outstanding.9 9 Additional paid-in capital .394 Retained earnings .97,595 96,036 Accumulated other comprehensive loss .(2,211)(3,387)Nonredeemable noncontrolling interests .5,782 5,610 Total equity .101,569 98,268 Total liabilities,redeemable noncontrolling interests and equity .$315,269$298,278 See Notes to the Condensed Consolidated Financial Statements 1UnitedHealth GroupCondensed Consolidated Statements of Operations(Unaudited)Three Months Ended September 30,Nine Months Ended September 30,(in millions,except per share data)2025202420252024Revenues:Premiums .$88,979$77,442$263,418$232,327 Products .13,296 12,631 39,896 36,751 Services .9,754 9,104 27,765 26,742 Investment and other income.1,132 1,643 3,273 3,651 Total revenues .113,161 100,820 334,352 299,471 Operating costs:Medical costs.79,958 65,957 231,954 197,150 Operating costs .15,223 13,280 42,595 40,519 Cost of products sold .12,566 11,834 37,975 34,230 Depreciation and amortization .1,099 1,041 3,244 3,058 Total operating costs .108,846 92,112 315,768 274,957 Earnings from operations .4,315 8,708 18,584 24,514 Interest expense .(1,003)(1,074)(3,028)(2,903)Loss on sale of subsidiary and subsidiaries held for sale .(83)(20)(139)(8,331)Earnings before income taxes .3,229 7,614 15,417 13,280 Provision for income taxes .(686)(1,356)(2,828)(3,822)Net earnings.2,543 6,258 12,589 9,458 Earnings attributable to noncontrolling interests .(195)(203)(543)(596)Net earnings attributable to UnitedHealth Group common shareholders .$2,348$6,055$12,046$8,862 Earnings per share attributable to UnitedHealth Group common shareholders:.Basic .$2.59$6.56$13.27$9.61 Diluted .$2.59$6.51$13.21$9.53 Basic weighted-average number of common shares outstanding .906 923 908 922 Dilutive effect of common share equivalents .2 7 4 8 Diluted weighted-average number of common shares outstanding .908 930 912 930 Anti-dilutive shares excluded from the calculation of dilutive effect of common share equivalents .16 4 12 6 See Notes to the Condensed Consolidated Financial Statements 2UnitedHealth GroupCondensed Consolidated Statements of Comprehensive Income(Unaudited)Three Months Ended September 30,Nine Months Ended September 30,(in millions)2025202420252024Net earnings .$2,543$6,258$12,589$9,458 Other comprehensive income:Gross unrealized gains on investment securities during the period .535 1,434 1,383 1,069 Income tax effect.(122)(328)(316)(243)Total unrealized gains,net of tax .413 1,106 1,067 826 Gross reclassification adjustment for net realized gains included in net earnings.(24)(291)(51)(349)Income tax effect.6 67 12 80 Total reclassification adjustment,net of tax .(18)(224)(39)(269)Foreign currency translation(losses)gains .(71)88 148 (197)Reclassification adjustment for translation losses included in net earnings .4,214 Total foreign currency translation(losses)gains .(71)88 148 4,017 Other comprehensive income .324 970 1,176 4,574 Comprehensive income .2,867 7,228 13,765 14,032 Comprehensive income attributable to noncontrolling interests .(195)(203)(543)(596)Comprehensive income attributable to UnitedHealth Group common shareholders$2,672$7,025$13,222$13,436 See Notes to the Condensed Consolidated Financial Statements 3UnitedHealth GroupCondensed Consolidated Statements of Changes in Equity(Unaudited)Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossNonredeemable Noncontrolling InterestsTotal EquityThree months ended September 30,(in millions)SharesAmountNet Unrealized(Losses)Gains on InvestmentsForeign Currency Translation(Losses)GainsBalance at June 30,2025 .905$9$97,250$(1,593)$(942)$5,745$100,469 Net earnings .2,348 167 2,515 Other comprehensive income(loss).395 (71)324 Issuances of common stock,and related tax effects .1 241 241 Share-based compensation .214 214 Common share repurchases .1 (1)Cash dividends paid on common shares($2.21 per share).(2,002)(2,002)Redeemable noncontrolling interests fair value and other adjustments .(62)(62)Acquisition and other adjustments of nonredeemable noncontrolling interests .34 34 Distribution to nonredeemable noncontrolling interests .(164)(164)Balance at September 30,2025 .906$9$394$97,595$(1,198)$(1,013)$5,782$101,569 Balance at June 30,2024 .921$9$373$92,400$(2,296)$(1,127)$5,317$94,676 Net earnings .6,055 155 6,210 Other comprehensive income .882 88 970 Issuances of common stock,and related tax effects .4 842 842 Share-based compensation .208 208 Common share repurchases .(2)(957)(957)Cash dividends paid on common shares($2.10 per share).(1,937)(1,937)Redeemable noncontrolling interests fair value and other adjustments .(5)(5)Acquisition and other adjustments of nonredeemable noncontrolling interests .28 28 Distribution to nonredeemable noncontrolling interests .(154)(154)Balance at September 30,2024 .923$9$461$96,518$(1,414)$(1,039)$5,346$99,881 See Notes to the Condensed Consolidated Financial Statements 4UnitedHealth GroupCondensed Consolidated Statements of Changes in Equity(Unaudited)Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossNonredeemable Noncontrolling InterestsTotal EquityNine months ended September 30,(in millions)SharesAmountNet Unrealized(Losses)Gains on InvestmentsForeign Currency Translation(Losses)GainsBalance at January 1,2025 .915$9$96,036$(2,226)$(1,161)$5,610$98,268 Net earnings .12,046 464 12,510 Other comprehensive income .1,028 148 1,176 Issuances of common stock,and related tax effects .3 620 620 Share-based compensation .805 805 Common share repurchases .(12)(954)(4,573)(5,527)Cash dividends paid on common shares($6.52 per share).(5,914)(5,914)Redeemable noncontrolling interests fair value and other adjustments .(77)(77)Acquisition and other adjustments of nonredeemable noncontrolling interests .209 209 Distribution to nonredeemable noncontrolling interests .(501)(501)Balance at September 30,2025 .906$9$394$97,595$(1,198)$(1,013)$5,782$101,569 Balance at January 1,2024 .924$9$95,774$(1,971)$(5,056)$5,665$94,421 Net earnings .8,862 462 9,324 Other comprehensive income .557 4,017 4,574 Issuances of common stock,and related tax effects .7 1,280 1,280 Share-based compensation .770 770 Common share repurchases .(8)(1,528)(2,517)(4,045)Cash dividends paid on common shares($6.08 per share).(5,601)(5,601)Redeemable noncontrolling interests fair value and other adjustments .(61)(61)Acquisition and other adjustments of nonredeemable noncontrolling interests .(291)(291)Distribution to nonredeemable noncontrolling interests .(490)(490)Balance at September 30,2024 .923$9$461$96,518$(1,414)$(1,039)$5,346$99,881 See Notes to the Condensed Consolidated Financial Statements 5UnitedHealth GroupCondensed Consolidated Statements of Cash Flows(Unaudited)Nine Months Ended September 30,(in millions)20252024Operating activitiesNet earnings.$12,589$9,458 Noncash items:Depreciation and amortization .3,244 3,058 Deferred income taxes .(1,019)(234)Share-based compensation .795 831 Loss on sale of subsidiary and subsidiaries held for sale .139 8,331 Other,net .64 (610)Net change in other operating items,net of effects from acquisitions and dispositions:Accounts receivable .65 685 Other assets .(3,105)(2,988)Medical costs payable .6,178 2,235 Accounts payable and other liabilities .(417)1,250 Unearned revenues .56 (181)Cash flows from operating activities .18,589 21,835 Investing activitiesPurchases of investments .(12,805)(19,951)Sales of investments .7,945 15,065 Maturities of investments .6,517 6,738 Cash paid for acquisitions and other transactions,net of cash assumed .(4,436)(11,674)Purchases of property,equipment and capitalized software .(2,674)(2,587)Loans to care providers-cyberattack .(8,904)Repayments of care provider loans-cyberattack .1,543 3,189 Other,net .(2,164)(1,284)Cash flows used for investing activities .(6,074)(19,408)Financing activitiesCommon share repurchases .(5,545)(4,028)Cash dividends paid .(5,914)(5,601)Proceeds from common stock issuances .803 1,611 Repayments of long-term debt .(2,000)(2,500)Proceeds from(repayments of)short-term borrowings,net .1,469 (191)Proceeds from issuance of long-term debt .2,969 17,811 Customer funds administered .(1,792)(1,059)Other,net .(603)(1,213)Cash flows(used for)from financing activities .(10,613)4,830 Effect of exchange rate changes on cash and cash equivalents .25 (30)Increase in cash and cash equivalents,including cash within businesses held for sale .1,927 7,227 Less:net increase in cash within businesses held for sale .(29)(254)Net increase in cash and cash equivalents .1,898 6,973 Cash and cash equivalents,beginning of period.25,312 25,427 Cash and cash equivalents,end of period .$27,210$32,400 See Notes to the Condensed Consolidated Financial Statements 6UnitedHealth GroupNotes to the Condensed Consolidated Financial Statements(Unaudited)1.Basis of Presentation UnitedHealth Group Incorporated(individually and together with its subsidiaries,“UnitedHealth Group”and the“Company”)is a health care and well-being company with a mission to help people live healthier lives and help make the health system work better for everyone.The Companys two distinct,yet complementary businesses Optum and UnitedHealthcare are working to help build a modern,high-performing health system through improved access,affordability,outcomes and experiences for the individuals and organizations the Company is privileged to serve.The Company has prepared the Condensed Consolidated Financial Statements according to U.S.Generally Accepted Accounting Principles(GAAP)and has included the accounts of UnitedHealth Group and its subsidiaries.The year-end condensed consolidated balance sheet was derived from audited financial statements,but does not include all disclosures required by GAAP.In accordance with the rules and regulations of the U.S.Securities and Exchange Commission(SEC),the Company has omitted certain footnote disclosures that would substantially duplicate the disclosures contained in its annual audited Consolidated Financial Statements.Therefore,these Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and the Notes included in Part II,Item 8,“Financial Statements and Supplementary Data”in the Companys Annual Report on Form 10-K for the year ended December 31,2024 as filed with the SEC(2024 10-K).The accompanying Condensed Consolidated Financial Statements include all normal recurring adjustments necessary to present the interim financial statements fairly.Use of EstimatesThese Condensed Consolidated Financial Statements include certain amounts based on the Companys best estimates and judgments.The Companys most significant estimates relate to estimates and judgments for medical costs payable and goodwill.Certain of these estimates require the application of complex assumptions and judgments,often because they involve matters that are inherently uncertain and will likely change in subsequent periods.The impact of any change in estimates is included in earnings in the period in which the estimate is adjusted.Revenues-Products and ServicesAs of September 30,2025 and December 31,2024,accounts receivable related to products and services were$10.1 billion and$9.9 billion,respectively.As of September 30,2025,revenue expected to be recognized in any future year related to remaining performance obligations,excluding revenue pertaining to contracts having an original expected duration of one year or less,contracts where revenue is recognized as invoiced and contracts with variable consideration related to undelivered performance obligations,was$11.6 billion,of which approximately half is expected to be recognized in the next three years.72.InvestmentsA summary of debt securities by major security type is as follows:(in millions)AmortizedCostGrossUnrealizedGainsGrossUnrealizedLossesFairValueSeptember 30,2025Debt securities-available-for-sale:U.S.government and agency obligations .$3,893$2$(167)$3,728 State and municipal obligations .6,747 20 (273)6,494 Corporate obligations .24,731 156 (578)24,309 U.S.agency mortgage-backed securities .10,258 25 (651)9,632 Non-U.S.agency mortgage-backed securities .2,757 11 (109)2,659 Total debt securities-available-for-sale .48,386 214 (1,778)46,822 Debt securities-held-to-maturity:U.S.government and agency obligations .459 1 (1)459 State and municipal obligations .26 (2)24 Corporate obligations .3 3 Total debt securities-held-to-maturity .488 1 (3)486 Total debt securities .$48,874$215$(1,781)$47,308 December 31,2024Debt securities-available-for-sale:U.S.government and agency obligations .$4,600$1$(274)$4,327 State and municipal obligations .7,357 2 (375)6,984 Corporate obligations .24,391 56 (1,140)23,307 U.S.agency mortgage-backed securities .10,577 1 (994)9,584 Non-U.S.agency mortgage-backed securities .2,890 2 (175)2,717 Total debt securities-available-for-sale .49,815 62 (2,958)46,919 Debt securities-held-to-maturity:U.S.government and agency obligations .444 (2)442 State and municipal obligations .28 (2)26 Corporate obligations .40 40 Total debt securities-held-to-maturity .512 (4)508 Total debt securities .$50,327$62$(2,962)$47,427 The Company held$5.6 billion and$4.9 billion of equity securities as of September 30,2025 and December 31,2024,respectively.The Companys investments in equity securities primarily consist of venture investments and employee savings plan related investments.Additionally,the Companys investments included$3.5 billion and$3.8 billion of equity method investments primarily in operating businesses in the health care sector as of September 30,2025 and December 31,2024,respectively.The allowance for credit losses on held-to-maturity securities at September 30,2025 and December 31,2024 was not material.8The amortized cost and fair value of debt securities as of September 30,2025,by contractual maturity,were as follows:Available-for-SaleHeld-to-Maturity(in millions)AmortizedCostFairValueAmortizedCostFairValueDue in one year or less .$3,485$3,466$264$264 Due after one year through five years .13,603 13,360 202 202 Due after five years through ten years .11,582 11,243 5 5 Due after ten years .6,701 6,462 17 15 U.S.agency mortgage-backed securities .10,258 9,632 Non-U.S.agency mortgage-backed securities .2,757 2,659 Total debt securities .$48,386$46,822$488$486 The fair value of available-for-sale debt securities with gross unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position were as follows:Less Than 12 Months12 Months or Greater Total(in millions)FairValueGrossUnrealizedLossesFairValueGrossUnrealizedLossesFairValueGrossUnrealizedLossesSeptember 30,2025Debt securities-available-for-sale:U.S.government and agency obligations .$525$(5)$2,561$(162)$3,086$(167)State and municipal obligations .1,346 (47)3,825 (226)5,171 (273)Corporate obligations .1,610 (16)11,293 (562)12,903 (578)U.S.agency mortgage-backed securities .1,044 (11)6,434 (640)7,478 (651)Non-U.S.agency mortgage-backed securities .188 1,471 (109)1,659 (109)Total debt securities-available-for-sale .$4,713$(79)$25,584$(1,699)$30,297$(1,778)December 31,2024Debt securities-available-for-sale:U.S.government and agency obligations .$1,475$(51)$2,152$(223)$3,627$(274)State and municipal obligations .2,593 (58)4,085 (317)6,678 (375)Corporate obligations .7,402 (213)11,449 (927)18,851 (1,140)U.S.agency mortgage-backed securities .4,791 (191)4,674 (803)9,465 (994)Non-U.S.agency mortgage-backed securities .416 (5)1,863 (170)2,279 (175)Total debt securities-available-for-sale .$16,677$(518)$24,223$(2,440)$40,900$(2,958)The Companys unrealized losses from debt securities as of September 30,2025 were generated from approximately 25,000 positions out of a total of 41,000 positions.The Company believes that it will timely collect the principal and interest due on its debt securities that have an amortized cost in excess of fair value.The unrealized losses were primarily caused by interest rate increases and not by unfavorable changes in the credit quality associated with these securities which impacted the Companys assessment on collectability of principal and interest.At each reporting period,the Company evaluates available-for-sale debt securities for any credit-related impairment when the fair value of the investment is less than its amortized cost.The Company evaluated the expected cash flows,the underlying credit quality and credit ratings of the issuers,noting no significant credit deterioration since purchase.As of September 30,2025,the Company did not have the intent to sell any of the available-for-sale debt securities in an unrealized loss position.Therefore,the Company believes these losses to be temporary.The allowance for credit losses on available-for-sale debt securities at September 30,2025 and December 31,2024 was not material.93.Fair ValueCertain assets and liabilities are measured at fair value in the Condensed Consolidated Financial Statements or have fair values disclosed in the Notes to the Condensed Consolidated Financial Statements.These assets and liabilities are classified into one of three levels of a hierarchy defined by GAAP.For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument,see Note 4 of Notes to the Consolidated Financial Statements included in Part II,Item 8,“Financial Statements and Supplementary Data”in the 2024 10-K.The following table presents a summary of fair value measurements by level and carrying values for items measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets:(in millions)Quoted Pricesin ActiveMarkets(Level 1)OtherObservableInputs(Level 2)UnobservableInputs(Level 3)TotalFair and CarryingValueSeptember 30,2025Cash and cash equivalents .$21,305$5,905$27,210 Debt securities-available-for-sale:U.S.government and agency obligations .3,561 167 3,728 State and municipal obligations .6,494 6,494 Corporate obligations .23,842 467 24,309 U.S.agency mortgage-backed securities .9,632 9,632 Non-U.S.agency mortgage-backed securities .2,659 2,659 Total debt securities-available-for-sale .3,561 42,794 467 46,822 Equity securities .2,023 214 207 2,444 Total assets at fair value .$26,889$48,913$674$76,476 Percentage of total assets at fair value .35d%10cember 31,2024Cash and cash equivalents .$25,248$64$25,312 Debt securities-available-for-sale:U.S.government and agency obligations .4,194 133 4,327 State and municipal obligations .6,984 6,984 Corporate obligations .29 22,841 437 23,307 U.S.agency mortgage-backed securities .9,584 9,584 Non-U.S.agency mortgage-backed securities .2,717 2,717 Total debt securities-available-for-sale .4,223 42,259 437 46,919 Equity securities .1,859 24 65 1,948 Total assets at fair value .$31,330$42,347$502$74,179 Percentage of total assets at fair value .42W%10%There were no transfers in or out of Level 3 financial assets or liabilities during the nine months ended September 30,2025 or 2024.10The following table presents a summary of fair value measurements by level and carrying values for certain financial instruments not measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets:(in millions)Quoted Pricesin ActiveMarkets(Level 1)OtherObservableInputs(Level 2)UnobservableInputs(Level 3)TotalFairValueTotal Carrying ValueSeptember 30,2025Debt securities-held-to-maturity .$461$25$486$488 Long-term debt and other financing obligations .$73,627$73,627$77,247 December 31,2024Debt securities-held-to-maturity .$482$26$508$512 Long-term debt and other financing obligations .$70,565$70,565$75,604 Nonfinancial assets and liabilities or financial assets and liabilities that are measured at fair value on a nonrecurring basis are subject to fair value adjustments only in certain circumstances,such as when the Company records an impairment.The assets and liabilities within our South American operations held for sale as of September 30,2025 were measured at the lower of carrying value or fair value less cost to sell.Fair value is measured based upon unobservable amounts,such as estimated selling price derived from Company-specific information,market conditions and third-party indications.There were no significant fair value adjustments for assets and liabilities recorded during the nine months ended September 30,2025 or 2024.4.Medical Costs PayableThe following table shows the components of the change in medical costs payable for the nine months ended September 30:(in millions)20252024Medical costs payable,beginning of period .$34,224$32,395 Acquisitions(dispositions),net .20 (755)Reported medical costs:Current year .231,984 197,750 Prior years .(30)(600)Total reported medical costs .231,954 197,150 Medical payments:Payments for current year .(195,548)(165,544)Payments for prior years .(30,453)(29,095)Total medical payments .(226,001)(194,639)Less:increase in medical costs payable included within businesses held for sale .(16)(200)Medical costs payable,end of period .$40,181$33,951 For the nine months ended September 30,2025 and 2024,prior years medical cost reserve development included no individual factors that were significant.Medical costs payable included reserves for claims incurred by consumers but not yet reported to the Company of$27.8 billion and$23.7 billion at September 30,2025 and December 31,2024,respectively.115.Short-Term Borrowings and Long-Term DebtIn June 2025,the Company issued$3.0 billion of senior unsecured notes consisting of the following:(in millions,except percentages)Par Value4.4%,June 2028 .$500 4.65%,January 2031 .750 5.3%,June 2035 .1,000 5.95%,June 2055 .750 As of September 30,2025,the Company had$2.9 billion of commercial paper outstanding,with a weighted-average annual interest rate of 4.2%.For more information on the Companys short-term borrowings,debt covenants and long-term debt,see Note 8 of Notes to the Consolidated Financial Statements included in Part II,Item 8,“Financial Statements and Supplementary Data”in the 2024 10-K.6.DividendsIn June 2025,the Companys Board of Directors increased the Companys quarterly cash dividend to shareholders to an annual rate of$8.84 compared to$8.40 per share,which the Company had paid since June 2024.Declaration and payment of future quarterly dividends is at the discretion of the Board of Directors and may be adjusted as business needs or market conditions change.The following table provides details of the Companys dividend payments during the nine months ended September 30,2025:Payment DateAmount per ShareTotal Amount Paid(in millions)March 18 .$2.10$1,912 June 24.2.21 2,000 September 23 .2.21 2,002 7.Commitments and ContingenciesLegal MattersThe Company is frequently made party to a variety of legal actions and regulatory inquiries,including class actions and suits brought by members,care providers,consumer advocacy organizations,customers,shareholders,and regulators,relating to the Companys businesses,including management and administration of health benefit plans and other services.These matters include medical malpractice,employment,intellectual property,antitrust,privacy and contract claims and claims related to health care benefits coverage and other business practices.The Company records liabilities for its estimates of probable costs resulting from these matters where appropriate.Estimates of costs resulting from legal and regulatory matters involving the Company are inherently difficult to predict,particularly where the matters:involve indeterminate claims for monetary damages or may involve fines,penalties or punitive damages;present novel legal theories or represent a shift in regulatory policy;involve a large number of claimants or regulatory bodies;are in the early stages of the proceedings;or could result in a change in business practices.Accordingly,the Company is often unable to estimate the losses or ranges of losses for those matters where there is a reasonable possibility or it is probable a loss may be incurred.12Government Investigations,Audits and ReviewsThe Company has been involved or is currently involved in various governmental investigations,audits and reviews.These include routine,regular and special investigations,audits and reviews by the Centers for Medicare and Medicaid Services(CMS),state insurance and health and welfare departments,state attorneys general,the Office of the Inspector General(OIG),the Office of Personnel Management,the Office for Civil Rights,the Government Accountability Office,the Federal Trade Commission,U.S.Congressional committees,the U.S.Department of Justice(DOJ),the SEC,the Internal Revenue Service,the U.S.Drug Enforcement Administration,the U.S.Department of Labor,the Federal Deposit Insurance Corporation,the Consumer Financial Protection Bureau,the Defense Contract Audit Agency,the Food and Drug Administration and other governmental authorities.Similarly,the Companys international businesses are also subject to investigations,audits and reviews by applicable foreign governments.The Company has also been responding to subpoenas,information requests and investigations from governmental entities.The Company can provide no assurance as to the scope and outcome of these matters and no assurance as to whether its business,financial condition or results of operations will be materially adversely affected.Certain of the Companys businesses have been reviewed or are currently under review,including for,among other matters,compliance with coding and other requirements under the Medicare risk-adjustment model.CMS and OIG have selected certain of the Companys local plans for risk adjustment data validation(RADV)audits to validate the coding practices of and supporting documentation maintained by health care providers and such audits may result in retrospective adjustments to payments made to the Companys health plans.On February 14,2017,the DOJ announced its decision to pursue certain claims within a lawsuit initially asserted against the Company and filed under seal by a whistleblower in 2011.The whistleblowers complaint,which was unsealed on February 15,2017,alleges the Company made improper risk adjustment submissions and violated the False Claims Act.In March 2025,a Special Master appointed by the court issued a report recommending that the court enter summary judgment in the Companys favor on all remaining claims.In April 2025,the DOJ filed a motion asking the court to reject the Special Masters report.The Company cannot reasonably estimate the outcome which may result from this matter given its procedural status.8.Held for SaleThe Companys planned sale of its remaining South American operations continues to progress and is now expected to close in the second half of 2026,subject to regulatory and other customary closing conditions.Assets and liabilities held for sale have been included within prepaid expenses and other current assets and other current liabilities on the Condensed Consolidated Balance Sheet,respectively.The assets and liabilities of the held for sale disposal group as of September 30,2025,were as follows:(in millions)Businesses Held for SaleAssetsCash and cash equivalents .$248 Accounts receivable and other current assets .682 Property,equipment and capitalized software .743 Goodwill and other intangible assets .460 Other long-term assets.294 Remeasurement of assets of businesses held for sale to fair value less cost to sell(1).(1,397)Total assets .$1,030 LiabilitiesMedical costs payable .$195 Accounts payable and other current liabilities .377 Other long-term liabilities .407 Total liabilities .$979(1)Includes the effect of$985 million of cumulative foreign currency translation losses and$269 million of noncontrolling interests.139.Business CombinationsDuring the nine months ended September 30,2025,the Company completed several business combinations for total consideration of$4.7 billion.Acquired assets(liabilities)at acquisition date were:(in millions)Cash and cash equivalents .$305 Accounts receivable and other current assets .554 Property,equipment and other long-term assets .454 Other intangible assets .864 Total identifiable assets acquired .2,177 Medical costs payable .(20)Accounts payable and other current liabilities.(496)Other long-term liabilities .(364)Total identifiable liabilities acquired .(880)Total net identifiable assets .1,297 Goodwill .3,705 Nonredeemable noncontrolling interests .(244)Net assets acquired .$4,758 The majority of goodwill is not deductible for income tax purposes.Goodwill attributable to Optum Health from the business combinations completed was$3.4 billion.The preliminary purchase price allocations for the various business combinations are subject to adjustment as valuation analyses,primarily related to intangible assets and contingent liabilities,are finalized.The acquisition date fair values and weighted-average useful lives assigned to intangible assets were:(in millions,except years)Fair ValueWeighted-Average Useful LifeAcquired finite-lived intangible assets:Customer-related .$33 9 yearsTrademarks and technology.21 2 yearsOther .61 9 yearsTotal acquired finite-lived intangible assets .115 8 yearsTotal acquired indefinite-lived intangible assets-operating licenses and certificates .749 Total acquired intangible assets .$864 The results of operations and financial condition of acquired entities have been included in the Companys consolidated results and the results of the corresponding operating segment as of the date of acquisition.Through September 30,2025,acquired entities impact on revenues and net earnings was not material.Unaudited pro forma revenues and net earnings for the nine months ended September 30,2025 and 2024,as if the business combinations had occurred on January 1,2024,were immaterial for both periods.1410.Segment Financial InformationThe Companys four reportable segments are UnitedHealthcare,Optum Health,Optum Insight and Optum Rx.For more information on the Companys segments,see Part I,Item I,“Business”and Note 14 of Notes to the Consolidated Financial Statements included in Part II,Item 8,“Financial Statements and Supplementary Data”in the 2024 10-K.The following tables present reportable segment financial information:Optum (in millions)UnitedHealthcareOptum HealthOptum InsightOptum RxOptum EliminationsOptumCorporate andEliminationsConsolidatedThree Months Ended September 30,2025Revenues-unaffiliated customers:Premiums .$83,924$5,055$5,055$88,979 Products .61 45 13,190 13,296 13,296 Services .2,578 4,394 1,539 1,243 7,176 9,754 Total revenues-unaffiliated customers .86,502 9,510 1,584 14,433 25,527 112,029 Total revenues-affiliated customers .15,918 3,290 25,195 (1,317)43,086 (43,086)Investment and other income .568 472 41 51 564 1,132 Total revenues .$87,070$25,900$4,915$39,679$(1,317)$69,177$(43,086)$113,161 Total operating costs(a).$85,265$25,645$4,209$38,130$(1,317)$66,667$(43,086)$108,846 Earnings from operations .$1,805$255$706$1,549$2,510$4,315 Interest expense .(1,003)(1,003)Loss on sale of subsidiary and subsidiaries held for sale .(83)(83)Earnings before income taxes .$1,722$255$706$1,549$2,510$(1,003)$3,229 Total assets.$130,492$100,895$33,846$62,528$197,269$(12,492)$315,269 Purchases of property,equipment and capitalized software .238 282 267 103 652 890 Depreciation and Amortization .221 309 359 210 878 1,099 Three Months Ended September 30,2024Revenues-unaffiliated customers:Premiums .$71,624$5,818$5,818$77,442 Products .84 41 12,506 12,631 12,631 Services .2,422 3,953 1,700 1,029 6,682 9,104 Total revenues-unaffiliated customers .74,046 9,855 1,741 13,535 25,131 99,177 Total revenues-affiliated customers .15,448 3,086 20,554 (1,130)37,958 (37,958)Investment and other income .807 614 104 118 836 1,643 Total revenues .$74,853$25,917$4,931$34,207$(1,130)$63,925$(37,958)$100,820 Total operating costs(a).$70,641$23,756$4,140$32,663$(1,130)$59,429$(37,958)$92,112 Earnings from operations .$4,212$2,161$791$1,544$4,496$8,708 Interest expense .(1,074)(1,074)Loss on sale of subsidiary and subsidiaries held for sale .(20)(20)Earnings before income taxes .$4,192$2,161$791$1,544$4,496$(1,074)$7,614 Total assets.$120,760$95,482$34,666$57,031$187,179$(8,630)$299,309 Purchases of property,equipment and capitalized software .211 256 398 126 780 991 Depreciation and Amortization .217 283 332 209 824 1,041(a)Total operating costs include medical costs,operating costs,cost of products sold and depreciation and amortization,as applicable for each reportable segment.15 Optum (in millions)UnitedHealthcareOptum HealthOptum InsightOptum RxOptum EliminationsOptumCorporate andEliminationsConsolidatedNine Months Ended September 30,2025Revenues-unaffiliated customers:Premiums .$248,456$14,962$14,962$263,418 Products .191 133 39,572 39,896 39,896 Services .7,665 12,114 4,556 3,430 20,100 27,765 Total revenues-unaffiliated customers .256,121 27,267 4,689 43,002 74,958 331,079 Total revenues-affiliated customers .47,785 9,588 70,122 (3,770)123,725 (123,725)Investment and other income.1,669 1,362 96 146 1,604 3,273 Total revenues .$257,790$76,414$14,373$113,270$(3,770)$200,287$(123,725)$334,352 Total operating costs(a).$248,684$73,909$11,708$108,962$(3,770)$190,809$(123,725)$315,768 Earnings from operations .$9,106$2,505$2,665$4,308$9,478$18,584 Interest expense .(3,028)(3,028)Loss on sale of subsidiary and subsidiaries held for sale .(139)(139)Earnings before income taxes .$8,967$2,505$2,665$4,308$9,478$(3,028)$15,417 Total assets .$130,492$100,895$33,846$62,528$197,269$(12,492)$315,269 Purchases of property,equipment and capitalized software .626 867 895 286 2,048 2,674 Depreciation and Amortization .661 892 1,054 637 2,583 3,244 Nine Months Ended September 30,2024Revenues-unaffiliated customers:Premiums .$214,867$17,460$17,460$232,327 Products .205 123 36,423 36,751 36,751 Services .7,339 12,006 4,807 2,590 19,403 26,742 Total revenues-unaffiliated customers .222,206 29,671 4,930 39,013 73,614 295,820 Total revenues-affiliated customers .48,641 8,887 58,208 (3,275)112,461 (112,461)Investment and other income.1,870 1,386 159 236 1,781 3,651 Total revenues .$224,076$79,698$13,976$97,457$(3,275)$187,856$(112,461)$299,471 Total operating costs(a).$211,465$73,719$12,149$93,360$(3,275)$175,953$(112,461)$274,957 Earnings from operations .$12,611$5,979$1,827$4,097$11,903$24,514 Interest expense .(2,903)(2,903)Loss on sale of subsidiary and subsidiaries held for sale .(8,331)(8,331)Earnings before income taxes .$4,280$5,979$1,827$4,097$11,903$(2,903)$13,280 Total assets .$120,760$95,482$34,666$57,031$187,179$(8,630)$299,309 Purchases of property,equipment and capitalized software .581 724 987 295 2,006 2,587 Depreciation and Amortization .673 832 958 595 2,385 3,058(a)Total operating costs include medical costs,operating costs,cost of products sold and depreciation and amortization,as applicable for each reportable segment.16ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion should be read together with the accompanying Condensed Consolidated Financial Statements and Notes and with our 2024 10-K,including the Consolidated Financial Statements and Notes included in Part II,Item 8,“Financial Statements and Supplementary Data”in that report.Unless the context indicates otherwise,references to the terms“UnitedHealth Group,”the“Company,”“we,”“our”or“us”used throughout this Managements Discussion and Analysis of Financial Condition and Results of Operations refer to UnitedHealth Group Incorporated and its consolidated subsidiaries.Readers are cautioned that the statements,estimates,projections or outlook contained in this Managements Discussion and Analysis of Financial Condition and Results of Operations,including discussions regarding financial prospects,economic conditions,trends and uncertainties contained in this Item 2,may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995(PSLRA).These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the results discussed or implied in the forward-looking statements.A description of some of the risks and uncertainties is set forth in Part I,Item 1A,“Risk Factors”in our 2024 10-K and in the discussion below.EXECUTIVE OVERVIEW GeneralUnitedHealth Group is a health care and well-being company with a mission to help people live healthier lives and help make the health system work better for everyone.Our two distinct,yet complementary businesses Optum and UnitedHealthcare are working to help build a modern,high-performing health system through improved access,affordability,outcomes and experiences for the individuals and organizations we are privileged to serve.We have four reportable segments:Optum Health;Optum Insight;Optum Rx;andUnitedHealthcare,which includes UnitedHealthcare Employer&Individual,UnitedHealthcare Medicare&Retirement and UnitedHealthcare Community&State.Further information on our business is presented in Part I,Item 1,“Business”and Part II,Item 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations”in our 2024 10-K and additional information on our segments can be found in this Item 2 and in Note 10 of Notes to the Condensed Consolidated Financial Statements included in Part I,Item 1 of this report.Business TrendsOur businesses participate primarily in the United States health markets.We expect overall spending on health care to continue to grow in the future,due to inflation,medical technology and pharmaceutical advancement,regulatory requirements,demographic trends in the population and national interest in health and well-being.The rate of market growth may be affected by a variety of factors,including macroeconomic conditions and regulatory changes,which could impact our results of operations,including our continued efforts to control health care costs.Pricing Trends.To price our health care benefits,products and services,we start with our view of expected future costs,including medical care patterns,the mix and health status of people served,inflation and labor market dynamics.For 2025,our pricing trends and patient and member health status assumptions were well-short of the medical cost trends incurred,significantly impacting our earnings.We continually evaluate and adjust our approach in each of the local markets we serve,considering relevant factors,such as product positioning,price competitiveness and environmental,competitive,legislative and regulatory considerations,including minimum medical loss ratio thresholds and similar revenue adjustments.We seek to balance growth and profitability across all these dimensions.The commercial risk market remains highly competitive in the small group,large group and individual segments.We expect broad-based competition to continue as the industry adapts to individual and employer needs.Continued increased medical costs may impact both future pricing and benefit design,including for our individual exchange products in markets where we choose to remain,and result in shifts between product categories for our employer benefits.These potential changes,along with certain regulatory impacts,may result in decreased membership in future periods.Medicare Advantage funding continues to be pressured,as discussed below in“Regulatory Trends and Uncertainties,”and we have observed increased care patterns as discussed below in“Medical Cost Trends,”which may impact pricing and benefit design in future periods.17Optum Healths fully accountable value-based care businesses have been impacted by Medicare funding reductions and have also seen continued medical cost trend pressures,which may impact future pricing in the markets we continue to participate.The Medicaid redetermination process has caused a timing mismatch between the health status of people served through Medicaid and state rate updates.Due to elevated care activity,specifically related to behavioral,pharmacy and home health,there continues to be a mismatch between the updated rates in 2025 and underlying member acuity.The funding and payment rate environment remains insufficient to meet the health needs of patients and creates the risk of continued downward pressure on Medicaid margin percentages.We continue to take a prudent,market-sustainable posture for both new business and maintenance of existing relationships.We continue to advocate for actuarially sound rates commensurate with our medical cost trends and we remain dedicated to partnering with those states that are committed to the long-term viability of their programs.Additionally,we expect some Medicaid membership losses in 2026 as a result of early adoption of recent legislation.Medical Cost Trends.Our medical cost trends primarily relate to changes in unit costs,care activity and prescription drug costs.We have observed increased care patterns,more notably related to physician and outpatient care,and to a lesser extent inpatient and emergency room utilization,that are above what we expected and contemplated in our pricing and benefits design.We have also observed an increase in health care unit costs and in the intensity of services delivered,driven by increases in provider pricing and additional services bundled per visit.Additionally,the member profile of newly added patients under value-based care arrangements,people served in Medicare Advantage in markets where other have plans exited,and people served within our individual exchange business have contributed to increased medical costs.These trends may continue in future periods.The Inflation Reduction Act(IRA)altered the Medicare Part D model and benefits,shifting more risk to plans,which results in both increased premiums and medical costs.The IRA also changed the quarterly relationship of medical costs to premiums,altering the seasonal progression and creating a more consistent relationship between medical costs and premiums throughout the year.We endeavor to mitigate medical cost increases by engaging hospitals,physicians and consumers with information and helping them make clinically sound choices,with the objective of helping them achieve high-quality,affordable care.Additionally,we have elevated our audit,clinical policy and payment integrity tools to protect customers and patients from unnecessary costs.Regulatory Trends and UncertaintiesMedicare Advantage Rates.Medicare Advantage rate notices for numerous years have resulted in industry base rates well below the industry forward medical cost trend,with the Final Notice for 2026 beginning to approach the industry forward medical cost trend.Additionally,increased medical costs in 2025,which are significantly above initial cost trend estimates,adds to the compounding impact of the previous multi-year rate shortfalls creating sustained pressure on the Medicare Advantage program.Further,substantial revisions to the risk adjustment model,which serves to adjust rates to reflect a patients health status and care resource needs,have resulted and will continue to result in reduced funding and potentially benefits for people,especially those with some of the greatest health and social challenges.As a result of ongoing Medicare funding pressures,there are adjustments we can make to partially offset these rate pressures and reductions for a particular period.For example,we can seek to intensify our medical and operating cost management,make changes to the size and composition of our care provider networks,adjust member benefits and implement or increase the member premiums supplementing the monthly payments we receive from the government.Additionally,we decide annually on a county-by-county basis where we will offer Medicare Advantage plans.SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMSThe following summarizes select third quarter 2025 year-over-year operating comparisons to third quarter 2024 and other financial results.Consolidated revenues grew 12%,UnitedHealthcare revenues grew 16%and Optum revenues grew 8%.UnitedHealthcare served 795,000 more people,primarily driven by growth in Medicare Advantage.Consolidated earnings from operations of$4.3 billion compared to$8.7 billion last year,with 2025 impacted by elevated medical cost trend and 2024 impacted by the Change Healthcare cyberattack.Diluted earnings per common share were$2.59.Cash flows from operations for the nine months ended September 30,2025 were$18.6 billion.18RESULTS SUMMARYThe following table summarizes our consolidated results of operations and other financial information:(in millions,except percentages and per share data)Three Months Ended September 30,Increase/(Decrease)Nine Months Ended September 30,Increase/(Decrease)202520242025 vs.2024202520242025 vs.2024Revenues:Premiums .$88,979$77,442$11,537 15%$263,418$232,327$31,091 13%Products .13,296 12,631 665 5 39,896 36,751 3,145 9 Services .9,754 9,104 650 7 27,765 26,742 1,023 4 Investment and other income .1,132 1,643 (511)(31)3,273 3,651 (378)(10)Total revenues .113,161 100,820 12,341 12 334,352 299,471 34,881 12 Operating costs:Medical costs .79,958 65,957 14,001 21 231,954 197,150 34,804 18 Operating costs .15,223 13,280 1,943 15 42,595 40,519 2,076 5 Cost of products sold .12,566 11,834 732 6 37,975 34,230 3,745 11 Depreciation and amortization .1,099 1,041 58 6 3,244 3,058 186 6 Total operating costs .108,846 92,112 16,734 18 315,768 274,957 40,811 15 Earnings from operations .4,315 8,708 (4,393)(50)18,584 24,514 (5,930)(24)Interest expense .(1,003)(1,074)71 (7)(3,028)(2,903)(125)4 Loss on sale of subsidiary and subsidiaries held for sale .(83)(20)(63)315 (139)(8,331)8,192 (98)Earnings before income taxes .3,229 7,614 (4,385)(58)15,417 13,280 2,137 16 Provision for income taxes .(686)(1,356)670 (49)(2,828)(3,822)994 (26)Net earnings.2,543 6,258 (3,715)(59)12,589 9,458 3,131 33 Earnings attributable to noncontrolling interests.(195)(203)8 (4)(543)(596)53 (9)Net earnings attributable to UnitedHealth Group common shareholders .$2,348$6,055$(3,707)(61)%$12,046$8,862$3,184 36%Diluted earnings per share attributable to UnitedHealth Group common shareholders .$2.59$6.51$(3.92)$13.21$9.53$3.68 Medical care ratio(a).89.9.2%4.7.1.9%3.2%Operating cost ratio .13.5 13.2 0.3 12.7 13.5 (0.8)Operating margin .3.8 8.6 (4.8)5.6 8.2 (2.6)Tax rate .21.2 17.8 3.4 18.3 28.8 (10.5)Net earnings margin(b).2.1 6.0 (3.9)3.6 3.0 0.6 Return on equity(c).9.9&.3%(16.4)17.0.2%3.8 (a)Medical care ratio(MCR)is calculated as medical costs divided by premium revenue.(b)Net earnings margin attributable to UnitedHealth Group shareholders.(c)Return on equity is calculated as annualized net earnings attributable to UnitedHealth Group common shareholders divided by average shareholders equity.Average shareholders equity is calculated using the shareholders equity balance at the end of the preceding year and the shareholders equity balances at the end of each of the quarters in the year presented.192025 RESULTS OF OPERATIONS COMPARED TO 2024 RESULTS OF OPERATIONSConsolidated Financial ResultsRevenuesThe increases in revenues were primarily driven by growth in people served through Medicare Advantage and those with higher acuity needs within Medicaid,growth at Optum Rx and pricing trends.Medical Costs and MCRMedical costs increased primarily due to the IRA-driven impacts on Medicare Part D plans,elevated medical cost trend and growth in people served through Medicare Advantage and those with higher acuity needs.The MCR increased as a result of the revenue effects of the Medicare funding reductions,elevated medical cost trend,the member profile of newly added patients under value-based care arrangements,the seasonal impacts of the IRA on Medicare Part D and the impacts of market morbidity changes on our individual exchange offerings.For the nine months ended September 30,2025,the MCR also increased due to decreased favorable reserve development,partially offset by the incremental medical costs for accommodations made to care providers in 2024 as a result of the Change Healthcare cyberattack.The acceleration of anticipated future losses related to our individual exchange offerings recorded in the second quarter of 2025 decreased the MCR for the three months ended September 30,2025 and increased the MCR for the nine months ended September 30,2025.Operating Cost RatioThe operating cost ratio for the three months ended September 30,2025,increased primarily due to decreased gains related to business portfolio refinement,business mix and investments to support future growth;partially offset by the revenue impacts of government programs,including the IRA-driven impacts on Medicare Part D plans and operating cost management.For the nine months ended September 30,2025 the operating cost ratio decreased due to the revenue impacts of government programs,including the IRA-driven impacts on Medicare Part D plans;operating cost management and our direct response efforts to the Change Healthcare cyberattack in 2024;partially offset by business mix,investments to support future growth and decreased gains related to business portfolio refinement.Tax RateThe effective income tax rate decreased for the nine months ended September 30,2025 due to non-deductible losses on the sale of subsidiary and subsidiaries held for sale in 2024.Reportable SegmentsSee Note 10 of Notes to the Condensed Consolidated Financial Statements included in Part I,Item 1 of this report for more information on our segments.We utilize various metrics to evaluate and manage our reportable segments,including people served by UnitedHealthcare by major market segment and funding arrangement,people served by Optum Health and adjusted scripts for Optum Rx.These metrics are the main drivers of revenue,earnings and cash flows at each business.The metrics also allow management and investors to evaluate and understand business mix,including the level and scope of services provided to people,and pricing trends when comparing the metrics to revenue by segment.20The following table presents a summary of the reportable segment financial information:Three Months EndedSeptember 30,Increase/(Decrease)Nine Months Ended September 30,Increase/(Decrease)(in millions,except percentages)202520242025 vs.2024202520242025 vs.2024RevenuesUnitedHealthcare .