CMI 10-K & 10-Q changes, risk factors and insider trading

Our products are subject to extensive and evolving statutory and regulatory requirements that can significantly increase our costs and, along with increased scrutiny from regulatory agencies and unpredictability in the adoption, implementation and enforcement of increasingly stringent and fragmented emission standards by multiple jurisdictions around the world, could have a material adverse impact on our results of operations, financial condition and cash flows.

Our engines are subject to extensive and evolving statutory and regulatory requirements governing emissions and noise, including standards imposed by the EPA, the EU, state regulatory agencies (such as the CARB) and other regulatory agencies around the world. Regulatory agencies are making certification and compliance with emissions and noise standards more stringent and subjecting diesel engine products to an increasing level of scrutiny. In addition, failure to comply with the terms and conditions of the Settlement Agreements will subject us to stipulated penalties. The discovery of noncompliance issues could have a material adverse impact on our results of operations, financial condition and cash flows.

Our operations are subject to increasingly stringent environmental laws and regulations in all of the countries in which we operate, including laws and regulations governing air emission, carbon content, discharges to water and the generation, handling, storage, transportation, treatment and disposal of waste materials. For example, in October 2023, the EPA published a final rule imposing reporting and recordkeeping requirements on manufacturers and importers of per- and polyfluoroalkyl substances (PFAS). While we believe that we are in compliance in all material respects with these environmental laws and regulations, there can be no assurance that we will not be adversely impacted by costs, liabilities or claims with respect to existing or subsequently acquired operations, under either present laws and regulations or those that may be adopted or imposed in the future. We are also subject to laws requiring the cleanup of contaminated property. If a release of hazardous substances occurs at or from any of our current or former properties or at a landfill or another location where we have disposed of hazardous materials, we may be held liable for the contamination and the amount of such liability could be material. We may become subject to additional evolving regulations related to the cleanup of contaminated property, such as the EPA's proposal to designate two widely used PFAS as hazardous substances.

We manufacture, sell and service products globally and rely upon a global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture and service our products. Changes in laws, regulations and government policies on foreign trade and investment can affect the demand for our products and services, cause non-U.S. customers to shift preferences toward domestically manufactured or branded products and impact the competitive position of our products or prevent us from being able to sell products in certain countries. Our business benefits from freeinternational trade agreements, such as the United States-Mexico-Canada Agreement and the U.S. trade relationships including those with China, Brazil, E.U. and the U.K. More restrictive trade policies, such as efforts to withdraw from or substantially modify such agreements or arrangements, including, without limitation, higher tariffs or new barriers to entry could adversely impact our production costs, customer demand and our relationships with customers and suppliers. Any of these consequences could have a material adverse effect on our results of operations, financial condition and cash flows.

We are subject to income taxes in the U.S. and numerous international jurisdictions. Our income tax provision and cash tax liability in the future could be adversely affected by thechanges adoption of newin tax legislation,laws or their interpretations, changes in earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities and the discovery of new information in the course of our tax return preparation process. The carrying value of deferred tax assets, which are predominantly in the U.S., is dependent on our ability to generate future taxable income in the U.S. We are also subject to ongoing tax audits. These audits can involve complex issues, which may require an extended period of time to resolve and can be highly judgmental. Tax authorities may disagree with certain tax reporting positions taken by us and, as a result, assess additional taxes against us. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. The amounts ultimately paid upon resolution of these or subsequent tax audits could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our tax provision.

Due to the international scope of our operations, we are subject to additional regulatory frameworks, including a complex system of commercial and trade regulations, around the world. In some cases, foreign regulatory frameworks are more stringent or complex than similar regimes in the United States.U.S. Recent years have seen an increase in the development and enforcement of laws regarding trade compliance and anti-corruption, such as the U.S. Foreign Corrupt Practices Act and similar laws from other countries and expected global sustainability regulations, as well as new regulatory requirements regarding data privacy, such as the European Union General Data Protection Regulation. These new and emerging regulations are likely to require significant resources and data management systems and could increase our cost of doing business, restrict our ability to operate our business or execute our strategies,strategies and could result in fines and penalties or reputational harm if we do not fully comply.

We continue to experience pockets of supply chain disruptions and related challenges throughout the supply chain.chain which are further impacted by the current global tariff environment. We single source a number of parts and raw materials critical to our business operations. Any delay in our suppliers' deliveries may adversely affect our operations at multiple manufacturing locations, forcing us to seek alternative supply sources to avoid serious disruptions. Delays may be caused by factors affecting our suppliers (including, but not limited to, raw material availability, capacity constraints, port congestion, labor disputes or unrest, shortages of labor, economic downturns, availability of credit, impaired financial condition, sanctions/tariffs, restrictions on the sale or distribution of critical rare earth metals, energy inflation/availability, suppliers' allocations to other purchasers, weather emergencies, natural disasters, acts of government or acts of war or terrorism). The effects of climate change, including extreme weather events, long-term changes in temperature levels and water availability may exacerbate these risks. Any extended delay in receiving critical supplies could impair our ability to deliver products to our customers and have a material adverse effect on our results of operations, financial condition and cash flows.