$87,070$74,853$12,217 16%$257,790$224,076$33,714 15%Optum Health .25,900 25,917 (17)76,414 79,698 (3,284)(4)Optum Insight .4,915 4,931 (16)14,373 13,976 397 3 Optum Rx .39,679 34,207 5,472 16 113,270 97,457 15,813 16 Optum eliminations .(1,317)(1,130)(187)17 (3,770)(3,275)(495)15 Optum .69,177 63,925 5,252 8 200,287 187,856 12,431 7 Eliminations .(43,086)(37,958)(5,128)14 (123,725)(112,461)(11,264)10 Consolidated revenues .$113,161$100,820$12,341 12%$334,352$299,471$34,881 12rnings from operationsUnitedHealthcare .$1,805$4,212$(2,407)(57)%$9,106$12,611$(3,505)(28)%Optum Health .255 2,161 (1,906)(88)2,505 5,979 (3,474)(58)Optum Insight .706 791 (85)(11)2,665 1,827 838 46 Optum Rx .1,549 1,544 5 4,308 4,097 211 5 Optum .2,510 4,496 (1,986)(44)9,478 11,903 (2,425)(20)Consolidated earnings from operations .$4,315$8,708$(4,393)(50)%$18,584$24,514$(5,930)(24)%Operating marginUnitedHealthcare .2.1%5.6%(3.5)%3.5%5.6%(2.1)%Optum Health .1.0 8.3 (7.3)3.3 7.5 (4.2)Optum Insight .14.4 16.0 (1.6)18.5 13.1 5.4 Optum Rx .3.9 4.5 (0.6)3.8 4.2 (0.4)Optum .3.6 7.0 (3.4)4.7 6.3 (1.6)Consolidated operating margin .3.8%8.6%(4.8)%5.6%8.2%(2.6)%UnitedHealthcareThe following table summarizes UnitedHealthcare revenues by business:Three Months Ended September 30,Increase/(Decrease)Nine Months Ended September 30,Increase/(Decrease)(in millions,except percentages)202520242025 vs.2024202520242025 vs.2024UnitedHealthcare Employer&Individual-Domestic .$19,049$18,985$64%$57,065$55,470$1,595 3%UnitedHealthcare Employer&Individual-Global .826 769 57 7 2,427 2,892 (465)(16)UnitedHealthcare Employer&Individual-Total .19,875 19,754 121 1 59,492 58,362 1,130 2 UnitedHealthcare Medicare&Retirement .43,356 34,904 8,452 24 127,684 105,294 22,390 21 UnitedHealthcare Community&State .23,839 20,195 3,644 18 70,614 60,420 10,194 17 Total UnitedHealthcare revenues .$87,070$74,853$12,217 16%$257,790$224,076$33,714 15!The following table summarizes the number of people served by our UnitedHealthcare businesses,by major market segment and funding arrangement:September 30,Increase/(Decrease)(in thousands,except percentages)202520242025 vs.2024Commercial:Risk-based .8,440 8,900 (460)(5)e-based .21,490 20,830 660 3 Total Commercial .29,930 29,730 200 1 Medicare Advantage .8,435 7,810 625 8 Medicaid .7,460 7,450 10 Medicare Supplement(Standardized).4,300 4,340 (40)(1)Total Community and Senior .20,195 19,600 595 3 Total UnitedHealthcare-Medical .50,125 49,330 795 2%Supplemental Data:Medicare Part D stand-alone .2,795 3,055 (260)(9)%South American businesses held for sale .1,160 1,335 (175)(13)%UnitedHealthcares revenues increased due to the IRA-driven impacts on Medicare Part D plans and growth in the number of people served through Medicare Advantage,fee-based commercial offerings and those with higher acuity needs,partially offset by decreased people served through risk-based commercial offerings and Medicaid offerings.Earnings from operations decreased primarily due to the impacts of Medicare Advantage funding reductions,elevated medical cost trend,the impacts of market morbidity changes on our individual exchange offerings and other write-offs and settlements.For the three months ended September 30,2025,decreased earnings from operations was also due to the seasonal impact of the IRA on Medicare Part D.For the nine months ended September 30,2025,decreased earnings from operations was partially offset by the seasonal impact of the IRA on Medicare Part D and the incremental medical costs for accommodations to support care providers in 2024 as a result of the Change Healthcare cyberattack.The acceleration of anticipated future losses related to our individual exchange offerings recorded in the second quarter of 2025 increased earnings from operations for the three months ended September 30,2025 and decreased operating earnings for the nine months ended September 30,2025.OptumTotal revenues increased primarily due to growth at Optum Rx.For the nine months ended September 30,2025,increased revenues were partially offset by Optum Health.Earnings from operations decreased due to Optum Health,partially offset by the impacts of the Change Healthcare cyberattack in 2024.The results by segment were as follows:Optum HealthRevenues at Optum Health decreased primarily due to the conversion of risk-based contracts,Medicare Advantage funding reductions and the profile of members served,partially offset by growth in patients served under value-based arrangements.Earnings from operations decreased due to Medicare Advantage funding reductions,the member profile of newly added patients under value-based care arrangements,elevated medical cost trends and decreased gains related to business portfolio refinement,partially offset by cost management initiatives.For the three months ended September 30,2025 decreased earnings from operations was also due to lower investment income,partially offset by decreased contractual settlements.For the nine months ended September 30,2025,decreased earnings from operations was also partially offset by the incremental medical costs for accommodations to support care providers in 2024 as a result of the Change Healthcare cyberattack.Optum Health served approximately 96 million people and 104 million people as of September 30,2025 and September 30,2024,respectively.Optum InsightRevenues and earnings from operations at Optum Insight decreased for the three months ended September 30,2025 due to lower volumes within business services,partially offset by growth in technology services and decreased impacts related to the Change Healthcare cyberattack.Revenues and earnings from operations increased for the nine months ended September 30,2025 due to decreased impacts related to the Change Healthcare cyberattack and growth in technology services,partially offset by lower volumes within business services.22Optum RxRevenues at Optum Rx increased due to higher script volumes from both new clients and growth in existing clients and growth in pharmacy services.Earnings from operations increased due to the factors impacting revenue and operating cost efficiencies,partially offset by decreased investment income.Optum Rx fulfilled 414 million and 407 million adjusted scripts in the third quarters of 2025 and 2024,respectively.LIQUIDITY,FINANCIAL CONDITION AND CAPITAL RESOURCESLiquiditySummary of our Major Sources and Uses of Cash and Cash Equivalents Nine Months Ended September 30,Increase/(Decrease)(in millions)202520242025 vs.2024Sources of cash:Cash provided by operating activities .$18,589$21,835$(3,246)Issuances of short-term borrowings and long-term debt,net of repayments .2,438 15,120 (12,682)Proceeds from common stock issuances .803 1,611 (808)Sales and maturities of investments,net of purchases .1,657 1,852 (195)Repayments of care provider loans-cyberattack .1,543 3,189 (1,646)Total sources of cash.25,030 43,607 (18,577)Uses of cash:Common stock repurchases .(5,545)(4,028)(1,517)Cash paid for acquisitions and other transactions,net of cash assumed .(4,436)(11,674)7,238 Purchases of property,equipment and capitalized software .(2,674)(2,587)(87)Cash dividends paid .(5,914)(5,601)(313)Loans to care providers-cyberattack .(8,904)8,904 Customer funds administered .(1,792)(1,059)(733)Other .(2,767)(2,497)(270)Total uses of cash .(23,128)(36,350)13,222 Effect of exchange rate changes on cash and cash equivalents .25 (30)55 Increase in cash and cash equivalents,including cash within businesses held for sale .$1,927$7,227$(5,300)Less:net increase in cash within businesses held for sale .(29)(254)225 Net increase in cash and cash equivalents .$1,898$6,973$(5,075)2025 Cash Flows Compared to 2024 Cash FlowsDecreased cash flows provided by operating activities were driven by decreased net earnings,partially offset by changes in working capital accounts and the impacts of the Change Healthcare cyberattack in 2024.Other significant changes in sources or uses of cash year-over-year included net repayments of loans to care providers in response to the Change Healthcare cyberattack and decreased cash paid for acquisitions and other transactions,offset by decreased net issuances of short-term borrowings and long-term debt,increased share repurchases,decreased proceeds from common stock issuances and decreased customer funds administered.Financial ConditionAs of September 30,2025,our cash,cash equivalent,available-for-sale debt securities and marketable equity securities balances of$76.3 billion included approximately$27.2 billion of cash and cash equivalents(of which$1.2 billion was available for general corporate use),$46.8 billion of debt securities and$2.2 billion of investments in marketable equity securities.Given the significant portion of our portfolio held in cash and cash equivalents,we do not anticipate fluctuations in the aggregate fair value of our financial assets to have a material impact on our liquidity or capital position.Our available-for-sale debt securities portfolio had a weighted-average duration of 4.3 years and a weighted-average credit rating of“Double A”as of September 30,2025.When multiple credit ratings are available for an individual security,the average of the available ratings is used to determine the weighted-average credit rating.23Capital Resources and Uses of LiquidityIn addition to cash flows from operations and cash and cash equivalent balances available for general corporate use,our capital resources and uses of liquidity are as follows:Cash Requirements.A summary of our cash requirements as of December 31,2024 was disclosed in Part II,Item 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations”in our 2024 10-K.During the nine months ended September 30,2025,there were no material changes to this previously disclosed information outside the ordinary course of business.We believe our capital resources are sufficient to meet future,short-term and long-term,liquidity needs.We continually evaluate opportunities to expand our operations,including through internal development of new products,programs and technology applications and business combinations.Short-Term Borrowings.Our revolving bank credit facilities provide liquidity support for our commercial paper borrowing program,which facilitates the private placement of unsecured debt through independent broker-dealers,and are available for general corporate purposes.For more information on our commercial paper and bank credit facilities,see Note 5 of the Notes to the Condensed Consolidated Financial Statements included in Part I,Item 1 of this report and Note 8 of Notes to the Consolidated Financial Statements included in Part II,Item 8,“Financial Statements and Supplementary Data”in our 2024 10-K.As of September 30,2025,we were in compliance with the various covenants under our bank credit facilities.Long-Term Debt.Periodically,we access capital markets and issue long-term debt for general corporate purposes,such as to meet our working capital requirements,to refinance debt,to finance acquisitions or for share repurchases.For more information on our long-term debt,see Note 5 of the Notes to the Condensed Consolidated Financial Statements included in Part I,Item 1 of this report and Note 8 of Notes to the Consolidated Financial Statements included in Part II,Item 8,“Financial Statements and Supplementary Data”in our 2024 10-K.Credit Ratings.Our credit ratings as of September 30,2025 were as follows:MoodysS&P GlobalFitchA.M.Best RatingsOutlookRatingsOutlookRatingsOutlookRatingsOutlookSenior unsecured debt .A2NegativeA NegativeANegativeA-StableCommercial paper .P-1n/aA-1n/aF1n/aAMB-1n/aThe availability of financing in the form of debt or equity is influenced by many factors,including our profitability,operating cash flows,debt levels,credit ratings,debt covenants and other contractual restrictions,regulatory requirements and economic and market conditions.A significant downgrade in our credit ratings or adverse conditions in the capital markets may increase the cost of borrowing for us or limit our access to capital.Regulatory Capital.As a result of an increased MCR impacting our regulated insurance and HMO subsidiaries,the specified levels of required statutory capital required to be maintained are expected to increase.We entered into various agreements with reinsurers that could limit our risk of loss under certain circumstances,thus reducing our capital and surplus requirements.These agreements do not qualify for reinsurance accounting and are therefore accounted for under deposit accounting.While we continue to maintain significant levels of excess statutory capital in our subsidiaries,the amount of dividends our subsidiaries are able to pay to their parent companies during the remainder of 2025 will be impacted.During the nine months ended September 30,2025,our domestic insurance and HMO subsidiaries paid their parent companies dividends,net of capital infusions,of$841 million.Share Repurchase Program.During the nine months ended September 30,2025,we repurchased approximately 12.1 million shares of common stock at an average price of$454.82 per share.As of September 30,2025,we had Board of Directors authorization to purchase up to 21.0 million shares of our common stock.The Board of Directors from time to time may further amend the share repurchase program in order to increase the authorized number of shares which may be repurchased under the program.Dividends.In June 2025,our Board of Directors increased our quarterly cash dividend to an annual rate of$8.84 compared to$8.40 per share,which we had paid since June 2024.For more information on our dividend,see Note 6 of Notes to the Condensed Consolidated Financial Statements included in Part I,Item 1 of this report.For additional liquidity discussion,see Note 10 of Notes to the Consolidated Financial Statements included in Part II,Item 8,“Financial Statements and Supplementary Data”and“Managements Discussion and Analysis of Financial Condition and Results of Operations”included in Part II,Item 7 in our 2024 10-K.24RECENTLY ISSUED ACCOUNTING STANDARDS There are no recently issued accounting standards that are expected to have a material impact on our Condensed Consolidated Financial Statements.CRITICAL ACCOUNTING ESTIMATESIn preparing our Condensed Consolidated Financial Statements,we are required to make judgments,assumptions and estimates,which we believe are reasonable and prudent based on the available facts and circumstances.These judgments,assumptions and estimates affect certain of our revenues and expenses and their related balance sheet accounts and disclosure of our contingent liabilities.We base our assumptions and estimates primarily on historical experience and consider known and projected trends.On an ongoing basis,we re-evaluate our selection of assumptions and the method of calculating our estimates.Actual results,however,may materially differ from our calculated estimates,and this difference would be reported in our current operations.Our critical accounting estimates include medical costs payable and goodwill.For a detailed description of our critical accounting estimates,see“Managements Discussion and Analysis of Financial Condition and Results of Operations”included in Part II,Item 7 in our 2024 10-K.For a detailed discussion of our significant accounting policies,see Note 2 of Notes to the Consolidated Financial Statements included in Part II,Item 8,“Financial Statements and Supplementary Data”in our 2024 10-K.FORWARD-LOOKING STATEMENTSThe statements,estimates,projections,guidance or outlook contained in this document include“forward-looking”statements which are intended to take advantage of the“safe harbor”provisions of the federal securities laws.The words“believe,”“expect,”“intend,”“estimate,”“anticipate,”“forecast,”“outlook,”“plan,”“project,”“should”and similar expressions identify forward-looking statements.These statements may contain information about financial prospects,economic conditions and trends and involve risks and uncertainties.Actual results could differ materially from those that management expects,depending on the outcome of certain factors including:our ability to effectively estimate,price for and manage medical costs;new or changes in existing health care laws or regulations,or their enforcement or application;cyberattacks,other privacy/data security incidents,or our failure to comply with related regulations;reductions in revenue or delays to cash flows received under government programs;changes in Medicare,the CMS star ratings program or the application of risk adjustment data validation audits;the DOJs legal actions concerning our participation in the Medicare program;our ability to maintain and achieve improvement in quality scores impacting revenue;failure to maintain effective and efficient information systems or if our technology products do not operate as intended;risks and uncertainties associated with our businesses providing pharmacy care services;competitive pressures,including our ability to maintain or increase our market share;changes in or challenges to our public sector contract awards;failure to achieve targeted operating cost productivity improvements;failure to develop and maintain satisfactory relationships with health care payers,physicians,hospitals and other service providers;the impact of potential changes in tax laws and regulations;increases in costs and other liabilities associated with litigation,government investigations,audits or reviews;failure to complete,manage or integrate strategic transactions;risk and uncertainties associated with the sale of our remaining operations in South America;risks associated with public health crises arising from large-scale medical emergencies,pandemics,natural disasters and other extreme events;failure to attract,develop,retain,and manage the succession of key employees and executives;our investment portfolio performance;impairment of our goodwill and intangible assets;failure to protect proprietary rights to our databases,software and related products;downgrades in our credit ratings;and our ability to obtain sufficient funds from our regulated subsidiaries or from external financings to fund our obligations,reinvest in our business,maintain our debt to total capital ratio at targeted levels,maintain our quarterly dividend payment cycle,or continue repurchasing shares of our common stock.This above list is not exhaustive.We discuss these matters,and certain risks that may affect our business operations,financial condition and results of operations,more fully in our filings with the SEC,including our reports on Forms 10-K,10-Q and 8-K.By their nature,forward-looking statements are not guarantees of future performance or results and are subject to risks,uncertainties and assumptions that are difficult to predict or quantify.Actual results may vary materially from expectations expressed or implied in this document or any of our prior communications.You should not place undue reliance on forward-looking statements,which speak only as of the date they are made.We do not undertake to update or revise any forward-looking statements,except as required by law.25ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKWe manage exposure to market interest rates by diversifying investments across different fixed-income market sectors and debt across maturities,as well as by matching a portion of our floating-rate assets and liabilities,either directly or through the use of interest rate swap contracts.Unrealized gains and losses on investments in available-for-sale debt securities are reported in comprehensive income.The following table summarizes the impact of hypothetical changes in market interest rates across the entire yield curve by 1%point or 2%points as of September 30,2025 on our investment income and interest expense per annum,and the fair value of our investments and debt(in millions,except percentages):September 30,2025Increase(Decrease)in Market Interest RateInvestmentIncome PerAnnumInterestExpense PerAnnumFair Value ofFinancial AssetsFair Value ofFinancial Liabilities2%.$728$576$(4,249)$(9,525)1 .364 288 (2,170)(5,160)(1).(364)(273)2,210 6,284(2).(728)(544)4,421 13,949 Note:The impact of hypothetical changes in interest rates may not reflect the full 100 or 200 basis point change on interest income and interest expense or on the fair value of financial assets and liabilities as the rates are assumed to not fall below zero.ITEM 4.CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURESWe maintain disclosure controls and procedures as defined in Rules 13a-15(e)and 15d-15(e)under the Securities Exchange Act of 1934(Exchange Act)that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is(i)recorded,processed,summarized and reported within the time periods specified in SEC rules and forms;and(ii)accumulated and communicated to our management,including our principal executive officer and principal financial officer,as appropriate to allow timely decisions regarding required disclosure.In connection with the filing of this quarterly report on Form 10-Q,management evaluated,under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer,the effectiveness of the design and operation of our disclosure controls and procedures as of September 30,2025.Based upon that evaluation,our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30,2025.CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTINGThere have been no changes in our internal control over financial reporting during the quarter ended September 30,2025 that have materially affected,or are reasonably likely to materially affect,our internal control over financial reporting.26PART II.OTHER INFORMATIONITEM 1.LEGAL PROCEEDINGSA description of our legal proceedings is included in and incorporated by reference to Note 7 of Notes to the Condensed Consolidated Financial Statements included in Part I,Item 1 of this report.ITEM 1A.RISK FACTORS In addition to the other information set forth in this report,you should carefully consider the factors discussed in Part I,Item 1A,“Risk Factors”of our 2024 10-K,which could materially affect our business,financial condition or future results.The risks described in our 2024 10-K are not the only risks facing us.Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business,financial condition or future results.There have been no material changes to the risk factors as disclosed in our 2024 10-K.ITEM 2.UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDSIn November 1997,our Board of Directors adopted a share repurchase program,which the Board of Directors evaluates periodically.In June 2024,the Board of Directors amended our share repurchase program to authorize the repurchase of up to 35 million shares of our common stock in open market purchases or other types of transactions(including prepaid or structured repurchase programs),in addition to all remaining shares authorized to be repurchased under the Boards 2018 renewal of the program.There is no established expiration date for the program.The Board of Directors from time to time may further amend the share repurchase program in order to increase the authorized number of shares which may be repurchased under the program.There were no repurchases of the Companys common stock during the three months ended September 30,2025.As of September 30,2025,the Company had 21 million shares remaining available under its share repurchase authorization.ITEM 5.OTHER INFORMATIONTrading Arrangements During the quarter ended September 30,2025,none of the Companys directors or officers(as defined in Rule 16a-1(f)under the Exchange Act)adopted or terminated any contract,instruction or written plan for the purchase or sale of Company securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)under the Exchange Act or any non-Rule 10b5-1 trading arrangement.27ITEM 6.EXHIBITS*The following exhibits are filed or incorporated by reference herein in response to Item 601 of Regulation S-K.The Company files Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q and Current Reports on Form 8-K pursuant to the Securities Exchange Act of 1934 under Commission File No.1-10864.3.1Certificate of Incorporation of UnitedHealth Group Incorporated(incorporated by reference to Exhibit 3.1 to the Companys Registration Statement on Form 8-A/A filed on July 1,2015)3.2Amended and Restated Bylaws of UnitedHealth Group Incorporated,effective February 23,2021(incorporated by reference to Exhibit 3.2 to UnitedHealth Group Incorporateds Current Report on Form 8-K filed on February 26,2021)4.1Amended and Restated Indenture,dated as of April 27,2023,between UnitedHealth Group Incorporated and Wilmington Trust Company,as successor trustee(incorporated by reference to Exhibit 4.1 to UnitedHealth Group Incorporateds Current Report on Form 8-K filed on April 28,2023)4.2Indenture,dated as of February 4,2008,between UnitedHealth Group Incorporated and U.S.Bank National Association(incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-3,SEC File Number 333-149031,filed on February 4,2008)4.3Supplemental Indenture,dated as of April 18,2023,between UnitedHealth Group Incorporated and U.S.Bank Trust Company,National Association,as trustee,relating to the 6.875%Senior Notes due 2038(incorporated by reference to Exhibit 4.1 to UnitedHealth Group Incorporateds Current Report on Form 8-K filed on April 24,2023)*10.1Employment Agreement,effective as of September 2,2025,between United HealthCare Services,Inc.and Wayne S.DeVeydt(incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporateds Current Report on Form 8-K filed on July 31,2025).31.1Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INS XBRL Instance Document-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.101.SCH Inline XBRL Taxonomy Extension Schema Document.101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.104 Cover Page Interactive Data File(formatted as Inline XBRL and embedded within Exhibit 101)._*Denotes management contracts and compensation plans in which certain directors and named executive officers participate and which are being filed pursuant to Item 601(b)(10)(iii)(A)of Regulation S-K.*Pursuant to Item 601(b)(4)(iii)of Regulation S-K,copies of instruments defining the rights of certain holders of long-term debt are not filed.The Company will furnish copies thereof to the SEC upon request.28SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.UNITEDHEALTH GROUP INCORPORATED/s/STEPHEN HEMSLEYChair and Chief Executive Officer(principal executive officer)Dated:October 28,2025Stephen Hemsley /s/WAYNE DEVEYDTChief Financial Officer(principal financial officer)Dated:October 28,2025Wayne DeVeydt /s/THOMAS ROOSSenior Vice President and Chief Accounting Officer(principal accounting officer)Dated:October 28,2025Thomas Roos 29
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|Public|NXP and the NXP logo are trademarks of NXP B.V.All other product or service names are the property of their respective owners.2024 NXP B.V.NXP Investor PresentationThird Quarter 2025October 2025|NXP|Public2Forward Looking StatementsThis document includes forward-looking statements which include statements regarding NXPs business strategy,financial condition,results of operations,market data,as well as any other statements which are not historical facts.By their nature,forward-looking statements are subject to numerous factors,risks and uncertainties that could cause actual outcomes and results to be materially different from those projected.These factors,risks and uncertainties include the following:market demand and semiconductor industry conditions;our ability to successfully introduce new technologies and products;the demand for the goods into which NXPs products are incorporated;global trade disputes,potential increase of barriers to international trade,including the imposition of new or increased tariffs,and resulting disruptions to our established supply chains;the impact of government actions and regulations,including as a result of executive orders,including restrictions on the export of products and technology;the impact of government actions and regulations,including as a result of executive orders,including restrictions on the export of products and technology;increasing and evolving cybersecurity threats and privacy risks;our ability to accurately estimate demand and match our production capacity accordingly or obtain supplies from third-party producers;our access to production capacity from third-party outsourcing partners,and any events that might affect their business or our relationship with them;our access to production from third-party outsourcing partners,and any events that might affect their business or our relationship with them;our ability to secure adequate and timely supply of equipment and materials from suppliers;our ability to avoid operational problems and product defects and,if such issues were to arise,to correct them quickly;our ability to form strategic partnerships and joint ventures and to successfully cooperate with our alliance partners;our ability to win competitive bid selection processes;our ability to develop products for use in customers equipment and products;the ability to successfully hire and retain key management and senior product engineers;global hostilities,including the invasion of Ukraine by Russia and resulting regional instability,sanctions and any other retaliatory measures taken against Russia and the continued hostilities and the armed conflict in the Middle East,which could adversely impact the global supply chain,disrupt our operations or negatively impact the demand for our products in our primary end markets;our ability to maintain good relationships with NXPs suppliers;our ability to integrate acquired businesses in an efficient and effective manner;and a change in tax laws could have an effect on our estimated effective tax rate.In addition,this document contains information concerning the semiconductor industry,our end markets and business generally,which is forward-looking in nature and is based on a variety of assumptions regarding the ways in which the semiconductor industry,our end markets and business will develop.NXP has based these assumptions on information currently available,if any one or more of these assumptions turn out to be incorrect,actual results may differ from those predicted.While NXP does not know what impact any such differences may have on its business,if there are such differences,its future results of operations and its financial condition could be materially adversely affected.Readers are cautioned not to place undue reliance on these forward-looking statements,which speak to results only as of the date the statements were made.Except for any ongoing obligation to disclose material information as required by the United States federal securities laws,NXP does not have any intention or obligation to publicly update or revise any forward-looking statements after we distribute this document,whether to reflect any future events or circumstances or otherwise.For a discussion of potential risks and uncertainties,please refer to the risk factors listed in our SEC filings.Copies of our SEC filings are available on our Investor Relations website, or from the SEC website,www.sec.gov.No offer of solicitationThe Presentation does not constitute or form part of,and should not be construed as,an offer to sell or issue,or the solicitation of an offer to purchase,subscribe to or acquire,securities of NXP,or an inducement to enter into investment activity in the United States or in any other jurisdiction in which such offer,solicitation,inducement or sale would be unlawful prior to registration,exemption from registration or qualification under the securities laws of such jurisdiction.No part of this Presentation,nor the fact of its distribution,should form the basis of,or be relied on in connection with,any contract or commitment or investment decision whatsoever.The Presentation is not for publication,release or distribution in any jurisdiction where such publication,release or distribution would constitute a violation of the relevant laws of such jurisdiction,nor should it be taken or transmitted into such jurisdiction.Use of Non-GAAP Financial MeasuresIn this presentation,we have included certain non-GAAP financial information,including(i)Gross profit,(ii)Gross margin,(iii)Research and development,(iv)Selling,general and administrative,(v)Amortization of acquisition-related intangible assets,(vi)Other income,(vii)Operating income(loss),(viii)Operating margin,(ix)Financial Income(expense),(x)Income tax benefit(provision),(xi)Results relating to non-foundry equity-accounted investees,(xii)Net income(loss)attributable to stockholders,(xiii)Earnings per Share-Diluted,(xiv)EBITDA,adjusted EBITDA and trailing 12 month adjusted EBITDA,and(xv)free cash flow,trailing 12 month free cash flow and trailing 12 month free cash flow as a percent of Revenue.The non-GAAP information excludes,where applicable,the amortization of acquisition related intangible assets,the purchase accounting effect on inventory and property,plant and equipment,merger related costs(including integration costs),certain items related to divestitures,share-based compensation expense,restructuring and asset impairment charges,extinguishment of debt,foreign exchange gains and losses,income tax effect on adjustments described above and results from non-foundry equity-accounted investments.The difference in the benefit(provision)for income taxes between our GAAP and non-GAAP results relates to the income tax effects of the GAAP to non-GAAP adjustments that we make and the income tax effect of any discrete items that occur in the interim period.Discrete items primarily relate to unexpected tax events that may occur as these amounts cannot be forecasted(e.g.,the impact of changes in tax law and/or rates,changes in estimates or resolved tax audits relating to prior year tax provisions,the excess or deficit tax effects on share-based compensation,etc.).Please refer to the NXP Historic Financial Model file found on the Financial Results page of the Investor Relations section of our website at .The difference in the benefit(provision)for income taxes between our GAAP and non-GAAP results relates to the income tax effects of the GAAP to non-GAAP adjustments that we make and the income tax effect of any discrete items that occur in the interim period.Discrete items primarily relate to unexpected tax events that may occur as these amounts cannot be forecasted(e.g.,the impact of changes in tax law and/or rates,changes in estimates or resolved tax audits relating to prior year tax provisions,the excess or deficit tax effects on share-based compensation,etc.).|NXP|Public3100%of Excess FCF to Our OwnersHybrid manufacturingRMS&system leadershipDoubling non-GAAP EPS by 2030 NXP,A Future of Innovation and Long-term Value Creation High Single Digit Organic Revenue GrowthS32 SDVIntelligent systems at the edgeGross Margin ExpansionAbove 60%Hybrid manufacturingMix/NPI1.Reconciliations of non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the appendix to the presentation2.NXP internal estimates|NXP|Public4201020112012201320142015201620172018201920202021202220232024NXP,A History of Innovation and Value CreationRefining strategic focus&financial disciplineIntelligent edge systems$4.4B$4.2B$4.4B$4.8B$5.6B$6.1B$9.5B$9.3B$9.4B$8.9B$8.6B16.0.9.1#.3%.0.6&.6).4(.7).0%.9%IPOFreescaleMergerMarvellConnectivityAssets Acquired$11.1B32.9%Non-GAAPOp.Margin RevenueYear EndShare Price$13.2B36.35.14.6%$13.3B$12.6BDivestSoundSolutionsDivestRFPowerDivestStandardProductsQCOMDealExit1.Reconciliations of non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the appendix to the presentation2.Annual share price is the closing share price of NXPI in each full year period sourced from FactSet$21$15$26$46$76$84$98$117$73$127$159$228$158$230$208|NXP|Public5Total Semiconductor Market Macrotrends Drive Waves of GrowthLaptopsDesktopsMobilesGame consolesHome audio&video$1.3 Trillion2000201020202030ECloud AI&Intelligent Systems at the EdgeCloud AIIntelligent edge systems Smart connected devices Smart factories and buildings Smart connected carsSmartphonesTabletsData-center serversAnalogOn-demandAnticipate&AutomateTAM is from OMDIA AMFT June 2024;2030E is from McKinsey September 2024 update|NXP|Public6Auto&Industrial Lead Growth at the Intelligent Edge Within a$1.3T Opportunity230180506050303202601401408060300Global Semiconductor market value by vertical,$billion90(13%)80(11%)90(13%)80(11%)30(4%)30(4%)300(43%)600WiredConsumerIndustrialAutomotiveWirelessComputing2021-2030ECAGR,%1,3002030E20219%Growth contribution$B(%of Total)700GenAI2021-2030E4%4%5%8%McKinsey September 2024 update100%|NXP|Public7NXP Uniquely Positioned to Bring Intelligent Systems to the EdgeIndustry challengesEcosystem shiftsFrom supply chain to value networkIncreasing complexityComponents to system-of-systemsSoftware-defined edgeFrom HW-to SW-defined solutionsResilience&sustainabilityRising concerns&awarenessNXPs unique capability and responseComplete portfolioSensingAI enabled processingActuationConnectivityDeep competenceSecurity leaderFunctional safety leaderAutomotive&industrial focusSimplifyingScalable system solutionsPre-integrated software&hardwareTop OEMs&long-tailResilient&SustainableHybrid manufacturingTarget carbon neutral by 2035NXP internal estimates.|NXP|Public8NXP Uniquely Positioned to Bring Intelligent Systems to the EdgeSenseThinkConnectActSafe&secureScalable system solutionsIndustrial&IoTFactoryautomationBuilding&homeHealthcarePower&energyAutomotiveSW-defined vehicleADASElectrification High RMS core franchisesNXP internal estimates.|NXP|Public9ProductLeadershipAugmenting product leadershipwith system leadershipNXP Investment Compass to Focus on Profitable GrowthInvestment matrixFocus on RMS leadership at above market growthLowHighRelative market share(RMS)LowHighGrowthSustain leadershipInvestfor growthDe-prioritize R&D investmentSeed investmentfor future growthNXP internal estimates.ProductLeadershipSystemLeadership|NXP|Public10NXP Semiconductors At a Glance1.All data as of end 2024;2.Revenue by Geographic Ship-To,and Channel from NXP Semiconductors 2024 Annual 10-K Report;3.Hybrid manufacturing reflects both internal and external sourcing for front-end and back-end manufacturing,presented as a percentage of revenue.China,$4.6B,36%Asia Pacific ex-China,$3.5B,28%EMEA,$2.7B,22%Americas,$1.8B,14 24 Geographic Revenue Ship-To by RegionDirect&Other,$5.4B,43%Distribution,$7.2B,57 24 Revenue Ship-To by ChannelInternal,38%External,62%Hybrid Manufacturing-Front-end SourcingInternal86%External14%Hybrid Manufacturing-Back-end Sourcing|NXP|Public11NXP Revenue Growth in Next 3 Years2024 Revenue by end-market exposure1.Reconciliations of non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the appendix to the presentation2.The sum of the percentages shown may not add to 100%due to roundingRevenue by business type2024A-2027E CAGRCore businesses3celerated growth15-25%6-10 2120242027E$11.1B$12.6B$16.0B38W%Automotive18%Industrial&IoT13%Comm Infra12%Mobile62s%|NXP|Public12Automotive Megatrends Drive Mid-high Single Digit Content GrowthSDVs48%Unit CAGR LV Production2%Unit CAGR xEVs20%Unit CAGR ADAS L1-L38%Unit CAGR Lines of code100M 500MData in the car50 GB 10 TBTime-to-market3-5 yrs 1-2 yrsECU power30-60W 50-200WSystem Complexity and Software Dependence Is Increasing13M42M2024E2027E50DM94M2024E2027EChinaROW 1%33M56M2024E2027E20FM58M2024E2027E8%7%S&P Global September 2024,TechInsights,OEM/Tier1 public statements,New York Times,NXP internal estimates,xEV includes BEV,PHEV,FHEV,MHEV and FCEV.SDV is based on Vehicle Compute Zonal processors.NXP S32 SDV20-30%Revenue CAGR NXP Auto8-12%Revenue CAGR NXP Electrification15-20%Revenue CAGR NXP Radar15-20%Revenue CAGR NXP Connectivity10-20%Revenue CAGR|NXP|Public13202120242027E$5.5B$7.2B$9.5BAutomotive-Revenue Growth in Next 3 YearsAccelerated growth drivers8-12celeratedgrowth drivers15-25%Core businesses3%SAARLow single digit growth PricingLow single digit erosion Content per vehicleMid to high single digit growth Macro-environmentGDP 2.5%and PMI 50Geo-politicsManufacturing regionalizationSupply chainNormalized auto tier-1 inventoryChannel Inventory at 11 weeks48as%Electrification systemsConnectivityS32 SDVRadar systems1.Reconciliations of non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the appendix to the presentation2.NXP Internal estimates.Revenue by business typeKey assumptions2024E-27E CAGR|NXP|Public14Megatrends driving an upgrade cycleEverything augmented by AILow-powerEnergy managementCloud independenceAutomation&autonomyUpgradeabilityLocal learningPredictive maintenanceOperational safetyPrivacy&securityEnergyefficiencyProductivityenhancementEnhancedresilienceIndustrial&IoT SAM($B)Intelligent Edge Systems Are Key to Create Efficiency and Sustainability1.OMDIA AMFT 2Q242.NXP internal estimates.16.218.62.53.24.66.85.56.97.39.42024E2027E7GR10GRFactoryAutomationHome&BuildingHealthcarePower&Energy31.644.9|NXP|Public15Industrial&IoT-Revenue Growth 2024 to 2027Accelerated growth drivers8-12celeratedgrowth drivers20-30%Core businesses4%1.Reconciliations of non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the appendix to the presentation2.NXP internal estimates.Industrial&IoT SAM7GR(2024E-2027E)Macro-environmentGDP 2.5%and PMI 50Geo-politicsManufacturing regionalizationSupply chainChannel Inventory at 11 weeks202120242027E$2.4B$2.3B$3.1B61sx%Revenue by business typeKey assumptions2024E-27E CAGRConnectivityProcessingAnalog&security|NXP|Public16Analyst Day 2024 Outlook:Accelerating Secular Profitable Revenue Growth20242027EMobile0-4GR$1.5B$1.6B20242027EComm.Infrastructure0GR$1.7B$1.7B20242027E25GR4GRIndustrial&IoT8 12GR$2.3B$3.1B20242027E20GR3GRAutomotive8-12GR$7.2B$9.5BHigh RMS Core Revenue Accelerated Growth Revenue Drivers1.NXP Strategy Office,as of NXP Analyst Day November 20242.Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures3.All growth rates are 3-year CAGR based on 2024 actuals through 2027 estimates,as of NXP Analyst Day 20244.The sum of the percentages shown may not add to 100%due to rounding|NXP|Public1720242027E2030E20 242027E2030E62 e58%External 130-40nm 130nm 28nm0.80.90.90.60.81.00.10.20.420242027E2030EHybrid Manufacturing:Value Creation and Customer EnablementStrategic investments300mm fab investment 200mm fab consolidationInternal A&T expansionDrives gross margin expansionMitigate geo and market risk Supply control via external&JV partnershipsExpand local manufacturingSupports long-term growth Advanced tech nodes transitionCustomer value:resilient,dependable,and scalable1.5M 2.3MWafer volume1.9MFront End MixBack End MixInternal*ExternalInternal*80 %1.Wafer volume is in 300mm equivalents2.Front Mix is a combination of internal sourcing and consolidated,majority owned joint ventures(SSMC)|NXP|Public18Diverse End-Customer Base with High Barriers to EntryReflects 2024 sales on a ship to basis through all channelsTop 20 End-customers are less than 45%of 2024 Revenue25,000 Total CustomersNo 10%CustomersAutomotiveIndustrial&IoTMobileComm.Infra.&Other|NXP|Public19Driving Profitable Growth in Excess of Addressable Market1.Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures2.Gross Profit,Gross Margin,Operating Profit,Operating Margin,Free Cash Flow(FCF),are all non-GAAP figures,5-yr.CAGR reflect the period 2019 2024$8.9$8.6$11.1$13.2$13.3$12.6 201920202021202220232024$2.6$2.2$3.6$4.8$4.7$4.4 201920202021202220232024$4.7$4.4$6.2$7.6$7.8$7.3 201920202021202220232024$1.9$2.1$2.3$2.8$2.7$2.1 201920202021202220232024As Reported RevenueUp 7%5-yr.CAGR($B)Non-GAAP Gross Profit/Non-GAAP Gross Margin Up 9%5-yr.CAGR($B)Non-GAAP Operating Profit/Non-GAAP Operating MarginUp 11%5-yr.CAGR($B)Non-GAAP Free Cash Flow/Non-GAAP Free Cash Flow MarginUp 2%5-yr.CAGR($B)53.5V.1W.9).02.96.3X.15.1.6!.5 .9$.3Q.1X.5!.1 .2%.94.6%|NXP|Public20Annual Revenue by End Market($B)Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures$1.9$1.7$1.7$2.0$2.1$1.7 201920202021202220232024$1.2$1.2$1.4$1.6$1.3$1.5 201920202021202220232024$4.2$3.8$5.5$6.9$7.5$7.2 201920202021202220232024$1.6$1.8$2.4$2.7$2.4$2.3 201920202021202220232024AutomotiveUp 11%5-yr.CAGR($B)Industrial&IoTUp 7%5-yr.CAGR($B)MobileUp 5%5-yr.CAGR($B)Communication Infrastructure&OtherDown 2%5-yr.CAGR($B)|NXP|Public21593 292 427 696 509 Q3 24Q4 24Q1 25Q2 25Q3 2512.2.9#.0%1,153 1,065 904 935 1,071 Q3 24Q4 24Q1 25Q2 25Q3 25Recent Quarterly Business Trends1.Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures2.Gross Profit,Gross Margin,Operating Profit,Operating Margin,Free Cash Flow are all non-GAAP figures.As Reported Revenue($M)Non-GAAP Gross Profit/Non-GAAP Gross MarginNon-GAAP Operating Profit/Non-GAAP Operating MarginNon-GAAP Free Cash Flow/Non-GAAP Free Cash Flow Margin1,892 1,789 1,591 1,652 1,810 Q3 24Q4 24Q1 25Q2 25Q3 2558.2X.4%3,250 3,111 2,835 2,926 3,173 Q3 24Q4 24Q1 25Q2 25Q3 2558.25.5.2%8%Q-Q(2%)Y-Y9.44.2W.5V.11.9.1V.52.0#.8W.03.8.0%|NXP|Public22Quarterly Revenue by End Market($M)Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial MeasuresAutomotiveIndustrial&IoT$407$396$338$331$430 Q3 24Q4 24Q1 25Q2 25Q3 25$451$409$315$320$327 Q3 24Q4 24Q1 25Q2 25Q3 25$1,829$1,790$1,674$1,729$1,837 Q3 24Q4 24Q1 25Q2 25Q3 25$563$516$508$546$579 Q3 24Q4 24Q1 25Q2 25Q3 256%Q-Q-Y-Y6%Q-Q3%Y-Y30%Q-Q6%Y-Y2%Q-Q(27%)Y-YMobileCommunication Infrastructure&Other|NXP|Public23A Robust Shareholder Centric Capital Return Policy1.Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures2.Non-GAAP Free Cash Flow(FCF),=Cash Flow from Operations less Net CapexCapital Return Policy:Return All Excess non-GAAP FCFCumulative Capital Return 2018 2024:$19.2B or 109%of non-GAAP FCF Capital Return Growth of 25GR Cumulative Repurchases 2018 2024:$14.9B or 78%of Capital Return Repurchase Growth of 20GR Reduced Diluted Shares by 21%Cumulative Cash Dividends 2018 2024:$4.2B or 22%of Capital Return Target 25sh Flow from Ops.Dividend Growth of 96GR135224489 18201920202021202220232024RepurchasesDividendsCumulative Capital Return as a%of non-GAAP FCFCapital Return($B)Increased 25%from 2018 to 2024(6-yr.CAGR)$5.1B$1.8B$1.0B$4.6B$2.2B$2.1B49Q6d%1%$2.4B43W%|NXP|Public24Debt Summary at the End of 3Q251.Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures2.For the third quarter ended September 28,2025,interest expense,net of($81)million is comprised of interest expense of($118)million,less interest income of$37 million.Interest expense,net is a component of Financial income(expense)of($98)million as reported in the NXP Historic Financial Model file found on the Financial Information page.$15$500$750$500$500$500$500$1,000$1,000$670$1,000$370$1,000$300$1,000$700$1,000$500$500 2025202620272028202920302031203220332035204120422051Comm.Paper Program(4.67%)25 Sr.Unsecured Note(2.70%)26 Sr.Unsecured Note(5.35%)26 Sr.Unsecured Note(3.875%)27 Sr.Unsecured Note(3.15%)27 Sr.Unsecured Note(4.40%)28 Sr.Unsecured Note(4.30%)28 Sr.Unsecured Note(5.55%)29 Sr.Unsecured Note(4.30%)30 Sr.Unsecured Note(3.4%)30 EIB Sr.Unsecured Facility(4.45%)31 Sr.Unsecured Note(2.50%)31 EIB Sr.Unsecured Facility(4.709%)32 Sr.Unsecured Note(4.85%)32 Sr.Unsecured Note(2.65%)33 Sr.Unsecured Note(5.00%)35 Sr.Unsecured Note(5.25%)41 Sr.Unsecured Note(3.25%)42 Sr.Unsecured Note(3.125%)51 Sr.Unsecured Note(3.25%)Total Leverage3Q25BV Long-and-short-Term Debt($M)12,235$Cash and Equivalents ST Deposits($M)3,954$Net Debt($M)8,281$TTM Adj.EBITDA4,648$Average Cost ST< Cost of Debt3.94%Reported Gross Leverage2.6XReported Net Leverage1.8XTTM Adj.EBITDA/TTM net Interest15.9x|NXP|Public25119116141131134Q3 24Q4 24Q1 25Q2 25Q3 253030343331Q3 24Q4 24Q1 25Q2 25Q3 256065626058Q3 24Q4 24Q1 25Q2 25Q3 25149151169158161Q3 24Q4 24Q1 25Q2 25Q3 25Working Capital Ratios(Days)1.Prior to Q2 25,working capital ratios excluded the effect of purchase price accounting amortization on GAAP COGS.Beginning in Q2 2025,we use GAAP COGS without this adjustment.The impact of this change is immaterial to historical periods presented,which are shown as originally reported.2.Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures.DSODPODIOCash Conversion CycleDSO=(91.25 x AR)/RevenueDPO=(91.25 x AP)/COGSDIO=(91.25 x Inventory)/COGSCash Conversion Cycle=DIO DSO-DPO|NXP|Public26Investor Day 2021NXP Growth 8 to 12%(3 yr.CAGR)Channel Inventory11 wks.Non-GAAP Gross MarginU to 58%Non-GAAP R&D(%of Rev)16%Non-GAAP SG&A(%of Rev)7%Non-GAAP Operating Margin2 to 36%Non-GAAP EAETR%-18%Non-controlling Interest(SSMC)($35M to$45M)Equity-accounted Investees(Loss)/Gain related to ESMC VSMC Mfg.JV-Financial Model:P&LReconciliations of non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the appendix to the presentation2024A4.5%(3 yr.CAGR)8 wks.58.1.3%7.24.6.8%($32M)-Investor Day 2024 6 to 10%(3 yr.CAGR)11 wks.57 to 63%74 to 40%-18%($25M to$35M)($200M)(25-27)|NXP|Public27Investor Day 2021Non-GAAP Free-cash Flow25%of RevDSO30DPO75DIO95Capacity Access Fee(VSMC)N/ANet Capex%of Revenue6 to 8%SBC$380M-$440MEquity Investments(ESMC/VSMC)N/ADividend ( from Ops.)25%Buyback(Buy Net Leverage 2.0 x)25%of Rev3075110$800M5%3%of Rev$1.7B25%2.0 x100%|NXP|Public28Guidance for the Fourth Quarter of 2025 NXP has based the guidance included in this release on judgments and estimates that management believes are reasonable given its assessment of historical trends and other information reasonably available as of the date of this release.Please note,the guidance included in this release consists of predictions only and is subject to a wide range of known and unknown risks and uncertainties,many of which are beyond NXPs control.The guidance included in this release should not be regarded as representations by NXP that the estimated results will be achieved.Actual results may vary materially from the guidance we provide today.In relation to the use of non-GAAP financial information see the note regarding Non-GAAP Financial Measures below.For the factors,risks,and uncertainties to which judgments,estimates and forward-looking statements generally are subject see the note regarding Forward-looking Statements.We undertake no obligation to publicly update or revise any forward-looking statements,including the guidance set forth herein,to reflect future events or circumstances.1.GAAP Gross Profit is expected to include Purchase Price Accounting(“PPA”)effects,$(6)million;Share-based Compensation,$(15)million;Other Incidentals,$(7)million;2.GAAP Operating Income(loss)is expected to include PPA effects,$(42)million;Share-based Compensation,$(118)million;Restructuring and Other Incidentals,$(39)million;3.GAAP Financial Income(expense)is expected to include Other financial expense$(9)million;4.GAAP Results relating to equity-accounted investees is expected to include results relating to non-foundry equity-accounted investees$(1)million;5.GAAP diluted EPS is expected to include the adjustments noted above for PPA effects,Share-based Compensation,Restructuring and Other Incidentals in GAAP Operating Income(loss),the adjustment for Other financial expense,the adjustment for results relating to non-foundry equity-accounted investees and the adjustment on Tax due to the earlier mentioned adjustments.ReconciliationLowMidHighLowMidHighTotal Revenue3,2003,3003,4003,2003,3003,400Q-Q1%4%7%1%4%7%Y-Y3%6%9%3%6%9%Gross Profit1,7961,8701,944(28)1,8241,8981,972Gross Margin56.1V.7W.2W.0W.5X.0%Operating Income(loss)8789421,006(199)1,0771,1411,205Operating Margin27.4(.5).63.74.65.4%Financial income(expense)(112)(112)(112)(9)(103)(103)(103)Tax rateEquity-accounted investees(4)(4)(4)(1)(3)(3)(3)Non-controlling interests(14)(14)(14)0(14)(14)(14)Shares254.3254.3254.3254.3254.3254.3Earnings per share-diluted2.402.612.813.073.283.49GAAPNon-GAAP17.5%-18.5.5%-18.5%|NXP|Public29NXP Sustainability MissionInnovationEnvironmentalSocialGovernanceInnovate advancements that enable a better,safer,more secure and more sustainable worldOptimize our use of resources and impacts associated with our operationsLeverage our global team to actively drive our business strategy and impact on the worldCollaborate with our stakeholders on global sustainability initiatives.Build trust through transparency in our business practices and operationsPush boundaries and explore new approaches to develop innovative and sustainable products and solutionsPursue continual improvements to use resources efficiently and responsiblyRespect human rights and promote an ethical,safe,and healthy work environment.Foster an environment of trust and respect,where team members collaborate to drive innovationProactively assess risk and build resilience through robust governance systems,including appropriate goals and processes StrategyGuiding principlesDevelop higher-performing,more energy-efficient solutions that positively impacts the planet and societyCarbon neutral by 2035;by 2027 reduce carbon emissions by 35%,drive 50%renewable electricity,60%of wastewater recycled,and 90%of waste recycledFoster an inclusive environment and improve representation of women inour global workforce;zero tolerance of forced labor and human-rights abuses;zero workplace injuriesWork with NXP supply-chain partners to reduce their environmental footprint and to integrate sustainability into NXPs business to foster ownership and accountabilityGoals2024 NXP Corporate Sustainability Report:See the 2024 NXP Corporate Sustainability Report for more discussion around Scope 3 methodology.Cataloging Scope 3 emissions is a complex endeavor that presents specific challenges.In the coming years,we will continue to review our calculations,refine our methodologies and evaluate whether the underlying assumptions made earlier in the project are still accurate|NXP|Public30NXP 2024 Sustainability ProgressAdditional Progress36crease PFC emissionsfrom 20235 percentage-point increasein renewable energy usage from 20230.4crease electricity consumption from 202343crease HTF emissionsfrom 20233creasefossil fuel emissionsfrom 20232crease N2O emissionsfrom 20234 percentage-point increase in water recycling from 202320%Women in R&D positions100rtified Conflict free 3TG smeltersScope 1Direct sourcesScope 2Indirect sourcesScope 3Upstream and downstream sources31creasefrom 202313creasefrom 202318creasefrom 20232024 NXP Corporate Sustainability Report:See the 2024 NXP Corporate Sustainability Report for more discussion around Scope 3 methodology.Cataloging Scope 3 emissions is a complex endeavor that presents specific challenges.In the coming years,we will continue to review our calculations,refine our methodologies and evaluate whether the underlying assumptions made earlier in the project are still accurate|NXP|Public31NXP Sustainability Ratings20202021202220232024BBAAAAAAAA2020202120222023202419.419.821.619.8Medium RiskLow RiskLow RiskLow Risk20202021202220232024Climate:DWater:DClimate:DWater:DClimate:DWater:DClimate:CWater:B-20202021202220232024C PrimeC PrimeC PrimeB-PrimeB-Prime16.7Low RiskAAA2024 NXP Corporate Sustainability Report:See the 2024 NXP Corporate Sustainability Report for more discussion around Scope 3 methodology.Cataloging Scope 3 emissions is a complex endeavor that presents specific challenges.In the coming years,we will continue to review our calculations,refine our methodologies and evaluate whether the underlying assumptions made earlier in the project are still accurateClimate:CWater:B-|NXP|Public32Annual GAAP Condensed Consolidated Statement of Operations($M)Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures($in millions,unless otherwise stated)201920202021202220232024Revenue8,8778,61211,06313,20513,27612,614Cost of Revenue4,2594,3774,9965,6885,7235,495Gross Profit4,6184,2356,0677,5177,5537,119Research and development1,6431,7251,9362,1482,4182,347Selling,general and administrative9248799561,0661,1591,164Amortization of acquisition-related intangible assets1,4351,327592509300136Total operating expenses4,0023,9313,4843,7233,8773,647Other income(expense)25114-3(15)(55)Operating income(loss)6414182,5833,7973,6613,417Financial income(expense)(350)(417)(403)(434)(309)(318)Income(loss)before taxes29112,1803,3633,3523,099Benefit(provision)for income taxes(20)83(272)(529)(523)(545)Results relating to equity-accounted investees1(4)(2)(1)(7)(12)Net income(loss)272801,9062,8332,8222,542Less:Net Income(loss)attributable to non-controlling interests(29)(28)(35)(46)(25)(32)Net income(loss)attributable to stockholders243521,8712,7872,7972,510Basic earnings per share0.860.196.9110.6410.839.84Diluted earnings per share0.850.186.7910.5510.709.73Basic-weighted average number of shares282,056279,763270,687261,879258,381255,208Diluted-weighted average number of shares285,911283,809275,646264,053261,370257,848|NXP|Public33Annual GAAP to non-GAAP Reconciliation($M)Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures($in millions,unless otherwise stated)201920202021202220232024GAAP Gross Profit4,6184,2356,0677,5177,5537,119Gross profit adjustments(131)(165)(138)(126)(209)(213)Non-GAAP Gross Profit4,7494,4006,2057,6437,7627,332GAAP Gross Margin52.0I.2T.8V.9V.9V.4%Non-GAAP Gross Margin53.5Q.1V.1W.9X.5X.1%GAAP Operating income(loss)6414182,5833,7973,6613,417Operating income adjustments(1,932)(1,810)(1,058)(994)(1,001)(952)Non-GAAP Operating income(loss)2,5732,2283,6414,7914,6624,369GAAP Operating Margin7.2%4.9#.3(.8.6.1%Non-GAAP Operating Margin29.0%.92.96.35.14.6%|NXP|Public34Annual Cash Flow Overview($M)Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures($in millions,unless otherwise stated)201920202021202220232024Net cash provided by(used for)operating activities2,3732,4823,0773,8953,5132,782Net cash provided by(used for)investing activities(2,284)(418)(934)(1,249)(1,508)(686)Net cash provided by(used for)financing activities(1,831)(835)(1,585)(1,619)(1,990)(2,662)Effects of changes in exchange rates on cash position(2)1(3)(12)2(4)Increase(decrease)in cash and cash equivalents(1,744)1,2305551,01517(570)Cash and cash equivalents at beginning of the period2,7891,0452,2752,8303,8453,862Cash and cash equivalents at end of period1,0452,2752,8303,8453,8623,292Net cash provided by(used for)operating activities2,3732,4823,0773,8953,5132,782Net capital expenditures on property,plant and equipment(503)(388)(766)(1,061)(826)(693)Non-GAAP free cash flow1,8702,0942,3112,8342,6872,089Trailing 12-month Non-GAAP free cash flow as a percentage of Revenue21.1$.3 .9!.5 .2.6%|NXP|Public35Annual Adjusted EBITDA($M)1.Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures2.Excluded from total other incidental items,charges included in depreciation or amortization reconciling items:($in millions,unless otherwise stated)201920202021202220232024Net income(loss)272801,9062,8332,8222,542Financial(income)expense350417403434309318(Benefit)provision for income taxes20(83)272529523545Depreciation518547551605652630Amortization1,5291,441711645454295Non-GAAP EBITDA2,6892,4023,8435,0464,7604,330Reconciling items to adjusted EBITDAResults of equity-accounted investees,excluding Foundry investees(1)421712Purchase accounting effect on inventory817-Restructuring28781(7)98125Stock-based compensation346384353364411461Merger-related costs338-Other incidental items1(3)(101)3365134136Non-GAAP Adjusted EBITDA3,1002,7924,2325,4695,4105,064(1)Excluding from total other incidental items,charges included in depreciation or amortization reconciling items:other incidental items-8-245|NXP|Public36Quarterly GAAP Condensed Consolidated Statement of Operations($M)Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures($in millions,unless otherwise stated)Q3 2024Q4 2024Q1 2025Q2 2025Q3 2025Revenue3,2503,1112,8352,9263,173Cost of Revenue(1,384)(1,433)(1,275)(1,364)(1,386)Gross Profit1,8661,6781,5601,5621,787Research and development(577)(612)(547)(573)(575)Selling,general and administrative(265)(323)(281)(278)(286)Amortization of acquisition-related intangible assets(29)(28)(27)(25)(31)Total operating expenses(871)(963)(855)(876)(892)Other income(expense)(5)(40)181(2)Operating income(loss)990675723687893Financial income(expense)(82)(91)(92)(86)(98)Income(loss)before taxes908584631601795Benefit(provision)for income taxes(173)(77)(130)(116)(148)Results relating to equity-accounted investees(6)(2)(4)(28)(1)Net income(loss)729505497457646Less:Net Income(loss)attributable to non-controlling interests111071215Net income(loss)attributable to stockholders718495490445631Basic earnings per share2.821.951.931.762.50Diluted earnings per share2.791.931.921.752.48Basic-weighted average number of shares254,458254,349253,709252,418252,170Diluted-weighted average number of shares257,717256,628255,018253,844254,310|NXP|Public37Quarterly GAAP to non-GAAP Reconciliation($M)Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures($in millions,unless otherwise stated)Q32024Q42024Q12025Q22025Q32025GAAP Gross Profit1,8661,6781,5601,5621,787Gross profit adjustments(26)(111)(31)(90)(23)Non-GAAP Gross Profit1,8921,7891,5911,6521,810GAAP Gross Margin57.4S.9U.0S.4V.3%Non-GAAP Gross Margin58.2W.5V.1V.5W.0%GAAP Operating income(loss)990675723687893Operating income adjustments(163)(390)(181)(248)(178)Non-GAAP Operating income(loss)1,1531,0659049351,071GAAP Operating Margin30.5!.7%.5#.5(.1%Non-GAAP Operating Margin35.54.21.92.03.8%GAAP Provision for income taxes(173)(77)(130)(116)(148)Income tax effect987133225Non-GAAP Provision for income tax(182)(164)(143)(148)(173)GAAP Net income(loss)attributable to stockholders718495490445631Non-GAAP Net income(loss)attributable to stockholders890817673690790GAAP Diluted earnings per share2.791.931.921.752.48Non-GAAP Diluted earnings per share3.453.182.642.723.11Q32024Q42024Q12025Q22025Q32025GAAP Net income(loss)attributable to stockholders718495490445631PPA Effects(42)(39)(40)(32)(38)Restructuring-(112)(14)(67)(3)Share-based compensation(115)(117)(127)(117)(118)Other incidentals(6)(122)-(32)(19)Other adjustments combined(9)68(2)319Foreign exchange loss(3)3(3)(7)(6)Other financial expense(9)(20)(9)6(1)Income tax effect987133225Results relating to equity accounted investees(6)(2)(3)(28)1Non-GAAP Net income(loss)attributable to stockholders890817673690790GAAP net income(loss)per common share attributable to shareholders-diluted2.791.931.921.752.48Total GAAP to Non-GAAP adjustments per common share(0.66)(1.25)(0.72)(0.97)(0.63)Non-GAAP net income(loss)per common share attributable to shareholders-diluted3.453.182.642.723.11GAAP Financial income/(expense)(82)(91)(92)(86)(98)Financial income/(expense)adjustments(12)(17)(12)(1)(7)Non-GAAP Financial income/(expense)(70)(74)(80)(85)(91)|NXP|Public38Quarterly Cash Flow Overview($M)Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures($in millions,unless otherwise stated)Q32024Q42024Q12025Q22025Q32025Net cash provided by(used for)operating activities779391565779585Net cash provided by(used for)investing activities(371)198(216)(892)(783)Net cash provided by(used for)financing activities(526)(41)345(709)482Effects of changes in exchange rates on cash position7(4)24-Increase(decrease)in cash and cash equivalents(111)544696(818)284Cash and cash equivalents at beginning of the period2,8592,7483,2923,9883,170Cash and cash equivalents at end of period2,7483,2923,9883,1703,454Net cash provided by(used for)operating activities779391565779585Net capital expenditures on property,plant and equipment(186)(99)(138)(83)(76)Non-GAAP free cash flow593292427696509Trailing 12-month Non-GAAP free cash flow2,7592,0891,8892,0081,924Trailing 12-month Non-GAAP free cash flow as a percentage of Revenue21%|NXP|Public39Quarterly Adjusted EBITDA($M)Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at for additional information relative to our Non-GAAP Financial Measures($in millions,unless otherwise stated)Q32024Q42024Q12025Q22025Q32025Net income(loss)729505497457646Reconciling items to adjusted net incomeFinancial(income)expense8291928698(Benefit)provision for income taxes17377130116148Depreciation149190143143132Amortization6969666469Non-GAAP EBITDA1,2029329288661,093Reconciling items to adjusted EBITDAResults of equity-accounted investees,excluding Foundry investees62328(1)Purchase accounting effect on asset sale-5-Restructuring-11214673Stock-based compensation115117127117118Other incidental items1677(4)2519Non-GAAP Adjusted EBITDA 1,3291,2401,0731,1031,232Trailing 12-month Non-GAAP Adjusted EBITDA5,2355,0644,8854,7454,648(1)Excluding from total other incidental items,charges included in depreciation or amortization reconciling items:other incidental items-4547-|NXP|Public40NXPs New Battery Cell Control IC Family Advances New Energy SolutionNotable Product Announcements|NXP|Public41100%of Excess FCF to Our OwnersHybrid manufacturingRMS&system leadershipDoubling non-GAAP EPS by 2030 NXP,A Future of Innovation and Long-term Value Creation High Single Digit Organic Revenue GrowthS32 SDVIntelligent systems at the edgeGross Margin ExpansionAbove 60%Hybrid manufacturingMix/NPI1.Reconciliations of non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the appendix to the presentation2.NXP internal |Public|NXP and the NXP logo are trademarks of NXP B.V.All other product or service names are the property of their respective owners.2024 NXP B.V.
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 28,2025or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .Commission File Number:001-34841NXP Semiconductors N.V.(Exact name of registrant as specified in its charter)Netherlands98-1144352(State or other jurisdictionof incorporation or organization)(I.R.S.employer identification number)60 High Tech Campus5656 AGEindhovenNetherlands(Address of principal executive offices)(Zip code) 31402729999(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading symbol(s)Name of each exchange on which registeredCommon shares,EUR 0.20 par valueNXPIThe Nasdaq Global Select MarketIndicate 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 12months(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 ofthis 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 growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated 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 financialaccounting 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 October 24,2025,there were 251,674,471 shares of our common stock,0.20 par value per share,issued and outstanding.NXP Semiconductors N.V.Form 10-QFor the Fiscal Quarter Ended September 28,2025TABLE OF CONTENTSPagePart IIntroduction and Forward Looking Statements1Item 1.Financial Statements3Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations21Item 3.Quantitative and Qualitative Disclosures About Market Risk36Item 4.Controls and Procedures36Part IIItem 1.Legal Proceedings37Item 1A.Risk Factors37Item 2.Unregistered Sales of Equity Securities and Use of Proceeds37Item 5.Other Information37Item 6.Exhibits38Introduction and Forward Looking StatementsThis Form 10-Q and certain information incorporated herein by reference contains forward-looking statements,which are provided under the“safe harbor”protection ofthe Private Securities Litigation Reform Act of 1995.When used in this Form 10-Q,the words“anticipate”,“believe”,“estimate”,“forecast”,“expect”,“intend”,“plan”and“project”and similar expressions,as they relate to us,our management or third parties,identify forward-looking statements.Forward-looking statements includestatements regarding our business strategy,financial condition,results of operations,market data as well as any other statements that are not historical facts.Thesestatements reflect beliefs of our management,as well as assumptions made by our management and information currently available to us.Although we believe that thesebeliefs and assumptions are reasonable,these statements are subject to numerous factors,risks and uncertainties that could cause actual outcomes and results to bematerially different from those projected.These factors,risks and uncertainties expressly qualify all subsequent oral and written forward-looking statements attributableto us or persons acting on our behalf and include,in addition to those listed in our Annual Report on Form 10-K for the year ended December 31,2024 under Part I,Item 1A.Risk Factors and elsewhere in this Form 10-Q,the following:market demand and semiconductor industry conditions;our ability to successfully introduce new technologies and products;the demand for the goods into which our products are incorporated;global trade disputes,potential increase of barriers to international trade,including the imposition of new or increased tariffs,and resulting disruptions to ourestablished supply chains;the impact of government actions and regulations,including as a result of executive orders,including restrictions on the export of products and technology;increasing and evolving cybersecurity threats and privacy risks;our ability to accurately estimate demand and match our production capacity accordingly or obtain supplies from third-party producers;our access to production from third-party outsourcing partners,and any events that might affect their business or our relationship with them;our ability to secure adequate and timely supply of equipment and materials from suppliers;our ability to avoid operational problems and product defects and,if such issues were to arise,to correct them quickly;our ability to form strategic partnerships and joint ventures and successfully cooperate with our strategic alliance partners;our ability to win competitive bid selection processes;our ability to develop products for use in our customers equipment and products;our ability to successfully hire and retain key management and senior product engineers;global hostilities,including the invasion of Ukraine by Russia and resulting regional instability,sanctions and any other retaliatory measures taken againstRussia,and the continued hostilities and armed conflict in the Middle East,which could adversely impact the global supply chain,disrupt our operations ornegatively impact the demand for our products in our primary end markets;our ability to maintain good relationships with our suppliers;our ability to integrate acquired businesses in an efficient and effective manner;our ability to generate sufficient cash,raise sufficient capital or refinance our debt at or before maturity to meet our debt service,research and development andcapital investment requirements;anda change in tax laws could have an effect on our estimated effective tax rates.We do not assume any obligation to update any forward-looking statements and disclaim any obligation to update our view of any risks or uncertainties describedherein or to publicly announce the result of any revisions to the forward-looking statements made in this Form 10-Q,except as required by law.In addition,this Form 10-Q contains information concerning the semiconductor industry,our end markets and business generally,which is forward-looking innature and is based on a variety of assumptions regarding the ways in which the semiconductor industry,our end markets and business will develop.We have basedthese assumptions on information currently available to us,including through the market research and industry reports referred to in this Form 10-Q.If any one or moreof these assumptions turn out to be incorrect,actual market results may differ from those predicted.While we do not know what impact any such differences may haveon our business,if there are such differences,they could have a material adverse effect on our future results of operations and financial condition,and the trading priceof our common stock.Readers are cautioned not to place undue reliance on these forward-looking statements,which speak to results only as of the date the statementswere made.Except for any ongoing obligation to disclose material information as required by the United States federal securities laws,NXP1does not have any intention or obligation to publicly update or revise any forward-looking statements after we distribute this document,whether to reflect any futureevents or circumstances or otherwise.The financial information included in this Form 10-Q is based on United States Generally Accepted Accounting Principles(U.S.GAAP),unless otherwiseindicated.In presenting and discussing our financial position,operating results and cash flows,management uses certain non-U.S.GAAP financial measures.These non-U.S.GAAP financial measures should not be viewed in isolation or as alternatives to the equivalent U.S.GAAP measures and should be used in conjunction with themost directly comparable U.S.GAAP measures.A discussion of non-U.S.GAAP measures included in this Form 10-Q and a reconciliation of such measures to themost directly comparable U.S.GAAP measures are set forth under“Use of Certain Non-U.S.GAAP Financial Measures”contained in this Form 10-Q under Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations.Unless otherwise required,all references herein to“we”,“our”,“us”,“NXP”and the“Company”are to NXP Semiconductors N.V.and its consolidatedsubsidiaries.This Form 10-Q includes market data and certain other statistical information and estimates that are based on reports and other publications from industryanalysts,market research firms,and other independent sources,as well as managements own good faith estimates and analyses.NXP believes these third-party reportsto be reputable,but has not independently verified the underlying data sources,methodologies or assumptions.The reports and other publications referenced aregenerally available to the public and were not commissioned by NXP.Information that is based on estimates,forecasts,projections,market research or similarmethodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in thisinformation.2PART I FINANCIAL INFORMATIONItem 1.Financial StatementsCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)($in millions,unless otherwise stated)For the three months endedFor the nine months endedSeptember 28,2025September 29,2024September 28,2025September 29,2024Revenue3,173 3,250 8,934 9,503 Cost of revenue(1,386)(1,384)(4,025)(4,062)Gross profit1,787 1,866 4,909 5,441 Research and development(575)(577)(1,695)(1,735)Selling,general and administrative(286)(265)(845)(841)Amortization of acquisition-related intangible assets(31)(29)(83)(108)Total operating expenses(892)(871)(2,623)(2,684)Other income(expense)(2)(5)17(15)Operating income(loss)893 990 2,303 2,742 Financial income(expense):Other financial income(expense)(98)(82)(276)(227)Income(loss)before income taxes795 908 2,027 2,515 Benefit(provision)for income taxes(148)(173)(394)(468)Results relating to equity-accounted investees(1)(6)(33)(10)Net income(loss)646 729 1,600 2,037 Less:Net income(loss)attributable to non-controlling interests15 11 34 22 Net income(loss)attributable to stockholders631 718 1,566 2,015 Earnings per share data:Net income(loss)per common share attributable to stockholders in$Basic2.50 2.82 6.20 7.89 Diluted2.48 2.79 6.16 7.80 Weighted average number of shares of common stock outstanding during the period(in thousands):Basic252,170 254,458 252,759 255,501 Diluted254,310 257,717 254,401 258,426 See accompanying notes to the Condensed Consolidated Financial Statements3CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Unaudited)($in millions,unless otherwise stated)For the three months endedFor the nine months endedSeptember 28,2025September 29,2024September 28,2025September 29,2024Net income(loss)646 729 1,600 2,037 Other comprehensive income(loss),net of tax:Change in fair value cash flow hedges(4)16 6 8 Change in foreign currency translation adjustment 59 179 5 Change in net actuarial gain(loss)1(1)(1)1 Total other comprehensive income(loss)(3)74 184 14 Total comprehensive income(loss)643 803 1,784 2,051 Less:Comprehensive income(loss)attributable to non-controlling interests15 11 34 22 Total comprehensive income(loss)attributable to stockholders628 792 1,750 2,029 See accompanying notes to the Condensed Consolidated Financial Statements4CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)($in millions,unless otherwise stated)September 28,2025December 31,2024ASSETSCurrent assets:Cash and cash equivalents3,454 3,292 Short-term deposits500 Accounts receivable,net1,095 1,032 Assets held for sale292 Inventories,net2,452 2,356 Other current assets716 625 Total current assets8,509 7,305 Non-current assets:Deferred tax assets1,313 1,251 Other non-current assets2,186 1,796 Property,plant and equipment,net of accumulated depreciation of$6,434 and$6,1453,086 3,267 Identified intangible assets,net of accumulated amortization of$846 and$1,0371,139 836 Goodwill10,121 9,930 Total non-current assets17,845 17,080 Total assets26,354 24,385 LIABILITIES AND EQUITYCurrent liabilities:Accounts payable886 1,017 Restructuring liabilities-current49 147 Other current liabilities1,384 1,434 Short-term debt1,264 500 Total current liabilities3,583 3,098 Non-current liabilities:Long-term debt10,971 10,354 Restructuring liabilities60 10 Other non-current liabilities1,313 1,392 Total non-current liabilities12,344 11,756 Total liabilities15,927 14,854 Equity:Non-controlling interests382 348 Stockholders equity:Common stock,par value 0.20 per share:56 56 Capital in excess of par value15,324 14,962 Treasury shares,at cost:22,394,275 shares(2024:20,195,011 shares)(4,439)(4,004)Accumulated other comprehensive income(loss)167(17)Accumulated deficit(1,063)(1,814)Total stockholders equity10,045 9,183 Total equity10,427 9,531 Total liabilities and equity26,354 24,385 See accompanying notes to the Condensed Consolidated Financial Statements5CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)($in millions,unless otherwise stated)For the nine months endedSeptember 28,2025September 29,2024Cash flows from operating activities:Net income(loss)1,600 2,037 Adjustments to reconcile net income(loss)to net cash provided by(used for)operating activities:Depreciation and amortization617 666 Share-based compensation362 344 Amortization of discount(premium)on debt,net2 2 Amortization of debt issuance costs5 5 Net(gain)loss on sale of assets(29)(2)(Gain)loss on equity security,net2 12 Results relating to equity-accounted investees33 10 Deferred tax expense(benefit)(32)(127)Changes in operating assets and liabilities:(Increase)decrease in receivables and other current assets(81)(182)(Increase)decrease in inventories(180)(100)Increase(decrease)in accounts payable and other liabilities(296)(204)Decrease(increase)in other non-current assets(98)(88)Exchange differences21 15 Other items3 3 Net cash provided by(used for)operating activities1,929 2,391 Cash flows from investing activities:Purchase of identified intangible assets(85)(113)Capital expenditures on property,plant and equipment(299)(597)Insurance recoveries received for equipment damage 2 Proceeds from disposals of property,plant and equipment2 3 Purchase of interests in businesses,net of cash acquired(690)Proceeds of short-term deposits 9 Investment in short-term deposits(500)Purchase of investments(319)(193)Proceeds from sale of investments 5 Net cash provided by(used for)investing activities(1,891)(884)Cash flows from financing activities:Repurchase of long-term debt(500)(1,000)Proceeds from the issuance of long-term debt1,868 Cash paid for debt issuance costs(8)Proceeds from issuance of commercial paper notes2,426 Repayment of commercial paper notes(2,411)Dividends paid to common stockholders(771)(780)Proceeds from issuance of common stock through stock plans77 79 Purchase of treasury shares and restricted stock unit withholdings(561)(918)Other,net(2)(2)Net cash provided by(used for)financing activities118(2,621)Effect of changes in exchange rates on cash positions6 Increase(decrease)in cash and cash equivalents162(1,114)Cash and cash equivalents at beginning of period3,292 3,862 Cash and cash equivalents at end of period3,454 2,748 Supplemental disclosures to the Condensed Consolidated Cash flowsNet cash paid during the period for:Interest194 151 Income taxes,net of refunds437 587 Net gain(loss)on sale of assets:Cash proceeds from the sale of assets38 3 Book value of these assets(9)(1)Non-cash investing activities:Non-cash capital expenditures112 125 See accompanying notes to the Condensed Consolidated Financial Statements6CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Unaudited)($in millions,unless otherwise stated)Outstandingnumber ofshares(inthousands)CommonstockCapital inexcess ofpar valueTreasuryshares atcostAccumu-latedothercompre-hensiveincome(loss)Accumu-lateddeficitTotalstock-holdersequityNon-con-trollinginterestsTotalequityBalance as of December 31,2024254,324 56 14,962(4,004)(17)(1,814)9,183 348 9,531 Net income(loss)490 490 7 497 Other comprehensive income(loss)46 46 46 Share-based compensation plans131 131 131 Shares issued pursuant to stock awards238 54(22)32 32 Treasury shares repurchased and retired(1,413)(303)(303)(303)Dividends common stock($1.014 pershare)(257)(257)(257)Balance as of March 30,2025253,149 56 15,093(4,253)29(1,603)9,322 355 9,677 Net income(loss)445 445 12 457 Other comprehensive income(loss)141 141 141 Share-based compensation plans113 113 113 Shares issued pursuant to stock awards70 16(9)7 7 Treasury shares repurchased and retired(1,105)(204)(204)(204)Dividends common stock($1.014 pershare)(255)(255)(255)Balance as of June 29,2025252,114 56 15,206(4,441)170(1,422)9,569 367 9,936 Net income(loss)631 631 15 646 Other comprehensive income(3)(3)(3)Share-based compensation plans118 118 118 Shares issued pursuant to stock awards249 56(18)38 38 Treasury shares repurchased and retired(238)(54)(54)(54)Dividends common stock($1.014 pershare)(254)(254)(254)Balance as of September 28,2025252,125 56 15,324(4,439)167(1,063)10,045 382 10,427 7CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Unaudited)($in millions,unless otherwise stated)Outstandingnumber ofshares(inthousands)CommonstockCapital inexcess ofpar valueTreasuryshares atcostAccumu-latedothercompre-hensiveincome(loss)Accumu-lateddeficitTotalstock-holdersequityNon-con-trollinginterestsTotalequityBalance as of December 31,2023257,190 56 14,501(3,210)90(2,793)8,644 316 8,960 Net income(loss)639 639 5 644 Other comprehensive income(loss)(46)(46)(46)Share-based compensation plans118 118 118 Shares issued pursuant to stock awards228 44(7)37 37 Treasury shares repurchased and retired(1,323)(303)(303)(303)Dividends common stock($1.014 pershare)(260)(260)(260)Balance as of March 31,2024256,095 56 14,619(3,469)44(2,421)8,829 321 9,150 Net income(loss)658 658 6 664 Other comprehensive income(loss)(14)(14)(14)Share-based compensation plans111 111 111 Shares issued pursuant to stock awards89 17(14)3 3 Treasury shares repurchased and retired(1,208)(310)(310)(310)Dividends common stock($1.014 pershare)(259)(259)(259)Balance as of June 30,2024254,976 56 14,730(3,762)30(2,036)9,018 327 9,345 Net income(loss)718 718 11 729 Other comprehensive income74 74 74 Share-based compensation plans119 119 119 Shares issued pursuant to stock awards245 46(7)39 39 Treasury shares repurchased and retired(1,219)(305)(305)(305)Dividends common stock($1.014 pershare)(257)(257)(257)Balance as of September 29,2024254,002 56 14,849(4,021)104(1,582)9,406 338 9,744 See accompanying notes to the Condensed Consolidated Financial Statements8NXP SEMICONDUCTORS N.V.NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAll amounts in millions of$unless otherwise stated1 Basis of Presentation and OverviewWe prepared our interim Condensed Consolidated Financial Statements that accompany these notes in conformity with U.S.generally accepted accounting principles,consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended December 31,2024.Use of estimatesWe have made estimates and judgments affecting the amounts reported in our Condensed Consolidated Financial Statements and the accompanying notes.The actualresults that we experience may differ materially from our estimates.The interim financial information is unaudited,but reflects all normal adjustments that are,in ouropinion,necessary to provide a fair statement of results for the interim periods presented.This interim information should be read in conjunction with the ConsolidatedFinancial Statements in our Annual Report on Form 10-K for the year ended December 31,2024.Segment reportingNXP has one reportable segment representing the entity as a whole,aligning with our organizational structure and with the way our chief operating decision maker(CODM),the Chief Executive Officer,makes operating decisions,allocates resources,and manages the growth and profitability of the Company.Our CODM regularly reviews income and expense items at the consolidated company(reporting segment)level and uses net income to evaluate income generated fromtotal assets to evaluate whether and how to reinvest profits into the entitys operations,shareholder return,acquisitions or otherwise.Net income is also used to monitorbudget versus actual results,forecasted information and in competitive analysis.These interim income and expense items are as included on the Consolidated Statementsof Operations and in our notes to the Consolidated Financial Statements.Chief Executive Officer SuccessionFollowing the previous announcement on April 28,2025,Kurt Sievers has voluntarily retired as CEO and executive director of the Company effective October 28,2025.The Companys Board of Directors has unanimously appointed Rafael Sotomayor to succeed Mr.Sievers as President and CEO and temporary executive directorof the Company effective as of October 28,2025.2 Significant Accounting Policies and Recent Accounting PronouncementsSignificant Accounting PoliciesFor a discussion of our significant accounting policies,see Part II Item 8.Financial Statements and Supplementary Data Notes to Consolidated Financial Statements“Significant Accounting Policies”of our Annual Report on Form 10-K for the year ended December 31,2024.There have been no changes to our significantaccounting policies since our Annual Report on Form 10-K for the year ended December 31,2024.Recent accounting standardsAccounting Standards Adopted in 2025In December 2023,the FASB issued Accounting Standards Update(ASU)2023-09,Income Taxes(Topic 740):Improvements to Income Tax Disclosures.Theamendments in ASU 2023-09 require greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid.In addition,the amendments require disclosure of income(or loss)from continuing operations before income tax expense(or benefit)disaggregated between domestic and foreign;and,disclosure of income tax expense(or benefit)from continuing operations disaggregated.We have adopted ASU 2023-09 and will implement the applicabledisclosure for our fiscal year ending December 31,2025.Accounting standards not yet adoptedIn November 2024,the FASB issued Accounting Standards Update(ASU)2024-03,Disaggregation of Income Statement Expenses.The standard requires disaggregateddisclosure of income statement expenses.It requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to thefinancial statements.ASU 2024-03 is effective for fiscal years beginning after December 15,2026,with early adoption permitted.We are currently evaluating the effectof this new guidance on our Consolidated Financial Statements.9No other new accounting pronouncements were issued or became effective in the period that had,or are expected to have,a material impact on our ConsolidatedFinancial Statements.3 Acquisitions and DivestmentsOn October 24,2025,NXP closed the previously announced acquisition of 100%of Aviva Links for$243 million in cash,before closing adjustments.Aviva Links is aprovider of Automotive SerDes Alliance(ASA)compliant in-vehicle connectivity solutions.The Aviva Links acquisition complements and expands NXPs automotivenetworking solutions in the Automotive and Industrial&IoT end markets.We are currently evaluating the purchase price allocation for this transaction and expect tohave our preliminary allocation completed in the fourth quarter of 2025.On October 27,2025,NXP closed the previously announced acquisition of 100%of Kinara,Inc.for$307 million in cash,before closing adjustments.Kinara is anindustry leader in high performance,energy-efficient and programmable discrete neural processing units(NPUs).The Kinara acquisition complements and expandsNXPs solutions for AI-powered edge systems in the Industrial&IoT and Automotive end markets.We are currently evaluating the purchase price allocation for thistransaction and expect to have our preliminary allocation completed in the fourth quarter of 2025.2025On June 17,2025,NXP announced the closing of the acquisition of 100%of TTTech Auto for$766 million in cash($679 million net of cash acquired).TTTech Auto isa leader in innovating unique safety-critical systems and middleware for software-defined vehicles(SDVs).The TTTech Auto acquisition complements and expandsNXPs system and software offerings in the Automotive and Industrial&IoT end markets.The preliminary fair values of the assets acquired and liabilities assumed in the TTTech Auto acquisition,by major class,were recognized as follows:Cash91 Other assets75 Other liabilities(52)Identified intangible assets345 Goodwill307 Net assets acquired766 The final determination of the fair values of certain assets and liabilities will be completed in the quarters subsequent to the acquisition date.Goodwill arising from the TTTech Auto acquisition is attributed to the anticipated growth from new product sales,sales to new customers,the assembled workforce,andsynergies expected from the combination.The goodwill recognized is non-deductible for income tax purposes.10The identified intangible assets assumed were recognized as follows:Fair valueWeighted AverageEstimated Useful Life(in Years)Software267 11.5Technology25 11.5Customer relationships49 8.5Order backlog4 3.5Total identified intangible assets345 The income approach was applied to estimate the fair values of the intangible assets acquired.Software,technology,customer relationships,and order backlog werevalued using the excess earnings method,which reflects the present values of the projected cash flows that are expected to be generated by the software,technology,customer relationships,and order backlog less charges representing the contribution of other assets to those cash flows.There were no material divestments during the first nine months of 2025.2024There were no material acquisitions or divestments during the first nine months of 2024.4 Assets Held for SaleIn the second quarter of 2025,NXP management,in reviewing its portfolio,concluded that certain activities related to our MEMS sensors business line no longer fit theNXP strategic portfolio and took actions that resulted in the business line meeting the criteria to be classified as held for sale.On July 24,2025,NXP reached adefinitive agreement with STMicroelectronics International N.V.,under which NXP will sell the business for an amount up to$950 million in cash,including$900 million at closing and up to an additional$50 million subject to the achievement of technical milestones.Subject to customary closing conditions,the transaction isexpected to close during 2026.The carrying value of these assets held for sale as of September 28,2025,are comprised of current assets of$87 million and non-currentassets of$205 million,which consists primarily of goodwill of$170 million.5 Supplemental Financial InformationStatement of Operations Information:Disaggregation of revenueThe following table presents revenue disaggregated by sales channel:For the three months endedFor the nine months endedSeptember 28,2025September 29,2024September 28,2025September 29,2024Distributors1,866 1,897 5,026 5,440 Original Equipment Manufacturers and Electronic Manufacturing Services1,269 1,321 3,810 3,970 Other38 32 98 93 Total Revenue3,173 3,250 8,934 9,503 11Depreciation,amortization and impairmentFor the three months endedFor the nine months endedSeptember 28,2025September 29,2024September 28,2025September 29,2024Depreciation of property,plant and equipment132 149 418 440 Amortization of internal use software14 8 30 22 Amortization of other identified intangible assets55 61 169 204 Total-Depreciation,amortization and impairment201 218 617 666 Financial income and expenseFor the three months endedFor the nine months endedSeptember 28,2025September 29,2024September 28,2025September 29,2024Interest income37 36 111 125 Interest expense(118)(96)(339)(298)Other financial income/(expense)(17)(22)(48)(54)Total(98)(82)(276)(227)Earnings per shareThe computation of earnings per share(EPS)is presented in the following table:For the three months endedFor the nine months endedSeptember 28,2025September 29,2024September 28,2025September 29,2024Net income(loss)646 729 1,600 2,037 Less:net income(loss)attributable to non-controlling interests15 11 34 22 Net income(loss)attributable to stockholders631 718 1,566 2,015 Weighted average number of shares outstanding(after deduction of treasury shares)during the year(in thousands)252,170 254,458 252,759 255,501 Plus incremental shares from assumed conversion of:Options 74 134 83 155 Restricted Share Units,Performance Share Units and Equity Rights 2,066 3,125 1,559 2,770 Dilutive potential common shares2,140 3,259 1,642 2,925 Adjusted weighted average number of shares outstanding(after deduction of treasuryshares)during the year(in thousands)254,310 257,717 254,401 258,426 EPS attributable to stockholders in$:Basic net income(loss)2.50 2.82 6.20 7.89Diluted net income(loss)2.48 2.79 6.16 7.80 There were no stock options to purchase shares of NXPs common stock that were outstanding in Q3 2025 and YTD 2025(Q3 2024 and YTD 2024:no shares)that were anti-dilutiveand were not included in the computation of diluted EPS because the exercise price was greater than the average fair market value of the common stock or the number of sharesassumed to be repurchased using the proceeds of unrecognized compensation expense and exercise prices were greater than the weighted average number of shares underlyingoutstanding stock options.There were 0.4 million unvested RSUs,PSUs and equity rights that were outstanding in Q3 2025 and YTD 2025(Q3 2024:0.4 million shares and YTD 2024:0.2 shares)that wereanti-dilutive and were not included in the computation of diluted EPS because the number of shares assumed to be repurchased using the proceeds of unrecognized compensationexpense were greater than the weighted average number of outstanding unvested RSUs,PSUs and equity rights or the performance goal has not been met yet.1)2)12Balance Sheet InformationCash and cash equivalentsAt September 28,2025,and December 31,2024,our cash balance was$3,454 million and$3,292 million,respectively,of which$324 million and$261 million washeld by SSMC,our consolidated joint venture company with TSMC.Under the terms of our joint venture agreement with TSMC,a portion of this cash can bedistributed by way of a dividend to us,but 38.8%of the dividend will be paid to our joint venture partner.During both first nine months of 2025 and 2024,no dividendswere declared by SSMC.InventoriesInventories are summarized as follows:September 28,2025December 31,2024Raw materials108 109 Work in process1,666 1,576 Finished goods678 671 2,452 2,356 The amounts recorded above are net of allowance for obsolescence of$115 million as of September 28,2025(December 31,2024:$150 million).Equity InvestmentsAt September 28,2025 and December 31,2024,the total carrying value of investments in equity securities is summarized as follows:September 28,2025December 31,2024Marketable equity securities1 1 Non-marketable equity securities118 71 Equity-accounted investments538 300 657 372 The total carrying value of investments in equity-accounted investees is summarized as follows:September 28,2025December 31,2024Shareholding%AmountShareholding%AmountVisionPower Semiconductor Manufacturing Company Pte.Ltd.