Our markets are cyclical in nature and we face periods when demand fluctuates significantly higher or lower than our normal operating levels, including variability driven by supply chain inconsistency. Accurately forecasting our expected volumes and appropriately adjusting our capacity are important factors in determining our results of operations and cash flows. We manage our capacity by adjusting our manufacturing workforce, capital expenditures and purchases from suppliers. In periods of weak demand, we may face under-utilized capacity and un-recovered overhead costs, while in periods of strong demanddemand, we may experience unplanned costs and could fail to meet customer demand. We cannot guarantee that we will be able to adequately adjust our manufacturing capacity in response to significant changes in customer demand, which could harm our business. For products where we are manufacturing at capacity, we cannot guarantee that we will be able to increase manufacturing capacity to a level that meets demand for our products and services, which could prevent us from meeting increased customer demand and could harm our business. However, if we overestimate our demand and overbuild our capacity, we may have significantly underutilized assets and we may experience reduced margins. If we do not accurately align our manufacturing capabilities with demanddemand, it could have a material adverse effect on our results of operations, financial condition and cash flows.

For 2024,2025, we recognized $395$469 million of equity, royalty and interest income from investees, compared to $483$395 million in 2023.2024. In 2024,2025, morenearly than fortyfifty percent of our equity, royalty and interest income from investees iswas from three of our 50 percent ownedpercent-owned joint ventures in China - Beijing FotonChongqing Cummins Engine Co.,Company, Ltd., Dongfeng Cummins Engine Company, Ltd. and ChongqingBeijing Foton Cummins Engine Company,Co., Ltd. Although a significant percentage of our net income is derived from these unconsolidated entities, we do not unilaterally control their management or their operations, which puts a substantial portion of our net income at risk from the actions or inactions of these entities. A significant reduction in the level of contribution by these entities to our net income would likely have a material adverse effect on our results of operations and cash flows.

We recognize significant sales of engines and components to a few large on-highway truck OEM customerscustomers, which have been an integral part of our positive business results for several years. Many are truck manufacturers or OEMs that manufacture engines for some of their own vehicles. Despite their own engine manufacturing abilities, these customers have historically chosen to outsource certain types of engine production to us due to the quality of our engine products, our emission compliance capabilities, our systems integration, their customers' preferences, their desire for cost reductions, their desire for eliminating production risks and their desire to maintain company focus. However, there can be no assurance that these customers will continue to outsource, or outsource as much of, their engine production in the future. In addition, increased levels of OEM vertical integration could result from a number of factors, such as shifts in our customers' business strategies, acquisition by a customer of another engine manufacturer, the inability of third-party suppliers to meet product specifications and the emergence of low-cost production opportunities in foreign countries. Any significant reduction in the level of engine production outsourcing from our truck manufacturer or OEM customers, financial distress of one of our large truck OEM customers due to a change-in-control, could likely lead to significant reductions in our sales volumes, commercial disputes, receivable collection issues,issues and other negative consequences that could have a material adverse impact on our results of operations, financial condition and cash flows.

Our businesses establish prices with our customers in accordance with contractual time frames; however, the timing of material and commodity market price increases may prevent us from passing these additional costs on to our customers through timely pricing actions. While we customarily enter into financial transactions and contractual pricing adjustment provisions with our customers that attempt to address some of these risks, there can be no assurance that commodity price fluctuations will not adversely affect our results of operations and cash flows. While the use of commodity price hedging instruments and contractual pricing adjustments may provide us with some protection from adverse fluctuations in commodity prices, by utilizing these instruments, we potentially forego the benefits that might result from favorable fluctuations in price. As a result, higher material and commodity costs,costs could result in declining margins.

The development of new technologies may materially reduce the demand for our current products and services.services, and we may not be successful in developing new technologies and products in order to effectively address the energy transition.

We are investing in new products and technologies, including electrolyzers for hydrogen production and electrified power systems and related components and subsystems. Given the early stages of development of some of these new products and technologies, there can be no guarantee of the future market acceptance and investment returns with respect to our planned products, which will face competition from an array of other technologies and manufacturers. The ongoing energy transition away from fossil fuels and the increased adoption of electrified powertrains in some market segments could result in lower demand for current diesel or natural gas engines and components and, over time, reduce the demand for related parts and service revenues from diesel or natural gas powertrains. Furthermore, it is possible that we may not be successful in developing segment-leading electrified orpowertrains. alternateWe fuelmay powertrainsface technological challenges and someevolving government and customer requirements, and we may not succeed in anticipating them and developing the desired technologies and products on a timely basis. Some of our existing customers could choose to develop their own,own or source from other manufacturers,manufacturers. Additionally, competitors may develop these technologies and anyproducts ofbefore thesewe factorsdo, couldand havethey amay materialbe adverseviewed impact onby our resultscustomers ofto operations,be financialsuperior conditionto technologies and cashproducts flows.we may develop.

Concerns regarding climate change may lead to additional international, national, regional and local legislative and regulatory responses, accords and mitigation efforts. Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, are continuing to look for ways to reduce GHG emissions, and consumers are increasingly demanding products and services resulting in lower GHG emissions. We could face risks to our brand reputation, investor confidence and market share due to an inability to innovate and develop new products that decrease GHG emissions. Increased input costs, such as fuel, utility, transportation and compliance-related costscosts, could increase our operating costs and negatively impact customer operations and demand for our products. As the impact of any additional future climate related legislative or regulatory requirements on our global businesses and products is dependent on the timing, scope and design of the mandates or standards, we are currently unable to predict its potential impactimpact, which could have a material adverse effect on our results of operations, financial condition and cash flows.

Our business and operations are subject to interest rate risksrisks, and changes in interest rates can reduce demand for our products and increase borrowing costs and result in non-cash charges

Rising interest rates could have a dampening effect on overall economic activity and/or the financial condition of our customers, either or both of which could negatively affect customer demand for our products and our customers’ ability to repay obligations to us. Rising interest rates may increase our cost of capitalcapital, which could have material adverse effects on our financial condition and cash flows. Rising interest rates could also impact certain goodwill assets requiring non-cash impairment chargescharges, which could have a material adverse impact on our earnings.

Our IT environment and our products are exposed to potential security breaches or other disruptionsdisruptions, which may adversely impact our competitive position, reputation, results of operations, financial condition and cash flows.

The data handled by our technologies is vulnerable to security threats. Our operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to our business, customers, dealers, suppliers, employees and other sensitive matters. As such, our IT environment faces information technology security threats, such as security breaches, computer malware, ransomware attacks and other "cyber attacks," which are increasing in both frequency and sophistication, along with power outages or hardware failures. Increasing use of artificial intelligenceAI may increase these risks. These threats could result in unauthorized public disclosures of information, create financial liability, subject us to legal or regulatory sanctions, disrupt our ability to conduct our business, result in the loss of intellectual property or damage our reputation with customers, dealers, suppliers and other stakeholders. As the result of changing market conditions, a large percentage of our salaried employees continue to work remotely full or part-time. This remote working environment may pose a heightened risk for security breaches or other disruptions of our IT environment.

In addition, our products, including our engines, contain interconnected and increasingly complex technologies that control various processesprocesses, and these technologies are potentially subject to "cyber attacks" and disruption. The impact of a significant IT event on either our IT environment or our products could have a material adverse effect on our competitive position, reputation, results of operations, financial condition and cash flows.

We mayare useusing artificial intelligenceAI in our business and in our products, services and features, and challenges with properly managing its use could result in reputational harm, competitive harm,harm and legal liability, and adversely affect our results of operations.

WeIf we fail to keep pace with rapidly evolving technological developments in AI, our competitive position and business results may incorporate artificial intelligence solutions into our products, services and features, and we may leverage artificial intelligence, including generative artificial intelligence and machine learning, in our product development, operations and software programming.suffer. Our competitors or other third parties may incorporate artificial intelligenceAI into their products or operational processes more quickly or more successfully than us, which could have a material adverse effect on our competitive position, reputation and results of operations.

In addition, there are significant risks involved in developing and deploying artificial intelligenceAI, and there can be no assurance that the usage of artificial intelligenceAI will enhance our products or services or be beneficial to our business, including our efficiency or profitability. The rapid evolution of artificial intelligence,AI, including the regulation of artificial intelligenceAI by government or other regulatory agencies, will require significant resources to develop, test and maintain our platforms, offerings, services,services and features to implement artificial intelligenceAI ethically and minimize any unintended harmful impacts.

We are exposed to political, economic and other risks that arise from operating a multinational business. Greater political, economic and social uncertaintyuncertainty, among, between and within countries, and the evolving globalization of businesses could significantly change the dynamics of our competition, customer base and product offerings and impact our growth globally.

In addition, there continues to be significant uncertainty about the future relationships between the U.S. and China, including with respect to trade policies, treaties, government regulations and tariffs. Any increased trade barriers or restrictions on global trade, especially trade with ChinaChina, could adversely impact our competitive position, results of operations, financial condition and cash flows.

At December 31, 2024,2025, we employed approximately 69,60067,400 persons worldwide. Approximately 22,00020,000 of our employees worldwide were represented by various unions under collective bargaining agreements that expire between 20252026 and 2029. While2030.While we have no reason to believe that we will be materially impacted by work stoppages or other labor matters, there can be no assurance that future issues with our labor unions will be resolved favorably or that we will not encounter future strikes, work stoppages, or other types of conflicts with labor unions or our employees. Any of these consequences may have an adverse effect on us or may limit our flexibility in dealing with our workforce. In addition, many of our customers and suppliers have unionized work forces. Work stoppages or slowdowns experienced by us, our customers or suppliers could result in slowdowns or closures that would have a material adverse effect on our results of operations, financial condition and cash flow.