(VSMC)40.0042 40.004 European Semiconductor Manufacturing Company(ESMC)GmbH 10.006 10.00w SMART Growth Fund,L.P.8.418 8.419 SigmaSense,LLC9.40.64( Others 22 22 538 300 NXP accounts for its investment in ESMC under the equity method due to our ability to exercise significant influence over ESMCs operations,primarily through representation on ESMCs board of directors and other operational arrangements.1)1)13Results related to equity-accounted investees at the end of each period were as follows:For the three months endedFor the nine months endedSeptember 28,2025September 29,2024September 28,2025September 29,2024Companys share in income(loss)(1)(6)(7)(11)Other results (26)1(1)(6)(33)(10)For the nine-month period ending September 28,2025,other results includes the impairment of our equity method investment SigmaSense.Other current liabilitiesOther current liabilities at September 28,2025 and December 31,2024 consisted of the following:September 28,2025December 31,2024Accrued compensation and benefits352 371 Customer programs45 131 Income taxes payable102 114 Dividend payable255 258 Other630 560 1,384 1,434 1)1)14Accumulated other comprehensive income(loss)Total comprehensive income(loss)represents net income(loss)plus the results of certain equity changes not reflected in the Condensed Consolidated Statements ofOperations.The after-tax components of accumulated other comprehensive income(loss)and their corresponding changes are shown below:Currency translationdifferencesChange infair valuecash flowhedgesNet actuarialgain/(losses)Accumulated OtherComprehensiveIncome(loss)As of December 31,202466(5)(78)(17)Other comprehensive income(loss)before reclassifications179 9(1)187 Amounts reclassified out of accumulated other comprehensive income(loss)(1)(1)Tax effects(2)(2)Other comprehensive income(loss)179 6(1)184 As of September 28,2025245 1(79)167 Cash dividendsThe following dividends were declared during the first nine months of 2025 and 2024 under NXPs quarterly dividend program:Fiscal Year 2025Fiscal Year 2024Dividend per shareAmountDividend per shareAmountFirst quarter1.014 257 1.014 260 Second quarter1.014 256 1.014 259 Third quarter1.014 255 1.014 258 The dividend declared in the third quarter(not yet paid)is classified in the Condensed Consolidated Balance Sheet in other current liabilities as of September 28,2025and was subsequently paid on October 8,2025.6 RestructuringAt each reporting date,we evaluate our restructuring liabilities,which consist primarily of termination benefits,to ensure that our accruals are still appropriate.The following table presents the changes in restructuring liabilities in 2025:As of January1,2025AdditionsUtilizedReleasedOtherchangesAs of September28,2025Restructuring liabilities157 89(137)(5)5 109 The total restructuring liability as of September 28,2025 of$109 million is classified in the Consolidated Balance Sheet under current liabilities($49 million)and non-current liabilities($60 million).The restructuring charges for the nine-month period ending September 28,2025 primarily consist of$89 million for personnel related costs for specific targeted actions,offset by a$5 million release for an earlier program.The restructuring charges for the nine-month period ending September 29,2024 consist of$21 million for personnelrelated costs for specific targeted actions,offset by a$9 million release for an earlier program.These restructuring charges recorded in operating income,for the periods indicated,are included in the following line items in the statement of operations:15For the three months endedFor the nine months endedSeptember 28,2025September 29,2024September 28,2025September 29,2024Cost of revenue 65 7 Research and development1 11 7 Selling,general and administrative2 8(1)Net restructuring charges3 84 13 7 Income TaxEach year NXP makes an estimate of its annual effective tax rate.This estimated annual effective tax rate(EAETR)is then applied to the year-to-date Income(loss)before income taxes excluding discrete items,to determine the year-to-date benefit(provision)for income taxes.The income tax effects of any discrete items arerecognized in the interim period in which they occur.As the year progresses,the Company continually refines the EAETR based upon actual events and theapportionment of our earnings(loss).This continual estimation process periodically may result in a change to our EAETR for the year.When this occurs,we adjust on anaccumulated basis the benefit(provision)for income taxes during the quarter in which the change occurs.Our provision for income taxes for 2025 is based on our EAETR of 18.7%,which is lower than the Netherlands statutory tax rate of 25.8%,primarily due to tax benefitsfrom the Netherlands and foreign tax incentives.For the three months endedFor the nine months endedSeptember 28,2025September 29,2024September 28,2025September 29,2024Tax benefit(provision)calculated at EAETR(149)(160)(380)(446)Discrete tax benefit(provision)items1(13)(14)(22)Benefit(provision)for income taxes(148)(173)(394)(468)Effective tax rate18.6.0.4.6%The effective tax rate of 18.6%for the third quarter of 2025 was lower than the EAETR due to the income tax benefit for discrete items of$1 million.The discrete itemsare primarily related to the impact of foreign currency on income tax related items,changes in estimates for previous years,and changes in the litigation accrual andrelated insurance reimbursements relating to the Motorola Personal Injury Lawsuits regarding previous years.For the first nine months ended 2025,the effective tax rate of 19.4%was higher than 18.7%due to a net result of unfavorable discrete items of$14 million.Thesediscrete items are primarily related to the impact of changes in estimates for previous years,and changes in the litigation accrual and related insurance reimbursementsrelating to the Motorola Personal Injury Lawsuits.The effective tax rate of 19.4%for the first nine months of 2025 was higher compared to the rate for the first nine months ended 2024 of 18.6%due to a different mix ofthe benefit(provision)for income taxes in our operating locations and lower foreign tax incentives in the current period as a result of a decrease in qualifying income.On July 4,2025,the One Big Beautiful Bill Act(“OBBBA”)was enacted in the U.S.The OBBBA includes significant provisions,such as the permanent extension ofcertain expiring provisions of the Tax Cuts and Jobs Act,modifications to the international tax framework and the restoration of favorable tax treatment for certainbusiness provisions.The legislation has multiple effective dates,with certain provisions effective in 2025 and others implemented as of 2026.We have assessed thatthere is effectively no material tax impact on our consolidated financial statements.We also note that there is still unclarity about what the G7 statement in relation to theUS on global minimum taxes,as announced on June 28,2025,could mean for the Company.168 Identified Intangible AssetsIdentified intangible assets as of September 28,2025 and December 31,2024,respectively,were composed of the following:September 28,2025December 31,2024Gross carryingamountAccumulatedamortizationGross carryingamountAccumulatedamortizationIn-process R&D(IPR&D)24 24 Customer-related845(435)790(400)Technology-based1,116(411)1,059(637)Identified intangible assets1,985(846)1,873(1,037)IPR&D is not subject to amortization until completion or abandonment of the associated research and development effort.The estimated amortization expense for these identified intangible assets for each of the five succeeding years is:2025(remaining)68 2026234 2027215 2028132 202990 Thereafter400 All intangible assets,excluding IPR&D and goodwill,are subject to amortization and have no assumed residual value.The expected weighted average remaining life of identified intangibles is 6 years as of September 28,2025(December 31,2024:5 years).9 DebtCommercial PaperWe have a$2 billion Commercial Paper Program to support general corporate purposes.As of September 28,2025,we had$15 million commercial paper notesoutstanding with a duration of up to 98 days.The weighted-average interest rate of the Companys outstanding commercial paper notes is 4.62%.Debt issuance and redemptionOn August 19,2025,NXP Semiconductors N.V.,together with NXP B.V.,NXP Funding LLC and NXP USA,Inc.issued$500 million of 4.30%senior unsecured notesdue 2028,$300 million of 4.85%senior unsecured notes due 2032 and$700 million of 5.25%senior unsecured notes due 2035.On May 1,2025,we repaid the$500 million aggregate principal amount of outstanding 2.7%senior unsecured notes due 2025 at maturity using available cash.1)1)17Long-term debtThe following table summarizes the outstanding debt as of September 28,2025 and December 31,2024:September 28,2025December 31,2024MaturitiesAmountInterestrateAmountInterestrateFixed-rate 2.7%senior unsecured notesMay,2025 2.700 500 2.700 Fixed-rate 5.35%senior unsecured notesMar,2026500 5.350 500 5.350 Fixed-rate 3.875%senior unsecured notesJun,2026750 3.875 750 3.875 Fixed-rate 3.15%senior unsecured notesMay,2027500 3.150 500 3.150 Fixed-rate 4.40%senior unsecured notesJun,2027500 4.400 500 4.400 Fixed-rate 4.30%senior unsecured notesAug,2028500 4.300 Fixed-rate 5.55%senior unsecured notesDec,2028500 5.550 500 5.550 Fixed-rate 4.3%senior unsecured notesJun,20291,000 4.300 1,000 4.300 Fixed-rate 3.4%senior unsecured notesMay,20301,000 3.400 1,000 3.400 Fixed-rate 2.5%senior unsecured notesMay,20311,000 2.500 1,000 2.500 Fixed-rate 2.65%senior unsecured notesFeb,20321,000 2.650 1,000 2.650 Fixed-rate 4.85%senior unsecured notesAug,2032300 4.850 Fixed-rate 5.0%senior unsecured notesJan,20331,000 5.000 1,000 5.000 Fixed-rate 5.25%senior unsecured notesAug,2035700 5.250 Fixed-rate 3.25%senior unsecured notesMay,20411,000 3.250 1,000 3.250 Fixed-rate 3.125%senior unsecured notesFeb,2042500 3.125 500 3.125 Fixed-rate 3.25%senior unsecured notesNov,2051500 3.250 500 3.250 Floating-rate revolving credit facility(RCF)Aug,2027 Fixed-rate 4.45%EIB Facility LoanDec,2030670 4.450 670 4.450 Fixed-rate 4.709%EIB Facility LoanFeb,2031370 4.709 Total principal12,290 10,920 Unamortized discounts,premiums and debt issuance costs(70)(66)Total debt,including unamortized discounts,premiums,debt issuance costs and fair value adjustments12,220 10,854 Current portion of long-term debt(1,249)(500)Long-term debt10,971 10,354 10 Related-Party TransactionsThe Companys related parties are the members of the board of directors of NXP Semiconductors N.V.,the executive officers of NXP Semiconductors N.V.and equity-accounted investees.The following table presents the amounts related to revenue and other income and purchase of goods and services incurred in transactions with these related parties:For the three months endedFor the nine months endedSeptember 28,2025September 29,2024September 28,2025September 29,2024Revenue and other income 1 2 3 Purchase of goods and services1 1 2 3 The following table presents the amounts related to receivable and payable balances with these related parties:September 28,2025December 31,2024Receivables1 1 Payables2 3 18Driven by our investment in VSMC,NXP has committed to contribute$1,200 million to support the long-term capacity infrastructure,and in exchange NXP secures acapacity commitment over the lifetime of the factory.NXP has contributed$385 million during the nine months ended September 28,2025 and$660 million to-date,which is recorded in other non-current assets.Refer to Note 5 Supplemental Financial Information for information on the total carrying value of investments in equity-accounted investees,and to Note 12 Commitments and Contingencies for NXPs related party commitments.11 Fair Value MeasurementsThe following table summarizes the estimated fair value of our financial instruments which are measured at fair value on a recurring basis:Estimated fair valueFair valuehierarchySeptember 28,2025December 31,2024Assets:Short-term deposits1500 Money market funds12,373 2,398 Marketable equity securities11 2 Derivative instruments-assets24 2 Liabilities:Derivative instruments-liabilities2(9)(10)The following methods and assumptions were used to estimate the fair value of financial instruments:Assets and liabilities measured at fair value on a recurring basisInvestments in short-term deposits,representing liquid assets with original maturity beyond three months and having no significant risk of changes in fair value,arerepresented at carrying value as reasonable estimates of fair value due to the relatively short period of time between the origination of the instruments and their expectedrealization.Money market funds(as part of our cash and cash equivalents)and marketable equity securities(as part of other non-current assets)have fair valuemeasurements which are all based on quoted prices in active markets for identical assets or liabilities.For derivatives(as part of other current assets or accrued liabilities)the fair value is based upon significant other observable inputs depending on the nature of the derivative.Assets and liabilities recorded at fair value on a non-recurring basisWe measure and record our non-marketable equity securities,equity method investments and non-financial assets,such as intangible assets and property,plant andequipment,at fair value when an impairment charge is required.Assets and liabilities not recorded at fair value on a recurring basisFinancial instruments not recorded at fair value on a recurring basis include non-marketable equity securities and equity method investments that have not beenremeasured or impaired in the current period and debt.As of September 28,2025,the estimated fair value of current and non-current debt was$11.5 billion($9.8 billion as of December 31,2024).The fair value is estimatedon the basis of broker-dealer quotes and other observable inputs,which are Level 2 inputs.Accrued interest is included under accrued liabilities and not within thecarrying amount or estimated fair value of debt.Given the short tenure of the Companys commercial paper notes,the carrying value of the outstanding commercialpaper notes approximates the fair values,and therefore are excluded from the values above($15 million as of September 28,2025 and no outstanding commercial papernotes as of December 31,2024).12 Commitments and ContingenciesPurchase CommitmentsThe Company maintains purchase commitments with certain suppliers,primarily for raw materials,semi-finished goods and manufacturing services and for some non-production items.Purchase commitments for inventory materials are generally restricted to a forecasted time-horizon as mutually agreed upon between the parties.Thisforecasted time-horizon can vary for different suppliers.As of September 28,2025,other than foundry joint venture commitments,the Company had purchase19commitments of$3,341 million,which are due through 2044.Foundry Joint Venture CommitmentsDriven by our investment in VSMC,NXP has committed to invest an additional$1,251 million in equity through 2026.NXP has committed to contribute an additional$540 million to support the long-term capacity infrastructure that is expected to be paid through 2026.In addition,NXP has an agreed purchase commitment withVSMC that over the lifetime of the factory the minimal loading will be between 80%-90%,resulting in a total purchase commitment of approximately$14,096 millionthat is expected to be purchased over 37 years once wafer production starts.Related to our investment in ESMC,NXP has committed to invest an additional$449 million in equity through 2028.Lease CommitmentsThe Company has operating and finance lease arrangements related to buildings(corporate offices,research and development and manufacturing facilities anddatacenters),land,machinery and installations and other equipment(vehicles and certain office equipment).As of September 28,2025,amounts related to future leasepayments for operating lease obligations totaled$531 million(December 31,2024:$321 million),which are due through 2048.The increase in Q3 2025 resulted from alease agreement for a new greenfield facility with office and lab areas,commencing in 2030 with a fixed 20-year term.Legal ProceedingsWe are regularly involved as plaintiffs or defendants in claims and litigation relating to a variety of matters such as contractual disputes,personal injury claims,employee grievances and intellectual property litigation.In addition,our acquisitions,divestments and financial transactions sometimes result in,or are followed by,claims or litigation.Some of these claims may possibly be recovered from insurance reimbursements.Although the ultimate disposition of asserted claims cannot bepredicted with certainty,it is our belief that the outcome of any such claims,either individually or on a combined basis,will not have a material adverse effect on ourConsolidated Financial Position.However,such outcomes may be material to our Condensed Consolidated Statement of Operations for a particular period.TheCompany records an accrual for any claim that arises whenever it considers that it is probable that it is exposed to a loss contingency and the amount of the losscontingency can be reasonably estimated.The Company does not record a gain contingency until the period in which all contingencies are resolved and the gain isrealized or realizable.Legal fees are expensed when incurred.Motorola Personal Injury LawsuitsThe Company is currently assisting Motorola in the defense of personal injury lawsuits due to indemnity obligations included in the agreement that separated Freescalefrom Motorola in 2004.The multi-plaintiff Motorola lawsuits are pending in the Circuit Court of Cook County,Illinois.These claims allege a link between working insemiconductor manufacturing clean room facilities and birth defects.The Company is in process of finalizing agreements to resolve 4 cases,and claims from 5individuals remain pending in Cook County.The Motorola suits allege exposures between 1980 and 2005.Each claim seeks an unspecified amount of damages for thealleged injuries;however,legal counsel representing the plaintiffs has indicated they will seek substantial compensatory and punitive damages from Motorola for theentire inventory of claims which,if proven and recovered,the Company considers to be material.A portion of any indemnity due to Motorola will be reimbursed toNXP if Motorola receives an indemnification payment from its insurance coverage.Motorola has potential insurance coverage for many of the years indicated above,but with differing types and levels of coverage,self-insurance retention amounts and deductibles.We are in discussions with Motorola and their insurers regarding theavailability of applicable insurance coverage for each of the individual cases.Motorola and NXP have denied liability for these alleged injuries based on numerousdefenses.Legal Proceedings Related Accruals and Insurance CoverageThe Company reevaluates at least on a quarterly basis the claims that have arisen to determine whether any new accruals need to be made or whether any accruals madeneed to be adjusted based on the most current information available to it and based on its best estimate.Based on the procedures described above,the Company has anaggregate amount of$116 million accrued for potential and current legal proceedings as of September 28,2025,compared to$281 million accrued at December 31,2024(without reduction for any related insurance reimbursements).The accruals are included in“Other current liabilities”and in“Other non-current liabilities”.As ofSeptember 28,2025,the Companys related balance of insurance reimbursements was$92 million(December 31,2024:$259 million)and is included in“Other non-current assets”.20The Company also estimates the aggregate range of reasonably possible losses in excess of the amount accrued based on currently available information for those casesfor which such estimate can be made.The estimated aggregate range requires significant judgment,given the varying stages of the proceedings,the existence of multipledefendants(including the Company)in such claims whose share of liability has yet to be determined,the numerous yet-unresolved issues in many of the claims,and theattendant uncertainty of the various potential outcomes of such claims.Accordingly,the Companys estimate will change from time to time,and actual losses may bemore than the current estimate.As at September 28,2025,the Company believes that for all litigation pending its potential aggregate exposure to loss in excess of theamount accrued(without reduction for any amounts that may possibly be recovered under insurance programs)could range between$0 and$116 million.Based uponour past experience with these matters,the Company would expect to receive additional insurance reimbursement of up to$92 million on certain of these claims thatwould partially offset the potential aggregate exposure to loss in excess of the amount accrued.Item 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsManagements Discussion and Analysis(MD&A)should be read in conjunction with our Consolidated Financial Statements and Notes and the MD&A in our AnnualReport on Form 10-K for the year ended December 31,2024,and the Financial Statements and the related Notes that appear elsewhere in this document.OverviewQuarterly Financial HighlightsRevenue was$3,173 million,down 2.4%year-on-year;GAAP gross margin was 56.3%,and GAAP operating margin was 28.1%;Non-GAAP gross margin was 57.0%,and non-GAAP operating margin was 33.8%;Cash flow from operations was$585 million,with net capital expenditures on property,plant and equipment of$76 million,resulting in non-GAAP free cashflow of$509 million;During the third quarter of 2025,NXP returned capital to shareholders with the payment of$256 million in cash dividends and the repurchase of$54 million ofits common shares,for a total capital return of$310 million.On October 24,2025,NXP closed the previously announced acquisition of 100%of Aviva Links for$243 million in cash,before closing adjustments.Aviva Links is aprovider of Automotive SerDes Alliance(ASA)compliant in-vehicle connectivity solutions.The Aviva Links acquisition complements and expands NXPs automotivenetworking solutions in the Automotive and Industrial&IoT end markets.We are currently evaluating the purchase price allocation for this transaction and expect tohave our preliminary allocation completed in the fourth quarter of 2025.On October 27,2025,NXP closed the previously announced acquisition of 100%of Kinara,Inc.for$307 million in cash,before closing adjustments.Kinara is anindustry leader in high performance,energy-efficient and programmable discrete neural processing units(NPUs).The Kinara acquisition complements and expandsNXPs solutions for AI-powered edge systems in the Industrial&IoT and Automotive end markets.We are currently evaluating the purchase price allocation for thistransaction and expect to have our preliminary allocation completed in the fourth quarter of 2025.See Note 3 to the consolidated financial statements for further information regarding NXPs acquisition of TTTech Auto(acquired in Q2),Aviva Links,and Kinara,Inc.Following the previous announcement on April 28,2025,Kurt Sievers has voluntarily retired as CEO and executive director of the Company effective October 28,2025.The Companys Board of Directors has unanimously appointed Rafael Sotomayor to succeed Mr.Sievers as President and CEO and temporary executive directorof the Company effective as of October 28,2025.21Sequential ResultsQ3 2025 compared to Q2 2025Revenue for the three months ended September 28,2025 was$3,173 million compared to$2,926 million for the three months ended June 29,2025,an increase of$247million or 8.4%quarter-on-quarter,in line with managements expectations.Within our end markets,the Automotive end market increased$108 million or 6.2%,theMobile end market increased$99 million or 29.9%,the Industrial&IoT end market increased$33 million or 6.0%,and the Communication Infrastructure&Other endmarket increased$7 million or 2.2%.When aggregating all end markets together and reviewing sales channel performance,revenues through NXPs third party distribution partners was$1,866 million,anincrease of$230 million or 14.1%compared to the previous period.Revenues through NXPs third party direct OEM and EMS customers was$1,269 million,anincrease of$12 million or 1.0%versus the previous period.From a geographic perspective,revenue increased quarter-on-quarter in the China region by 13.0%,in the Americas region by 11.2%,in the Asia Pacific region by 7.7%,and in the EMEA region by 0.4%.Our gross profit percentage for the three months ended September 28,2025 of 56.3%increased compared with 53.4%for the three months ended June 29,2025,drivenmainly by lower restructuring costs.Operating income for the three months ended September 28,2025 was$893 million compared to$687 million for the three months ended June 29,2025,an increase of$206 million or 30.0%.The sequential increase was mainly driven by higher revenue.22Results of operationsThe following table presents operating results for each of the three-and nine-month periods ended September 28,2025 and September 29,2024,respectively:($in millions,unless otherwise stated)Q3 2025%ofRevenueQ3 2024%ofRevenueYTD 2025%ofRevenueYTD 2024%ofRevenueRevenue3,173 3,250 8,934 9,503%nominal growth(2.4)(5.4)(6.0)(3.6)Gross profit1,787 1,866 4,909 5,441 Gross margin56.3W.4T.9W.3%Research and development(575)18.1%(577)17.8%(1,695)19.0%(1,735)18.3%Selling,general and administrative(286)9.0%(265)8.2%(845)9.5%(841)8.8%Amortization of acquisition-related intangibleassets(31)1.0%(29)0.9%(83)0.9%(108)1.1%Other income(expense)(2)0.1%(5)0.2 0.2%(15)0.2%Operating income(loss)893 28.10 30.5%2,303 25.8%2,742 28.9%Financial income(expense)(98)3.1%(82)2.5%(276)3.1%(227)2.4nefit(provision)for income taxes(148)4.7%(173)5.3%(394)4.4%(468)4.9%Results relating to equity-accounted investees(1)%(6)0.2%(33)0.4%(10)0.1%Net income(loss)646 20.4r9 22.4%1,600 17.9%2,037 21.4%Less:Net income(loss)attributable to non-controlling interests15 0.5 0.34 0.4 0.2%Net income(loss)attributable to stockholders631 19.9q8 22.1%1,566 17.5%2,015 21.2%Diluted earnings per share2.48 2.79 6.16 7.80 23RevenueQ3 2025 OverviewQ3 2025 compared to Q3 2024Revenue for the three months ended September 28,2025 was$3,173 million compared to$3,250 million for the three months ended September 29,2024,a decrease of$77 million or 2.4%,in line with managements expectations.YTD 2025 OverviewYTD 2025 compared to YTD 2024Revenue for the nine months ended September 28,2025 was$8,934 million compared to$9,503 million for the nine months ended September 29,2024,a decrease of$569 million or 6.0%.24Revenue by end market was as follows:($in millions,unless otherwise stated)Q3 2025Q3 2024%changeYTD 2025YTD 2024%changeAutomotive1,837 1,829 0.4%5,240 5,361(2.3)%Industrial&IoT579 563 2.8%1,633 1,753(6.8)%Mobile430 407 5.7%1,099 1,101(0.2)%Communication Infrastructure&Other327 451(27.5)2 1,288(25.3)%Total Revenue3,173 3,250(2.4)%8,934 9,503(6.0)%Revenue by sales channel was as follows:($in millions,unless otherwise stated)Q3 2025Q3 2024%changeYTD 2025YTD 2024%changeDistributors1,866 1,897(1.6)%5,026 5,440(7.6)%OEM/EMS1,269 1,321(3.9)%3,810 3,970(4.0)%Other38 32 18.8 93 5.4%Total Revenue3,173 3,250(2.4)%8,934 9,503(6.0)%Revenue by geographic region,which is based on the customers shipped-to location was as follows:($in millions,unless otherwise stated)Q3 2025Q3 2024%changeYTD 2025YTD 2024%changeChina 1,229 1,203 2.2%3,351 3,315 1.1%APAC,excluding China851 845 0.7%2,389 2,653(10.0)%EMEA(Europe,the Middle East and Africa)677 719(5.8)%1,994 2,138(6.7)%Americas416 483(13.9)%1,200 1,397(14.1)%Total Revenue3,173 3,250(2.4)%8,934 9,503(6.0)%China includes Mainland China and Hong KongQ3 2025 compared to Q3 2024From an end market perspective,NXP experienced growth in its Mobile,Industrial&IoT,and Automotive end markets,which was offset by a decline in theCommunication Infrastructure&Other end market versus the year ago period.Revenue in the Automotive end market was$1,837 million,an increase of$8 million or 0.4%versus the year-ago period.The increase in the Automotive end marketrevenue was attributable to growth in our advanced analog products,which were offset by declines in our ADAS Safety products and automotive processors.Revenue in the Industrial&IoT end market was$579 million,an increase of$16 million or 2.8%versus the year-ago period.The increase in the Industrial&IoT endmarket revenue was attributable to growth in our advanced analog,connectivity,and security products,which were offset by declines in our processors portfolio.Revenue in the Mobile end market was$430 million,an increase of$23 million or 5.7%versus the year ago period.The increase in the Mobile end market revenue wasattributable to growth in our advanced analog products,which were offset by declines in our mobile wallet processors.Revenue in the Communication Infrastructure&Other end market was$327 million,a decrease of$124 million or 27.5%versus the year ago period.The decrease in theCommunication Infrastructure&Other end market revenue was attributable to declines in our processors,secure cards,and RF power products.When aggregating all end markets together and reviewing sales channel performance,revenues through NXPs third party distribution partners was$1,866 million,adecrease of 1.6%versus the year-ago period.Revenues through direct OEM and EMS customers was$1,269 million,a decrease of 3.9%versus the year ago period.From a geographic perspective,revenue increased year-on-year in the China region by 2.2%and in the Asia Pacific region by 0.7%,while revenue decreased in theAmericas region by 13.9%and in the EMEA region by 5.8%.YTD 2025 compared to YTD 2024From an end market perspective,NXP experienced consistent revenue in its Mobile end market,which was offset by declines in the Automotive,Industrial&IoT,andCommunication Infrastructure&Other end markets versus the year ago period.1)1)25Revenue in the Automotive end market was$5,240 million,a decrease of$121 million or 2.3%versus the year ago period.The decrease in the Automotive end marketrevenue was attributable to declines in our automotive processors and advanced analog portfolio,which were offset by growth in our ADAS Safety products.Revenue in the Industrial&IoT end market was$1,633 million,a decrease of$120 million or 6.8%versus the year ago period.Within the Industrial&IoT end market,the decrease was primarily attributable to our processors portfolio.Revenue in the Mobile end market was$1,099 million,consistent with the year ago period.Revenue in the Communication Infrastructure&Other end market was$962 million,a decrease of$326 million or 25.3%versus the year ago period.The decrease in theCommunication Infrastructure&Other end market was attributable to declines in our processors,secure cards,and RF power products.When aggregating all end markets together,and reviewing sales channel performance,revenues through NXPs third party distribution partners was$5,026 million,adecrease of 7.6%versus the year-ago period.Revenues through direct OEM and EMS customers was$3,810 million,a decrease of 4.0%versus the year ago period.From a geographic perspective,revenue increased year-on-year in the China region by 1.1%,while revenue decreased in the Americas region by 14.1%,in the AsiaPacific region by 10.0%,and in the EMEA region by 6.7%.Gross profitQ3 2025 compared to Q3 2024Gross profit for the three months ended September 28,2025 was$1,787 million,or 56.3%of revenue,compared to$1,866 million,or 57.4%of revenue for the t hreemonths ended September 29,2024.The decrease in gross margin is primarily due to price and unfavorable product mix.YTD 2025 compared to YTD 2024Gross profit for the nine months ended September 28,2025 was$4,909 million,or 54.9%of revenue,compared to$5,441 million,or 57.3%of revenue for the ninemonths ended September 29,2024.The decrease in gross margin is primarily due to price and unfavorable product mix.Operating expensesQ3 2025 compared to Q3 2024Operating expenses for the three months ended September 28,2025 totaled$892 million,or 28.1%of revenue,compared to$871 million,or 26.8%of revenue for thethree months ended September 29,2024.YTD 2025 compared to YTD 2024Operating expenses for the nine months ended September 28,2025 totaled$2,623 million,or 29.4%of revenue,compared to$2,684 million,or 28.2%of revenue for thenine months ended September 29,2024.Research and development($in millions,unless otherwise stated)Q3 2025Q3 2024%changeYTD 2025YTD 2024%changeResearch and development575 577(0.3)%1,695 1,735(2.3)%As a percentage of revenue18.1.8%0.3 ppt19.0.3%0.7 pptQ3 2025 compared to Q3 2024R&D costs for the three months ended September 28,2025 decreased by$2 million,or 0.3%,when compared to the three months ended September 29,2024,driven byhigher subsidies from government agencies($7 million),lower personnel related expenses($4 million),offset by expenditures related to the integration of the TTTechAuto acquisition($9 million).YTD 2025 compared to YTD 2024R&D costs for the nine months ended September 28,2025 decreased by$40 million,or 2.3%,when compared to the nine months ended September 29,2024.Thisreduction was driven by lower personnel-related expenses($69 million),inclusive of lower variable compensation costs,to create capacity for future strategicinvestments.This decrease was partially offset by expenditures related to the integration of the TTTech Auto acquisition($9 million)and an increase in mask-relatedcosts($15 million).26Selling,general and administrative($in millions,unless otherwise stated)Q3 2025Q3 2024%changeYTD 2025YTD 2024%changeSelling,general and administrative286 265 7.95 841 0.5%As a percentage of revenue9.0%8.2%0.8 ppt9.5%8.8%0.7 pptQ3 2025 compared to Q3 2024SG&A costs for the three months ended September 28,2025 increased by$21 million,or 7.9%,when compared to the three months ended September 29,2024 mainlydriven by personnel and integration related costs driven by the TTTech Auto acquisition($10 million),legal fees($4 million)and higher share-based compensation costs($4 million).YTD 2025 compared to YTD 2024SG&A costs for the nine months ended September 28,2025 increased by$4 million,or 0.5%,when compared to the nine months ended September 29,2024 due tohigher expenses related to our closed or pending acquisitions ($23 million),offset by a reduction in variable compensation costs($21 million).Amortization of acquisition-related intangible assets($in millions,unless otherwise stated)Q3 2025Q3 2024%changeYTD 2025YTD 2024%changeAmortization of acquisition-related intangible assets31 29 6.9 108(23.1)%As a percentage of revenue1.0%0.9%0.1 ppt0.9%1.1%(0.2)pptQ3 2025 compared to Q3 2024Amortization of acquisition-related intangible assets for the three months ended September 28,2025 increased by$2 million,or 6.9%,when compared to the threemonths ended September 29,2024.YTD 2025 compared to YTD 2024Amortization of acquisition-related intangible assets for the nine months ended September 28,2025 decreased by$25 million,or 23.1%,when compared to the ninemonths ended September 29,2024 primarily due to the effect of certain acquisition-related intangibles becoming fully amortized(with regard to the previous Marvellacquisition).Financial income(expense)The following table presents the details of financial income and expenses:($in millions,unless otherwise stated)Q3 2025Q3 2024YTD 2025YTD 2024Interest income37 36 111 125 Interest expense(118)(96)(339)(298)Other financial income/(expense)(17)(22)(48)(54)Total(98)(82)(276)(227)Q3 2025 compared to Q3 2024Financial income(expense)was an expense of$98 million for the three months ended September 28,2025,compared to an expense of$82 million for the three monthsended September 29,2024.Interest income remained flat,whereas interest expense increased by$22 million due to the interest expenses on the issuance of new bonds,interest expenses on the EIB loans as well as the commercial paper.Within Other financial income/(expense),fair value adjustments in equity securities resulted in noresult for the three months ended September 28,2025 versus a loss of$7 million for the three months ended September 29,2024.YTD 2025 compared to YTD 2024Financial income(expense)was an expense of$276 million for the nine months ended September 28,2025,compared to an expense of$227 million for the nine monthsended September 29,2024.Interest income decreased by$14 million due to lower cash levels,whereas interest expense increased by$41 million due to the interestexpenses due to issuance of new bonds,interest expenses on the EIB loans and commercial paper.Within Other financial income/(expense),fair value adjustments inequity securities resulted in a loss of$2 million for the nine months ended September 28,2025,versus a loss of$12 million for the nine months ended September 29,2024.27Benefit(provision)for income taxesOur provision for income taxes for 2025 is based on our EAETR of 18.7%,which is lower than the Netherlands statutory tax rate of 25.8%,primarily due to tax benefitsfrom the Netherlands and foreign tax incentives.Q3 2025Q3 2024YTD 2025YTD 2024Tax benefit(provision)calculated at EAETR(149)(160)(380)(446)Discrete tax benefit(provision)items1(13)(14)(22)Benefit(provision)for income taxes(148)(173)(394)(468)Effective tax rate18.6.0.4.6%Q3 2025 compared to Q3 2024The effective tax rate of 18.6%for the third quarter of 2025 was lower than the EAETR due to the income tax benefit for discrete items of$1 million.The discrete itemsare primarily related to the impact of foreign currency on income tax related items,changes in estimates for previous years,and changes in the litigation accrual andrelated insurance reimbursements relating to the Motorola Personal Injury Lawsuits regarding previous years.YTD 2025 compared to YTD 2024For the first nine months ended 2025,the effective tax rate of 19.4%was higher than 18.6%due to a net result of unfavorable discrete items of$14 million.Thesediscrete items are primarily related to the impact of changes in estimates for previous years,and changes in the litigation accrual and related insurance reimbursementsrelating to the Motorola Personal Injury Lawsuits.The effective tax rate of 19.4%for the first nine months of 2025 was higher compared to the rate for the first nine months ended 2024 of 18.6%due to a different mix ofthe benefit(provision)for income taxes in our operating locations and lower foreign tax incentives in the current period as a result of a decrease in qualifying income.On July 4,2025,the One Big Beautiful Bill Act(“OBBBA”)was enacted in the U.S.The OBBBA includes significant provisions,such as the permanent extension ofcertain expiring provisions of the Tax Cuts and Jobs Act,modifications to the international tax framework and the restoration of favorable tax treatment for certainbusiness provisions.The legislation has multiple effective dates,with certain provisions effective in 2025 and others implemented as of 2026.We have assessed thatthere is effectively no material tax impact on our consolidated financial statements.We also note that there is still unclarity about what the G7 statement in relation to theUS on global minimum taxes,as announced on June 28,2025,could mean for the Company.Results Relating to Equity-accounted InvesteesQ3 2025 compared to Q3 2024Results relating to equity-accounted investees amounted to a loss of$1 million for the three months ended September 28,2025,whereas the three months endedSeptember 29,2024 results relating to equity-accounted investees amounted to a loss of$6 million.YTD 2025 compared to YTD 2024Results relating to equity-accounted investees amounted to a loss of$33 million(which includes an impairment charge of$27 million related to our investment inSigmaSense)for the nine months ended September 28,2025,whereas the nine months ended September 29,2024 results relating to equity-accounted investeesamounted to a loss of$10 million.Non-controlling InterestsQ3 2025 compared to Q3 2024Non-controlling interests are related to the third-party share in the results of consolidated companies,predominantly SSMC.Their share of non-controlling interestsamounted to a profit of$15 million for the three months ended September 28,2025,compared to a profit of$11 million for the three months ended September 29,2024.YTD 2025 compared to YTD 2024Non-controlling interests are related to the third-party share in the results of consolidated companies,predominantly SSMC.Their share of non-controlling interestsamounted to a profit of$34 million for the nine months ended September 28,2025,compared to a profit of$22 million for the nine months ended September 29,2024.28Liquidity and Capital ResourcesWe derive our liquidity and capital resources primarily from our cash flows from operations.We continue to generate strong positive operating cash flows.At the end ofthe third quarter of 2025,our cash balance was$3,454 million,an increase of$162 million compared to December 31,2024.Taking into account the available amountof the unsecured revolving credit facility of$2,500 million(RCF),we had access to$5,954 million of liquidity as of September 28,2025.We currently use cash tofund operations,meet working capital requirements,for capital expenditures and for potential common stock repurchases,dividends and strategic investments.Based onpast performance and current expectations,we believe that our current available sources of funds(including cash and cash equivalents,short-term deposits of$500million,RCF of$2.5 billion,plus anticipated cash generated from operations)will be adequate to finance our operations,working capital requirements,capitalexpenditures and potential dividends for at least the next twelve months.