Significant declines in current and future financial and stock market conditions could cause material losses in our pension plan assets, which could result in increased pension cost in future years and adversely impact our results of operations, financial condition and cash flow. Depending upon the severity and length of market declines and government regulatory changes, we may be legally obligated to make pension payments in the U.S. and perhaps other countriescountries, and these contributions could be material.

•OPERATINGREPORTABLE SEGMENT RESULTS

We are a global power leader committed to powering a more prosperous world. Since 1919, we have delivered innovative solutions leaderthat comprisedmove ofpeople, goods and economies forward. Our five businessreportable segments - Engine, Components, Distribution, Power Systems and Accelera - supportedoffer bya ourbroad globalportfolio, manufacturing and extensive service and support network, skilled workforce and vast technical expertise. Our products range fromincluding advanced diesel, natural gas, electric and hybrid powertrains; andintegrated powertrain-relatedpower generation systems; critical components includingsuch as aftertreatment, turbochargers, fuel systems, valvetrain technologies, controls systems, air handling systems, automatedcontrols, transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, electrified power systems with innovative componentsaxles and subsystems,brakes; includingand battery,zero fuelemissions celltechnologies like battery and electric powerpowertrain technologiessystems. With a global footprint, deep technical expertise and hydrogenan productionextensive technologies.service network, we deliver dependable, cutting-edge solutions tailored to our customers' needs, supporting them through the energy transition with our Destination Zero strategy. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We have long-standing relationships with many of the leading manufacturers in the markets we serve, including PACCAR Inc,Inc., Traton Group, Daimler Trucks North AmericaAG and Stellantis N.V. We serve our customers through a service network of approximately 650640 wholly-owned, joint venture and independent distributor locations and more than 19,00013,000 Cummins certified dealer locations in approximately 190 countries and territories.

Our segment reporting structure is organized according to the products and markets each segment serves. The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Components segment sells axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, automated transmissions and electronics. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products, maintaining relationships with various OEMs throughout the world and providing selected sales and aftermarket support for our Accelera business. The Power Systems segment is an integrated power provider, which designs, manufactures and sells standby and prime power generators, engines (16 liters and larger) for standby and prime power generator sets and industrial applications (including mining, oil and gas, marine, rail and defense), alternators and other power components. The Accelera segment designs, manufactures, sells and supports electrified power systems with innovative components and subsystems, including battery, fuel cellbattery and electric powertrain technologies as well as hydrogen production technologies. The Accelera segment is currently in the early stages of commercializing these technologies with efforts primarily focused on the development of electrified power systems and related components and subsystems and our electrolyzers for hydrogen production.subsystems. We continue to serve all our markets as they adopt electrification and alternative power technologies,electrification, meeting the needs of our OEM partners and end customers.

Our financial performance depends, in large part, on varying conditions in the markets we serve, particularly the on-highway, off-highway, power generation and general industrial markets. Demand in these markets tends to fluctuate in response to overall economic conditions. Our sales may also be impacted by OEM inventory levels, production schedules, stoppages and supply chain challenges. Economic downturns in markets we serve generally result in reduced sales of our products and can result in price reductions in certain products and/or markets. As a worldwide business, our operations are also affected by geopolitical risks, currency fluctuations, political and economic uncertainty, tariffs and related trade disruptions, public health crises (epidemics or pandemics) and regulatory matters, including adoption and enforcement of environmental and emission standards, in the countries we serve.standards. As part of our growth strategy, we invest in businesses in certain countries that carry higher levels of these risks such as China, Brazil, India, Mexico and other countries in Europe, the Middle East and Africa. At the same time, our geographic diversity and broad product and service offerings have helped limit the impact from a drop in demand in any one industry, region, customer or the economy of any single country or customer on our consolidated results.

Accelera Strategic Reorganization Actions

In the fourth quarter of 2024, our Accelera segment underwent a strategic review to better streamline operations as well as pace and re-focus investments on the most promising paths as the adoption of certain zero emission solutions slows.slow. This review resulted in strategic reorganization actions, including decisions to consolidate certain manufacturing efforts, focus internal development efforts towards areas of differentiation while continuing to leverage partners and reduce our investments in certain technologies, joint ventures and markets. In addition, declining customer demand in certain key product lines caused us to re-evaluate the recoverability of certain inventory items. As a result of these actions, we recorded several charges in the fourth quarter related to inventory write-downs, intangible and fixed asset impairments and joint venture impairments. Total charges for these strategic reorganization actions were $312 million. See NOTE 22, "“ACCELERA STRATEGIC REORGANIZATION ACTIONS,"” to our Consolidated Financial Statements for additional information.

On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus Filtration Technologies Inc. (Atmus) common stock through a tax-free split-off. The exchange resulted in a reduction of shares of our common stock outstanding by 5.6 million shares and a gain of approximately $1.3 billion. See NOTE 21, "“ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE,"” to our Consolidated Financial Statements for additional information.

In December 2023, we announced that we reached an agreement in principle with the U.S. Environmental Protection Agency (EPA), the California Air Resources Board (CARB), the Environmental and Natural Resources Division of the U.S. Department of Justice (DOJ) and the California Attorney General’s Office to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S., which became final and effective in April 2024 (collectively, the Settlement Agreements). We recorded a charge of $2.0 billion in the fourth quarter of 2023 to resolve the matters addressed by the Settlement Agreements involving approximately one million of our pick-up truck applications in the U.S. In the second quarter of 2024, we made $1.9 billion of payments required by the Settlement Agreements. See NOTE 14, "COMMITMENTS AND CONTINGENCIES,"” to our Consolidated Financial Statements for additional information.

The table below presents our consolidated net sales by geographic areacountry based on the location of the customer:

The following table contains sales and EBITDA (defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests) by operatingreportable segment for the years ended December 31, 20242025 and 2023.2024. See NOTE 25,24, "OPERATING“REPORTABLE SEGMENTS,"” to our Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Consolidated Statements of Net Income.

We generated $3.6 billion in cash from operations for the year ended December 31, 2025, compared to $1.5 billion in 2024. The $2.1 billion increase was mainly due to the absence of operating$1.9 cashbillion flowsof payments in 2024,2024 comparedrequired toby $4.0the billionSettlement in 2023.Agreements. See the section titled "“Cash Flows"” in the "“LIQUIDITY AND CAPITAL RESOURCES"” section for a discussion of items impacting cash flows. See NOTE 14, “COMMITMENTS AND CONTINGENCIES,” to our Consolidated Financial Statements for additional information on the Settlement Agreements.

Our debt to capital ratio (total capital defined as debt plus equity) at December 31, 2024,2025, was 38.436.0 percent, compared to 40.338.4 percent at December 31, 2023.2024. The decrease was primarily due to the increased equity balancebalances from strongerstrong earnings since December 31, 2023,2024, partially offset by higher debt balances at December 31, 2024.2025. At December 31, 2024,2025, we had $2.3$3.6 billion in cash and marketable securities on hand and access to our $4.0 billion credit facilities (net of $1.3$353 billionmillion of commercial paper outstanding), if necessary, to meet working capital, investment, acquisition and funding needs.

In the second quarterhalf of 2024,2025, we maderecorded $1.9$458 billionmillion of requiredcharges paymentsfor towardsAccelera the Settlement Agreements.actions. See NOTE 14,22, “COMMITMENTSACCELERA AND CONTINGENCIES,ACTIONS,” to our Consolidated Financial Statements for additional information.

On FebruaryMay 20,9, 2024,2025, we issued $2.25$2.0 billion aggregate principal amount of senior unsecured notes consisting of $500$300 million aggregate principal amount of 4.904.25 percent senior unsecured notes due in 2029,2028, $750$700 million aggregate principal amount of 5.154.70 percent senior unsecured notes due in 20342031 and $1.0 billion aggregate principal amount of 5.455.30 percent senior unsecured notes due in 2054.2035. WeNet of the discount and underwriter fees, we received net proceeds of $2.2$1.99 billion. See NOTE 12, "“DEBT,"” to our Consolidated Financial Statements for additional information.

As of the date of this filing, our credit ratings and outlooks from the credit rating agencies remain unchanged. See the section titled “Credit Ratings” in the “LIQUIDITY AND CAPITAL RESOURCES” section for our current ratings.

Net sales increaseddecreased $37$432 million, primarily driven by the following:

•DistributionEngine segment sales increaseddecreased 117 percent primarilymainly due to higherlower demand in power generation markets, especially in North AmericaAmerican heavy-duty and Europe.medium-duty truck markets.

Sales to international markets (excluding the U.S. and Canada), based on location of customers, were 3940 percent of total net sales in 2024,2025, compared with 39 percent of total net sales in 2023.2024. A more detailed discussion of sales by segment is presented in the "OPERATING“REPORTABLE SEGMENT RESULTS"” section.

The types of expenses included in cost of sales are the following: parts and material consumption, including direct and indirect materials; compensation and related expenses, including variable compensation, salaries and fringe benefits; depreciation on production equipment and facilities and amortization of technology intangibles; estimated costs of warranty programs and campaigns; production utilities; production-related purchasing; warehousing, including receiving and inspection; freight costs; engineering support costs; repairs and maintenance; production and warehousing facility property insurance and rent for production facilities and other production overhead. Cost of sales in 2025 and 2024 included $157 million and $112 millionmillion, respectively of inventory write-downswrite-downs, contract termination costs and severance in our Accelera segment. See NOTE 22, "“ACCELERA STRATEGIC REORGANIZATION ACTIONS,"” to our Consolidated Financial Statements for additional information.