($in millions,unless otherwise stated)YTD 2025YTD 2024Cash from operations1,929 2,391 Capital expenditures299 597 Cash to shareholders1,332 1,698 Cash and short-term depositsAt September 28,2025,our cash and short-term deposits balance was$3,954 million of which$324 million was held by SSMC,our consolidated joint venture companywith TSMC.Under the terms of our joint venture agreement with TSMC,a portion of this cash can be distributed by way of a dividend to us,but 38.8%of the dividendwill be paid to our joint venture partner.Capital expendituresOur cash outflows for capital expenditures were$299 million in the first nine months of 2025,compared to$597 million in the first nine months of 2024.Capital returnUnder our Quarterly Dividend Program,interim dividends of$1.014 per ordinary share were paid on January 8,2025($258 million),dividends of$1.014 per ordinaryshare were paid on April 9,2025($257 million),dividends of$1.014 per ordinary share were paid on July 9,2025($256 million)and dividends of$1.014 per ordinaryshare were paid on October 8,2025($255 million).In the first nine months of 2025 we repurchased approximately$561 million of shares.DebtOur total debt,inclusive of aggregate principal,unamortized discounts,premiums,debt issuance costs and fair value adjustments,amounted to$12,235 million as ofSeptember 28,2025,an increase of$1,381 million compared to December 31,2024($10,854 million).On May 1,2025,we repaid the$500 million aggregate principal amount of outstanding 2.7%senior unsecured notes due 2025 at maturity using available cash.On August 19,2025,NXP issued$500 million of 4.30%senior unsecured notes due 2028,$300 million of 4.85%senior unsecured notes due 2032 and$700 million of5.25%senior unsecured notes due 2035(collectively,the Notes).The Company intends to use the net proceeds from the offering of the Notes to redeem the$500million aggregate principal amount of outstanding dollar-denominated 5.35%senior unsecured notes due 2026 and the$750 million aggregate principal amount ofoutstanding dollar-denominated 3.875%senior unsecured notes due 2026,in accordance with the terms of the applicable indenture governing such notes,including allpremiums,accrued interest and costs and expenses related to such redemptions.Pending such application,such proceeds and the excess net proceeds from the Notes willbe temporarily held as cash and other short-term securities or used for general corporate purposes,which may include capital expenditures or short-term debt repayment.As of September 28,2025,we had outstanding fixed-rate notes with varying maturities for an aggregate principal amount of$11,250 million(collectively the“Notes”),of which$1.25 billion is payable within 12 months.Future interest payments associated with the Notes total$2,997 million,with$424 million payable within 12months.As of September 28,2025,the Company had outstanding loans with the European Investment Bank(EIB)for an aggregated principal amount of$1,040 million.Futureinterest payments associated with the EIB loans total$252 million,with$47 million payable within 12 months.As of September 28,2025,we had$15 million commercial paper notes outstanding with a duration less than 12 months.29Our net debt position(see section Use of Certain Non-GAAP Financial Measures)at September 28,2025 amounted to$8,281 million,compared to$7,562 million as ofDecember 31,2024.Additional Capital RequirementsExpected working and other capital requirements are described in our Annual Report on Form 10-K for the fiscal year ended December 31,2024 in Part II,Item 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations”.At September 28,2025,other than for changes disclosed in the“Notes toCondensed Consolidated Financial Statements”and“Liquidity and Capital Resources”in this Quarterly Report,there have been no other material changes to ourexpected working and other capital requirements described in our Annual Report on Form 10-K for the fiscal year ended December 31,2024.30Cash flowsOur cash and cash equivalents during the first nine months of 2025 increased by$156 million(excluding the effect of changes in exchange rates on our cash position of$6 million)as follows:($in millions,unless otherwise stated)YTD 2025YTD 2024Net cash provided by(used for)operating activities1,929 2,391 Net cash(used for)provided by investing activities(1,891)(884)Net cash provided by(used for)financing activities118(2,621)Increase(decrease)in cash and cash equivalents156(1,114)Cash Flow from Operating ActivitiesFor the first nine months of 2025 our operating activities provided$1,929 million in cash.This was primarily the result of net income of$1,600 million,adjustments toreconcile the net income of$960 million and changes in operating assets and liabilities of$(655)million.Adjustments to net income(loss)include non-cash items,suchas depreciation and amortization of$617 million,share-based compensation of$362 million and changes in deferred taxes(benefit)of$(32)million.Changes inoperating assets and liabilities were primarily driven by a$81 million increase in receivables and other current assets due to the related timing of cash collection,$180million increase in inventories in order to align inventory on hand with expected demand,and$296 million decrease in accounts payable and other liabilities as a resultof lower purchase volumes and timing related to payments.For the first nine months of 2024 our operating activities provided$2,391 million in cash.This was primarily the result of net income of$2,037 million,adjustments toreconcile the net income of$910 million and changes in operating assets and liabilities of$(574)million.Adjustments to net income(loss)includes non-cash items,such as depreciation and amortization of$666 million,share-based compensation of$344 million and changes in deferred taxes of($127)million.Changes in operatingassets and liabilities were primarily driven by a$204 million decrease in accounts payable and other liabilities as a result of lower purchase volumes and timing relatedto payments,$182 million increase in receivables and other current assets due to the linearity of revenue between the two periods,customer mix,and the related timingof cash collection,and$100 million increase in inventories in order to align inventory on hand with expected demand,partially offset by a$88 million increase in othernon-current assets from the application of prepayments used to secure long-term production supply.Cash Flow from Investing ActivitiesNet cash used for investing activities amounted to$1,891 million for the first nine months of 2025 and principally consisted of the purchase of interests in business(netof cash acquired)of$690 million(mainly driven by the acquisition of TTTech Auto for$679 million),investments in short-term deposits of$500 million,capitalexpenditures of$299 million,$319 million for the purchase of investments(driven primarily by the capital contributions of$209 million into VSMC and approximately$47 million into ESMC)and$85 million for the purchase of identified intangible assets,including EDA(electronic design automation).Net cash used for investing activities amounted to$884 million for the first nine months of 2024 and principally consisted of the cash outflows for capital expendituresof$597 million,$193 million for the purchase of investments(driven primarily by the capital contributions of approximately$31 million into ESMC and approximately$140 million into VSMC),and$113 million for the purchase of identified intangible assets,including EDA(electronic design automation).Cash Flow from Financing ActivitiesNet cash provided from financing activities of$118 million for the first nine months of 2025 was primarily driven by the proceeds from the issuance of commercialpaper notes of$2,426 million,proceeds from issuance of long-term debt of$1,868 million,and the proceeds from the issuance of common stock through stock plans of$77 million,partially offset by the repayment of commercial paper notes of$2,411 million,dividend payments to common stockholders of$771 million,purchase oftreasury shares and restricted stock unit holdings of$561 million,and repurchase of long-term debt of 500 million.Net cash used for financing activities of$2,621 million for the first nine months of 2024 was primarily driven by the payment of$1 billion to retire at maturity ouroutstanding 4.875%senior unsecured notes due March 2024,dividend payment to common stockholders of$780 million,and purchase of treasury shares and restrictedstock unit holdings of$918 million;partially offset by the proceeds from the issuance of common stock through stock plans of$79 million.31Information Regarding Guarantors of NXP(unaudited)Summarized Combined Financial Information for Guarantee of Securities of SubsidiariesAll debt instruments are guaranteed,fully and unconditionally,jointly and severally,by NXP Semiconductors N.V.and issued or guaranteed by NXP USA,Inc.,NXPB.V.and NXP LLC,(together,the“Subsidiary Obligors”and together with NXP Semiconductors N.V.,the“Obligor Group”).Other than the Subsidiary Obligors,noneof the Companys subsidiaries(together the“Non-Guarantor Subsidiaries”)guarantee the Notes.The Company consolidates the Subsidiary Obligors in its ConsolidatedFinancial Statements and each of the Subsidiary Obligors are wholly owned subsidiaries of the Company.All of the existing guarantees by the Company rank equally in right of payment with all of the existing and future senior indebtedness of the Obligor Group.There are nosignificant restrictions on the ability of the Obligor Group to obtain funds from respective subsidiaries by dividend or loan.The following tables present summarized financial information of the Obligor Group on a combined basis,with intercompany balances and transactions between entitiesof the Obligor Group eliminated and investments and equity in the earnings of the Non-Guarantor Subsidiaries excluded.The Obligor Groups amounts due from,amounts due to,and intercompany transactions with Non-Guarantor Subsidiaries have been disclosed below the table,when material.Summarized Statements of IncomeFor the nine monthsended($in millions)September 28,2025Revenue4,939 Gross Profit2,278 Operating income571 Net income(24)Summarized Balance SheetsAs of($in millions)September 28,2025December 31,2024Current assets3,902 3,273 Non-current assets12,064 12,191 Total assets15,966 15,464 Current liabilities2,011 1,244 Non-current liabilities11,426 10,967 Total liabilities13,437 12,211 Obligors Group equity2,529 3,253 Total liabilities and Obligors Group equity15,966 15,464 NXP Semiconductors N.V.is the head of a fiscal unity for the corporate income tax and VAT that contains the most significant Dutch wholly-owned group companies.The Company is therefore jointly and severally liable for the tax liabilities of the tax entity as a whole,and as such the income tax expense of the Dutch fiscal unity hasbeen included in the Net income of the Obligor Group.The financial information of the Obligor Group includes sales executed through a Non-Guarantor Subsidiary single-billing entity as a sales agent on behalf of an entityin the Obligor Group.The Obligor Group has sales to non-guarantors(for the nine months ended September 28,2025:$532 million).The Obligor Group has amountsdue from equity financing(September 28,2025:$5,534 million;December 31,2024:$5,749 million)and due to debt financing(September 28,2025:$2,060 million;December 31,2024:$2,283 million)with non-guarantor subsidiaries.32Use of Certain Non-GAAP Financial MeasuresNon-GAAP Financial MeasuresIn addition to providing financial information on a basis consistent with U.S.generally accepted accounting principles(“US GAAP”or“GAAP”),NXP also providesselected financial measures on a non-GAAP basis which are adjusted for specified items.The adjustments made to achieve these non-GAAP financial measures or thenon-GAAP financial measures as specified are described below,including the usefulness to management and investors.In managing NXPs business on a consolidated basis,management develops an annual operating plan,which is approved by our Board of Directors,using non-GAAPfinancial measures.In measuring performance against this plan,management considers the actual or potential impacts on these non-GAAP financial measures fromactions taken to reduce costs with the goal of increasing our gross margin and operating margin and when assessing appropriate levels of research and developmentefforts.In addition,management relies upon these non-GAAP financial measures when making decisions about product spending,administrative budgets,and otheroperating expenses.We believe that these non-GAAP financial measures,when coupled with the GAAP results and the reconciliations to corresponding GAAP financialmeasures,provide a more complete understanding of the Companys results of operations and the factors and trends affecting NXPs business.We believe that theyenable investors to perform additional comparisons of our operating results,to assess our liquidity and capital position and to analyze financial performance excludingthe effect of expenses unrelated to core operating performance,certain non-cash expenses and share-based compensation expense,which may obscure trends in NXPsunderlying performance.This information also enables investors to compare financial results between periods where certain items may vary independent of businessperformance,and allow for greater transparency with respect to key metrics used by management.The presentation of these and other similar items in NXPs non-GAAP financial results should not be interpreted as implying that these items are non-recurring,infrequent,or unusual.These non-GAAP financial measures are provided in addition to,and not as a substitute for,or superior to,measures of financial performanceprepared in accordance with GAAP.Non-GAAP Adjustment orMeasureDefinitionUsefulness to Management and InvestorsPurchase price accounting effectsPurchase price accounting(PPA)effects reflect the fair value adjustments impactingacquisition accounting and other acquisition adjustments charged to the ConsolidatedStatement of Operations.This typically relates to inventory,property,plant and equipment,aswell as intangible assets,such as developed technology and marketing and customerrelationships acquired.The PPA effects are recorded within both cost of revenue and operatingexpenses in our US GAAP financial statements.These charges are recorded over the estimateduseful life of the related acquired asset,and thus are generally recorded over multiple years.We believe that excluding these charges related to fair valueadjustments for purposes of calculating certain non-GAAPmeasures allows the users of our financial statements to betterunderstand the historic and current cost of our products,ourgross margin,our operating costs,our operating margin,and alsofacilitates comparisons to peer companies.RestructuringRestructuring charges are costs associated with a restructuring plan and are primarily related toemployee severance and benefit arrangements.Charges related to restructuring are recordedwithin both cost of revenue and operating expenses in our US GAAP financial statementsWe exclude restructuring charges,including any adjustments tocharges recorded in prior periods,for purposes of calculatingcertain non-GAAP measures because these costs do not reflectour core operating performance.These adjustments facilitate auseful evaluation of our core operating performance andcomparisons to past operating results and provide investors withadditional means to evaluate expense trends.Share-based compensationShare-based compensation consists of incentive expense granted to eligible employees in theform of equity based instruments.Charges related to share-based compensation are recordedwithin both cost of revenue and operating expenses in our US GAAP financial statements.We exclude charges related to share-based compensation forpurposes of calculating certain non-GAAP measures becausewe believe these charges,which are non-cash,are notrepresentative of our core operating performance as they canfluctuate from period to period based on factors that are notwithin our control,such as our stock price on the dates share-based grants are issued.We believe these adjustments provideinvestors with a useful view,through the eyes of management,of our core business model,how management currentlyevaluates core operational performance,and additional means toevaluate expense trends.Other incidentalsOther incidentals consist of certain items which may be non-recurring,unusual,infrequent ordirectly related to an event that is distinct and non-reflective of the Companys core operatingperformance.These may include such items as process and product transfer costs,certaincharges related to acquisitions and divestitures,litigation and legal settlements,costsassociated with the exit of a product line,factory or facility,environmental or governmentalsettlements,and other items of similar nature.We exclude these certain items which may be non-recurring,unusual,infrequent or directly related to an event that is distinctand non-reflective of the Companys core operating performancefor purposes of calculating certain non-GAAP measures.Theseadjustments facilitate a useful evaluation of our core operatingperformance and comparisons to past operating results andprovide investors with additional means to evaluate expensetrends.33Non-GAAP Adjustment orMeasureDefinitionUsefulness to Management and InvestorsNon-GAAP Provision forincome taxesNon-GAAP provision for income taxes is NXPs GAAP provision for income taxes adjustedfor the income tax effects of the adjustments to our GAAP measure,including PPA effects,restructuring costs,share-based compensation,other incidental items and certain otheradjustments to financial income(expense)items.Additionally,adjustments are made for theincome tax effect of any discrete items that occur in the interim period.Discrete itemsprimarily relate to unexpected tax events that may occur as these amounts cannot be forecasted(e.g.,the impact of changes in tax law and/or rates,changes in estimates or resolved tax auditsrelating to prior year tax provisions,the excess or deficit tax effects on share-basedcompensation,etc.).The non-GAAP provision for income taxes is used to ascertainand present on a comparable basis NXPs provision for incometax after adjustments,the usefulness of which is describedwithin this table.Additionally,the income tax effects of theadjustments to achieve the noted non-GAAP measures are usedto determine NXPs non-GAAP net income(loss)attributable tostockholders and accordingly,our diluted non-GAAP earningsper share attributable to stockholders.Free Cash FlowFree Cash Flow represents operating cash flow adjusted for net additions to property,plant andequipment.We believe that free cash flow provides insight into our cash-generating capability and our financial performance,and is anefficient means by which users of our financial statements canevaluate our cash flow after meeting our capital expenditure.Net debtNet debt represents total debt(short-term and long-term)after deduction of cash and cashequivalents and short-term deposits.We believe this measure provides investors with usefulsupplemental information about the financial performance of ourbusiness,enables comparison of financial results betweenperiods where certain items may vary independent of businessperformance,and allow for greater transparency with respect ofcalculating our net leverage.The following are reconciliations of our most comparable US GAAP measures to our non-GAAP measures presented:($in millions)For the three months endedSeptember 28,2025June 29,2025September 29,2024GAAP gross profit$1,787$1,562$1,866 PPA effects(6)(7)(12)Restructuring(61)Share-based compensation(15)(14)(14)Other incidentals(2)(8)Non-GAAP gross profit$1,810$1,652$1,892 GAAP Gross Margin56.3S.4W.4%Non-GAAP Gross Margin57.0V.5X.2%GAAP research and development$(575)$(573)$(577)Restructuring(1)(3)Share-based compensation(57)(58)(58)Other incidentals(2)(7)Non-GAAP research and development$(515)$(505)$(519)GAAP selling,general and administrative$(286)$(278)$(265)PPA effects(1)(1)Restructuring(2)(3)Share-based compensation(46)(45)(43)Other incidentals(14)(15)(2)Non-GAAP selling,general and administrative$(223)$(215)$(219)GAAP operating income(loss)$893$687$990 34($in millions)For the three months endedSeptember 28,2025June 29,2025September 29,2024GAAP operating income(loss)$893$687$990 PPA effects(38)(32)(42)Restructuring(3)(67)Share-based compensation(118)(117)(115)Other incidentals(19)(32)(6)Non-GAAP operating income(loss)$1,071$935$1,153 GAAP Operating Margin28.1#.50.5%Non-GAAP Operating Margin33.82.05.5%GAAP Income tax benefit(provision)$(148)$(116)$(173)Income tax effect25 32 9 Non-GAAP Income tax benefit(provision)$(173)$(148)$(182)($in millions)For the three months endedSeptember 28,2025June 29,2025September 29,2024Net cash provided by(used for)operating activities$585$779$779 Net capital expenditures on property,plant and equipment(76)(83)(186)Non-GAAP free cash flow$509$696$593($in millions)For the three months endedSeptember 28,2025June 29,2025September 29,2024Long-term debt$10,971$9,479$9,683 Short-term debt1,264 1,999 499 Total debt12,235 11,478 10,182 Less:cash and cash equivalents(3,454)(3,170)(2,748)Less:short-term deposits(500)(400)Net debt$8,281$8,308$7,034 35Item 3.Quantitative and Qualitative Disclosures About Market RiskThere have been no material changes to the Companys market risk during the first nine months of 2025.For a discussion of the Companys exposure to market risk,refer to the Companys market risk disclosures set forth in Part II,Item 7A,“Quantitative and Qualitative Disclosures About Market Risk”in our Annual Report onForm 10-K for the year ended December 31,2024.Item 4.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management,with the participation of the Chief Executive Officer and Chief Financial Officer(Certifying Officers),evaluated the effectiveness of the Companysdisclosure controls and procedures(as defined in Rules 13a-15(e)or 15d-15(e)promulgated under the Securities Exchange Act of 1934,as amended)on September 28,2025.Based on that evaluation,the Certifying Officers concluded the Companys disclosure controls and procedures were effective as of September 28,2025.Changes in Internal Control Over Financial ReportingThere were no changes in the Companys internal control over financial reporting during the three-month period ended September 28,2025,which were identified inconnection with managements evaluation required by paragraph(d)of Rules 13a-15 and 15d-15 under the Exchange Act that have materially affected,or are reasonablylikely to materially affect,our internal control over financial reporting.We are currently in the process of integrating the TTTech Auto operations within our controlenvironment and have excluded TTTech Auto from our evaluation.36PART II OTHER INFORMATIONItem 1.Legal ProceedingsNot applicable.Item 1A.Risk FactorsThere have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31,2024.Item 2.Unregistered Sales of Equity Securities and Use of ProceedsPurchases of Equity Securities by the Issuer and Affiliated PurchasersOur Board has approved the purchase of shares from participants in NXPs equity programs to satisfy participants tax withholding obligations and this authorization willremain in effect until terminated by the Board.In January 2022,the Board approved the repurchase of shares up to a maximum of$2 billion(the 2022 ShareRepurchase Program).In August 2024,the Board approved the repurchase of shares up to a maximum of$2 billion(the 2024 Share Repurchase Program)in additionto the 2022 Share Repurchase Program.At September 28,2025,there was no amount remaining under the 2022 Share Repurchase Program and approximately$1.8billion under the 2024 Share Repurchase Program.The following share repurchase activity occurred under these programs during the three months ended September 28,2025:PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareNumber of SharesPurchased as Part ofPublicly AnnouncedBuy Back ProgramsMaximum Number of Shares That May Yet Be Purchased Under the Buy Back ProgramNumber of SharesPurchased as Tradefor Tax(1)June 30,2025 August 3,202515,154$223.928,739,32315,154August 4,2025 August 31,2025(38)$224.437,811,619(38)September 1,2025 September 28,2025222,950224.26222,9507,894,886Total238,066222,95015,116 Reflects shares surrendered by participants to satisfy tax withholding obligations in connection with the Companys equity programs.Item 5.Other InformationRule 10b5-1 Trading PlansOn August 1,2025,Andrew Micallef,Executive Vice President and Chief Operations and Manufacturing Officer of the Company,entered into a Rule 10b5-1 TradingPlan(the“Plan”),pursuant to which a maximum amount of 4,000 common shares of the Company may be sold under the Plan from March 16,2026 through December31,2026.The Plan terminates on the earlier of:(i)December 31,2026,(ii)the first date on which all trades set forth in the Plan have been executed,or(iii)such date thePlan is otherwise terminated according to its terms.On August 5,2025,Jennifer
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Rambus Third Quarter 2025 Financial ResultsThis presentation contains forward-looking statements,inc.
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NXP Semiconductors Reports Third Quarter 2025 ResultsEINDHOVEN,The Netherlands,October 27,2025 NXP Semiconductors N.V.(NASDAQ:NXPI)today reported financial results for the third quarter,which ended September 28,2025.“NXP reported quarterly revenue of$3.17 billion,exceeding the midpoint of our guidance.We experienced broad-based sequential improvement across all regions and end markets.Our outlook reflects the strength of our company specific growth drivers and signs of a cyclical recovery.We remain focused on disciplined investment and portfolio enhancement to drive profitable growth,while maintaining control over the factors we can influence,”said Rafael Sotomayor,NXP President and incoming Chief Executive Officer.Key Highlights for the Third Quarter 2025:Revenue was$3.17 billion,down 2 percent year-on-year;GAAP gross margin was 56.3 percent,GAAP operating margin was 28.1 percent and GAAP diluted Net Income per Share was$2.48;Non-GAAP gross margin was 57.0 percent,non-GAAP operating margin was 33.8 percent,and non-GAAP diluted Net Income per Share was$3.11;Cash flow from operations was$585 million,with net capex investments of$76 million,resulting in non-GAAP free cash flow of$509 million;Capital return during the quarter was$310 million,representing 60.9 percent of third quarter non-GAAP free cash flow.Share buybacks were$54 million and dividends paid during the quarter were$256 million.After the end of the third quarter,between September 29,2025,and October 24,2025,NXP executed via a 10b5-1 program additional share repurchases totaling$100 million;On July 2,2025,NXP announced its new 18-channel Li-ion battery cell controller BMx7318/7518 IC family,designed for electric vehicle high-voltage battery management systems(HVBMS),industrial energy storage systems(ESS)and 48 V battery management systems.The new IC family meets both automotive ASIL C and industrial SIL 2 functional safety certifications;On July 24,2025,NXP reached a definitive agreement with STMicroelectronics International N.V.,under which NXP will sell its MEMS sensors business line for an amount up to$950 million in cash,including$900 million at closing and up to an additional$50 million subject to the achievement of technical milestones.We expect final closing sometime during the first half of 2026;On August 19,2025,NXP closed the pricing of an offering by its subsidiaries NXP B.V.,NXP Funding LLC and NXP USA,Inc.of$500 million aggregate principal amount of 4.300%senior unsecured notes due 2028,$300 million aggregate principal amount of 4.850%senior unsecured notes due 2032 and$700 million aggregate principal amount of 5.250%senior unsecured notes due 2035;On August 28,2025,the NXP board of directors has approved the payment of an interim dividend of$1.014 per ordinary share for the third quarter of 2025.The interim dividend was paid in cash on October 8,2025,to shareholders of record as of September 17,2025;On October 24,2025,NXP closed the previously announced acquisition of Aviva Links for$243 million in cash before closing adjustments.Aviva Links is a provider of Automotive SerDes Alliance(ASA)compliant-in-vehicle connectivity solutions.The Aviva Links acquisition complements and expands NXPs automotive networking solutions in the Automotive and Industrial&IoT end markets;andNXP has received all required regulatory approvals for the previously announced acquisition of Kinara,an industry leader in high performance,energy-efficient and programmable discrete neural processing units(NPUs).NXP and Kinara are in the process of completing all required closing conditions.1Summary of Reported Third Quarter 2025($millions,unaudited)(1)Q3 2025Q2 2025Q3 2024Q-QY-YTotal Revenue$3,173$2,926$3,250 8%-2%GAAP Gross Profit$1,787$1,562$1,866 14%-4%Gross Profit Adjustments(i)$(23)$(90)$(26)Non-GAAP Gross Profit$1,810$1,652$1,892 10%-4%GAAP Gross Margin 56.3S.4W.4%Non-GAAP Gross Margin 57.0V.5X.2%GAAP Operating Income (Loss)$893$687$990 30%-10%Operating Income Adjustments(i)$(178)$(248)$(163)Non-GAAP Operating Income$1,071$935$1,153 15%-7%GAAP Operating Margin 28.1#.50.5%Non-GAAP Operating Margin 33.82.05.5%GAAP Net Income(Loss)attributable to Stockholders$631$445$718 42%-12%Net Income Adjustments(i)$(159)$(245)$(172)Non-GAAP Net Income(Loss)Attributable to Stockholders$790$690$890 14%-11%GAAP diluted Net Income(Loss)per Share(ii)$2.48$1.75$2.79 42%-11%Non-GAAP diluted Net Income(Loss)per Share(ii)$3.11$2.72$3.45 14%-10ditional informationQ3 2025Q2 2025Q3 2024Q-QY-YAutomotive$1,837$1,729$1,829 6%Industrial&IoT$579$546$563 6%3%Mobile$430$331$407 30%6%Comm.Infra.&Other$327$320$451 2%-27%DIO161158149DPO 586060DSO313330Cash Conversion Cycle134131119Channel Inventory(weeks)998Gross Financial Leverage(iii)2.6x2.4x1.9xNet Financial Leverage(iv)1.8x1.8x1.3x1.Additional Information for the Third Quarter 2025:i.For an explanation of GAAP to non-GAAP adjustments,please see“Non-GAAP Financial Measures”.ii.Refer to Table 1 below for the weighted average number of diluted shares for the presented periods.iii.Gross financial leverage is defined as gross debt divided by trailing twelve months adjusted EBITDA.iv.Net financial leverage is defined as net debt divided by trailing twelve months adjusted EBITDA.2 Guidance for the Fourth Quarter 2025:($millions,except Per Share data)(1)GAAPReconciliationnon-GAAPLowMidHighLowMidHighTotal Revenue$3,200$3,300$3,400$3,200$3,300$3,400Q-Q1%4%7%1%4%7%Y-Y3%6%9%3%6%9%Gross Profit$1,796$1,870$1,944$(28)$1,824$1,898$1,972Gross Margin56.1V.7W.2W.0W.5X.0%Operating Income(loss)$878$942$1,006$(199)$1,077$1,141$1,205Operating Margin27.4(.5).63.74.65.4%Financial Income(expense)$(112)$(112)$(112)$(9)$(103)$(103)$(103)Tax rate17.5%-18.5.5%-18.5%Equity-accounted investees$(4)$(4)$(4)$(1)$(3)$(3)$(3)Non-controlling interests$(14)$(14)$(14)$(14)$(14)$(14)Shares-diluted254.3254.3254.3254.3254.3254.3Earnings Per Share-diluted$2.40$2.61$2.81$3.07$3.28$3.49Note(1)Additional Information:1.GAAP Gross Profit is expected to include Purchase Price Accounting(“PPA”)effects,$(6)million;Share-based Compensation,$(15)million;Other Incidentals,$(7)million;2.GAAP Operating Income(loss)is expected to include PPA effects,$(42)million;Share-based Compensation,$(118)million;Restructuring and Other Incidentals,$(39)million;3.GAAP Financial Income(expense)is expected to include Other financial expense$(9)million;4.GAAP Results relating to equity-accounted investees is expected to include results relating to non-foundry equity-accounted investees$(1)million;5.GAAP diluted EPS is expected to include the adjustments noted above for PPA effects,Share-based Compensation,Restructuring and Other Incidentals in GAAP Operating Income(loss),the adjustment for Other financial expense,the adjustment for results relating to non-foundry equity-accounted investees and the adjustment on Tax due to the earlier mentioned adjustments.NXP has based the guidance included in this release on judgments and estimates that management believes are reasonable given its assessment of historical trends and other information reasonably available as of the date of this release.Please note,the guidance included in this release consists of predictions only,and is subject to a wide range of known and unknown risks and uncertainties,many of which are beyond NXPs control.The guidance included in this release should not be regarded as representations by NXP that the estimated results will be achieved.Actual results may vary materially from the guidance we provide today.In relation to the use of non-GAAP financial information see the note regarding Non-GAAP Financial Measures below.For the factors,risks,and uncertainties to which judgments,estimates and forward-looking statements generally are subject see the note regarding Forward-looking Statements.We undertake no obligation to publicly update or revise any forward-looking statements,including the guidance set forth herein,to reflect future events or circumstances.Non-GAAP Financial MeasuresIn managing NXPs business on a consolidated basis,management develops an annual operating plan,which is approved by our Board of Directors,using non-GAAP financial measures,that are not in accordance with,nor an alternative to,U.S.generally accepted accounting principles(“GAAP”).In measuring performance against this plan,management considers the actual or potential impacts on these non-GAAP financial measures from actions taken to reduce costs with the goal of increasing our gross margin and operating margin and when assessing appropriate levels of research and development efforts.In addition,management relies upon these non-GAAP financial measures when making decisions about product spending,administrative budgets,and other operating expenses.We believe that these non-GAAP financial measures,when coupled with the GAAP results and the reconciliations to corresponding GAAP financial measures,provide a more complete understanding of the Companys results of operations and the factors and trends affecting NXPs business.We believe that they enable investors to perform additional comparisons of our operating results,to assess our liquidity and capital position and to analyze financial performance excluding the effect of expenses unrelated to core operating performance,certain non-cash expenses and share-based compensation expense,which may obscure trends in NXPs underlying performance.This information also enables investors to compare financial results between periods where certain items may vary independent of business performance,and allow for greater transparency with respect to key metrics used by management.These non-GAAP financial measures are provided in addition to,and not as a substitute for,or superior to,measures of financial performance prepared in accordance with GAAP.The presentation of these and other similar items in NXPs non-GAAP financial results should not be interpreted as implying that these items are non-recurring,infrequent,or unusual.Reconciliations of these non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the financial statements portion of this release in a schedule entitled“Financial Reconciliation of GAAP to non-GAAP Results(unaudited).”Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at https:/ for additional information related to our rationale for using these non-GAAP financial measures,as well as the impact of these measures on the presentation of NXPs operations.In addition to providing financial information on a basis consistent with GAAP,NXP also provides the following selected financial measures on a non-GAAP basis:(i)Gross profit,(ii)Gross margin,(iii)Research and development,(iv)Selling,general and administrative,(v)Amortization of acquisition-related intangible assets,(vi)Other income,(vii)Operating income(loss),(viii)Operating margin,(ix)Financial Income(expense),(x)Income tax benefit(provision),(xi)Results relating to non-foundry equity-accounted investees,(xii)Net income(loss)attributable to stockholders,(xiii)Earnings per Share-Diluted,(xiv)EBITDA,adjusted EBITDA and trailing 12 month adjusted EBITDA,and(xv)free cash flow,trailing 12 month free cash flow and trailing 12 month free cash flow as a percent of Revenue.The non-GAAP information excludes,where applicable,the amortization of acquisition related intangible assets,the purchase accounting effect on inventory and property,plant 3and equipment,merger related costs(including integration costs),certain items related to divestitures,share-based compensation expense,restructuring and asset impairment charges,extinguishment of debt,foreign exchange gains and losses,income tax effect on adjustments described above and results from non-foundry equity-accounted investments.The difference in the benefit(provision)for income taxes between our GAAP and non-GAAP results relates to the income tax effects of the GAAP to non-GAAP adjustments that we make and the income tax effect of any discrete items that occur in the interim period.Discrete items primarily relate to unexpected tax events that may occur as these amounts cannot be forecasted(e.g.,the impact of changes in tax law and/or rates,changes in estimates or resolved tax audits relating to prior year tax provisions,the excess or deficit tax effects on share-based compensation,etc.).Conference Call and Webcast InformationThe company will host a conference call with the financial community on Tuesday,October 28,2025 at 8:00 a.m.U.S.Eastern Daylight Time(EDT)to review the third quarter 2025 results in detail.Interested parties may preregister to obtain a user-specific access code for the call here.The call will be webcast and can be accessed from the NXP Investor Relations website at .A replay of the call will be available on the NXP Investor Relations website within 24 hours of the actual call.About NXP SemiconductorsNXP Semiconductors N.V.(NASDAQ:NXPI)is the trusted partner for innovative solutions in the automotive,industrial&IoT,mobile,and communications infrastructure markets.NXPs Brighter Together approach combines leading-edge technology with pioneering people to develop system solutions that make the connected world better,safer,and more secure.The company has operations in more than 30 countries and posted revenue of$12.61 billion in 2024.Find out more at .Forward-looking Statements This document includes forward-looking statements which include statements regarding NXPs business strategy,financial condition,results of operations,market data,as well as any other statements which are not historical facts.By their nature,forward-looking statements are subject to numerous factors,risks and uncertainties that could cause actual outcomes and results to be materially different from those projected.These factors,risks and uncertainties include the following:market demand and semiconductor industry conditions;our ability to successfully introduce new technologies and products;the demand for the goods into which NXPs products are incorporated;global trade disputes,potential increase of barriers to international trade,including the imposition of new or increased tariffs,and resulting disruptions to our established supply chains;the impact of government actions and regulations,including as a result of executive orders,including restrictions on the export of products and technology;increasing and evolving cybersecurity threats and privacy risks;our ability to accurately estimate demand and match our production capacity accordingly or obtain supplies from third-party producers;our access to production capacity from third-party outsourcing partners,and any events that might affect their business or our relationship with them;our ability to secure adequate and timely supply of equipment and materials from suppliers;our ability to avoid operational problems and product defects and,if such issues were to arise,to correct them quickly;our ability to form strategic partnerships and joint ventures and to successfully cooperate with our strategic alliance partners;our ability to win competitive bid selection processes;our ability to develop products for use in customers equipment and products;our ability to successfully hire and retain key management and senior product engineers;global hostilities,including the invasion of Ukraine by Russia and resulting regional instability,sanctions and any other retaliatory measures taken against Russia and the continued hostilities and the armed conflict in the Middle East,which could adversely impact the global supply chain,disrupt our operations or negatively impact the demand for our products in our primary end markets;our ability to maintain good relationships with our suppliers;our ability to integrate acquired businesses in an efficient and effective manner;our ability to generate sufficient cash,raise sufficient capital or refinance corporate debt at or before maturity to meet both NXPs debt service and research and development and capital investment requirements;and a change in tax laws could have an effect on our estimated effective tax rates.In addition,this document contains information concerning the semiconductor industry,our end markets and business generally,which is forward-looking in nature and is based on a variety of assumptions regarding the ways in which the semiconductor industry,our end markets and business will develop.NXP has based these assumptions on information currently available,if any one or more of these assumptions turn out to be incorrect,actual results may differ from those predicted.While NXP does not know what impact any such differences may have on its business,if there are such differences,its future results of operations and its financial condition could be materially adversely affected.Readers are cautioned not to place undue reliance on these forward-looking statements,which speak to results only as of the date the statements were made.Except for any ongoing obligation to disclose material information as required by the United States federal securities laws,NXP does not have any intention or obligation to publicly update or revise any forward-looking statements after we distribute this document,whether to reflect any future events or circumstances or otherwise.For a discussion of potential risks and uncertainties,please refer to the risk factors listed in our SEC filings.Copies of our SEC filings are available on our Investor Relations website, or from the SEC website,www.sec.gov.For further information,please contact:Investors:Media:Jeff Palmer Paige I 1 408 205 0687 1 817 975 0602NXP-CORP4NXP SemiconductorsTable 1:Condensed consolidated statement of operations(unaudited)($in millions except share data)Three months endedSeptember 28,2025June 29,2025September 29,2024Revenue$3,173$2,926$3,250 Cost of revenue(1,386)(1,364)(1,384)Gross profit 1,787 1,562 1,866 Research and development(575)(573)(577)Selling,general and administrative(286)(278)(265)Amortization of acquisition-related intangible assets(31)(25)(29)Total operating expenses(892)(876)(871)Other income(expense)(2)1 (5)Operating income(loss)893 687 990 Financial income(expense):Other financial income(expense)(98)(86)(82)Income(loss)before income taxes 795 601 908 Benefit(provision)for income taxes(148)(116)(173)Results relating to equity-accounted investees(1)(28)(6)Net income(loss)646 457 729 Less:Net income(loss)attributable to non-controlling interests 15 12 11 Net income(loss)attributable to stockholders 631 445 718 Earnings per share data:Net income(loss)per common share attributable to stockholders in$Basic$2.50$1.76$2.82 Diluted$2.48$1.75$2.79 Weighted average number of shares of common stock outstanding during the period(in thousands):Basic 252,170 252,418 254,458 Diluted 254,310 253,844 257,717 5NXP SemiconductorsTable 2:Condensed consolidated balance sheet(unaudited)($in millions)As ofSeptember 28,2025June 29,2025September 29,2024ASSETSCurrent assets:Cash and cash equivalents$3,454$3,170$2,748 Short-term deposits 500 400 Accounts receivable,net 1,095 1,071 1,070 Assets held for sale 292 294 Inventories,net 2,452 2,361 2,234 Other current assets 716 790 574 Total current assets 8,509 7,686 7,026 Non-current assets:Deferred tax assets 1,313 1,306 1,131 Other non-current assets 2,186 1,909 1,510 Property,plant and equipment,net 3,086 3,130 3,309 Identified intangible assets,net 1,139 1,121 735 Goodwill 10,121 10,098 9,958 Total non-current assets 17,845 17,564 16,643 Total assets 26,354 25,250 23,669 LIABILITIES AND EQUITYCurrent liabilities:Accounts payable 886 892 899 Restructuring liabilities-current 49 65 52 Other current liabilities 1,384 1,471 1,542 Short-term debt 1,264 1,999 499 Total current liabilities 3,583 4,427 2,992 Non-current liabilities:Long-term debt 10,971 9,479 9,683 Restructuring liabilities 60 60 4 Other non-current liabilities 1,313 1,348 1,246 Total non-current liabilities 12,344 10,887 10,933 Non-controlling interests 382 367 338 Stockholders equity 10,045 9,569 9,406 Total equity 10,427 9,936 9,744 Total liabilities and equity 26,354 25,250 23,669 6NXP SemiconductorsTable 3:Condensed consolidated statement of cash flows(unaudited)($in millions)Three months endedSeptember 28,2025June 29,2025September 29,2024Cash flows from operating activities:Net income(loss)$646$457$729 Adjustments to reconcile net income(loss)to net cash provided by(used for)operating activities:Depreciation and amortization 201 207 218 Share-based compensation 118 117 115 Amortization of discount(premium)on debt,net 1 Amortization of debt issuance costs 2 2 2 Net(gain)loss on sale of assets(1)(6)Results relating to equity-accounted investees 1 28 6(Gain)loss on equity securities,net(1)(3)7 Deferred tax expense(benefit)(8)3 (40)Changes in operating assets and liabilities:(Increase)decrease in receivables and other current assets 54 (106)(167)(Increase)decrease in inventories(96)(90)(86)Increase(decrease)in accounts payable and other liabilities(219)33 118(Increase)decrease in other non-current assets(123)131 (134)Exchange differences 8 9 7 Other items 2 (3)4 Net cash provided by(used for)operating activities 585 779 779 Cash flows from investing activities:Purchase of identified intangible assets(23)(37)(26)Capital expenditures on property,plant and equipment(77)(83)(186)Proceeds from the disposals of property,plant and equipment 1 Purchase of interests in businesses,net of cash acquired(11)(679)Investment in short-term deposits(500)Purchase of investments(173)(93)(159)Net cash provided by(used for)investing activities(783)(892)(371)Cash flows from financing activities:Repurchase of long-term debt (500)Proceeds from the issuance of long-term debt 1,498 Cash paid for debt issuance costs(8)Proceeds from the issuance of commercial paper notes 215 1,565 Repayment of commercial paper notes(950)(1,315)Dividends paid to common stockholders(256)(257)(259)Proceeds from issuance of common stock through stock plans 38 2 39 Purchase of treasury shares and restricted stock unit withholdings(54)(204)(305)Other,net(1)(1)Net cash provided by(used for)financing activities 482 (709)(526)Effect of changes in exchange rates on cash positions 4 7 Increase(decrease)in cash and cash equivalents 284 (818)(111)Cash and cash equivalents at beginning of period 3,170 3,988 2,859 Cash and cash equivalents at end of period 3,454 3,170 2,748 Net cash paid during the period for:Interest 44 109 27 Income taxes,net of refunds 174 167 196 Net gain(loss)on sale of assets:Cash proceeds from the sale of assets 1 6 Non-cash investing activities:Non-cash capital expenditures 112 103 125 7NXP SemiconductorsTable 4:Financial Reconciliation of GAAP to non-GAAP Results(unaudited)GAAP Gross Profit$1,787$1,562$1,866 PPA Effects(6)(7)(12)Restructuring (61)Share-based compensation(15)(14)(14)Other incidentals(2)(8)Non-GAAP Gross Profit$1,810$1,652$1,892 GAAP Gross margin 56.3S.4W.4%Non-GAAP Gross margin 57.0V.5X.2%GAAP Research and development$(575)$(573)$(577)Restructuring(1)(3)Share-based compensation(57)(58)(58)Other incidentals(2)(7)Non-GAAP Research and development$(515)$(505)$(519)GAAP Selling,general and administrative$(286)$(278)$(265)PPA effects(1)(1)Restructuring(2)(3)Share-based compensation(46)(45)(43)Other incidentals(14)(15)(2)Non-GAAP Selling,general and administrative$(223)$(215)$(219)GAAP Operating income(loss)$893$687$990 PPA effects(38)(32)(42)Restructuring(3)(67)Share-based compensation(118)(117)(115)Other incidentals(19)(32)(6)Non-GAAP Operating income(loss)$1,071$935$1,153 GAAP Operating margin 28.1#.50.5%Non-GAAP Operating margin 33.82.05.5%GAAP Income tax benefit(provision)$(148)$(116)$(173)Income tax effect 25 32 9 Non-GAAP Income tax benefit(provision)$(173)$(148)$(182)GAAP Net income(loss)attributable to stockholders$631$445$718 PPA Effects(38)(32)(42)Restructuring(3)(67)Share-based compensation(118)(117)(115)Other incidentals(19)(32)(6)Other adjustments:Adjustments to financial income(expense)(7)(1)(12)Income tax effect 25 32 9 Results relating to equity-accounted investees,excluding Foundry investees1 1 (28)(6)Non-GAAP Net income(loss)attributable to stockholders$790$690$890 Additional Information:1.Refer to Table 7 below for further information regarding the results relating to equity-accounted investees.($in millions except share data)Three months endedSeptember 28,2025June 29,2025September 29,20248GAAP net income(loss)per common share attributable to stockholders-diluted$2.48$1.75$2.79 PPA Effects(0.15)(0.12)(0.16)Restructuring(0.01)(0.27)Share-based compensation(0.47)(0.46)(0.45)Other incidentals(0.08)(0.13)(0.02)Other adjustments:Adjustments to financial income(expense)(0.02)(0.05)Income tax effect 0.10 0.12 0.04 Results relating to equity-accounted investees,excluding Foundry investees1 (0.11)(0.02)Non-GAAP net income(loss)per common share attributable to stockholders-diluted$3.11$2.72$3.45 Additional Information:1.Refer to Table 7 below for further information regarding the results relating to equity-accounted investees.($in millions except share data)Three months endedSeptember 28,2025June 29,2025September 29,2024NXP SemiconductorsTable 5:Financial Reconciliation of GAAP to non-GAAP Financial income(expense)(unaudited)($in millions)Three months endedSeptember 28,2025June 29,2025September 29,2024GAAP Financial income(expense)$(98)$(86)$(82)Foreign exchange loss(6)(7)(3)Other financial expense(1)6 (9)Non-GAAP Financial income(expense)$(91)$(85)$(70)NXP SemiconductorsTable 6:Financial Reconciliation of GAAP to non-GAAP Other income(expense)(unaudited)($in millions)Three months endedSeptember 28,2025June 29,2025September 29,2024GAAP Other income(expense)$(2)$1$(5)Other incidentals(1)(2)(4)Non-GAAP Other income(expense)$(1)$3$(1)NXP SemiconductorsTable 7:Financial Reconciliation of GAAP to non-GAAP Results relating to equity-accounted investees(unaudited)($in millions)Three months endedSeptember 28,2025June 29,2025September 29,2024GAAP Results relating to equity-accounted investees$(1)$(28)$(6)Results of equity-accounted investees,excluding Foundry investees1 1 (28)(6)Non-GAAP Results relating to equity-accounted investees$(2)$Additional Information:1.We adjust our results relating to equity-accounted investees for those results from investments over which NXP has significant influence,but not control,and whose business activities are not related to the core operating performance of NXP.Our equity-investments in foundry partners are part of our long-term core operating performance and accordingly those results comprise the Non-GAAP Results relating to equity-accounted investees.9NXP SemiconductorsTable 8:Adjusted EBITDA and Free Cash Flow(unaudited)($in millions)Three months endedSeptember 28,2025June 29,2025September 29,2024GAAP Net income(loss)$646$457$729 Reconciling items to EBITDA(Non-GAAP)Financial(income)expense 98 86 82(Benefit)provision for income taxes 148 116 173 Depreciation and impairment 132 143 149 Amortization 69 64 69 EBITDA(Non-GAAP)$1,093$866$1,202 Reconciling items to adjusted EBITDA(Non-GAAP)Results of equity-accounted investees,excluding Foundry investees1(1)28 6 Restructuring 3 67 Share-based compensation 118 117 115 Other incidental items2 19 25 6 Adjusted EBITDA(Non-GAAP)$1,232$1,103$1,329 Trailing twelve month adjusted EBITDA(Non-GAAP)$4,648$4,745$5,235 Additional Information:1.Refer to Table 7 above for further information regarding the results relating to equity-accounted investees.2.Excluding from total other incidental items,charges included in depreciation,amortization or impairment reconciling items:other incidental items 7 ($in millions)Three months endedSeptember 28,2025June 29,2025September 29,2024Net cash provided by(used for)operating activities$585$779$779 Net capital expenditures on property,plant and equipment(76)(83)(186)Non-GAAP free cash flow$509$696$593 Trailing twelve month non-GAAP free cash flow$1,924$2,008$2,759 Trailing twelve month non-GAAP free cash flow as percent of Revenue 16!