Gross margin increased $190$77 million and increased 0.50.6 points as a percentage of sales. The increases were mainly due to strong growth in power generation markets, especially data center and commercial markets, as well as favorable non-tariff related pricing andmainly higherdue volumes,to the launch of updated engine products in light-duty automotive markets, partially offset by lower demand in on-highway commercial truck markets and the divestitureabsence of Atmus,Atmus highersales. compensationThe expensesnet impact of tariff costs and increasedrelated productrecoveries coverage.was immaterial for the year ended December 31, 2025. The provision for base warranties issued as a percentage of sales was 1.9 percent in 20242025 and 1.81.9 percent in 2023.2024.

Research, development and engineering expenses decreased $37$67 million and decreased 0.10.2 points as a percentage of sales. The decreases were mainly due to lower spending on prototypes and decreased compensation expenses. Compensation and related expenses include salaries, fringe benefits and variable compensation.

Research activities continue to focus on development of new products and improvements of current technologies to meet future emission standards around the world, improvements in fuel economy performance of diesel and natural gas-powered engines and related components, as well as development activities around electrified power systems with innovative components and systems including battery and electric power technologies and hydrogen production technologies.

Interest expense decreased $5$41 million, primarily due to lower weighted-average interest rates, partially offset by higher average debt balances.

The year ended December 31, 2023,2025, contained unfavorable net favorable discrete tax items of $397$75 million, primarily due to $398 million in the fourth quarter related to the $2.0 billion charge from the Settlement Agreements, $22$51 million of unfavorablefavorable adjustments for uncertain tax positionspositions, and $3$15 million of netfavorable unfavorableadjustments otherfor discreteshare-based compensation tax items,benefits, partially offset by $21$7 million of favorable return to provision adjustments and $5$2 million of other favorable share-based compensation tax benefits.adjustments.

The change in the effective tax rate for the year ended December 31, 2024,2025, versus year ended December 31, 2023,2024, was primarily due to the absence of the Settlement Agreements charge and the non-taxable gain on the Atmus split-off.split-off, the impact of the Act and additional tax expense from the Accelera actions. See NOTE 22, "ACCELERA ACTIONS" to our Consolidated Financial Statements for additional information.

Noncontrolling interests eliminate the income or loss attributable to non-Cummins ownership interests in our consolidated entities. Noncontrolling interests in income of consolidated subsidiaries increaseddecreased $17$8 million principallyprimarily due to losses from a former joint venture consolidated in the first quarter of 2025, the divestiture of Atmus and lower earnings at our other joint ventures, partially offset by higher earnings at Cummins India Limited and the absence of losses at Hydrogenics Corporation resulting from the June 2023 acquisition, partially offset by lower earnings at Eaton Cummins Joint Venture and the divestiture of Atmus.Limited.

The foreign currency translation adjustment was a net lossgain of $276$244 million and net gainloss of $92$276 million for the years ended December 31, 20242025 and 2023,2024, respectively. The details were as follows:

OPERATINGREPORTABLE SEGMENT RESULTS

Our reportable operating segments consist of the Engine, Components, Distribution, Power Systems and Accelera segments. This reporting structure is organized according to the products and markets each segment serves. We use segment EBITDA as the basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable operating segments. We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors. Segment amounts exclude certain expenses not specifically identifiable to segments. See NOTE 25,24, "OPERATING“REPORTABLE SEGMENTS,"” to our Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Consolidated Statements of Net Income.

Following is a discussion of results for each of our operatingreportable segments. For all prior year segment results comparisons to 20222023 see the Results of Operations section of our 20232024 Form 10-K.

In addition to other information set forth in this report, you should consider other risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition or future results. Other than noted below, there have been no material changes to ourThe risks described in our 2025 Annual Report on Form 10-K or the “CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION” in this Quarterly report.report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently judge to be immaterial also may materially adversely affect our business, financial condition or operating results.