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1/26 Quarterly Statement Q3 2025 Current cloud backlog of 18.8 billion,up 23%and up 27%at constant currencies Cloud revenue up 22%and up 27%at constant currencies Cloud ERP Suite revenue up 26%and up 31%at constant currencies Total revenue up 7%and up 11%at constant currencies IFRS operating profit up 12%,non-IFRS operating profit up 14%and up 19%at constant currencies SAP updates its 2025 cloud revenue,operating profit and free cash flow outlook Q3 2025|in millions,unless otherwise stated Quarterly Statement Q3 2025 2/26 Quarterly Statement Q3 2025 Walldorf,Germany October 22,2025 SAP SE(NYSE:SAP)announced today its financial results for the third quarter ended September 30,2025.Christian Klein,CEO:SAP delivered a great Q3 with strong cloud revenue growth of 27%.We are gaining market share as our customers are adopting solutions across the entire Business Suite,including Business Data Cloud and AI at accelerated pace.For Q4 we are executing against a strong pipeline-which gives us confidence in our accelerating total revenue growth ambition for 2026.Dominik Asam,CFO:Q3s strong performance underscores the strength and agility of our model.Through disciplined execution and a sharp focus on profitability and cash flow,weve maintained forward momentum despite an uncertain macroeconomic backdrop.We enter the fourth quarter confident in our ability to deliver on our commitments,as reflected by an improved outlook for operating profit and free cash flow.Financial Performance Group results at a glance Third quarter 2025 IFRS Non-IFRS1 million,unless otherwise stated Q3 2025 Q3 2024 in%Q3 2025 Q3 2024 in%in%const.curr.SaaS/PaaS 5,212 4,234 23 5,212 4,234 23 28 Thereof Cloud ERP Suite2 4,586 3,636 26 4,586 3,636 26 31 Thereof Extension Suite3 626 598 5 626 598 5 9 IaaS4 78 117 34 78 117 34 31 Cloud revenue 5,290 4,351 22 5,290 4,351 22 27 Cloud and software revenue 8,016 7,429 8 8,016 7,429 8 12 Total revenue 9,076 8,470 7 9,076 8,470 7 11 Share of more predictable revenue(in%)87 84 2pp 87 84 2pp Cloud gross profit 3,948 3,184 24 3,972 3,209 24 28 Gross profit 6,671 6,212 7 6,696 6,236 7 11 Operating profit(loss)2,487 2,214 12 2,566 2,244 14 19 Profit(loss)after tax 2,051 1,441 42 1,852 1,437 29 Earnings per share-Basic(in)1.72 1.25 37 1.59 1.23 29 Net cash flows from operating activities 1,502 1,403 7 Free cash flow 1,266 1,200 5 1 For a breakdown of the individual adjustments see table“Non-IFRS Operating Expense Adjustments by Functional Areas”in this Quarterly Statement.2 Cloud ERP Suite references the portfolio of strategic Software-as-a-Service(SaaS)and Platform-as-a-Service(PaaS)solutions that are tightly integrated with our core ERP solutions and are included in key commercial packages,such as RISE with SAP.Further,Cloud ERP Suite also includes cloud-based capabilities enabling our customers ERP landscapes and their cloud transformation.The following offerings contribute to Cloud ERP Suite revenue:SAP Cloud ERP,SAP Business Technology Platform,financial-and spend management,supply chain management,core solutions for human capital management,commerce,business transformation management and AI.3 Extension Suite references SAPs remaining SaaS and PaaS solutions that supplement and extend the functional coverage of the Cloud ERP Suite.4 Infrastructure as a service(IaaS):The major portion of IaaS comes from SAP HANA Enterprise Cloud.3/26 Quarterly Statement Q3 2025 Group results at a glance Nine months ended September 2025 IFRS Non-IFRS1 million,unless otherwise stated Q1Q3 2025 Q1-Q3 2024 in%Q1Q3 2025 Q1-Q3 2024 in%in%const.curr.SaaS/PaaS 15,147 12,016 26 15,147 12,016 26 29 Thereof Cloud ERP Suite revenue2 13,258 10,217 30 13,258 10,217 30 32 Thereof Extension Suite revenue3 1,889 1,799 5 1,889 1,799 5 8 IaaS4 267 417 36 267 417 36 35 Cloud revenue 15,413 12,433 24 15,413 12,433 24 27 Cloud and software revenue 23,920 21,563 11 23,920 21,563 11 13 Total revenue 27,116 24,798 9 27,116 24,798 9 11 Share of more predictable revenue(in%)86 84 2pp 86 84 2pp Cloud gross profit 11,501 9,052 27 11,573 9,101 27 30 Gross profit 19,898 17,990 11 19,971 18,039 11 13 Operating profit(loss)7,276 2,648 100 7,590 5,717 33 35 Profit(loss)after tax 5,596 1,534 100 5,280 3,660 44 Earnings per share-Basic(in)4.70 1.31 100 4.53 3.13 44 Net cash flows from operating activities 7,859 5,791 36 Free cash flow 7,205 5,130 40 1 For a breakdown of the individual adjustments see table“Non-IFRS Operating Expense Adjustments by Functional Areas”in this Quarterly Statement.2 Cloud ERP Suite references the portfolio of strategic Software-as-a-Service(SaaS)and Platform-as-a-Service(PaaS)solutions that are tightly integrated with our core ERP solutions and are included in key commercial packages,such as RISE with SAP.Further,Cloud ERP Suite also includes cloud-based capabilities enabling our customers ERP landscapes and their cloud transformation.The following offerings contribute to Cloud ERP Suite revenue:SAP Cloud ERP,SAP Business Technology Platform,financial-and spend management,supply chain management,core solutions for human capital management,commerce,business transformation management and AI.3 Extension Suite references SAPs remaining SaaS and PaaS solutions that supplement and extend the functional coverage of the Cloud ERP Suite.4 Infrastructure as a service(IaaS):The major portion of IaaS comes from SAP HANA Enterprise Cloud Financial Highlights1 Third Quarter 2025 In the third quarter,current cloud backlog grew by 23%to 18.84 billion and was up 27%at constant currencies,retaining its second quarter growth momentum considering that the WalkMe acquisition is now in the base.Cloud revenue was up 22%to 5.29 billion and up 27%at constant currencies.Cloud ERP Suite revenue was up 26%to 4.59 billion and up 31%at constant currencies.Software licenses revenue decreased by 43%to 0.16 billion and was down 42%at constant currencies.Cloud and software revenue was up 8%to 8.02 billion and up 12%at constant currencies.Services revenue was up 2%to 1.06 billion and up 6%at constant currencies.Total revenue was up 7%to 9.08 billion and up 11%at constant currencies.The share of more predictable revenue increased by 2 percentage points to 87%.IFRS cloud gross profit was up 24%to 3.95 billion.Non-IFRS cloud gross profit was up 24%to 3.97 billion and was up 28%at constant currencies.IFRS cloud gross margin was up 1.5 percentage points to 74.6%,non-IFRS cloud gross margin up 1.3 percentage points to 75.1%and up 1.1 percentage points at constant currencies to 74.9%.IFRS operating profit increased 12%to 2.49 billion and IFRS operating margin was up 1.3 percentage points to 27.4%.Non-IFRS operating profit was up 14%to 2.57 billion and was up 19%at constant currencies.Non-IFRS operating margin increased by 1.8 percentage points to 28.3%at both nominal and constant currencies.IFRS and non-IFRS operating profit growth were negatively impacted by approximately 0.1 billion as a result of a change in case law that affected SAPs other tax litigation as well as approximately 0.1 billion related to a workforce transformation,with another 0.1 billion expected to be realized in the fourth quarter of 2025.IFRS earnings per share(basic)increased 37%to 1.72.Non-IFRS earnings per share(basic)increased 29%to 1.59.IFRS effective tax rate was 25.3%and non-IFRS effective tax rate was 27.9%.The IFRS effective tax rate is lower than the non-IFRS effective tax rate due to tax benefits from tax-exempt income.1 The Q3 2025 results were also impacted by other effects.For details,please refer to the disclosures on page 26 of this document.4/26 Quarterly Statement Q3 2025 Operating cash flow in the third quarter was up 7%to 1.50 billion and free cash flow increased by 5%to 1.27 billion.The increase was mainly attributable to higher profitability and to lower restructuring payments,which were partially offset by higher tax payments.For the first nine months,operating cash flow was up 36%to 7.86 billion and free cash flow increased by 40%to 7.21 billion.Share Repurchase Program In May 2023,SAP announced a share repurchase program with an aggregate volume of up to 5 billion,which was completed on August 13,2025.SAP had repurchased 26,010,591 shares at an average price of 188.24 resulting in a purchased volume of approximately 4.9 billion under the program.The fourth and final tranche of the program was completed with a purchased volume of approximately 1.5 billion.2024 Transformation Program:Focus on scalability of operations and key strategic growth areas In January 2024,SAP announced a company-wide restructuring program which concluded as planned in the first quarter 2025.Overall expenses associated with the program were approximately 3.2 billion.Restructuring payouts amounted to 2.5 billion for the full-year 2024 and 0.7 billion for the first nine months of 2025.Approximately 0.1 billion is expected to be paid out in the fourth quarter of 2025.Business Highlights In the third quarter,customers around the globe continued to choose the“RISE with SAP”journey to drive their end-to-end business transformations.These customers included:Alphabet,ANA HOLDINGS,BarmeniaGothaer,Computacenter,DXC Technology,Endress Hauser,Ericsson,Jack Wolfskin,Japan Aviation Electronics Industry,JK Tyre&Industries,JYSK,The Magnum Ice Cream Company,Maple Leaf Foods,NIPPON EXPRESS HOLDINGS,Olam Food Ingredients,Otto Aerospace,STIHL,Takeda Pharmaceuticals,Tapestry,Vale Base Metals,and Zalaris.BMW,City of Charlottesville,The Clorox Company,Country Fire Authority,La Trobe University,Nestl,NYK Line,and PwC went live on SAP S/4HANA Cloud in the third quarter.ABB,ArborGen,Kodiak AI,Konecta,Noventa,Perplexity,and VidaVeg chose“GROW with SAP”,a journey helping customers adopt cloud ERP with speed,predictability,and continuous innovation.Key customer wins across SAPs solution portfolio included:BREITLING,Canton of Bern,Derbyshire County Council,Grupo Boticrio,Panasonic,Schwarz Group,Sysmex Corporation,Tata Consultancy Services,and Volkswagen Mexico.Aeropuertos Argentina,The Australian Postal Corporation,HiPP,Landis Gyr,and Rieter went live on SAP solutions.In the third quarter,SAPs cloud revenue performance was particularly strong in APJ and EMEA and solid in the Americas region.Brazil,France,Germany,India,Italy and South Korea had outstanding performance,while Japan,Spain,and the U.S.were particularly strong.On August 1,SAP and SmartRecruiters announced that SAP entered into an agreement to acquire SmartRecruiters,a leading talent acquisition(TA)software provider.The acquisition was completed on September 11.On September 19,SAP and ADP,a global leader in HR and payroll solutions,announced that they are partnering to enable shared clients to run ADP Global Payroll in the cloud.On September 24,SAP and OpenAI announced the launch of OpenAI for Germany,a partnership to bring SAPs enterprise applications expertise and OpenAIs leading AI technology to Germanys public sector.In addition,SAP and Amazon Web Services(AWS),an A company,unveiled plans to make SAPs Sovereign Cloud capabilities available on the AWS European Sovereign Cloud,a new independent cloud for Europe backed by a planned 7.8 billion investment from Amazon.On September 25,SAP confirmed that the European Commission began formal proceedings on on-premise maintenance and support policies.SAP is working closely with the EU Commission to resolve the matter.Further,SAP does not currently anticipate the engagement will result in material impact on its financial performance.In September,SAP National Security Services(SAP NS2)was awarded a$1 billion firm-fixed-price Indefinite Delivery/Indefinite Quantity(IDIQ)contract from the United States Army for an end-user license agreement for the RISE with SAP portfolio.This significant deal is expected to run through September 2035,and enables the migration from on-premise systems to SAPs NS2s FedRAMP-authorized cloud platform,enhancing the speed and efficiency of enterprise software delivery to support mission-critical military operations.On October 6,SAP and Google Cloud announced that they are expanding their long-standing data and analytics partnership with the launch of SAP Business Data Cloud Connect for Google BigQuery-a new capability introduced that simplifies access to mission-critical SAP data products from SAP Business Data Cloud through bidirectional,zero-copy sharing.5/26 Quarterly Statement Q3 2025 Outlook 2025 Financial Outlook 2025 For 2025,SAP is updating its cloud revenue,operating profit and free cash flow outlook and now expects:To generate cloud revenue towards the lower end of the outlook range of 21.6 21.9 billion at constant currencies(2024:17.14 billion),up 26%to 28%at constant currencies.To generate non-IFRS operating profit towards the upper end of the outlook range of 10.3 10.6 billion at constant currencies(2024:8.15 billion),up 26%to 30%at constant currencies.8.0 8.2 billion free cash flow(2024:4.22 billion).The previous outlook was approximately 8.0 billion.SAP continues to expect:33.1 33.6 billion cloud and software revenue at constant currencies(2024:29.83 billion),up 11%to 13%at constant currencies.An effective tax rate(non-IFRS)of approximately 32%(2024:32.3%)2.Current cloud backlog growth at constant currencies to slightly decelerate in 2025.While SAPs 2025 financial outlook for the income statement parameters is at constant currencies(including an average exchange rate of 1.08 USD per EUR),actual currency reported figures are expected to be impacted by currency exchange rate fluctuations as the company progresses through the year,as reflected in the table below.Currency Impact Assuming September 30,2025 Rates Apply for the Remainder of 2025 In percentage points Q4 2025 FY 2025 Cloud revenue growth-7.0pp-4.0pp Cloud and software revenue growth-5.5pp-3.0pp Operating profit growth(non-IFRS)-6.5pp-3.5pp This includes an exchange rate of 1.17 USD per EUR.Non-Financial Outlook 2025 For 2025,SAP continues to expect:A Customer Net Promoter Score of 12 to 16.The Business Health Culture Index(BHCI)to be in a range of 80%to 82%.The Employee Engagement Index to be in a range of 74%to 78%.To steadily decrease carbon emissions across the relevant value chain.2 The effective tax rate(non-IFRS)is a non-IFRS financial measure and is presented for supplemental informational purposes only.We do not provide an outlook for the effective tax rate(IFRS)due to the uncertainty and potential variability of gains and losses associated with equity securities,which are reconciling items between the two effective tax rates(non-IFRS and IFRS).These items cannot be provided without unreasonable efforts but could have a significant impact on our future effective tax rate(IFRS).6/26 Quarterly Statement Q3 2025 Additional Information This quarterly statement and all information therein is preliminary and unaudited.Due to rounding,numbers may not add up precisely.SAP Performance Measures For more information about our key growth metrics and performance measures,their calculation,their usefulness,and their limitations,please refer to the following document on our Investor Relations website:https:/ SAP senior management will host a financial analyst conference call on Wednesday,October 22nd at 11:00 PM(CEST)/10:00 PM(BST)/5:00 PM(EDT)/2:00 PM(PDT).The conference will be webcast on the Companys website at https:/ and will be available for replay.Supplementary financial information pertaining to the third quarter results can be found at https:/ SAP Asa global leader in enterprise applications and business AI,SAP(NYSE:SAP)stands at thenexusof business and technology.For over 50 years,organizations have trusted SAPto bring out their best by uniting business-criticaloperations spanning finance,procurement,HR,supply chain,and customer experience.For more information,.For more information,financial community only:Alexandra Steiger 49(6227)7-767336 ,CET Follow SAP Investor Relations on LinkedIn at SAP Investor Relations.For more information,press only:Joellen Perry 1(650)445-6780 ,PT Daniel Reinhardt 49(6227)7-40201 ,CET For customers interested in learning more about SAP products:Global Customer Center: 49 180 534-34-24 United States Only: 1(800)872-1SAP( 1-800-872-1727)Note to editors:To preview and download broadcast-standard stock footage and press photos digitally,please visit this platform,you can find high resolution material for your media channels.This document contains forward-looking statements,which are predictions,projections,or other statements about future events.These statements are based on current expectations,forecasts,and assumptions that are subject to risks and uncertainties that could cause actual results and outcomes to materially differ.Additional information regarding these risks and uncertainties may be found in our filings with the Securities and Exchange Commission,including but not limited to the risk factors section of SAPs 2024 Annual Report on Form 20-F.2025 SAP SE.All rights reserved.SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE in Germany and other countries.Please see https:/ for additional trademark information and notices.7/26 Quarterly Statement Q3 2025 Contents Financial and Non-Financial Key Facts (IFRS and Non-IFRS)8 Primary Financial Statements of SAP Group(IFRS)10(A)Consolidated Income Statements.10(B)Consolidated Statements of Financial Position.12(C)Consolidated Statements of Cash Flows.13 Non-IFRS Numbers 14(D)Basis of Non-IFRS Presentation.14(E)Reconciliation from Non-IFRS Numbers to IFRS Numbers.14(F)Non-IFRS Adjustments Actuals and Estimates.19(G)Non-IFRS Operating Expense Adjustments by Functional Areas.19 Disaggregations 21(H)Segment Reporting.21(I)Revenue by Region(IFRS and Non-IFRS).23(J)Employees by Region and Functional Areas.25 Other Disclosures 26(K)Share-Based Payment.26(L)Business Combinations.26(M)Tax-related Litigation.26 8/26 Quarterly Statement Q3 2025 Financial and Non-Financial Key Facts (IFRS and Non-IFRS)millions,unless otherwise stated Q1 2024 Q2 2024 Q3 2024 Q4 2024 TY 2024 Q1 2025 Q2 2025 Q3 2025 Revenues Cloud 3,928 4,153 4,351 4,708 17,141 4,993 5,130 5,290%change yoy 24 25 25 27 25 27 24 22%change constant currency yoy 25 25 27 27 26 26 28 27 Cloud ERP Suite 3,167 3,414 3,636 3,949 14,166 4,251 4,422 4,586%change yoy 31 33 34 35 33 34 30 26%change constant currency yoy 32 33 36 35 34 33 34 31 Software licenses 203 229 285 683 1,399 183 194 161%change yoy 26 28 15 18 21 10 15 43%change constant currency yoy 25 27 14 19 21 10 13 42 Software support 2,829 2,792 2,793 2,876 11,290 2,761 2,642 2,565%change yoy 3 3 3 1 2 2 5 8%change constant currency yoy 1 3 2 1 1 3 3 5 Total revenue 8,041 8,288 8,470 9,377 34,176 9,013 9,027 9,076%change yoy 8 10 9 11 10 12 9 7%change constant currency yoy 9 10 10 10 10 11 12 11 Profits Operating profit(loss)(IFRS)787 1,222 2,214 2,016 4,665 2,333 2,456 2,487 Operating profit(loss)(non-IFRS)1,533 1,940 2,244 2,436 8,153 2,455 2,568 2,566%change-yoy 16 33 27 24 25 60 32 14%change constant currency-yoy 19 35 28 24 26 58 35 19 Profit(loss)after tax(IFRS)824 918 1,441 1,616 3,150 1,796 1,749 2,051 Profit(loss)after tax(non-IFRS)944 1,278 1,437 1,619 5,279 1,681 1,747 1,852%change-yoy 9 60 6 24 22 78 37 29 Margins Cloud gross margin(IFRS,in%)72.2 73.0 73.2 72.8 72.8 74.5 74.7 74.6 Cloud gross margin(non-IFRS,in%)72.5 73.3 73.7 73.5 73.3 75.0 75.2 75.1 Gross margin(IFRS,in%)71.7 72.6 73.3 74.0 73.0 73.3 73.3 73.5 Gross margin(non-IFRS,in%)71.8 72.7 73.6 74.3 73.2 73.6 73.6 73.8 Operating margin(IFRS,in%)9.8 14.7 26.1 21.5 13.6 25.9 27.2 27.4 Operating margin(non-IFRS,in%)19.1 23.4 26.5 26.0 23.9 27.2 28.5 28.3 Order Entry and current cloud backlog Current cloud backlog 14,179 14,808 15,377 18,078 18,078 18,202 18,052 18,839%change yoy 27 28 25 32 32 28 22 23%change constant currency yoy 28 28 29 29 29 29 28 27 Share of cloud orders greater than 5 million based on total cloud order entry volume(in%)52 52 64 68 63 54 53 63 Share of cloud orders smaller than 1 million based on total cloud order entry volume(in%)21 20 16 11 15 20 20 16 Liquidity and Cash Flow Net cash flows from operating activities 2,878 1,509 1,403 584 5,207 3,780 2,577 1,502 Free cash flow 2,642 1,288 1,200 908 4,222 3,583 2,357 1,266 Cash and cash equivalents 9,295 7,870 10,005 9,609 9,609 11,345 7,942 8,554 Group liquidity 13,411 11,449 11,856 11,080 11,080 12,760 9,788 9,688 Financial debt()7,770 7,776 8,996 9,385 9,385 8,121 7,492 7,235 Net liquidity( )/Net debt()5,641 3,674 2,860 1,695 1,695 4,639 2,297 2,453 9/26 Quarterly Statement Q3 2025 Non-Financials Number of employees(quarter end)1 108,133 105,315 107,583 109,121 109,121 108,187 108,929 110,730 Gross greenhouse gas emissions(scope 1,2,3/market-based)2 (in million tons CO2 equivalents)1.8 1.8 1.8 1.8 6.9 1.6 1.6 1.6 1 In full-time equivalents.2 Our gross greenhouse gas emissions(GHG)include the total lifecycle emissions resulting from the use of our on-premise software.The calculation of use of sold products emissions is based on the number of active maintenance contracts at quarter end.Therefore,the emissions for individual quarters will not add up to the total sum of GHG emissions at year end.10/26 Quarterly Statement Q3 2025 Primary Financial Statements of SAP Group(IFRS)(A)Consolidated Income Statements(A.1)Consolidated Income Statements Quarter millions,unless otherwise stated Q3 2025 Q3 2024 in%Cloud 5,290 4,351 22 Software licenses 161 285 43 Software support 2,565 2,793 8 Software licenses and support 2,726 3,078 11 Cloud and software 8,016 7,429 8 Services 1,060 1,041 2 Total revenue 9,076 8,470 7 Cost of cloud 1,342 1,167 15 Cost of software licenses and support 303 306 1 Cost of cloud and software 1,645 1,472 12 Cost of services 760 786 3 Total cost of revenue 2,405 2,258 7 Gross profit 6,671 6,212 7 Research and development 1,644 1,568 5 Sales and marketing 2,185 2,098 4 General and administration 364 361 1 Restructuring 18 52 66 Other operating income/expense,net 8 22 63 Total operating expenses 6,589 6,256 5 Operating profit(loss)2,487 2,214 12 Other non-operating income/expense,net 46 62 NA Finance income 524 240 100 Finance costs 312 241 30 Financial income,net 212 1 NA Profit(loss)before tax 2,745 2,151 28 Income tax expense 694 710 2 Profit(loss)after tax 2,051 1,441 42 Attributable to owners of parent 2,004 1,463 37 Attributable to non-controlling interests 47 23 NA Earnings per share,basic(in)1 1.72 1.25 37 Earnings per share,diluted(in)1 1.71 1.24 38 1 For the three months ended September 30,2025 and 2024,the weighted average number of shares was 1,164 million(diluted 1,172 million)and 1,166 million(diluted:1,178 million),respectively(treasury stock excluded).11/26 Quarterly Statement Q3 2025 (A.2)Consolidated Income Statements Year-to-Date millions,unless otherwise stated Q1Q3 2025 Q1Q3 2024 in%Cloud 15,413 12,433 24 Software licenses 538 716 25 Software support 7,969 8,414 5 Software licenses and support 8,507 9,130 7 Cloud and software 23,920 21,563 11 Services 3,196 3,236 1 Total revenue 27,116 24,798 9 Cost of cloud 3,912 3,381 16 Cost of software licenses and support 909 943 4 Cost of cloud and software 4,821 4,324 12 Cost of services 2,397 2,485 4 Total cost of revenue 7,218 6,808 6 Gross profit 19,898 17,990 11 Research and development 4,935 4,839 2 Sales and marketing 6,576 6,594 0 General and administration 1,083 1,057 2 Restructuring 0 2,821 100 Other operating income/expense,net 27 31 12 Total operating expenses 19,840 22,150 10 Operating profit(loss)7,276 2,648 100 Other non-operating income/expense,net 53 215 NA Finance income 1,246 850 47 Finance costs 859 726 18 Financial income,net 387 124 100 Profit(loss)before tax 7,715 2,557 100 Income tax expense 2,119 1,023 100 Profit(loss)after tax 5,596 1,534 100 Attributable to owners of parent 5,481 1,523 100 Attributable to non-controlling interests 115 11 100 Earnings per share,basic(in)1 4.70 1.31 100 Earnings per share,diluted(in)1 4.67 1.29 100 1 For the nine months ended September 30,2025 and 2024,the weighted average number of shares was 1,166 million(diluted:1,175 million)and 1,167 million(diluted:1,179 million),respectively(treasury stock excluded).12/26 Quarterly Statement Q3 2025 (B)Consolidated Statements of Financial Position as at 09/30/2025 and 12/31/2024 millions 2025 2024 Cash and cash equivalents 8,554 9,609 Other financial assets 1,380 1,629 Trade and other receivables 5,778 6,774 Other non-financial assets 2,777 2,682 Tax assets 418 707 Total current assets 18,907 21,401 Goodwill 29,028 31,264 Intangible assets 2,390 2,706 Property,plant,and equipment 4,396 4,493 Other financial assets 7,058 7,141 Trade and other receivables 126 209 Other non-financial assets 3,964 3,990 Tax assets 317 359 Deferred tax assets 2,210 2,719 Total non-current assets 49,490 52,881 Total assets 68,396 74,282 millions 2025 2024 Trade and other payables 2,074 1,988 Tax liabilities 934 585 Financial liabilities 3,032 4,277 Other non-financial liabilities 4,152 5,537 Provisions 170 716 Contract liabilities 6,749 5,978 Total current liabilities 17,111 19,082 Trade and other payables 3 10 Tax liabilities 554 512 Financial liabilities 6,089 7,169 Other non-financial liabilities 520 749 Provisions 547 494 Deferred tax liabilities 187 371 Contract liabilities 145 88 Total non-current liabilities 8,044 9,394 Total liabilities 25,155 28,476 Issued capital 1,229 1,229 Share premium 2,790 2,564 Retained earnings 45,671 42,907 Other components of equity 282 4,692 Treasury shares 7,163 5,954 Equity attributable to owners of parent 42,807 45,438 Non-controlling interests 434 368 Total equity 43,241 45,806 Total equity and liabilities 68,396 74,282 13/26 Quarterly Statement Q3 2025 (C)Consolidated Statements of Cash Flows millions Q1Q3 2025 1 Q1Q3 2024 Profit(loss)after tax 5,596 1,534 Adjustments to reconcile profit(loss)after tax to net cash flows from operating activities:Depreciation and amortization 986 943 Share-based payment expense 1,379 1,815 Income tax expense 2,119 1,023 Financial income,net 387 124 Increase/decrease in allowances on trade receivables 10 8 Other adjustments for non-cash items 3 212 Increase/decrease in trade and other receivables 679 943 Increase/decrease in other assets 365 56 Increase/decrease in trade payables,provisions,and other liabilities 1,676 746 Increase/decrease in contract liabilities 1,492 1,054 Share-based payments 691 1,064 Income taxes paid,net of refunds 1,280 1,341 Net cash flows from operating activities 7,859 5,791 Business combinations,net of cash and cash equivalents acquired 700 1,104 Purchase of intangible assets and property,plant,and equipment 559 528 Proceeds from sales of intangible assets and property,plant,and equipment 110 80 Purchase of equity or debt instruments of other entities 4,369 6,517 Proceeds from sales of equity or debt instruments of other entities 4,454 7,452 Interest received 317 420 Net cash flows from investing activities 747 197 Dividends paid 2,743 2,565 Dividends paid on non-controlling interests 3 0 Purchase of treasury shares 1,937 1,625 Proceeds from borrowings 2 1,251 Repayments of borrowings 2,106 14 Payments of lease liabilities 204 213 Interest paid 451 439 Net cash flows from financing activities 7,442 3,618 Effect of foreign currency rates on cash and cash equivalents 726 94 Net increase/decrease in cash and cash equivalents 1,055 1,881 Cash and cash equivalents at the beginning of the period 9,609 8,124 Cash and cash equivalents at the end of the period 8,554 10,005 1 As of January 2025,SAP no longer classifies interest paid and interest received as a part of cash flows from operating activities.14/26 Quarterly Statement Q3 2025 Non-IFRS Numbers (D)Basis of Non-IFRS Presentation SAP disclose certain financial measures such as expense(non-IFRS)and profit measures(non-IFRS)that are not prepared in accordance with IFRS and are therefore considered non-IFRS financial measures.For a more detailed description of all of SAPs non-IFRS measures and their limitations as well as SAPs constant currency and free cash flow figures,see Explanation of Non-IFRS Measures.(E)Reconciliation from Non-IFRS Numbers to IFRS Numbers (E.1)Reconciliation of Non-IFRS Revenue Quarter millions,unless otherwise stated Q3 2025 Q3 2024 in%IFRS Currency Impact Non-IFRS Constant Currency IFRS IFRS Non-IFRS Constant Currency Revenue Numbers Cloud 5,290 214 5,504 4,351 22 27 Software licenses 161 4 165 285 43 42 Software support 2,565 78 2,644 2,793 8 5 Software licenses and support 2,726 83 2,809 3,078 11 9 Cloud and software 8,016 297 8,313 7,429 8 12 Services 1,060 39 1,100 1,041 2 6 Total revenue 9,076 336 9,413 8,470 7 11 15/26 Quarterly Statement Q3 2025 (E.2)Reconciliation of Non-IFRS Operating Expenses Quarter millions,unless otherwise stated Q3 2025 Q3 2024 in%IFRS Adj.Non-IFRS Currency Impact Non-IFRS Constant Currency IFRS Adj.Non-IFRS IFRS Non-IFRS Non-IFRS Constant Currency Operating Expense Numbers Cost of cloud 1,342 24 1,318 1,167 25 1,142 15 15 Cost of software licenses and support 303 0 303 306 0 306 1 1 Cost of cloud and software 1,645 24 1,622 1,472 25 1,448 12 12 Cost of services 760 0 759 786 0 785 3 3 Total cost of revenue 2,405 24 2,381 2,258 25 2,233 7 7 Gross profit 6,671 24 6,696 236 6,932 6,212 25 6,236 7 7 11 Research and development 1,644 1 1,643 1,568 0 1,568 5 5 Sales and marketing 2,185 67 2,118 2,098 51 2,047 4 3 General and administration 364 4 360 361 6 356 1 1 Restructuring 18 18 0 52 52 0 66 NA Other operating income/expense,net 8 0 8 22 0 22 63 63 Total operating expenses 6,589 79 6,510 239 6,749 6,256 30 6,226 5 5 8 (E.3)Reconciliation of Non-IFRS Profit Figures,Income Tax,and Key Ratios Quarter millions,unless otherwise stated Q3 2025 Q3 2024 in%IFRS Adj.Non-IFRS Currency Impact Non-IFRS Constant Currency IFRS Adj.Non-IFRS IFRS Non-IFRS Non-IFRS Constant Currency Profit Numbers Operating profit(loss)2,487 79 2,566 98 2,664 2,214 30 2,244 12 14 19 Other non-operating income/expense,net 46 0 46 62 0 62 NA NA Finance income 524 348 175 240 87 153 100 15 Finance costs 312 93 219 241 63 178 30 23 Financial income,net 212 256 44 1 24 24 NA 79 Profit(loss)before tax 2,745 177 2,569 2,151 6 2,157 28 19 Income tax expense 694 22 717 710 10 720 2 0 Profit(loss)after tax 2,051 199 1,852 1,441 3 1,437 42 29 Attributable to owners of parent 2,004 158 1,846 1,463 29 1,434 37 29 Attributable to non-controlling interests 47 41 6 23 26 3 NA 91 Key Ratios Operating margin(in%)27.4 28.3 28.3 26.1 26.5 1.3pp 1.8pp 1.8pp Effective tax rate(in%)1 25.3 27.9 33.0 33.4 7.7pp 5.5pp Earnings per share,basic(in)1.72 1.59 1.25 1.23 37 29 1 The difference between our effective tax rate(IFRS)and effective tax rate(non-IFRS)in Q3 2025 mainly resulted from tax effects of equity securities.The difference between our effective tax rate(IFRS)and effective tax rate(non-IFRS)in Q3 2024 mainly resulted from tax effects of acquisition-related charges and restructuring expenses.16/26 Quarterly Statement Q3 2025 (E.4)Reconciliation of Non-IFRS Revenue Year-to-Date millions,unless otherwise stated Q1Q3 2025 Q1Q3 2024 in%IFRS Currency Impact Non-IFRS Constant Currency IFRS IFRS Non-IFRS Constant Currency Revenue Numbers Cloud 15,413 325 15,738 12,433 24 27 Software licenses 538 8 546 716 25 24 Software support 7,969 118 8,086 8,414 5 4 Software licenses and support 8,507 126 8,633 9,130 7 5 Cloud and software 23,920 451 24,371 21,563 11 13 Services 3,196 58 3,254 3,236 1 1 Total revenue 27,116 509 27,625 24,798 9 11 (E.5)Reconciliation of Non-IFRS Operating Expenses Year-to-Date millions,unless otherwise stated Q1Q3 2025 Q1Q3 2024 in%IFRS Adj.Non-IFRS Currency Impact Non-IFRS Constant Currency IFRS Adj.Non-IFRS IFRS Non-IFRS Non-IFRS Constant Currency Operating Expense Numbers Cost of cloud 3,912 71 3,841 3,381 49 3,332 16 15 Cost of software licenses and support 909 0 909 943 0 943 4 4 Cost of cloud and software 4,821 71 4,750 4,324 49 4,275 12 11 Cost of services 2,397 1 2,396 2,485 0 2,484 4 4 Total cost of revenue 7,218 73 7,146 6,808 50 6,759 6 6 Gross profit 19,898 73 19,971 360 20,331 17,990 50 18,039 11 11 13 Research and development 4,935 4 4,931 4,839 3 4,835 2 2 Sales and marketing 6,576 230 6,346 6,594 180 6,413 0 1 General and administration 1,083 6 1,077 1,057 14 1,043 2 3 Restructuring 0 0 0 2,821 2,821 0 100 NA Other operating income/expense,net 27 0 27 31 0 31 12 12 Total operating expenses 19,840 314 19,527 390 19,917 22,150 3,069 19,081 10 2 4 17/26 Quarterly Statement Q3 2025 (E.6)Reconciliation of Non-IFRS Profit Figures,Income Tax,and Key Ratios Year-to-Date millions,unless otherwise stated Q1Q3 2025 Q1Q3 2024 in%IFRS Adj.Non-IFRS Currency Impact Non-IFRS Constant Currency IFRS Adj.Non-IFRS IFRS Non-IFRS Non-IFRS Constant Currency Profit Numbers Operating profit(loss)7,276 314 7,590 118 7,708 2,648 3,069 5,717 100 33 35 Other non-operating income/expense,net 53 0 53 215 0 215 NA NA Finance income 1,246 840 406 850 369 482 47 16 Finance costs 859 285 575 726 222 504 18 14 Financial income,net 387 555 168 124 147 23 100 100 Profit(loss)before tax 7,715 241 7,474 2,557 2,922 5,479 100 36 Income tax expense 2,119 75 2,194 1,023 796 1,819 100 21 Profit(loss)after tax 5,596 316 5,280 1,534 2,126 3,660 100 44 Attributable to owners of parent 5,481 203 5,278 1,523 2,134 3,657 100 44 Attributable to non-controlling interests 115 114 2 11 8 3 100 42 Key Ratios Operating margin(in%)26.8 28.0 27.9 10.7 23.1 16.2pp 4.9pp 4.8pp Effective tax rate(in%)1 27.5 29.4 40.0 33.2 12.5pp 3.8pp Earnings per share,basic(in)4.70 4.53 1.31 3.13 100 44 1 The difference between our effective tax rate(IFRS)and effective tax rate(non-IFRS)in the first nine months of 2025 mainly resulted from tax effects of equity securities.The difference between our effective tax rate(IFRS)and effective tax rate(non-IFRS)in the first nine months of 2024 mainly resulted from tax effects of restructuring expenses and acquisition-related charges.18/26 Quarterly Statement Q3 2025 (E.7)Reconciliation of Free Cash Flow millions,unless otherwise stated Q1Q3 2025 Q1Q3 2024 Net cash flows from operating activities 7,859 5,791 Purchase of intangible assets and property,plant,and equipment 559 528 Proceeds from sales of intangible assets and property,plant,and equipment 110 80 Payments of lease liabilities 204 213 Free cash flow 7,205 5,130 Net cash flows from investing activities 747 197 Net cash flows from financing activities 7,442 3,618 19/26 Quarterly Statement Q3 2025 (F)Non-IFRS Adjustments Actuals and Estimates millions,unless otherwise stated Estimated Amounts for Full Year 2025 Q3 2025 Q1Q3 2025 Q3 2024 Q1Q3 2024 Profit(loss)before tax(IFRS)2,745 7,715 2,151 2,557 Adjustment for acquisition-related charges 380-460 96 313 90 256 Adjustment for restructuring 0-25 18 0 52 2,821 Adjustment for regulatory compliance matter expenses 0 0 0 8 8 Adjustment for gains and losses from equity securities,net N/A1 256 555 24 147 Profit(loss)before tax(non-IFRS)2,569 7,474 2,157 5,479 1 Due to the uncertainty and potential variability of gains and losses from equity securities,we cannot provide an estimate for the full year without unreasonable efforts.This item could however have a material impact on our non-IFRS measures below operating profit.(G)Non-IFRS Operating Expense Adjustments by Functional Areas millions Q3 2025 Q3 2024 IFRS Acquisition-Related Restruc-turing RCM1 Non-IFRS IFRS Acquisition-Related Restruc-turing RCM1 Non-IFRS Cost of cloud 1,342 24 0 0 1,318 1,167 25 0 0 1,142 Cost of software licenses and support 303 0 0 0 303 306 0 0 0 306 Cost of services 760 0 0 0 759 786 0 0 0 785 Research and development 1,644 1 0 0 1,643 1,568 0 0 0 1,568 Sales and marketing 2,185 67 0 0 2,118 2,098 59 0 8 2,047 General and administration 364 4 0 0 360 361 6 0 0 356 Restructuring 18 0 18 0 0 52 0 52 0 0 Other operating income/expense,net 8 0 0 0 8 22 0 0 0 22 Total operating expenses 6,589 96 18 0 6,510 6,256 90 52 8 6,226 1 Regulatory Compliance Matters millions Q1Q3 2025 Q1Q3 2024 IFRS Acquisition-Related Restruc-turing RCM1 Non-IFRS IFRS Acquisition-Related Restruc-turing RCM1 Non-IFRS Cost of cloud 3,912 71 0 0 3,841 3,381 49 0 0 3,332 Cost of software licenses and support 909 0 0 0 909 943 0 0 0 943 Cost of services 2,397 1 0 0 2,396 2,485 0 0 0 2,484 Research and development 4,935 4 0 0 4,931 4,839 3 0 0 4,835 Sales and marketing 6,576 230 0 0 6,346 6,594 189 0 8 6,413 General and administration 1,083 6 0 0 1,077 1,057 14 0 0 1,043 Restructuring 0 0 0 0 0 2,821 0 2,821 0 0 Other operating income/expense,net 27 0 0 0 27 31 0 0 0 31 Total operating expenses 19,840 313 0 0 19,527 22,150 256 2,821 8 19,081 1 Regulatory Compliance Matters 20/26 Quarterly Statement Q3 2025 If not presented in a separate line item in our income statement,the restructuring expenses would break down as follows:millions Q3 2025 Q1Q3 2025 Q3 2024 Q1Q3 2024 Cost of cloud 1 1 1 94 Cost of software licenses and support 1 4 0 80 Cost of services 2 10 8 525 Research and development 4 20 12 1,088 Sales and marketing 12 18 12 894 General and administration 0 18 18 141 Restructuring expenses 18 0 52 2,821 21/26 Quarterly Statement Q3 2025 Disaggregations(H)Segment Reporting(H.1)Segment Policies and Changes SAP is organized in two operating segments,the Applications,Technology&Support(ATS)segment and the Core Services segment:The ATS segment represents SAPs cohesive product portfolio which is holistically steered and commercialized.It primarily generates revenue from cloud subscriptions and from the sale of software licenses and support offerings,and it incurs cost for support,operating our solutions,and the provision of infrastructure.The revenue and cost for services arise for SAPs training business which is highly integrated with SAPs product portfolio.The Core Services segment supports SAPs product portfolio by enabling customers to transform their business and accelerate the adoption of innovations.Revenues are mainly generated from professional consulting services and premium support services.Cost is incurred primarily for the delivery of those services.The Core Services segment does not reflect the full services business.The segment information for comparative prior periods was restated to conform with the new segment composition.(H.2)Segment Reporting Quarter Applications,Technology&Support(ATS)millions(non-IFRS)Q3 2025 Q3 2024 Actual Currency Constant Currency Actual Currency Cloud 5,290 5,504 4,351 Software licenses 161 165 285 Software support 2,565 2,644 2,793 Software licenses and support 2,726 2,809 3,078 Cloud and software 8,016 8,313 7,429 Services 66 67 96 Total segment revenue 8,082 8,380 7,524 Cost of cloud 1,281 1,341 1,104 Cost of software licenses and support 271 280 279 Cost of cloud and software 1,553 1,622 1,383 Cost of services 84 87 89 Total cost of revenue 1,636 1,709 1,472 Segment gross profit 6,446 6,671 6,053 Other segment expenses 3,090 3,203 3,039 Segment profit(loss)3,356 3,467 3,014 Core Services millions(non-IFRS)Q3 2025 Q3 2024 Actual Currency Constant Currency Actual Currency Services 994 1,032 945 Total segment revenue 994 1,032 945 Cost of cloud 27 28 24 Cost of software licenses and support 9 9 10 Cost of cloud and software 36 37 34 Cost of services 656 678 668 Total cost of revenue 692 715 702 Segment gross profit 302 317 242 Other segment expenses 144 149 140 Segment profit(loss)158 168 102 22/26 Quarterly Statement Q3 2025 (H.3)Segment Reporting Year-to-Date Applications,Technology&Support millions(non-IFRS)Q1Q3 2025 Q1Q3 2024 Actual Currency Constant Currency Actual Currency Cloud 15,413 15,738 12,433 Software licenses 538 546 716 Software support 7,969 8,086 8,414 Software licenses and support 8,507 8,633 9,130 Cloud and software 23,920 24,370 21,563 Services 216 220 305 Total segment revenue 24,136 24,591 21,867 Cost of cloud 3,712 3,811 3,223 Cost of software licenses and support 824 841 863 Cost of cloud and software 4,537 4,652 4,085 Cost of services 266 270 289 Total cost of revenue 4,802 4,923 4,374 Segment gross profit 19,334 19,668 17,493 Other segment expenses 9,522 9,718 9,517 Segment profit(loss)9,811 9,950 7,976 Core Services millions(non-IFRS)Q1Q3 2025 Q1Q3 2024 Actual Currency Constant Currency Actual Currency Services 2,979 3,032 2,930 Total segment revenue 2,979 3,033 2,930 Cost of cloud 87 89 76 Cost of software licenses and support 29 30 37 Cost of cloud and software 116 119 113 Cost of services 2,069 2,107 2,107 Total cost of revenue 2,185 2,226 2,220 Segment gross profit 794 807 710 Other segment expenses 430 439 460 Segment profit(loss)364 367 250 23/26 Quarterly Statement Q3 2025 (I)Revenue by Region(IFRS and Non-IFRS)(I.1)Revenue by Region(IFRS and Non-IFRS)Quarter millions Q3 2025 Q3 2024 intual currency Currency Impact Constant Currency Actual currency Actual currency Constant Currency Cloud Revenue by Region EMEA 2,271 24 2,295 1,742 30 32 Americas 2,247 140 2,387 1,989 13 20 APJ 772 51 822 620 24 33 Cloud revenue 5,290 214 5,504 4,351 22 27 Cloud and Software Revenue by Region EMEA 3,750 27 3,778 3,370 11 12 Americas 3,102 195 3,297 2,982 4 11 APJ 1,164 75 1,238 1,077 8 15 Cloud and software revenue 8,016 297 8,313 7,429 8 12 Total Revenue by Region Germany 1,455 1 1,456 1,282 13 14 Rest of EMEA 2,790 30 2,820 2,574 8 10 Total EMEA 4,245 31 4,276 3,856 10 11 United States 2,822 170 2,992 2,739 3 9 Rest of Americas 724 53 777 679 7 14 Total Americas 3,546 223 3,769 3,418 4 10 Japan 387 20 408 357 9 14 Rest of APJ 898 62 961 839 7 15 Total APJ 1,285 83 1,368 1,195 8 14 Total revenue 9,076 336 9,413 8,470 7 11 24/26 Quarterly Statement Q3 2025 (I.2)Revenue by Region(IFRS and Non-IFRS)Year-to-Date millions Q1Q3 2025 Q1Q3 2024 intual Currency Currency Impact Constant Currency Actual Currency Actual Currency Constant Currency Cloud Revenue by Region EMEA 6,466 21 6,487 4,972 30 30 Americas 6,693 230 6,922 5,751 16 20 APJ 2,255 74 2,329 1,710 32 36 Cloud revenue 15,413 325 15,738 12,433 24 27 Cloud and Software Revenue by Region EMEA 10,958 23 10,981 9,695 13 13 Americas 9,417 319 9,736 8,757 8 11 APJ 3,545 109 3,654 3,111 14 17 Cloud and software revenue 23,920 451 24,371 21,563 11 13 Total Revenue by Region Germany 4,247 1 4,245 3,802 12 12 Rest of EMEA 8,190 26 8,216 7,377 11 11 Total EMEA 12,436 25 12,461 11,180 11 11 United States 8,603 229 8,832 8,108 6 9 Rest of Americas 2,162 134 2,296 2,038 6 13 Total Americas 10,764 364 11,128 10,146 6 10 Japan 1,177 10 1,187 1,018 16 17 Rest of APJ 2,739 110 2,849 2,454 12 16 Total APJ 3,916 120 4,036 3,472 13 16 Total revenue 27,116 509 27,625 24,798 9 11 25/26 Quarterly Statement Q3 2025 (J)Employees by Region and Functional Areas Full-time equivalents 09/30/2025 09/30/2024 EMEA Americas APJ Total EMEA Americas APJ Total Cloud and software 4,600 4,514 5,348 14,462 4,510 4,256 4,592 13,357 Services 8,289 4,690 5,920 18,899 8,394 4,686 5,503 18,582 Research and development 18,375 5,895 13,639 37,909 18,422 5,623 12,729 36,774 Sales and marketing 11,951 9,923 5,039 26,914 12,078 9,742 5,149 26,969 General and administration 3,981 1,915 1,362 7,258 3,781 1,796 1,301 6,878 Infrastructure 3,143 1,152 993 5,289 2,964 1,156 903 5,023 SAP Group(09/30)50,339 28,089 32,302 110,730 50,149 27,257 30,177 107,583 Thereof acquisitions1 288 74 13 375 413 414 86 912 SAP Group(nine months end average)49,328 27,794 31,581 108,702 49,475 27,389 29,819 106,683 1 Acquisitions closed between January 1 and September 30 of the respective year.26/26 Quarterly Statement Q3 2025 Other Disclosures(K)Share-Based Payment SAPs share-based payment expenses included in SAPs non-IFRS operating expenses break down as follows:millions Q3 2025 Q1Q3 2025 Q3 2024 Q1Q3 2024 Cost of cloud 27 86 31 104 Cost of software licenses and support 8 24 9 31 Cost of services 64 197 78 269 Research and development 156 481 169 572 Sales and marketing 147 478 199 675 General and administration 28 112 49 164 Share-based payment expenses 429 1,379 535 1,815 The decrease in share-based payment expenses is mainly due to a reduction in the SAP share price as compared to an increase in 2024(around-8 in the first nine months of 2025;around 65 in the first nine months of 2024)as well as lower grant volumes as compared to prior years.Income for the hedging of cash-settled share-based compensation programs amounted to 14 million in the first nine months of 2025(Q1-Q3/2024:0 million).For more information about share-based payment expenses,see the Notes to the Consolidated Half-Year Financial Statements,Note(B.3).Additionally,in the third quarter of 2025 SAP reduced its expenses of 7 million(Q3/2024:17 million)relating to accelerated share-based payment expenses triggered by the transformation program.In the first nine months of 2025 expenses amounting to 12 million(Q1-Q3/2024:172 million)have been recognized.These share-based payment expenses are classified as restructuring expenses in SAPs consolidated income statements.Associated share-based payments in the first nine months of 2025 amounted to 162 million(Q1-Q3/2024:143 million)and are classified as a decrease in provisions and other liabilities in SAPs consolidated statements of cash flows.(L)Business Combinations On August 1,2025,SAP announced its intention to acquire 100%of SmartRecruiters,Inc.