As disclosed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, we operate our business on a global basis and changes in international, national and regional trade laws, regulations and policies affecting and/or restricting international trade, including higher tariffs, trade disruptions (such as embargoes, sanctions and export controls) and broader geopolitical tensions, could adversely impact the demand for our products and our competitive position. In 2025, the U.S. imposed tariffs on certain countries and products, which was followed by retaliatory tariffs and other trade actions against U.S. goods and services. On February 20, 2026, the U.S. Supreme Court ruled that U.S. tariffs imposed under the International Emergency Economic Powers Act (IEEPA) on goods imported into the U.S. were unauthorized. After this ruling, new tariffs were subsequently imposed under different statutes. The global trade environment has contributed to ongoing market volatility and heightened concerns about potential economic impacts. Our primary risks include reduced global movement of goods impacting freight activity, increased costs for suppliers and end-users and uncertainty around supply availability. These factors could lead to a decline in business confidence, reduced demand for our products and increased product costs. We continue to pursue mitigation strategies, including engaging with our suppliers, exploring alternative sourcing and negotiating agreements with our customers to recover tariff-related costs. The financial impact of tariffs, net of mitigation actions and U.S. government tariff refunds (net of amounts to be returned to customers), was immaterial to our profitability and operating cash flows during the firstthree quarterand ofsix months ended June 30, 2026. However, continued and increasing tariff costs, the effectiveness of our mitigation efforts and ongoing market volatility could materially and adversely affect our results of operations, financial condition and cash flows in the future. We continue to monitor developments and take actions to minimize the related impacts to our business to the extent possible. See the “OUTLOOK” section for a discussion of the potential tariff impacts for the remainder of 2026.

2026 FirstSecond Quarter Results

Net income attributable to Cummins Inc. was $654$932 million, or $4.71$6.73 per diluted share, on sales of $8.4$9.5 billion for the three months ended MarchJune 31,30, 2026, versus the comparable prior year period net income attributable to Cummins Inc. of $824$890 million, or $5.96$6.43 per diluted share, on sales of $8.2$8.6 billion. The decreasesincreases in net income attributable to Cummins Inc. and earnings per diluted share were primarily driven by the loss on sale of business and settlement of current and future customer obligations as well as higher compensationsales costs,leading to improved gross margin, partially offset by improvedhigher grosscompensation margincosts. andDiluted favorableearnings foreignper currencycommon fluctuationsshare (primarily infor the Euro).three Seemonths NOTEended 14,June “REPORTABLE30, SEGMENTS,”2026, benefited $0.01 from fewer weighted-average shares outstanding due to ourthe Condensedstock Consolidatedrepurchase Financial Statements for additional information on loss on sale of business and settlement of current and future customer obligations.program.

Worldwide revenues increased by 39 percent in the three months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily due to higher demand infor power generation markets,equipment, especially in data center applications, and commercial markets, partially offset by weaker demand in on-highwayinternational commercial truckconstruction markets. International sales (excludes the U.S. and Canada) improved 1612 percent primarilymainly due to higher sales in China and Europe.Asia Pacific. The increase in international sales was primarily due to higher demand for power generation demandequipment and in construction markets as well as favorable foreign currency fluctuation impactsfluctuations of 52 percent (primarily the EuroChinese renminbi and Chinese renminbiEuro). Net sales in the U.S. and Canada declinedimproved 68 percent primarily due to lower demand in medium-duty and heavy-duty truck markets, partially offsetdriven by higher salesdemand infor power generation markets.equipment and medium-duty trucks.

The following tabletables containscontain sales and EBITDA (defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests) by reportable segment for the three and six months ended MarchJune 31,30, 2026 and 2025. See NOTE 14, “REPORTABLE SEGMENTS,” to our Condensed Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Condensed Consolidated Statements of Net Income.

We generated $309$1,808 million in cash from operations for the threesix months ended MarchJune 31,30, 2026, compared to using $3$782 million for the comparable period in 2025. See the section titled “Cash Flows” in the “LIQUIDITY AND CAPITAL RESOURCES” section for a discussion of items impacting cash flows.

Our debt to capital ratio (total capital defined as debt plus equity) at MarchJune 31,30, 2026, was 36.535.6 percent, compared to 36.0 percent at December 31, 2025. The increasedecrease was primarily due to aan higherincreased debtequity balance from strong earnings since December 31, 2025.2025, partially offset by a higher total debt balance at June 30, 2026. At MarchJune 31,30, 2026, we had $3.2$3.9 billion in cash and marketable securities on hand and access to our $4.0 billion credit facilities (net of $349$348 million of commercial paper outstanding), if necessary, to meet working capital, investment, acquisition and funding needs.

In the first quarterhalf of 2026, we repurchased $243$468 million, or 0.50.8 million shares, of common stock.

Net sales for the three months ended MarchJune 31,30, 2026, increased by $224$814 million versus the comparable period in 2025. The primary drivers were as follows:

•Power Systems segment sales increased 19 percent primarily due to higher demand infor power generation markets,equipment, especially in China and North America.

•Distribution segment sales increased 79 percent principally due to higher demand infor power generation markets,equipment, especially in Asia Pacific and North America.

•Components segment sales decreasedincreased 57 percent mainly due to lowerhigher emission solutions demand, primarily in China and North America, and increased demand in North American medium-dutycomponents and heavy-dutysoftware truckmarkets, markets.especially in China and North America.

•Engine segment sales decreasedincreased 46 percent largely due to lowerhigher demand in Northconstruction Americanmarkets in China and medium-duty and heavy-duty truck markets.markets in North America.