(“SmartRecruiters”),a leading talent acquisition software provider.The transaction closed on September 11,2025,following satisfaction of regulatory and other approvals.The acquisition will strengthen the SAP SuccessFactors Human Capital Management(HCM)suite.SmartRecruiters products improve employee hiring decision-making and reduce time to hire.Embedded analytics and AI-powered recommendations from SAP and SmartRecruiters will provide valuable insights into talent pools,avoid 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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,DC 20549 FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30,2025ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number:001-39345 QUANTUMSCAPE CORPORATION(Exact name of registrant as specified in its charter)Delaware85-0796578(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)1730 Technology DriveSan Jose,CA95110(Address of principal executive offices)(Zip Code)Registrants telephone number,including area code:(408)452-2000 Securities registered pursuant to Section 12(b)of the Act:Title of each class Trading Symbol(s)Name of each exchange on which registeredClass A Common Stock,par value$0.0001 per share QS The New York Stock ExchangeIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 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 filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new 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 The number of shares of the registrants Class A Common Stock,par value$0.0001 per share outstanding was 562,404,592,and the number of shares of the registrants Class B Common Stock,par value$0.0001 per share outstanding was 38,905,601,as of October 17,2025.iTable of Contents PagePART I.FINANCIAL INFORMATION Item 1.Financial Statements(Unaudited)2 Condensed Consolidated Balance Sheets(Unaudited)2 Condensed Consolidated Statements of Operations and Comprehensive Income(Loss)(Unaudited)3 Condensed Consolidated Statements of Stockholders Equity(Unaudited)4 Condensed Consolidated Statements of Cash Flows(Unaudited)5 Notes to Condensed Consolidated Financial Statements(Unaudited)6Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations22Item 3.Quantitative and Qualitative Disclosures About Market Risk31Item 4.Controls and Procedures31PART II.OTHER INFORMATION Item 1.Legal Proceedings32Item 1A.Risk Factors32Item 2.Unregistered Sales of Equity Securities and Use of Proceeds59Item 3.Defaults Upon Senior Securities59Item 4.Mine Safety Disclosures59Item 5.Other Information60Item 6.Exhibits61Signatures62 1CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Unless the context otherwise requires,all references to“QuantumScape,”“we,”“us,”“our,”or the“Company”in this Quarterly Report on Form 10-Q(this“Report”)refer to QuantumScape Corporation and its subsidiaries.The Company makes forward-looking statements in this Report and in documents incorporated herein by reference.All statements,other than statements of present or historical fact included in or incorporated by reference in this Report,regarding the Companys future financial performance,as well as the Companys strategy,future operations,financial position,estimated revenues and losses,projected costs,prospects,plans and objectives of management are forward-looking statements.When used in this Report,the words“anticipate,”“believe,”“continue,”“could,”“estimate,”“expect,”“intends,”“may,”“might,”“plan,”“possible,”“potential,”“predict,”“project,”“prospective,”“should,”“will,”“would,”the negative of such terms,and other similar expressions are intended to identify forward-looking statements,although not all forward-looking statements contain such identifying words.These forward-looking statements are based on managements current expectations,assumptions,hopes,beliefs,intentions and strategies regarding future events and are based on currently available information as to the outcome and timing of future events.The Company cautions you that these forward-looking statements are subject to risks and uncertainties,including those described in Part II,Item 1A,“Risk Factors”in this Report,most of which are difficult to predict and many of which are beyond the control of the Company and incident to its business.It is not possible for our management to predict all risks,nor can we assess the impact of all factors on our business or the extent to which any factor,or combination of factors,may cause actual results to differ materially from those contained in any forward-looking statements we may make.In addition,forward-looking statements in this Report and in any document incorporated herein by reference should not be relied upon as representing the Companys views as of any subsequent date,and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made,whether as a result of new information,future events or otherwise,except as may be required under applicable laws.As a result of a number of known and unknown risks and uncertainties,the Companys actual results or performance may be materially different from those expressed or implied by these forward-looking statements.Some factors that could cause actual results to differ include those discussed in Part II,Item 1A,“Risk Factors”in this Report and in our other filings with the Securities and Exchange Commission(“SEC”).2PART IFINANCIAL INFORMATIONItem 1.Financial Statements.QuantumScape CorporationCondensed Consolidated Balance Sheets(Unaudited)(In Thousands,Except per Share Amounts)September 30,December 31,2025 2024 Assets Current assets Cash and cash equivalents$225,826$140,866 Marketable securities 777,907 769,901 Prepaid expenses and other current assets 11,798 11,519 Total current assets 1,015,531 922,286 Property and equipment,net 250,323 299,992 Right-of-use assets-operating lease 35,134 51,472 Right-of-use assets-finance lease 20,112 22,267 Other assets 22,132 26,378 Total assets$1,343,232$1,322,395 Liabilities and stockholders equity Current liabilities Accounts payable$6,446$6,466 Accrued liabilities 13,994 17,447 Accrued compensation and benefits 19,551 32,212 Operating lease liability,short-term 4,558 5,526 Finance lease liability,short-term 3,493 3,233 Total current liabilities 48,042 64,884 Operating lease liability,long-term 35,728 52,913 Finance lease liability,long-term 29,216 31,865 Other liabilities 14,498 14,886 Total liabilities 127,484 164,548 Commitment and contingencies(see Note 7)Stockholders equity Preferred stock-$0.0001 par value;100,000 shares authorized,none issued and outstanding as of September 30,2025 and December 31,2024 Common stock-$0.0001 par value;1,250,000 shares authorized(1,000,000 Class A and 250,000 Class B);558,608 Class A and 42,540 Class B shares issued and outstanding as of September 30,2025,487,883 Class A and 54,666 Class B shares issued and outstanding as of December 31,2024 60 54 Additional paid-in-capital 4,908,604 4,515,879 Accumulated other comprehensive income 543 428 Accumulated deficit (3,693,459)(3,358,514)Total stockholders equity 1,215,748 1,157,847 Total liabilities and stockholders equity$1,343,232$1,322,395 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.3QuantumScape CorporationCondensed Consolidated Statements of Operations and Comprehensive Income(Loss)(Unaudited)(In Thousands,Except per Share Amounts)Three Months Ended September 30,Nine Months Ended September 30,2025 2024 2025 2024 Operating expenses:Research and development$92,074$96,994$288,840$278,587 General and administrative 22,919 33,164 73,314 117,929 Total operating expenses 114,993 130,158 362,154 396,516 Loss from operations(114,993)(130,158)(362,154)(396,516)Other income(expense):Interest expense(503)(550)(1,547)(1,684)Interest income 9,997 11,347 28,706 35,428 Other income(expense)(325)(338)50 (508)Total other income 9,169 10,459 27,209 33,236 Net loss(105,824)(119,699)(334,945)(363,280)Less:Net loss attributable to non-controlling interest,net of tax of$0 (127)(85)Net loss attributable to common stockholders$(105,824)$(119,572)$(334,945)$(363,195)Net loss$(105,824)$(119,699)$(334,945)$(363,280)Other comprehensive income(loss):Unrealized gain on marketable securities 656 1,458 115 3,816 Total comprehensive loss(105,168)(118,241)(334,830)(359,464)Less:Comprehensive loss attributable to non-controlling interest (127)(85)Comprehensive loss attributable to common stockholders$(105,168)$(118,114)$(334,830)$(359,379)Basic and Diluted net loss per share$(0.18)$(0.23)$(0.59)$(0.72)Basic and Diluted weighted-average common shares outstanding 588,728 508,957 566,293 502,136 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.4QuantumScape CorporationCondensed Consolidated Statements of Stockholders Equity(Unaudited)(In Thousands)Common Stock AdditionalPaid-In Accumulated AccumulatedOtherComprehensive TotalStockholders Three Months Ended September 30,2025 Shares Amount Capital Deficit Income Equity Balance as of June 30,2025 565,316$56$4,612,488$(3,587,635)$(113)$1,024,796 Exercise of stock options and employee stock purchase plan 3,218 1 7,985 7,986 Shares issued upon vesting of restricted stock units 3,326 25 25 Shares issued under At-the-Market Offering,net of issuance costs 29,288 3 263,266 263,269 Stock-based compensation 24,840 24,840 Net loss (105,824)(105,824)Unrealized gain on marketable securities 656 656 Balance as of September 30,2025 601,148$60$4,908,604$(3,693,459)$543$1,215,748 Common Stock AdditionalPaid-In Accumulated AccumulatedOtherComprehensive TotalStockholders Nine Months Ended September 30,2025 Shares Amount Capital Deficit Income Equity Balance as of December 31,2024 542,549$54$4,515,879$(3,358,514)$428$1,157,847 Exercise of stock options and employee stock purchase plan 13,178 2 23,643 23,645 Shares issued upon vesting of restricted stock units 15,927 1 20,264 20,265 Shares issued under At-the-Market Offering,net of issuance costs 29,494 3 264,173 264,176 Stock-based compensation 84,645 84,645 Net loss (334,945)(334,945)Unrealized gain on marketable securities 115 115 Balance as of September 30,2025 601,148$60$4,908,604$(3,693,459)$543$1,215,748 Redeemable Non-Controlling Common Stock AdditionalPaid-In Accumulated AccumulatedOtherComprehensive TotalStockholders Three Months Ended September 30,2024Interest Shares Amount Capital Deficit Loss Equity Balance as of June 30,2024$1,812 503,640$50$4,305,018$(3,124,280)$(519)$1,180,269 Exercise of stock options 4,271 7,398 7,398 Shares issued upon vesting of restricted stock units 4,299 1 2,768 2,769 Stock-based compensation 38,303 38,303 Net loss(127)(119,572)(119,572)Unrealized gain on marketable securities 1,458 1,458 Dissolution of joint venture(1,685)Balance as of September 30,2024$512,210$51$4,353,487$(3,243,852)$939$1,110,625 Redeemable Non-Controlling Common Stock AdditionalPaid-In Accumulated AccumulatedOtherComprehensive TotalStockholders Nine Months Ended September 30,2024Interest Shares Amount Capital Deficit Loss Equity Balance as of December 31,2023$1,770 493,031$49$4,221,892$(2,880,657)$(2,877)$1,338,407 Exercise of stock options and employee stock purchase plan 7,208 13,968 13,968 Shares issued upon vesting of restricted stock units 11,971 2 23,083 23,085 Stock-based compensation 94,544 94,544 Net loss(85)(363,195)(363,195)Unrealized gain on marketable securities 3,816 3,816 Dissolution of joint venture(1,685)Balance as of September 30,2024$512,210$51$4,353,487$(3,243,852)$939$1,110,625 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.5QuantumScape CorporationCondensed Consolidated Statements of Cash Flows(Unaudited)(In Thousands)Nine Months Ended September 30,2025 2024 Operating activities Net loss$(334,945)$(363,280)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization 51,974 39,795 Amortization of right-of-use assets and non-cash lease expense 5,859 5,980 Amortization of premiums and accretion of discounts on marketable securities (13,696)(23,124)Stock-based compensation expense 96,117 110,471 Write-off of fixed assets 24,410 1,533 Other (2,936)186 Changes in operating assets and liabilities:Prepaid expenses and other current assets and other assets 1,120 (777)Accounts payable,accrued liabilities and accrued compensation and benefits (9,045)15,984 Operating lease liability (3,692)(3,717)Other liabilities (1,489)1,051 Net cash used in operating activities (186,323)(215,898)Investing activities Purchases of property and equipment (24,001)(51,085)Proceeds from sale of property and equipment 1,106 116 Proceeds from maturities of marketable securities 830,664 1,146,587 Proceeds from sales of marketable securities 1,245 Purchases of marketable securities (824,858)(858,921)Net cash(used in)provided by investing activities (17,089)237,942 Financing activities Proceeds from exercise of stock options and employee stock purchase plan 23,645 13,968 Proceeds from issuance of common stock 268,654 Common stock issuance costs paid (4,387)Principal payment for finance lease (2,388)(2,146)Dissolution of joint venture (1,685)Net cash provided by financing activities 285,524 10,137 Net increase in cash,cash equivalents and restricted cash 82,112 32,181 Cash,cash equivalents and restricted cash at beginning of period 158,914 160,572 Cash,cash equivalents and restricted cash at end of period$241,026$192,753 Supplemental disclosure:Cash paid for interest$1,547$1,684 Purchases of property and equipment,not yet paid$4,862$4,702 Common stock issuance costs,not yet paid$101$The following table presents the Companys cash,cash equivalents and restricted cash by category in the Companys Condensed Consolidated Balance Sheets(Unaudited)(amounts in thousands):As of September 30,2025 2024 Cash and cash equivalents$225,826$174,705 Other assets 15,200 18,048 Total cash,cash equivalents and restricted cash$241,026$192,753 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.6QuantumScape CorporationNotes to Condensed Consolidated Financial Statements(Unaudited)September 30,2025Note 1.Nature of Business Organization The original QuantumScape Corporation,now named QuantumScape Battery,Inc.(“Legacy QuantumScape”),a wholly owned subsidiary of the Company(as defined below),was founded in 2010 with the mission to revolutionize energy storage to enable a sustainable future.In 2020,QuantumScape became a publicly traded company(NYSE:QS)through a business combination with a special purpose acquisition company named Kensington Capital Acquisition Corp.(“Kensington”)which changed its name to QuantumScape Corporation upon closing in November 2020(the“Business Combination”).As a result of the Business Combination,QuantumScape Battery Inc.survived and became a wholly owned subsidiary of QuantumScape Corporation(the“Company”).The Company is focused on the development and commercialization of its solid-state lithium-metal batteries.Planned principal operations have not yet commenced.As of September 30,2025,the Company had not derived revenue from its principal business activities.Note 2.Summary of Significant Accounting Policies Basis of Presentation The Companys unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America(“U.S.GAAP”)as determined by the Financial Accounting Standards Board(the“FASB”)Accounting Standards Codification(“ASC”)and pursuant to the regulations of the U.S.Securities and Exchange Commission(the“SEC”).Certain prior period balances have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes.Since 2012,the Company has had a relationship with the Volkswagen Group,including its affiliates Volkswagen Group of America,Inc.(“VWGoA”)and Volkswagen Group of America Investments,LLC(“VGA”),collectively referred to as“Volkswagen.”Volkswagen as a related party stockholder is an approximately 25.2%and 24.0%voting interest holder of the Company as of September 30,2025 and December 31,2024,respectively.All intercompany accounts and transactions are eliminated in consolidation.Use of Estimates The preparation of financial statements in accordance with U.S.GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements as well as reported amounts of expenses during the reporting periods.Estimates made by the Company include,but are not limited to,those related to the determination of business milestone achievement dates related to stock awards with performance conditions,among others.The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances,the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources.Actual results could differ materially from those estimates.Unaudited Interim Condensed Consolidated Financial StatementsThe accompanying interim Condensed Consolidated Balance Sheets as of September 30,2025,the interim Condensed Consolidated Statements of Operations and Comprehensive Income(Loss),the interim Condensed Consolidated Statements of Stockholders Equity for the three and nine months ended September 30,2025 and 2024,and the interim Condensed Consolidated Statements of Cash Flows for the nine months ended September 30,2025 and 2024,are unaudited.The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and,in managements opinion,include adjustments consisting of only normal recurring adjustments necessary for the fair statement of the Companys financial position as of September 30,2025 and its results of operations for the three and nine months ended September 30,2025 and 2024,and cash flows for the nine months ended September 30,2025 and 2024.The financial data and the other financial information disclosed in the notes to these condensed consolidated financial statements related to the three-month period is also unaudited.The results of operations for the three and nine months ended September 30,2025 and 2024 are not necessarily indicative of the results to be expected for the full fiscal year or any other period.7These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Companys audited annual consolidated financial statements for the year ended December 31,2024,included in the Companys Annual Report on Form 10-K for the year ended December 31,2024,filed on February 26,2025(the“Annual Report”).Concentrations of Credit Risk Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents and marketable securities.As of September 30,2025 and December 31,2024,approximately$86.8 million and$78.7 million of our total cash and cash equivalents and marketable securities,are held in U.S.money market funds,and$659.9 million and$695.5 million are invested in U.S.government and agency securities,respectively.The Company seeks to mitigate its credit risk with respect to cash and cash equivalents and marketable securities by making deposits with what we believe to be large,reputable financial institutions and investing in high credit rated shorter-term instruments.Cash and Cash Equivalents and Restricted Cash Management considers all highly liquid investments with original maturities of three months or less to be cash equivalents.Restricted cash is maintained under an agreement that legally restricts the use of such funds and is reported within other assets as the date of availability or disbursement for all restricted cash is more than one year from September 30,2025.Restricted cash is comprised of$15.2 million as of September 30,2025 and$18.0 million as of December 31,2024,all of which is pledged as a form of security for the Companys lease agreements for its facilities.The restricted cash is maintained in certificates of deposits as of September 30,2025.Marketable Securities The Companys investment policy is consistent with the definition of available-for-sale securities.The Company does not buy and hold securities principally for the purpose of selling them in the near future.The Companys policy is focused on the preservation of capital,liquidity,and return.From time to time,the Company may sell certain securities,but the objectives are generally not to generate profits on short-term differences in price.These securities are carried at estimated fair value with unrealized gains and losses included in other comprehensive gain/loss in stockholders equity until realized.Gains and losses on marketable security transactions are reported on the specific-identification method.Dividend and interest income are recognized when earned.Fair Value Measurement The Company applies fair value accounting for all financial assets and liabilities measured on a recurring and nonrecurring basis.Fair value is defined as an exit price,representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.As such,fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.The accounting guidance established a fair value hierarchy based on three levels of inputs,of which the first two are considered observable and the last unobservable,used to determine the fair value of its financial instruments.A financial instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.Level 1 Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.Level 2 Inputs other than Level 1 that are observable,either directly or indirectly,such as quoted prices for similar assets or liabilities,quoted prices in markets that are not active,or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities.Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.Property and Equipment Property and equipment are recorded at historical cost,less accumulated depreciation.Depreciation is computed using the straight-line method over the estimated useful life of the related asset.Improvements that increase functionality of the fixed asset are capitalized and depreciated over the assets remaining useful life.Deposits for purchases of property and equipment are included in construction-in-progress.Construction-in-progress is not depreciated until the asset is placed in service.Fully depreciated assets are retained in property and equipment,net,until removed from service.The Company reviews the estimated useful lives of its fixed assets on an ongoing basis.The estimated useful lives of assets are generally as follows:8 Computer equipment,hardware,and software 3-5 yearsFurniture and fixtures 7-10 yearsMachinery and equipment 3-10 yearsLeasehold improvements Shorter of the lease term(including estimated renewals)or the estimated useful lives of the improvementsImpairment of Long-Lived Assets The Company evaluates the carrying value of long-lived assets when indicators of impairment exist.The carrying value of a long-lived asset is considered impaired when the estimated separately identifiable,undiscounted cash flows from such an asset are less than the carrying value of the asset.In that event,a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset.During the three and nine months ended September 30,2025 we recorded approximately$9.5 million and$24.4 million in impairment charges,respectively,related to assets no longer in use.During the three and nine months ended September 30,2024,we recorded approximately$0.3 million and$1.5 million in impairment charges,respectively,related to assets no longer in use.These charges are recorded in Research and Development expense in the Consolidated Statements of Operations and Comprehensive Income(Loss).Leases The Company classifies arrangements meeting the definition of a lease as operating or financing leases,and leases are recorded on the Condensed Consolidated Balance Sheets as both a right-of-use(“ROU”)asset and lease liability,calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Companys incremental borrowing rate which is the rate incurred to borrow on a collateralized basis over a similar term.Lease liabilities are increased by interest and reduced by payments each period,and the ROU asset is reduced over the lease term.For operating leases,interest on the lease liability and the non-cash lease expense result in straight-line rent expense over the lease term.For finance leases,interest on the lease liability and the amortization of the ROU asset results in front-loaded expense over the lease term.Variable lease expenses,including common maintenance fees,insurance and property tax,are recorded when incurred.In calculating the right-of-use asset and lease liability,the Company elects to combine lease and non-lease components for all classes of assets,and elects to exclude short-term leases having terms of twelve months or less.Segments Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker(the“CODM”)in deciding how to allocate resources to an individual segment and in assessing performance.The Companys CODM is its Chief Executive Officer.The Company has determined that it operates in one operating segment and one reportable segment,as the CODM reviews financial information presented on a consolidated basis.The operating segment has not derived revenue from its business activities as of September 30,2025.The CODM uses net loss for purposes of making operating decisions,allocating resources,and evaluating financial performance.For the three and nine months ended September 30,2025 significant expenses include non-cash stock-based compensation of$29.2 million and$96.1 million,depreciation and amortization of$14.2 million and$52.0 million,write-off of property and equipment of$9.5 million and$24.4 million,personnel costs of$33.4 million and$106.0 million,and professional services and legal contingency costs of$3.8 million and$10.7 million,respectively.Similarly,for the three and nine months ended September 30,2024,significant expenses include non-cash stock-based compensation of$43.4 million and$110.5 million,depreciation and amortization of$14.9 million and$39.8 million,write-off of property and equipment of$0.3 million and$1.5 million,personnel costs of$38.5 million and$116.3 million,and professional services and legal contingency costs of$6.4 million and$54.8 million,respectively.Other expenses include materials,facilities,other research,development,and administrative expenses,which are recorded within operating expenses.Other segment items included in consolidated net loss are interest income,interest expense,and other income(expense),which are reflected in the Consolidated Statements of Operations and Comprehensive Income(Loss)for the three and nine months ended September 30,2025,and 2024.The long-lived assets outside of United States are not material as of September 30,2025.The measure of segment assets is reported on the balance sheet as total consolidated assets.Refer to the Consolidated Balance Sheets as of September 30,2025 and December 31,2024 for total consolidated assets.Research and Development Cost Costs related to research and development are expensed as incurred.9General and Administrative Expenses General and administrative expenses represent costs incurred by the Company in managing the business,including salary,benefits,incentive compensation,marketing,insurance,professional fees and other operating costs associated with the Companys non-research and development activities.Stock-Based Compensation The Company measures and recognizes compensation expense for all stock-based awards made to employees,directors,and non-employees,including stock options,restricted stock units and restricted shares,based on estimated fair values recognized over the requisite service period.The Company accounts for forfeitures when they occur.The fair values of options granted with only service conditions are estimated on the grant date using the Black-Scholes option pricing model.This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation,including the expected term(weighted-average period of time that the options granted are expected to be outstanding),the volatility of the Companys common stock,and an assumed risk-free interest rate.The Company recognizes compensation expense for all options with only service conditions on a straight-line basis over the requisite service period of the awards,which is generally the option vesting term of four years.The fair values of options granted with performance(e.g.,business milestone)and market conditions(e.g.,stock price target)are estimated at the grant date using a Monte Carlo simulation model.The model determined the grant date fair value of each vesting tranche and the future date when the market condition for such tranche is expected to be achieved.The Monte Carlo valuation requires the Company to make assumptions and judgements about the variables used in the calculation including the expected term,volatility of the Companys common stock,an assumed risk-free interest rate,and cost of equity.For performance-based options with a vesting schedule based on the attainment of both performance and market conditions,along with service conditions,each quarter the Company assesses whether it is probable that it will achieve each performance condition that has not previously been achieved or deemed probable of achievement and if so,the future time when the Company expects to achieve that business milestone,or its“expected business milestone achievement time.”When the Company first determines that a business milestone has become probable of being achieved,the Company allocates the entire expense for the related tranche over the number of quarters between the grant date and the then-applicable“expected vesting date,”which represents the requisite service period.The requisite service period at any given time is generally the period between the grant date and the later of(i)the expected time when the performance condition will be achieved(if the related performance condition has not yet been achieved)and(ii)the expected time when the market condition will be achieved(if the related market condition has not yet been achieved).The Company immediately recognizes a cumulative catch-up expense for all accumulated expense for the quarters from the grant date through the quarter in which the performance condition was first deemed probable of being achieved.Each quarter thereafter,the Company recognizes the then-remaining expense for the tranche through the end of the requisite service period except that upon vesting of a tranche,all remaining expense for that tranche is immediately recognized.The fair values of restricted stock units granted with service conditions only are based on the closing price of the Companys Class A Common Stock on the date of grant.The Company recognizes compensation expense for restricted stock units with only service conditions on a straight-line basis over the requisite service period of the awards,which is generally the award vesting term of four years.The fair values of restricted stock units granted with service and performance conditions are based on the closing price of the Companys Class A Common Stock on the grant date.The vesting schedule of such awards is based entirely on the attainment of both service and performance conditions.Each quarter the Company assesses whether it is probable that it will achieve each performance condition and if so,the future time when the Company expects to achieve that performance condition,the“expected vesting date”.When the Company first determines that a performance condition has become probable of being achieved,the Company allocates the entire expense for the related tranche over the number of quarters between the grant date and expected vesting date,which represents the requisite service period.The requisite service period at any given time is generally the period between the grant date and the expected time when the performance condition will be achieved with the service condition also being met.The Companys 2020 Employee Stock Purchase Plan(the“ESPP”)is compensatory in accordance with ASC 718-50-25.The Company measures and recognizes compensation expense for shares to be issued under the ESPP based on estimated grant date fair value recognized on a straight-line basis over the offering period.The ESPP provides eligible employees with the opportunity to purchase shares of the Companys Class A Common Stock at a discount through payroll deductions.There were approximately 0.6 million shares purchased under the ESPP during the nine months ended September 30,2025.As of September 30,2025,8.7 million shares of Class A Common Stock were reserved for future issuance under the ESPP.10The Company has established the corporate bonus plan since 2023 to settle in the form of restricted stock units to eligible employees upon the achievement of certain service and performance conditions(“the Bonus Plan”).The awards under the Bonus Plan are classified as a liability prior to the settlement of vested restricted stock units,upon which the liability is reclassified into equity.The Company recognizes compensation expense for the annual Bonus Plan to be settled in restricted stock units on a straight-line basis over the requisite service period of approximately a year.The Bonus Plan awards are measured at the grant date fair value,i.e.,the closing price of the Companys Class A Common Stock on the grant date,which is the settlement date.Income Taxes The Company accounts for income taxes under an asset and liability approach.Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and operating loss carryforwards,measured by applying currently enacted tax laws.Valuation allowances are provided when necessary to reduce net deferred tax assets to an amount that is more likely than not to be realized.The Company recognizes tax liabilities based upon its estimate of whether,and the extent to which,additional taxes will be due when such estimates are more likely than not to be sustained.An uncertain income tax position will not be recognized if it has less than a 50%likelihood of being sustained.The Company has no material provision for income taxes for the three and nine months ended September 30,2025 and 2024.The Company has no material current tax expense from losses and no deferred expense from the valuation allowance.The Companys effective tax rate differs from the U.S.statutory rate primarily due to a valuation allowance against its net deferred tax assets as it is more likely than not that some or all of the deferred tax assets will not be realized.11Note 3.Recent Accounting Pronouncements Recently Adopted Accounting PronouncementsIn August 2023,the FASB issued ASU 2023-05,Business Combinations-Joint Venture Formations(Subtopic 805-60):Recognition and Initial Measurement,which addresses the accounting for contributions made to a joint venture,upon formation,in a joint ventures separate financial statements.The ASU is effective prospectively for all joint venture formations with a formation date on or after January 1,2025.Additionally,a joint venture that was formed before January 1,2025 may elect to apply the amendments retrospectively.Early adoption is permitted,either prospectively or retrospectively.The Company adopted this guidance in the first quarter of fiscal 2025.The adoption of such guidance had no impact on the Companys consolidated financial statements as the Company does not have any joint venture as of September 30,2025.Recent Accounting Pronouncements Not Yet AdoptedIn December 2023,the FASB issued ASU 2023-09,Income Taxes(Topic 740):Improvements to Income Tax Disclosures,which enhances the transparency and decision usefulness of income tax disclosures.The ASU is effective for all public business entities for annual periods beginning after December 15,2024.Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.The Company does not expect a material impact from the adoption of this standard on its consolidated financial statements.In November 2024,the FASB issued ASU 2024-03,Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures(Subtopic 220-40):Disaggregation of Income Statement Expenses,which requires disclosure of specified information about certain costs and expenses in the notes to financial statements at interim and annual reporting periods.The ASU is effective for all public business entities for annual periods beginning after December 15,2026 and interim periods within annual reporting periods beginning after December 15,2027.Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.In September 2025,the FASB issued ASU 2025-06,IntangiblesGoodwill and OtherInternal-Use Software(Subtopic 350-40):Targeted Improvements to the Accounting for Internal-Use Software,which eliminates accounting consideration of software project development stages and clarifies the threshold applied to begin capitalizing costs.The ASU is effective for fiscal years beginning after December 15,2027 and interim periods within those fiscal years,and permits prospective,modified prospective,or retrospective adoption.Early adoption is permitted.The Company is currently evaluating the impact of this guidance on its consolidated financial statements.12Note 4.Fair Value Measurement The Companys financial assets subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows(amounts in thousands):Fair Value Measured as of September 30,2025 Level 1 Level 2 Total Assets included in:Money market funds$86,822$86,822 Commercial paper 153,705 153,705 U.S.government and agency securities 659,889 659,889 Corporate notes and bonds 93,109 93,109 Total fair value$86,822$906,703$993,525 Fair Value Measured as of December 31,2024 Level 1 Level 2 Total Assets included in:Money market funds$78,736$78,736 Commercial paper 61,926 61,926 U.S.government and agency securities 695,504 695,504 Corporate notes and bonds 54,615 54,615 Total fair value$78,736$812,045$890,781 (1)Money market funds are included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.(2)Marketable securities consist of commercial paper,U.S.government and agency securities,corporate notes and bonds.As of September 30,2025 and December 31,2024,marketable securities with original maturities of three months or less of$128.8 million and$42.1 million,respectively,are included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.Level 1 assets:Money market funds are classified as Level 1 within the fair value hierarchy,as fair value is based on unadjusted quoted prices in active markets for identical assets.Level 2 assets:Investments in commercial paper,U.S.government and agency securities,and corporate notes and bonds are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets,quoted prices for identical or similar instruments in markets that are not active,and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.The Company had no financial liabilities subject to fair value measurements on a recurring basis as of September 30,2025 and December 31,2024.There have been no changes to the valuation methods utilized during the nine months ended September 30,2025.As of September 30,2025 and December 31,2024,the carrying values of cash and cash equivalents,accounts payable and accrued liabilities approximate their respective fair values due to their short-term nature.(1)(2)(2)(2)(1)(2)(2)(2)13Marketable Securities The following table summarizes,by major security type,the Companys assets that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.Amortized cost net of unrealized gain(loss)is equal to fair value as of September 30,2025 and December 31,2024.The fair value as of September 30,2025 and December 31,2024 are as follows(amounts in thousands):September 30,2025 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Level 1 securities Money market funds$86,822$86,822 Level 2 securities Commercial paper 153,705 153,705 U.S.government and agency securities 659,430 466 (7)659,889 Corporate notes and bonds 93,025 86 (2)93,109 Total$992,982$552$(9)$993,525 December 31,2024 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Level 1 securities Money market funds$78,736$78,736 Level 2 securities Commercial paper 61,926 61,926 U.S.government and agency securities 695,082 436 (14)695,504 Corporate notes and bonds 54,609 28 (22)54,615 Total$890,353$464$(36)$890,781 Realized gains and losses and interest income from the investment are included in interest income.The Company regularly reviews its available-for-sale marketable securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience,market data,issuer-specific factors,and current economic conditions.The following tables display additional information regarding gross unrealized losses and fair value by major security type for the 9 and 17 marketable securities in unrealized loss positions held by the Company as of September 30,2025 and December 31,2024,respectively(amounts in thousands):September 30,2025 Less than 12 Consecutive Months 12 Consecutive Months or Longer Total Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value U.S.government and agency securities$(7)$71,558$(7)$71,558 Corporate notes and bonds (2)6,488 (2)6,488 Total$(9)$78,046$(9)$78,046 December 31,2024 Less than 12 Consecutive Months 12 Consecutive Months or Longer Total Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value U.S.government and agency securities$(14)$96,988$(14)$96,988 Corporate notes and bonds (19)33,111 (3)1,063 (22)34,174 Total$(33)$130,099$(3)$1,063$(36)$131,162 14The unrealized losses were attributable to changes in interest rates that impacted the value of the investments,and not increased credit risk.There were no sales of available-for-sale marketable securities during the three and nine months ended September 30,2025.There were no sales of available-for-sale marketable securities during the three months ended September 30,2024,and during the nine months ended September 30,2024 the Company received proceeds of$1.2 million,including interest,from the sale of available-for-sale marketable securities.The Company realized immaterial gains as a result of such sale.The Company does not intend to sell the investments that are in an unrealized loss position,nor is it more likely than not that the Company will be required to sell the investments before the recovery of the amortized cost basis,which may be its maturity.Accordingly,the Company did not record an allowance for credit losses associated with these investments.The estimated amortized cost and fair value of available-for-sale securities by contractual maturity as of September 30,2025 are as follows(amounts in thousands):September 30,2025 Amortized Cost Fair Value Due within one year$992,982$993,525 Due after one year and through five years Total$992,982$993,525 Note 5.Balance Sheet Components Property and EquipmentProperty and equipment as of September 30,2025 and December 31,2024 consisted of the following(amounts in thousands):September 30,December 31 2025 2024 Computer equipment,hardware,and software$7,843$7,831 Furniture and fixtures 124,298 107,886 Leasehold improvements 110,756 115,879 Machinery and equipment 160,664 161,460 Construction-in-progress 29,266 61,935 Property and equipment,gross 432,827 454,991 Accumulated depreciation and amortization (182,504)(154,999)Property and equipment,net$250,323$299,992 Depreciation and amortization expense related to property and equipment was$13.9 million and$14.8 million for the three months ended September 30,2025 and 2024,respectively.Depreciation and amortization expense related to property and equipment was$51.3 million and$39.3 million for the nine months ended September 30,2025 and 2024,respectively.Accrued LiabilitiesAccrued liabilities as of September 30,2025 and December 31,2024 consisted of the following(amounts in thousands):September 30,December 31,2025 2024 Litigation-related accrual$3,900$11,950 Accrued property and equipment 2,793 975 Other 7,301 4,522 Accrued liabilities$13,994$17,447 Note 6.Leases The Company leases its facilities and certain equipment,with current lease terms running through 2032.The Company did not include renewal options in the calculation of the lease liability and right-of use asset at the lease inception unless the exercise of such options was reasonably certain.Fixed rent generally escalates each year,and the Company is responsible for a portion of the landlords operating expenses such as property tax,insurance and common area maintenance.The Companys leases include various operating leases expiring at various dates through September 2032 and a finance lease expiring September 2032 for one of our buildings in San Jose.Many leases include options to renew.The Company does not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably certain.15The Companys leases do not have any contingent rent payments and do not contain residual value guarantees.In July 2025,the Company entered into a Lease Termination Agreement to terminate the Companys lease for certain premises outside of the Companys headquarters,consisting of approximately 80,641 rentable square feet of space located in San Jose,California,effective as of August 1,2025.The original term of the Lease commenced on November 1,2021 and was to expire on September 30,2032.The Company recognized a loss of approximately$8.3 million on its Consolidated Statements of Operations and Comprehensive Income(Loss)for the three and nine months ended September 30,2025,which includes the impairment charge of approximately$7.6 million related to leasehold improvements and a lease termination loss of approximately$0.7 million.The components of lease related expense are as follows(amounts in thousands):Three Months Ended September 30,Nine Months Ended September 30,Lease costs 2025 2024 2025 2024 Finance lease costs:Amortization of right-of-use assets$718$718$2,155$2,155 Interest on lease liabilities 503 550 1,547 1,684 Operating lease costs 1,697 2,253 6,203 6,745 Variable lease costs 796 800 3,094 2,456 Total lease expense$3,714$4,321$12,999$13,040 The components of supplemental cash and non-cash information related to leases are as follows(amounts in thousands):Nine Months Ended September 30,2025 2024 Operating outgoing cash flows-finance lease$1,547$1,684 Financing outgoing cash flows-finance lease 2,388 2,146 Operating outgoing cash flows-operating lease 6,245 6,605 Right-of-use assets obtained in exchange for new operating lease liabilities 528 777 The table below displays additional information for leases as of September 30,2025 and December 31,2024:September 30,2025 December 31,2024 Finance lease Weighted-average remaining lease term-finance lease(in years)7.0 7.8 Weighted-average discount rate-finance lease 6.06%6.06%Operating lease Weighted-average remaining lease term-operating lease(in years)6.9 7.7 Weighted-average discount rate-operating lease 6.52%6.34%As of September 30,2025,future minimum payments during the next five years and thereafter are as follows(amounts in thousands):Fiscal Year Operating Leases Finance Lease 2025(remaining three months)$1,742$1,335 2026 7,097 5,417 2027 7,254 5,566 2028 7,110 5,719 2029 7,129 5,876 2030 7,343 6,038 Thereafter 12,730 10,433 Total 50,405 40,384 Less present value discount (10,119)(7,675)Lease liabilities$40,286$32,709 As the Companys lease agreements do not provide an implicit rate,the Company used an estimated incremental borrowing rate that will be incurred to borrow on a collateralized basis over a similar term at the lease commencement date or modification date in determining the present value of lease payments.16Asset Retirement Obligations The Company establishes assets and liabilities for the present value of estimated future costs to return certain of our leased facilities to their original condition upon the termination or expiration of a lease.The recognition of an asset retirement obligation requires the Company to make assumptions and judgments including the actions required to satisfy the liability,inflation rates and the credit-adjusted risk-free rate.The initially recognized asset retirement cost is amortized using the same method and useful life as the long-lived asset to which it relates.Accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value.The Company recorded asset retirement obligation of approximately$13.6 million and$12.4 million as of September 30,2025 and December 31,2024,respectively,in Other liabilities in the Condensed Consolidated Balance Sheets.Note 7.Commitments and Contingencies From time to time,and in the ordinary course of business,the Company is subject to certain claims,charges and litigation concerning matters arising in connection with the conduct of the Companys business activities.Shareholder Derivative LitigationTwo shareholder derivative suits were filed in February 2021 in the United States District Court for the Northern District of California against 11 officers and directors of the Company and have been consolidated into one action,with the first-filed complaint being designated the operative one.The Company is the nominal defendant.The complaint alleges that the individual defendants breached various duties to the Company and contains similar allegations to the settled and dismissed securities class action brought against the Company and three of its executives in January 2021,in which it was alleged that materially false and misleading statements were made concerning the Companys business,operations,and prospects,including information regarding its battery technology.VGA is also named as a defendant in the derivative litigation.The action is currently stayed.A shareholder derivative suit was filed in October 2024 in the United States District Court for the Northern District of California against current and former officers and directors of the Company and VGA alleging breaches of duties to the Company.The Company is the nominal defendant.The action was deemed related to the consolidated action and is currently stayed.In June through August 2022,four shareholder derivative suits were filed in the Court of Chancery of the State of Delaware against current and former directors and officers of the Company.The Company is the nominal defendant.The complaints allege that the individual defendants breached various duties to the Company.VGA is also named as a defendant in three of those actions.In September 2022,the four actions were consolidated and stayed.A consolidated amended complaint was filed on July 30,2024.A shareholder derivative action was filed in the United States District Court for the District of Delaware on February 22,2024,against current and former directors and officers of the Company.The Company is the nominal defendant.The complaint alleges that the individual defendants breached various duties to the Company and includes a claim for contribution related to the securities class action that was brought against the Company and three of its executives in January 2021 and subsequently settled and dismissed.The complaint also alleges that plaintiff previously sent a litigation demand to the Board and alleges that the demand has effectively been rejected.The action is currently stayed.Two additional shareholder derivative actions were filed in the Court of Chancery of the State of Delaware in May 2024 and October 2024,against current and former directors and officers of the Company.The Company is the nominal defendant.The complaints allege that the individual defendants breached various duties to the Company.The complaints also allege that the plaintiffs previously sent a litigation demand to the Board and allege that the demands had effectively been rejected.The action filed in May 2024 is currently stayed.17Private Attorneys General ActionsThe Company is a defendant in two Private Attorneys General Act(“PAGA”)wage-and-hour actions filed in Santa Clara County Superior Court by former employees,along with a related class action in arbitration.The complaints allege violations of Californias Labor Code.The actions are presently stayed.The Company denies the allegations.In April 2025,the parties reached an agreement in principle to settle the claims.For many legal matters,particularly those in early stages,the Company cannot reasonably estimate the possible loss(or range of loss),if any.The Company records an accrual for legal matters at the time or times it determines that a loss is both probable and reasonably estimable.As of September 30,2025 and December 31,2024,the amount accrued for each matter was individually not material,and the aggregate amount accrued was approximately$4.0 million as of September 30,2025 and$12 million as of December 31,2024.Regarding matters for which no accrual has been made(including the potential for losses in excess of amounts accrued),the Company currently believes,based on its own investigations,that any losses(or ranges of losses)that are reasonably possible and estimable will not,in the aggregate,have a material adverse effect on its financial position,results of operations,or cash flows.However,the ultimate outcome of legal proceedings involves judgments,estimates,and inherent uncertainties and cannot be predicted with certainty.Should the ultimate outcome of any legal matter be unfavorable,the Companys business,financial condition,results of operations,or cash flows could be materially and adversely affected.The Company may also incur substantial legal fees,which are expensed as incurred,in defending against legal claims.Other commitmentsThe Companys minimum purchase commitments consist of non-cancellable agreements to purchase goods and services,primarily for materials,and licenses and hosting services,entered into in the ordinary course of business.As of September 30,2025,future minimum purchase commitments in aggregate during the next five years and thereafter are as follows(amounts in thousands):Fiscal Year Minimum Purchase Commitments 2025(remaining three months)$1,439 2026 2,646 2027 1,923 2028 259 Thereafter Total$6,267 Note 8.Stockholders Equity As of September 30,2025 and December 31,2024,1,350,000,000 shares,$0.0001 par value per share,are authorized,of which,1,000,000,000 shares are designated as Class A Common Stock,250,000,000 shares are designated as Class B Common Stock,and 100,000,000 shares are designated as Preferred Stock.Common Stock Holders of common stock are entitled to dividends when,as,and if,declared by the Companys Board of Directors(the“Board”),subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends.As of September 30,2025,the Company had not declared any dividends.The holder of each share of Class A Common Stock is entitled to one vote,and the holder of each share of Class B Common Stock is entitled to ten votes.In August 2023,the Company completed an underwritten public offering of 37.5 million shares of its Class A Common Stock for an aggregate purchase price of$288.2 million,net of issuance costs of$11.8 million(the“August 2023 Public Offering”).In February 2023,the Company entered into separate Distribution Agreements with J.P.Morgan Securities LLC,Cowen and Company,LLC,Deutsche Bank Securities Inc.and UBS Securities LLC,as sales agents,pursuant to which the Company issued and sold,from time to time,common stock with an aggregate offering price of$400 million(the“ATM offering”)under the prospectus supplement dated February 28,2023 to a shelf registration statement on Form S-3(the“Form S-3”).During the year ended December 31,2024,24.9 million shares of the Companys Class A Common Stock were sold pursuant to the ATM offering for aggregate proceeds of approximately$128.5 million,net of issuance costs paid.During the three and nine months ended September 30,2025,29.3 million and 29.5 million shares of Class A Common Stock were sold pursuant to the ATM offering for aggregate proceeds of approximately$263.3 million and$264.2 million,net of issuance costs,respectively,completing the ATM offering.The Form S-3 expired in August 2025.18Equity Incentive Plans Prior to the Business Combination,the Company maintained its 2010 Equity Incentive Plan(the“2010 Plan”),under which the Company granted options and restricted stock units to purchase or directly issue shares of common stock to employees,directors,and non-employees.Upon the closing of the Business Combination,awards under the 2010 Plan were converted at an exchange ratio of 4.02175014920,and assumed into the 2020 Equity Incentive Award Plan(the“2020 Plan”,and together with the 2010 Plan,the“Plans”).The 2020 Plan permits the granting of awards in the form of incentive stock options,nonqualified stock options,stock appreciation rights,restricted shares,restricted stock units and performance awards to employees,directors,and non-employees.As of September 30,2025,136,592,934 shares of Class A Common Stock are authorized for issuance pursuant to awards under the 2020 Plan,plus any shares of Class A Common Stock subject to stock options,restricted stock units or other awards that were assumed in the Business Combination and terminate as a result of being unexercised or are forfeited or repurchased by the Company,with the maximum number of shares to be added to the 2020 Plan equal to 69,846,580 shares of Class A Common Stock.Stock OptionsStock option activity under the Plans,including the EPA Program discussed below,is as follows:Number ofSharesOutstanding(in thousands)WeightedAverageExercise Price WeightedAverageRemainingContractualTerm(Years)Intrinsic value(in thousands)Balance as of December 31,2024 24,043$7.36 4.21 Cancelled and forfeited (5,039)23.04 Expired (35)6.13 Exercised (12,562)1.72 Balance as of September 30,2025 6,407$6.10 4.02$48,886 Vested and expected to vest as of September 30,2025 5,903$4.65 3.83$48,886 Vested and exercisable as of September 30,2025 5,567$3.54 3.68$48,886(1)This includes 5.9 million options granted and outstanding as of December 31,2024 pursuant to the EPA Program.(2)This represents options cancelled and forfeited under the EPA Program.(3)This includes 0.3 million options granted pursuant to the EPA Program that are expected to vest as of September 30,2025.None of the options granted pursuant to the EPA Program were vested and exercisable as of September 30,2025.There were no options granted during the nine months ended September 30,2025 or September 30,2024.The aggregate intrinsic value of options exercised during the nine months ended September 30,2025 and 2024 was$54.3 million and$31.3 million,respectively.Excluding options granted pursuant to the EPA Program,as of September 30,2025,there was no unrecognized compensation cost related to stock options.EPA ProgramIn December 2021,the Company granted stock options for the purchase of an aggregate of approximately 14.7 million shares of the Companys Class A Common Stock to the Companys Chief Executive Officer at the time and other members of the Companys management team pursuant to the EPA Program that was approved by the Companys stockholders in December 2021.In December 2022,the remaining 2.1 million stock options under the EPA Program were granted to members of the Companys management team under the same terms as those in the initial grant in 2021,representing the final grant pursuant to the EPA Program approved in December 2021.The EPA Program consists of five equal tranches(each a“Tranche”)that vest if the Company meets certain business milestones(performance conditions)and stock price targets(market conditions).The Company accounts for the compensation expense associated with each Tranche when it determines that achievement of a related business milestone is considered probable.As of September 30,2025,the business milestone for one Tranche had been achieved;however,because the related stock price target has not yet been achieved,no shares have vested to date.As of September 30,2025,one other Tranche was considered probable.In February 2025,certain named executive officers and certain other senior employees entered into agreements with the Company to waive the stock options granted to them under the Companys 2021 Extraordinary Performance Award Program.The total number of shares of the Companys Class A Common Stock underlying such waived stock options was 3,989,584.As such,these stock options were cancelled in February 2025.The remaining number of shares outstanding under the EPA Program is approximately 0.8 million as of September 30,2025.(1)(2)(3)19For the three months ended September 30,2025,the Company recorded an immaterial credit to stock-based compensation expense primarily due to forfeited awards in the current period related to the EPA Program.For the nine months ended September 30,2025,the Company recorded stock-based compensation expense of$4.7 million related to the EPA Program,net of expense including$5.7 million for the EPA awards cancelled in February 2025 where the unamortized expense was fully recognized offset by the forfeitures of awards.For the three and nine months ended September 30,2024,the Company recorded$0.9 million in stock-based compensation expense and a credit in stock-based compensation expense of$13.9 million for the EPA Program,respectively,primarily due to the reversal of the previously recognized expense for the options where the requisite service period had not been completed at the time of forfeiture.As of September 30,2025,the Company had immaterial total unrecognized stock-based compensation expense for the business milestones currently achieved or considered probable of achievement,which will be recognized over an estimated weighted-average period of 1.6 years.As of September 30,2025,the Company had approximately$4.4 million of total unrecognized stock-based compensation expense for the business milestones currently considered not probable of achievement.Restricted Stock Units Activities In 2023 and 2024,the Company granted 4.4 million and 4.2 million shares of restricted stock units with service and performance conditions(“PSU”),respectively,to members of the Companys management team and certain other employees under the Companys 2020 Plan.The performance conditions for these PSUs are related to the Companys product development milestones through May 2026,and May 2027,respectively.These PSUs will expire in May 2026 and May 2027,respectively,if performance conditions are not met.During the nine months ended September 30,2025,the Company granted 5.4 million shares of PSUs to members of the Companys management team and certain other employees.The performance conditions for these PSUs are related to the Companys product development milestones through May 2028.These PSUs will expire in May 2028 if performance conditions are not met.For the three and nine months ended September 30,2025,the Company recorded stock-based compensation expense of$3.7 million and$10.5 million,respectively,related to these PSUs.For the three and nine months ended September 30,2024,the Company recorded stock-based compensation expense of$9.0 million and$24.2 million,respectively,related to these PSUs,for the product development milestones achieved or considered probable of achievement.The Companys Bonus Plan is settled in the form of restricted stock units to eligible employees upon the achievement of certain service and performance conditions.These performance conditions are related to the Companys product development,operational,and business milestones for the year.The stock-based compensation expense related to the Bonus Plan were recorded as liabilities under Accrued compensation and benefits prior to the settlement of vested restricted stock units,upon which the liability is reclassified into equity.In February 2025,approximately 4.3 million restricted stock units were granted and vested under the 2024 Bonus Plan for final settlement,resulting in approximately$20.2 million in additional paid in capital.For the three months ended September 30,2025 and 2024,the Company recorded$4.4 million and$5.1 million,respectively,to stock-based compensation related to the current year Bonus Plan.For the nine months ended September 30,2025 and 2024,the Company recorded stock-based compensation expense of approximately$11.5 million and$15.9 million,respectively,related to the current year and prior year Bonus Plans.No shares have been granted under the 2025 Bonus Plan as of September 30,2025.Restricted stock units with service conditions only(“RSU”)and PSU activities under the Plans are as follows:RSUs Outstanding PSUs Outstanding Number ofUnits(in thousands)WeightedAverage GrantDate Fair Value Number ofUnits(in thousands)WeightedAverage GrantDate Fair Value Balance as of December 31,2024 26,875$7.51 6,575$6.92 Granted 20,746 3.66 9,698 4.13 Vested (8,929)8.01 (6,998)5.65 Forfeited (6,413)6.14 (1,021)5.17 Balance as of September 30,2025 32,279$5.17 8,254$4.94 20The fair value of RSUs which vested during the nine months ended September 30,2025 and September 30,2024 was$57.4 million and$46.0 million,respectively.The fair value of PSUs which vested during the nine months ended September 30,2025 was$32.9 million in total,consisting of the final settlement under the 2024 Bonus Plan and the PSUs granted to the management team and certain other employees.The fair value of PSUs which vested during the nine months ended September 30,2024 was$29.2 million,which was the final settlement under the 2023 Bonus Plan,the interim payout under the 2024 Bonus Plan,and the PSUs granted to the management team and certain other employees.As of September 30,2025,unrecognized stock-based compensation expense related to unvested RSUs and PSUs were$151.8 million and$17.9 million,respectively,and are expected to be recognized over a weighted average period of 2.7 years and 1.4 years,respectively.Stock-Based Compensation ExpenseTotal stock-based compensation expense recognized in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss for all awards is as follows(amounts in thousands):Three Months Ended September 30,Nine Months Ended September 30,2025 2024 2025 2024 Research and development$19,180$25,947$62,087$74,765 General and administrative 10,043 17,412 34,030 35,706 Total stock-based compensation expense$29,223$43,359$96,117$110,471 Note 9.Earnings(Loss)Per Share Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period.Diluted earnings per share adjusts basic earnings per share for the potentially dilutive impact of stock options.As the Company has reported a loss for the three and nine months ended September 30,2025 and 2024,potentially dilutive securities are antidilutive and accordingly,basic net loss per share equals diluted net loss per share.The following table sets forth the computation of basic and diluted loss per Class A Common Stock and Class B Common Stock(amounts in thousands,except per share amounts):Three Months Ended September 30,Nine Months Ended September 30,2025 2024 2025 2024 Numerator:Net loss attributable to common stockholders$(105,824)$(119,572)$(334,945)$(363,195)Denominator:Weighted average Class A and Class B Common Stock outstanding-Basic and Diluted 588,728 508,957 566,293 502,136 Net loss per share attributable to Class A and Class B Common stockholders-Basic and Diluted$(0.18)$(0.23)$(0.59)$(0.72)Basic and diluted earnings per share was the same for each period presented as the inclusion of all potential Class A Common Stock and Class B Common Stock outstanding would have been anti-dilutive.The following table presents the potential common stock outstanding that was excluded from the computation of diluted net loss per share of common stock as of the periods presented because including them would have been antidilutive(amounts in thousands):As of September 30,2025 2024 Options 6,407 26,489 RSUs 32,279 29,594 PSUs 9,284 10,686 Total 47,970 66,769 21Note 10.Related Party TransactionsIn July 2025,the Company entered into an Amended and Restated Collaboration Agreement(the“Amendment”)with PowerCo SE(“PowerCo”),a battery cell company wholly owned by the Volkswagen Group,which is a major investor in the Company with approximately 25.2%of the Companys voting power,for the industrialization of QSs QSE-5 solid-state lithium metal battery technology.Under the Amendment,QS and PowerCo entered into a statement of work outlining the scope and responsibilities of the joint scale-up team working on the Companys battery development.PowerCo has agreed that it will contribute up to$130.7 million for the project over the next two years,subject to the completion of certain technical milestones and other project goals by the joint scale-up team.The Amendment does not require the Company to repay funds contributed under the statement of work,and there are no restrictions on the use of the cash receipts.Under the Amendment,the Company recognizes costs as expenses in the period incurred.Payments from PowerCo will initially be recorded as a liability upon receipt.This liability will be reclassified to APIC in shareholders equity upon extinguishment.The Company determined that such payments should be accounted for as a liability in accordance with ASC 730-20 Research and Development Arrangements,as there is a presumption of a repayment obligation due to the significant related party relationship between the parties.Further,ASC 470-50 Debt Modifications and Extinguishments indicates extinguishment transactions between related entities may be in essence capital transactions.Therefore,the Company determined that the extinguishment will be accounted for as a capital transaction and reflected as an increase to APIC with no shares to be issued.As of September 30,2025,no such payments had been received from PowerCo.22Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations.The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and the related notes appearing elsewhere in this Report.This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors,including those set forth in the section titled“Risk Factors”as set forth in this Report.Unless the context otherwise requires,references in this“Managements Discussion and Analysis of Financial Condition and Results of Operations”to“the Company”,“we”,“us”and“our”refer to the business and operations of QuantumScape Corporation and its consolidated subsidiaries.OverviewWe are developing next-generation battery technology for EVs and other applications.We believe that our technology will enable a new category of battery that meets the requirements for broader market adoption.The lithium-metal solid-state battery technology that we are developing is being designed to offer greater energy density,faster charging,and greater safety when compared to todays conventional lithium-ion batteries.We are a development-stage company with no revenue to date,have incurred a net loss from operations of approximately$115.0 million and$362.2 million,for the three and nine months ended September 30,2025,respectively,and an accumulated deficit of approximately$3.7 billion from our inception through September 30,2025.We expect to incur significant expenses and continuing losses for the foreseeable future.Key Trends,Opportunities and UncertaintiesWe are a pre-revenue company.We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose significant risks and challenges,including those discussed below and in the section titled“Risk Factors”appearing elsewhere in this Report.Product DevelopmentWe have demonstrated capabilities of our solid-state separator and battery technology in single-layer and multilayer cell cycling data,and in 2022,shipped our first A0 prototype battery cells to multiple OEMs for testing.Following that shipment,we continued focusing our research and development on subsequent generations of prototype samples incorporating advances in cell functionality,process and reliability,as well as bringing online our pilot line in San Jose,California.In 2023,we announced our first targeted commercial product,the QSE-5,a cell with a capacity of approximately 5 amp-hours.In 2024,we began producing low volumes of our first B-sample cells,and we began shipping these cells for automotive customer testing.These are B-samples of our first product,QSE-5,with an energy density of over 800 Wh/L and 15 minute 10%to 80st-charging capability.In September 2025,we and PowerCo SE made the first live demonstration of our solid-state lithium metal batteries powering an electric vehicle;the technology was showcased in a Ducati motorcycle equipped with QSE-5 battery cells at the IAA Munich.Our research and development currently includes programs for the following areas:Continued improvement of the cathode.Our cathodes use a conventional cathode active material such as NMC mixed with a catholyte.We plan to benefit from industry cathode chemistry improvements and/or cost reduction,which in the future may include use of other cathode active materials,including cobalt-free compositions(e.g.,LFP),as well as cathode processing advances such as dry electrode processing.Over the years,we have developed catholytes made of differing mixtures of organic liquid electrolyte in an effort to optimize performance across multiple metrics such as voltage,temperature,power,and safety,among others.We have tested solid,gel and liquid catholytes in our cells.The solid catholyte is part of our ongoing research and development investigation into inorganic catholytes.Our solid-state cathode platform is being designed to enable higher rates of charge and discharge for even thicker cathode electrodes,which,when combined with a lithium-metal anode,may further increase cell energy densities.Continued improvement in quality,consistency and reliability.We are working to improve the quality and uniformity of our cells,including our separators,to further improve,among other things,the cycling behavior,power,operating conditions,and reliability of our cells.For some of our early-generation processes,we used methods of continuous processing found at scale in both the battery and ceramic industries and we are working on continuous improvement of these processes,including better quality,consistency,and higher throughput through automation and process control(including specification tightening and adding or improving inspection points along the production process flow),quality of material inputs,and particle reduction across our process.We are also developing subsequent methods not typically used in ceramics that offer significant potential cost savings.23Continued improvement in throughput.Increasing the volume of separator production results in the increased quantities to support internal development,prototype sampling to prospective customers,our prospective launch program,supply chain development,and technology transfer activities.We continue to invest and deploy resources to automate our production process,including purchasing higher throughput equipment,to improve the efficiency and efficacy of our production processes and to achieve higher battery cell output.Cell design.We have demonstrated capabilities of our solid-state separator and battery technology in single-layer and multilayer solid-state cells in commercially relevant areas(ranging from approximately 60 x75mm to 70 x85mm).In order to advance the maturity of our prototype cells and produce commercially viable solid-state battery cells,we must produce battery cells that achieve target cell design and capacities set by our customers and we may have to vary cell layer count,dimensions,and packaging;while we target our first commercial product,the QSE-5,to have approximately 5 amp-hours of capacity,the exact number of layers and dimensions will vary and depend upon customer specifications,cell design considerations,and other factors.We will need to overcome production challenges to produce sufficient volumes of our separators and prototype battery cells to complete development of our first commercial product and for customer evaluation and product qualification purposes,as well as subsequent cell designs that may require different capacity,layer counts,dimensions,and packaging.Our team of scientists,engineers,technicians,and other staff is highly motivated and committed to solving these challenges ahead.However,any delays in the completion of these tasks will require additional cash use and delay market entry.Process DevelopmentOur architecture depends on our proprietary solid-state ceramic separator.Though our separators design is unique,our early-generation process relied on established or similar high-volume production processes already deployed in other industries.We,and together with our partners,are developing subsequent,proprietary higher-volume separator production processes that seek to further reduce cost,increase throughput,and improve quality.Our separator is being designed to enable our anode-free architecture.As manufactured,our solid-state battery cell has no anode;the lithium-metal anode is formed during the first charge of the cell.The lithium that forms the anode comes from the cathode material we purchase.Eliminating the anode bill of materials and associated manufacturing costs found in conventional lithium-ion cells could result in a meaningful cost of goods sold(COGS)advantage once sufficient scale and process maturity are achieved.In addition,our solid-state battery cell is being designed to reduce the time and capital-intensity of the formation and aging process step as compared to conventional lithium-ion manufacturing.We are focused on the throughput and capability of our pilot line in San Jose,California.As part of the continued expansion of our throughput we are automating our production process and purchasing higher throughput battery-cell production equipment.Our pilot line is intended to serve four purposes.First,to provide a sufficient quantity of separators and cells for internal development and customer sampling.Second,to provide the basis for continued production process development and to help inform equipment selection and specifications for future production activities by us or our partners.Third,we target the initial production of QSE-5 cells from the pilot line.Fourth,to support collaboration and future technology transfer activities as part of the collaboration and licensing arrangements with PowerCo as well as potential future commercial arrangements.Delays in the successful buildout of our pilot line may impact both our development and future scale-up timelines.We will need to achieve significant cost savings in battery design and production,in addition to the cost savings associated with the elimination of an anode from our solid-state battery cells as manufactured,while controlling costs associated with the manufacture of our separator,including achieving substantial improvements in quality,consistency,reliability,throughput and safety required to hit commercial targets.Further,we will need to capture industry cost savings in the materials,components,equipment,facilities design,and processes for products we develop,notably in the cathode and cell design.As we advance our licensing business model,we anticipate our partners will need to achieve similar cost savings in battery design and production,and capture industry cost savings.Commercialization and Market FocusThe automotive qualification process generally includes several major delivery milestones of A,B and C samples.Each major sampling stage may consist of several generations of increasingly mature prototypes.The timelines for each stage involve uncertainty and will be influenced by a number of factors,including product and process development risks;the specification,ordering,and qualification of production equipment;other supply chain dynamics;and OEM validation timeframes.We have demonstrated capabilities of our solid-state separator and battery technology in single-layer and multilayer solid-state cells in commercially relevant areas(ranging from approximately 60 x75mm to 70 x85mm).We will work to continue improving quality,consistency,reliability,throughput,and safety and optimize all components of the cell.We will continue to work to further develop our production processes to enable increasing volumes of prototype shipments and,through successful technology transfer,high volume manufacturing by our licensing partners.24In July 2024,we entered into the PowerCo Collaboration Agreement with the goal of industrializing the solid-state lithium-metal battery technology we intend to use in our first planned productthe QSE-5.PowerCo was formed by Volkswagen in 2022 as a company intended to consolidate Volkswagens activities in the development and production of battery cells.In connection with the PowerCo Collaboration Agreement and subject to the completion of certain milestones,we and PowerCo intend to enter into the PowerCo IP License Agreement under which we will grant PowerCo a non-exclusive,limited,royalty-bearing license to use the QSE-5 technology for the purpose of manufacturing and selling batteries primarily for automotive applications,and PowerCo will pre-pay an initial royalty fee of$130 million,against which any future royalties due will be credited.The initial royalty is subject to a time-based diminishing clawback if the PowerCo IP License Agreement is terminated early by PowerCo under certain conditions.The PowerCo Collaboration Agreement supersedes the JVA,which was terminated concurrently.As compared to a joint venture arrangement of similar output volumes,we expect the licensing arrangement to result in less revenue,as well as lower costs and capital requirements.In July 2025,we entered into an amendment and restatement of the PowerCo Collaboration Agreement and entered into a statement of work outlining the scope and responsibilities of the joint scale-up team working at our battery development pilot line in San Jose,California for the development,validation,demonstration,and initial commercialization of battery cells based on the QSE-5 technology and toward the transfer of QSE-5 technology into cell size determined by PowerCo(the“Project”).PowerCo has agreed to contribute up to$130.7 million for the Project over the next two years,subject to the completion of certain milestones by the joint scale-up team.In addition to the signed agreements with PowerCo with the goal of commercializing our battery technology,we intend to continue working closely with automotive OEMs to make our solid-state battery cells widely available over time.We have also signed agreements,including customer sampling and joint development agreements,with a number of OEMs,ranging from leading manufacturers by global revenue to premium performance and luxury carmakers,to collaborate with us in the testing and validating of our solid-state battery cells with the goal to include such cells into pre-production prototype vehicles and ultimately into serial production vehicles.We are currently focused on automotive EV applications,which have among the most stringent sets of requirements for batteries.Meanwhile,our solid-state battery technology has applicability in other large and growing markets including stationary storage,consumer electronics,data centers,robotics,defense,and aviation and we intend to explore opportunities in those areas as appropriate.We believe that our technology enables a variety of business models and presents opportunities with a variety of potential customers,such as automotive OEMs,end-users,and licensees,as applicable.In addition to the collaboration with PowerCo,which contemplates a licensing arrangement,we may operate solely-owned manufacturing facilities,license technology to other manufacturers,or enter into joint venture arrangements,among other approaches.We intend to continue to invest in research and development to improve battery cell performance,improve production processes,and reduce cost.Access to CapitalBased on our current business plan,we believe that our cash resources will last through 2029.However,changes to our technology development,operating costs and scale-up,including our ability to meet the milestones for entry into the PowerCo IP License Agreement,receipt of the related initial royalty fee from PowerCo,and achievement of the Project milestones for receipt of Project contributions from PowerCo,could materially impact us and the availability of our capital resources.We may also need additional cash resources due to changed business conditions or other developments,including unanticipated delays in negotiations with automotive OEMs and tier-one automotive suppliers or other suppliers,supply chain challenges,competitive pressures,inflation,instability in global economic markets,increased trade tariffs,and regulatory developments,among others.To the extent that our current resources are insufficient to satisfy our cash requirements,we may need to seek additional equity or debt financing.If such financing is not available,or if the financing terms are onerous given the high-interest rate environment or less desirable than we expect,we may be forced to decrease our level of investment in product development or scale back our operations,which could have an adverse impact on our business and financial prospects.25Regulatory LandscapeWe operate in an industry that is subject to many established environmental regulations,which have generally become more stringent over time,particularly in hazardous waste generation and disposal and pollution control.Regulations in our target markets include economic incentives to purchasers of EVs,tax credits for EV manufacturers,and economic penalties that may apply to a car manufacturer based on its fleet-wide emissions which may indirectly benefit us to the extent that the regulations expand the market size of EVs.While we also expect environmental regulations to provide a tailwind to our growth,it is possible for certain regulations to result in margin pressures.Trade restrictions and tariffs,while historically minimal between the European Union and the United States where most of our production and sales are initially expected,are subject to unknown and unpredictable changes that could impact our ability to meet projected sales or margins.For example,with a change in administration in the United States in 2025,there has been an economic policy shift towards increasing tariffs,which in turn has led and could lead to further retaliatory tariffs.In addition,there are government regulations pertaining to battery safety,transportation of batteries,use of batteries in cars,and factory safety.We will ultimately have to comply with these regulations to sell our batteries into the market.The license and sale of our battery technologies abroad is likely to be subject to more stringent export controls in the future.Recent DevelopmentsCompletion of ATM OfferingIn February 2023,we filed a prospectus supplement to a shelf registration statement on Form S-3(the“Form S-3”)for the issuance and sale of our Class A Common Stock from time to time for an aggregate offering price of up to$400 million(the“ATM offering”).During the year ended December 31,2024,24.9 million shares of our Class A Common Stock were sold pursuant to the ATM offering for aggregate proceeds of approximately$128.5 million,net of issuance costs paid.During the three and nine months ended September 30,2025,29.3 million and 29.5 million shares of Class A Common Stock were sold pursuant to the ATM offering for aggregate proceeds of approximately$263.3 million and$264.2 million,respectively,net of issuance costs including the commission fees to the sales agents of approximately$4.0 million for the three and nine months ended September 30,2025,completing our ATM offering.The Form S-3 expired in August 2025.Basis of PresentationWe currently conduct our business through one operating segment.As a pre-revenue company with no commercial operations,our activities to date have been limited and were conducted primarily in the United States.Our historical results are reported under United States of America generally accepted accounting principles(“U.S.GAAP”)and in U.S.dollars.Upon commencement of commercial operations,we expect to expand our global operations substantially,including in the United States and the European Union,and as a result we expect our future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in our historical financial statements.As a result,we expect that the financial results we report for periods after we begin commercial operations will not be comparable to the financial results included in this Report.Components of Results of OperationsWe are a research and development stage company and we have not generated any revenues to date.Our historical results may not be indicative of our future results for reasons that may be difficult to anticipate.Accordingly,the drivers of our future financial results,as well as the components of such results,may not be comparable to our historical or projected results of operations.26Operating ExpensesResearch and Development ExpenseTo date,our research and development expenses have consisted primarily of personnel-related expenses for scientists,experienced engineers and technicians as well as costs associated with the construction and ramp up of our pilot line in San Jose,including the material and supplies to support the product development and process engineering efforts.As we ramp up our engineering operations to complete the development of our solid-state,lithium-metal batteries and required process engineering to meet automotive cost targets,we anticipate that research and development expenses will increase significantly for the foreseeable future as we continue to invest in additional plant and equipment for product development(e.g.,multilayer cell stacking,packaging engineering),building prototypes,and testing of battery cells as our team works to meet the full set of automotive product requirements.We also recognize significant non-cash stock-based compensation to employees directly involved in research and development activities.For stock-based compensation awards with performance and market conditions,such as the awards granted under our Extraordinary Performance Award Program(the“EPA Program”)in December 2022 and 2021,and for stock-based compensation awards with performance conditions,such as the restricted stock units with performance conditions(“PSUs”)granted in 2023 and 2024,the non-cash expense recognized is based on a probability assessment of the performance conditions,and as such,research and development expenses may fluctuate in the future as the performance conditions are re-assessed at each reporting period.Further,should the stated market conditions of the EPA Program grants be achieved prior to the expected achievement period,we may accelerate the stock-based compensation expense recognized,which could result in significant fluctuations in research and development expense recognized in the future.For more information on the EPA Program grants and PSUs,see Note 8,Stockholders Equity,to our consolidated financial statements included elsewhere in this Report.As we ramp toward commercialization of our technology,we will begin to incur expenses that are directly associated with such,including allocation of indirect costs from research and development.General and Administrative ExpenseGeneral and administrative expenses consist mainly of personnel-related expenses for our executive,sales and marketing,insurance and other administrative functions as well as outside professional services,including legal,accounting and other advisory services.We are continuing to expand our supporting systems,in anticipation of planning for and supporting the commercialization of our technology and due to the ongoing requirements of being a public company.Accordingly,we expect our general and administrative expenses to increase in the near term and for the foreseeable future.Upon commencement of commercial operations,we also expect general and administrative expenses to include customer and sales support and advertising costs.We also recognize significant non-cash stock-based compensation to executives and certain employees.The non-cash expenses recognized for EPA Program grants and PSUs are based on a probability assessment of the performance conditions,and as such,general and administrative expenses may fluctuate in the future as the performance conditions are re-assessed at each reporting period.Further,should the stated market conditions of the EPA Program awards be achieved prior to the expected achievement period,we may accelerate the stock-based compensation expense recognized,which could result in significant fluctuations in general and administrative expense recognized in the future.As we ramp toward commercialization of our technology,we will begin to incur expenses that are directly associated with such,including allocation of indirect costs from general and administrative activities.Other Income(Expense)Interest ExpenseInterest expense consists primarily of interest expense associated with our finance lease for one of our facilities.Interest IncomeInterest income consists primarily of interest income from marketable securities.Other Income(Expense)Our other income(expense)consists of miscellaneous income and expenses.Income Tax Expense(Benefit)Our income tax provision consists of an estimate for U.S.federal and state income taxes based on enacted rates,as adjusted for allowable credits,deductions,uncertain tax positions,changes in deferred tax assets and liabilities,and changes in tax law.We maintain a valuation allowance against the full value of our U.S.federal and state net deferred tax assets because we believe the recoverability of the tax assets is not more likely than not.27Results of OperationsComparison of the Three and Nine Months Ended September 30,2025 to the Three and Nine Months Ended September 30,2024The following table sets forth our historical operating results for the periods indicated(amounts in thousands):Three Months Ended September 30,$%Nine Months Ended September 30,$ 25 2024 Change Change 2025 2024 Change Change Operating expenses:Research and development$92,074$96,994$(4,920)(5)%$288,840$278,587$10,253 4%General and administrative 22,919 33,164 (10,245)(31)s,314 117,929 (44,615)(38)%Total operating expenses 114,993 130,158 (15,165)(12)62,154 396,516 (34,362)(9)%Loss from operations (114,993)(130,158)15,165 (12)%(362,154)(396,516)34,362 (9)%Other income(expense):Interest expense (503)(550)47 (9)%(1,547)(1,684)137 (8)%Interest income 9,997 11,347 (1,350)(12)(,706 35,428 (6,722)(19)%Other income(expense)(325)(338)13 (4)P (508)558 (110)%Total other income 9,169 10,459 (1,290)(12),209 33,236 (6,027)(18)%Net loss (105,824)(119,699)13,875 (12)%(334,945)(363,280)28,335 (8)%Less:Net loss attributable to non-controlling interest (127)127 (100)%(85)85 (100)%Net loss attributable to common stockholders$(105,824)$(119,572)$13,748 (11)%$(334,945)$(363,195)$28,250 (8)%Research and Development The decrease in research and development expense in the three months ended September 30,2025 compared to the three months ended September 30,2024 primarily resulted from a non-cash stock-based compensation expense decrease of$6.8 million primarily due to full amortization of awards,forfeitures and lower headcount,a decrease of$5.1 million in personnel costs and a decrease of$2.2 million in materials costs,offset by an increase of$9.2 million related to the write-off of fixed assets no longer in use,including the leasehold improvements associated with the lease termination.The increase in research and development expense in the nine months ended September 30,2025 compared to the nine months ended September 30,2024 primarily resulted from an increase of$22.9 million related to the write-off of fixed assets no long
2025-10-28
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