Gross margin increased $88$184 million for the three months ended MarchJune 31,30, 2026, and increaseddecreased 0.3 points as a percentage of net sales versus the comparable period in 2025. The increasesincrease in gross margin was primarily due to higher volumes and grossfavorable pricing, partially offset by increased compensation expenses. Gross margin as a percentage of sales were primarilydecreased due to favorable pricing, improved mix and favorable foreign currency impacts (primarily in the Euro and Brazilian real), partially offset by increasedhigher compensation expenses. The net impact of tariff costs and related recoveries was immaterial for the three month period ended MarchJune 31,30, 2026.

The provision for base warranties issued as a percentage of sales for the three and six months ended MarchJune 31,30, 2026, was 1.9 percent and 1.9 percent, respectively, compared to 1.9 percent and 1.9 percent for the comparable periodperiods in 2025.

Selling, general and administrative expenses increased $74$114 million forand the$188 three months ended March 31, 2026,million and increased 0.70.4 points and 0.5 points as a percentage of net salessales, respectively, for the three and six months ended June 30, 2026, versus the comparable periodperiods in 2025. The increases were mainlyprimarily due to higher compensation expenses.expenses and increased consulting costs. Compensation and related expenses included salaries, fringe benefits and variable compensation.

Research, development and engineering expenses increased $14$28 million and $42 million for the three and six months ended MarchJune 31,30, 2026, and increased 0.1 points as a percentage of net salesrespectively, versus the comparable periodperiods in 2025.2025, The increases were mainlyprimarily due to higher compensation expenses. Compensation and related expenses included salaries, fringe benefits and variable compensation. Overall research, development and engineering expenses as a percentage of net sales remained flat for both the three and six months ended June 30, 2026 versus the comparable periods in 2025.

Equity, royalty and interest income from investees increased $17$36 million for the three months ended MarchJune 31,30, 2026, versus the comparable period in 2025, primarily due to increased earnings at Beijing FotonDongfeng Cummins Engine Co., Ltd., Chongqing Cummins Engine Co., Ltd., DongfengBeijing Foton Cummins Engine Co., Ltd., GuangxiKomatsu Cummins IndustrialChile, Power Co., Ltd.Ltda. and Xian Cummins Engine Company Limited, partially offset by lowerhigher royalty and interest income from investees.

Our effective tax rates for the three and six months ended MarchJune 31,30, 20262026, were 25.1 percent and 26.0 percent, respectively. Our effective tax rates for the three and six months ended June 30, 2025, were 27.224.2 percent and 23.924.1 percent, respectively.

The threesix months ended MarchJune 31,30, 2026, had an unfavorable discrete tax impact due to the $199 million loss on sale of business and settlement of current and future customer obligations for which no tax benefit was recognized. Other discrete items were net favorableunfavorable $22 million, primarily due to $23 million of unfavorable return to provision adjustments, partially offset by $7$1 million.million of other net favorable discrete tax items. See NOTE 14, “REPORTABLE SEGMENTS,” to our Condensed Consolidated Financial Statements for additional information on loss on sale of business and settlement of current and future customer obligations.

The three months ended MarchJune 31,30, 2025, contained net favorable discrete tax items of $7$3 million, primarily due to $8$4 million of favorable share-basedadjustments compensationfor uncertain tax benefits,positions, partially offset by $1 million of other unfavorable adjustments.

The foreign currency translation adjustment was a net gain of $23 million and a net loss of $109$86 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to a net gain of $117$197 million and $314 million for the three and six months ended MarchJune 31,30, 2025, respectively, driven by the following:

UnitTotal engine shipments by engine classificationclassification, (including unit shipments to Power Systemson and off-highway engine units included in their respective classification)units, were as follows:

Engine segment sales for the three months ended MarchJune 31,30, 2026, decreasedincreased $99$185 million versus the comparable period in 2025. The following were the primary drivers by market:

These decreases were partially offset by an increase in off-highway•Off-highway sales ofincreased $111$108 million principallyprimarily due to higher international construction demand, especially in China.

Engine segment EBITDA for the three months ended MarchJune 31,30, 2026, decreased $179$14 million versus the comparable period in 2025, primarily due to lower volumes, higher compensation expenses and increased productfreight coveragecosts, costs.partially offset by improved tariff recovery.

Components segment sales for the three months ended MarchJune 31,30, 2026, decreasedincreased $140$186 million versus the comparable period in 2025 primarily due to lower demand in North American medium-duty and heavy-duty truck markets.2025. The following were the primary drivers by business:

•AutomatedEmission transmissionssolutions sales decreasedincreased $29$88 million primarily due to lowerhigher demand in China, North America and Latin America.

Components segment EBITDAsales for the threesix months ended MarchJune 31,30, 2026, decreasedincreased $45$46 million versus the comparable period in 2025,2025. mainlyThe duefollowing towere lowerthe volumesprimary and higher material costs, partially offsetdrivers by favorable pricing.business: