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

Rapid technological changes in semiconductor manufacturing processes subject us to increased pressure to develop technological advances that enable those processes. We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products or existing products have reliability, quality, design, or safety problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance of and payment for new products, and additional service and warranty expenses.expenses, Weand mayloss beof market share. If we are unable to develop and manufacture products successfully, or the products that we introduce may fail in the marketplace.marketplace, our business, results of operations and financial condition could be materially and adversely affected. For more than 25 years, the primary driver of technology advancement in the semiconductor industry has been to shrink the lithography that prints the circuit design on semiconductor chips. That driver could be approaching its technological limit, leading semiconductor manufacturers to investigate more complex changes in multiple technologies in an effort to continue technology development. In addition, the emergence of “big data” and new tools such as machine learning and artificial intelligence (“AI”) that capitalize on the availability of large data sets is leading semiconductor manufacturers and equipment manufacturers to pursue new products and approaches that exploit those tools to advance technology development. In the face of uncertainty on which technology solutions will become successful, we will need to focus our efforts on developing the technology changes that are ultimately successful in supporting our customers’ requirements. Our failure to develop and offer the correct technology solutions in a timely manner with productive and cost-effective products could adversely affect our business in a material way. Our failure to commercialize new products in a timely manner could result in loss of market share, unanticipated costs, and inventory obsolescence, which would adversely affect our business, results of operations and financial results.condition.

In order to develop new products and processes and enhance existing products and processes, we expect to continue to make significant investments in R&D, to investigate the acquisition of products and technologies, to invest in or acquire businesses or technologies, and to pursue joint development relationships with customers, suppliers, or other members of the industry. Our investments and acquisitions may not be as successful as we may expect, particularly in the event that we invest in or acquire product lines and technologies that are new to us. We may find that acquisitions are not available to us, for regulatory or other reasons, and that we must therefore limit ourselves to collaboration and joint venture development activities that do not have the same benefits as acquisitions. Pursuing development through collaboration and/or joint development activities rather than through an acquisition may pose substantial challenges for management, including those related to aligning business objectives; sharing confidential information, intellectual property and data; sharing value with third parties; and realizing synergies that might have been available in an acquisition but are not available through a joint development project. We must manage product transitions and joint development relationships successfully, as the introduction of new products could adversely affect our sales of existing products and certain jointly developed technologies may be subject to restrictions on our ability to share that technology, which could limit our market for products incorporating those technologies. Future technologies, processes, or product developmentsdevelopments, including as a result of adoption of AI, may render our current product offerings obsolete, leaving us with non-competitive products, obsolete inventory, or both. Moreover, customers may adopt new technologies or processes to address the complex challenges associated with next-generation devices.devices, or may adopt new technologies, including those based upon AI, that reduce their reliance on us for process development. This shift maycould result in a reduction inreduce the size of our addressable markets or couldmarkets, increase the relative size of markets in which we either do not compete or have relatively low market share.share, or reduce our competitiveness within the markets in which we do compete.

We face significant competition from multiple competitors, and our competitors may be able to develop products comparable or superior to those we offer or may adapt more quickly to new technologies or evolving customer requirements. In particular, while we continue to develop product enhancements that we believe will address future customer requirements, we may fail in a timely manner to identify those future customer requirements, to devote appropriate resources to developing products to address those requirements, or to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, competition may intensify, and we may be unable to continue to compete successfully in our markets, which could have a material adverse effect on our revenues, operatingresults results,of operations, and financial condition, and/or cash flows.condition.

With increased consolidation efforts in our industry, as well as the emergence and strengthening of new, regional competitors,competitors and the impact of AI, we may face increasing competitive pressures. Other companies continue to develop systems and/or acquire businesses and products that are competitive to ours and may introduce new products and product capabilities that may affect our ability to sell and support our existing or new products. We face a greater risk if our competitors enter into strategic relationships with leading semiconductor manufacturers covering products addressing applications similar to those we sell or may develop,develop products for, as this could adversely affect our ability to sell products to those manufacturers.manufacturers for those applications. We also face greater risk if our competitors acquire, or otherwise obtain control over, third parties that supply us with key intellectual property, technology, materials, components, software, or other inputs critical to our products and processes, as this could limit or condition our access to these inputs, result in the termination or non‑renewal of licenses or supply arrangements, restrict our ability to use or develop certain technologies, or otherwise disadvantage us relative to our competitors, which could adversely affect our product development, processes, and competitive position.

We believe that to remain competitive we must devote significant financial resources to offer products that meet our customers’ needs, to maintain customer service and support centers worldwide, and to invest in product and process R&D. Technological changes and developing technologies have required, and are expected to continue to require, new and costly investments. Certain of our competitors, including those that are created and financially backed by foreign governments, have substantially greater financial resources and more extensive engineering, manufacturing, marketing, and customer service and support resources than we do and therefore have the potential to offer customers a more comprehensive array of products and/or product capabilitiescapabilities, andwhich enables them to therefore achieve additional relative success in the semiconductor equipment industry. These competitors may deeply discount or give away products similar to those that we sell, challenging or even exceeding our ability to make similar accommodations and threatening our ability to sell those products. We also face competition from our own customers, who in some instances have established affiliated entities that manufacture equipment similar to ours. In addition, we face competition from companies that exist in a more favorable legal or regulatory environment than we do, who are able to sell products for certain applications at certain customers that we are prohibited from selling to under applicable export controls, allowing the freedom of action in ways that we may be unable to match and potentially contributing to the strengthening of such companies’ ability to compete with us. In many cases, speed to solution is necessary for customer satisfaction and our competitors may be better positioned to achieve these objectives. For these reasons, we may fail to continue to compete successfully worldwide.

The semiconductor capital equipment industry has historically been characterized by rapid changes in demand. Variability in our customers’ business plans may lead to changes in demand for our equipment and services, which could negatively impact our results.results of operations and cash flows. The variability in our customers’ investments during any particular period is dependent on several factors, including, but not limited to, electronics demand, economic conditions (both general and in the semiconductor and electronics industries), industry supply and demand, prices for semiconductors, and our customers’ ability to develop and manufacture increasingly complex and costly semiconductor devices. The changes in demand may require our management to adjust spending and other resources allocated to operating activities, which can be made more challenging due to the multi-year nature of investments made in certain technology programs and other initiatives.

During periods of rapid growth or decline in demand for our products and services, we may face significant challenges in maintaining adequate financial and business controls, management processes, information systems, and procedures for training, assimilating, and managing our workforce, and in appropriately sizing our supply chain infrastructure and facilities, work force, and other components of our business on a timely basis. If we do not adequately meet these challenges during periods of increasing or declining demand, our grossresults marginsof operations and earningsfinancial condition may be negatively impacted.

We continuouslyregularly reassessassess our strategic resource allocation choices in response to the changing business environment. If we do not adequately adapt to the changing business environment, we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during a period of growth, which could have a material adverse effect on our business, reputation, results of operations, financial condition, and/or our market share, or we may expand our capacity and resources too rapidly and/or beyond what is appropriate for the actual demand environment, resultingwhich could result in excess fixed costs.costs and have a material adverse effect on our results of operations and financial condition. For example, the growth of AI technologies and related infrastructure has been and is expected to continue to be a significant driver of capital equipment expenditures by semiconductor manufacturers across both the memory and non-memory market segments and requires us to respond (sometimes rapidly) to changes in demand for our products and services, including by expanding our equipment manufacturing capabilities and hiring additional personnel. If we are unable to effectively scale our business to meet our customers’ requirements in response to AI-driven demand, we may lose market share, and our business, reputation, results of operations, and financial condition could be harmed.

Especially duringDuring transitional periods, as is the case with the rapid adoption of AI technologies, resource allocation decisions can have a significant impact on our future performance, particularly if we have not accurately anticipated industry changes. Our success will depend, to a significant extent, on the ability of our executive officers and other members of our senior management to identify and respond to these challenges effectively.

Our business depends on the capital equipment expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits. With the consolidation of customers within the industry, the semiconductor capital equipment market has in the past experienced and may in the future experience rapid changes in demand driven both by changes in the market generally and the plans and requirements of particular customers. The economic, regulatory, political, and business conditions occurring nationally, globally, or in any of our key sales regions, which are often unpredictable, have historically impacted and may in the future impact customer demand for our products and services and normal commercial relationships with our customers, suppliers, and creditors. Additionally, in times of economic uncertainty, our customers’ budgets for our products, or their ability to access credit to purchase them, could be adversely affected. This would limit their ability to purchase our products and services. As a result, changing economic, regulatory, political or business conditions can cause material adverse changes to our results of operations and financial condition, including, but not limited to:

Fluctuating levels of investment by semiconductor manufacturers may materially affect our aggregate shipments, revenues, operatingresults results,of operations, and earnings.cash flows. Where appropriate, we willendeavor to attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which sometimes result in restructuring charges. Even during periods of reduced revenues, we must continue to invest in R&D and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our profitability and other financial results.

Sales to a limited number of large customers constitute a significant portion of our overall shipments, revenue, cash flowsflows, and profitability. As a result, the actions of even one customer may subject us to variability in those areas that is difficult to predict. In addition, large customers may be able to negotiate requirements that result in decreased pricing, increased costs, and/or lower margins for usus, and limitations on our ability to share technology with others. Similarly, significant portions of our credit risk may, at any given time, be concentrated among a limited number of customers so that the failure of even one of these key customers to pay its obligations to us could significantly impact our results of operations, and financial results.condition.

Similarly, our customers may partner with, or follow the lead of, educational or research institutions that establish processes for accomplishing various tasks or manufacturing steps. If those institutions utilize a competitor’s equipment when they establish those processes, it is likely that customers will tend to use the same equipment in setting up their own manufacturing lines. Even if they select our equipment, the institutions and the customers that follow their lead could impose conditions on acceptance of that equipment, such as adherence to standards and requirements or limitations on how we license our proprietary rights, that increase our costs or require us to take on greater risk. These actions could adversely impact our market share and financial results.

Our Revenues and OperatingResults Resultsof Operations Are Variable

Our revenues and operatingresults resultsof operations may fluctuate significantly from quarter to quarter or year to year due to a number of factors, not all of which are in our control. We manage our expense levels based in part on our expectations of future revenues. Because our operating expenses are based in part on anticipated future revenues, and a certain amount of those expenses are relatively fixed, a change in the timing of recognition of revenue and/or the level of gross profit from a small number of transactions can unfavorably affect operatingresults resultsof operations in a particular quarter or year. Factors that may cause our financialresults resultsof operations to fluctuate unpredictably include, but are not limited to:

•legal, tax, accounting, or regulatory changes (including, but not limited to, changes in import/export regulations and tariffs, such as regulations imposed by the U.S. government restricting exports to China,China or regulations imposed by other countries restricting the export of certain materials or the re-export of products containing such materials, or potential additional tariffs on imports, and tariffs imposed by other countries) or changes in the interpretation or enforcement of existing requirements;

•transportation, communication, demand, information technology, or supply disruptions based on factors outside our control, such as strikes, actsforce ofmajeure God,events, wars, terrorist activities, international conflict, widespreadepidemics, outbreakpandemics, outbreaks of illness,diseases or other global health emergencies, or natural or man-made disasters (including disasters resulting from climate change), including earthquakes, wildfires, hurricanes, flooding, and heat waves;

•management of supply chain risks; and

Our business is dependent upon the use and protection of technology, data, intellectual property and other sensitive information, which may be owned by, or licensed to, us or third parties, such as our customers and vendors. We maintain and rely upon certain critical information systems for the creation, transmission, use and storage of much of this information, and for the effective operation of our business. These information systems include, but are not limited to, telecommunications, the Internet, our corporate intranet, various computer hardware and software applications (some of which may be integrated into the products that we sell or be required in order to provide the services that we offer), network communications, and email. These information systems may be owned and maintained by us, our outsourced providers, or third parties such as vendors, contractors, customers and Cloud providers. In addition, we make use of Software-as-a-Service (“SaaS”) products for certain important business functions that are provided by third parties and hosted on their own networks and servers, or third-party networks and servers, all of which rely on networks, email and/or the Internet for their function.

•the shutdown or disruption of the proper function of our products, services and/or operations;

•the unauthorized public release of customer financial and business plans, customer orders and operational results;

While we have implemented International Organization for Standardization (“ISO”) 27001 compliant security procedures and virus protection software, intrusion prevention systems, identity and access control, and emergency recovery processes, and we carefully select our third-party providers of information systems, to mitigate risks to the information systems that we rely on and to the technology, data, intellectual property and other sensitive information we seek to protect, those security procedures and mitigation and protection systems cannot be guaranteed to be fail-safe, and we may still suffer cybersecurity and other incidents, which could have a material adverse effect on our business or operations. It has been difficult and may continue to be difficult to hire and retain employees with substantial cybersecurity acumen. In addition, there have been and may continue to be instances of our policies and procedures not being effective in enabling us to identify risks, threats and incidents in a timely manner, or at all, to mitigate the impact of such incidents when they occur, or to respond expediently, appropriately and effectively when incidents occur and repair any damage caused by such incidents, and such occurrences could have a material adverse effect on our business.

Non-U.S. sales, as reflected in Part II Item 7. Results of Operations of this 2025 Form 10-K,sales accounted for approximately 93%, 93%, and 91%93% of total revenue in each of the fiscal years 2026, 2025, 2024, and 2023, respectively.2024. We expect that international sales will continue to account for a substantial majority of our total revenue in future years.

•domestic and international trade regulations, policies, practices, relations, disputesdisputes, and issues;

•domestic and international tariffs, export controlscontrols, and other barriers;

•developing customers and/or suppliers,suppliers who may have limited access to capital resources;

•our ability to respond to customer and foreign government demands for locally sourced systems, spare parts, and services and to develop the necessary relationships with local suppliers;

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) providesgenerally adiscusses descriptionfiscal ofyear our2026 resultsand of2025 operationsitems and year-to-year comparisons between fiscal year 2026 and 2025 and should be read in conjunction with our Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this 20252026 Form 10-K. MD&A consistsdiscussion of fiscal year 2024 items and year-to-year comparisons between fiscal year 2025 and 2024 that are not included in this 2026 Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the followingfiscal sections:year ended June 29, 2025.

We believe we are in a strong position with our leadership and expertise in deposition, etch, and clean markets to facilitate some of the most significant innovations in semiconductor device manufacturing. Our Customer Support Business Group provides products and services to maximize installed equipment performance, predictability, and operational efficiency. Several factors create opportunities for sustainable differentiation for us: (i) our focus on research and development, with several on-goingongoing programs relating to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with semi-ecosystem partners, including our close-to-customer focus; (iv) our ability to identify and invest in the breadth of our product portfolio to meet technology inflections; and (v) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.

Wafer fabrication equipment spending levelsinvestments were strong in the 2025 fiscalcalendar yearyear, drivenand byhave ancontinued increaseto grow in 2026 with the AI market driving higher semiconductor industry spending across both the memory and non-memory market segments. In the short term, volatility in the semiconductor industry environment from trade restrictions, tariffs, as well as other direct and indirect risks and uncertainties,uncertainties discussed in Part I, Item 1A, “Risk Factors,” have had, and in the future may have, a negative impact on our revenue and operating margin. Over the longer term, we believe that secular demand for semiconductors, combined with technology inflections in our industry, including 3D device scaling, multiple patterning, process flow, and advanced packaging chip integration, will drive sustainable growth and lead to an increase in the served available market for our products and services in the deposition, etch, and clean businesses.

Fiscal year 20252026 revenue increased 23.7%26.0% compared to fiscal year 2024,2025, driven by strong customer demand for semiconductor equipment systemssystems, particularly from customers within the foundry market segment, as well as customer support-related revenues from customer investments across memory and non-memory markets.revenues. Gross margin as a percentage of revenue increased in fiscal year 20252026 compared to fiscal year 20242025 largely due to improved factory efficiencies and favorable productcustomer mix, partially offset by increasedaluminum transformationaland charges.steel tariff-related spend. The increase in operating expenses in fiscal year 20252026 compared to fiscal year 20242025 was drivenprimarily bydue higherto employee-related costs primarily as a result offrom increased headcount, increased spending on transformational activities,headcount and higher outsidesupplies servicespending expense.for research and development.

The increase in gross margin as a percentage of revenue for fiscal year 20252026 compared to fiscal year 20242025 was largely due to improved factory efficiencies and favorable productcustomer mix, partially offset by increasedaluminum transformationaland charges.steel tariff-related spend.

We continued to make significant R&D investments focused on leading-edge deposition, etch, clean, and other semiconductor manufacturing processes. TheFiscal increaseyear in2026 R&D expense duringincreased versus fiscal year 20252025, compareddue to fiscal year 2024 was primarily driven by an increase of $118$131.4 million in employee-related costs mainly as a result offrom increased headcount and $35$69.8 million in higher outsideengineering servicesupplies expense, inclusive of transformational and lab-related activities.expense.

The increase in SG&A expense during fiscal year 20252026 compared to fiscal year 20242025 was primarilymainly driven by an increase of $112$180.0 million in employee-related costs as a result of increasedadditional headcount.

Interest income decreased in fiscal year 20252026 compared to fiscal year 20242025 primarily due to lower interest rates,rates partiallyas offsetwell byas higheran impact from slightly lower average invested cash balances.balances Interestversus incomethe increasedprior in fiscal year 2024 compared to fiscal year 2023 primarily because of higher yields and higher cash balances.year.

Interest expense decreased in fiscal year 20252026 compared to fiscal year 20242025 primarily due to the maturity of $500$750.0 million of the Company’s seniorSenior notesNotes in March 2025. Interest expense was flat in fiscal year 2024 compared to fiscal year 2023.2026.

The gains on deferred compensation plan related assets, net were driven by fluctuations in the fair market value of the underlying funds for all periods presented.funds.

Foreign exchange fluctuations were primarily due to currency movements against portions of our unhedged balance sheet exposures for all periods presented.exposures.

The variation in other, net for the fiscal year 20252026 compared to fiscal yearsyear 2024 and 20232025 was primarily driven by fluctuations in the fair market value of equity investments.

The decreaseincrease in the effective tax rate in fiscal year 20252026 as compared to fiscal year 20242025 was primarily due to the recognition of previously unrecognized tax benefits from lapses of statutes of limitation in fiscal year 2025 and Global Minimum Tax (“GMT”) being fully effective in fiscal year 2026, offset by the change in level and proportion of income in higher and lower tax jurisdictions.jurisdictions and higher stock-based compensation excess tax benefits in fiscal year 2026.

International revenues account for a significant portion of our total revenues, such that a material portion of our pre-tax income is earned and taxed outside the United States. International pre-tax income is generally taxable in the United States at a lower effective tax rate than the federal statutory tax rate. Please refer to Note 7: Income Taxes ofto our Consolidated Financial Statements in Part II, Item 8 ofto this 20252026 Form 10-K.10-K for additional information.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law by U.S. President Donald Trump. The impact on income taxes due to change in legislation is required, under Accounting Standards Codification (“ASC”) 740, Income Taxes, to be recognized in the period in which the law is enacted, which iswas during ourthis fiscal year 2026.year. In general, the OBBBA introducesintroduced changes to U.S. taxation, including changes in the taxation of non-U.S. income. We are currently assessingassessed the potential implications of these changes toand ourconcluded that they were not material. The impact has been included within income tax expense in fiscal year 2026 Consolidated Financial Statements.2026.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Our gross deferred tax assets were $1,897$2.26 millionbillion and $1,516$1.90 millionbillion at the end of fiscal years 20252026 and 2024,2025, respectively. These gross deferred tax assets were offset by gross deferred tax liabilities of $197$235.5 million and $218$197.3 million and a valuation allowance primarily representing our entire California deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income in California of $424$464.1 million and $389$424.3 million at the end of fiscal years 20252026 and 2024,2025, respectively. The change in gross deferred tax assets, gross deferred tax liabilities, and valuation allowance between fiscal year 20252026 and 20242025 is primarily due to increases in gross deferred tax assets for outside basis differences of foreign subsidiaries.

Revenue Recognition: We generally consider documentation of terms with an approved purchase order as a customer contract, provided that collection is considered probable, which is assessed based on the creditworthiness of the customer as determined by credit checks, payment histories, and/or other circumstances. The transaction price for our contracts with customers is allocated among the identified performance obligations and consists of both fixed and variable consideration provided it is probable that a significant reversal of revenue will not occur when the uncertainty related to variable consideration is resolved. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration includes estimates for discounts and credits for future usage which are based on contractual terms outlined in volume purchase agreements and other factors known at the time. We generally invoice customers at shipment and for professional services as provided. Revenue for systems and spares are recognized at a point in time, which is generally upon shipment or delivery. Revenue from services is recognized over time as services are completed or ratably over the contractual period of generally one year or less. Revenue is recognized in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We elect to use the practical expedient afforded in the accounting guidance and therefore do not disclose remaining performance obligations for contracts with a

Total gross cash, cash equivalents, and restricted cash balances were $6.4$5.60 billion at the end of fiscal year 20252026 compared to $5.9$6.41 billion at the end of fiscal year 2024.2025. This increasedecrease was primarily due to cash provided by operating activities, partially offset by Common Stock repurchases in connection with our stock repurchase program, dividends paid, capital expenditures, and principal payments on debt instruments.instruments, partially offset by cash provided by operating activities.

Net cash provided by operating activities of $6.2$5.86 billion and $6.17 billion during fiscal year 20252026 and 2025, respectively, consisted of (in thousands):

Significant changes in operating asset and liability accounts, net of foreign exchange impact, during fiscal year 2025 included the following sources of cash: increases in deferred gross profit of $1.1$1.15 billion, accrued expenses and other liabilities of $328$328.3 million, and accounts payable of $212$212.0 million. These sources of cash arewere offset by the following uses of cash: increases in accounts receivable of $859$858.7 million, prepaid expenses and other current assets of $207$206.7 million, and inventory of $181$180.7 million.

Rapid technological changes in semiconductor manufacturing processes subject us to increased pressure to develop technological advances that enable those processes. We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products or existing products have reliability, quality, design, or safety problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance of and payment for new products, and additional service and warranty expenses.expenses, Weand mayloss beof market share. If we are unable to develop and manufacture products successfully, or the products that we introduce may fail in the marketplace.marketplace, our business, results of operations and financial condition could be materially and adversely affected. For more than 25 years, the primary driver of technology advancement in the semiconductor industry has been to shrink the lithography that prints the circuit design on semiconductor chips. That driver could be approaching its technological limit, leading semiconductor manufacturers to investigate more complex changes in multiple technologies in an effort to continue technology development. In addition, the emergence of “big data” and new tools such as machine learning and artificial intelligence (“AI”) that capitalize on the availability of large data sets is leading semiconductor manufacturers and equipment manufacturers to pursue new products and approaches that exploit those tools to advance technology development. In the face of uncertainty on which technology solutions will become successful, we will need to focus our efforts on developing the technology changes that are ultimately successful in supporting our customers’ requirements. Our failure to develop and offer the correct technology solutions in a timely manner with productive and cost-effective products could adversely affect our business in a material way. Our failure to commercialize new products in a timely manner could result in loss of market share, unanticipated costs, and inventory obsolescence, which would adversely affect our financial results.

We face significant competition from multiple competitors, and our competitors may be able to develop products comparable or superior to those we offer or may adapt more quickly to new technologies or evolving customer requirements. In particular, while we continue to develop product enhancements that we believe will address future customer requirements, we may fail in a timely manner to identify those future customer requirements, to devote appropriate resources to developing products to address those requirements, or to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, competition may intensify, and we may be unable to continue to compete successfully in our markets, which could have a material adverse effect on our revenues, operating results, financial condition, and/or cash flows.

With increased consolidation efforts in our industry, as well as the emergence and strengthening of new, regional competitors,competitors and the potentially disruptive impact of AI, we may face increasing competitive pressures. Other companies continue to develop systems and/or acquire businesses and products that are competitive to ours and may introduce new products and product capabilities that may affect our ability to sell and support our existing products. We face a greater risk if our competitors enter into strategic relationships with leading semiconductor manufacturers covering products similar to those we sell or may develop, as this could adversely affect our ability to sell products to those manufacturers.

The semiconductor capital equipment industry has historically been characterized by rapid changes in demand. Variability in our customers’ business plans may lead to changes in demand for our equipment and services, which could negatively impact our results.results of operations and cash flows. The variability in our customers’ investments during any particular period is dependent on several factors, including, but not limited to, electronics demand, economic conditions (both general and in the semiconductor and electronics industries), industry supply and demand, prices for semiconductors, and our customers’ ability to develop and manufacture increasingly complex and costly semiconductor devices. The changes in demand may require our management to adjust spending and other resources allocated to operating activities, which can be made more challenging due to the multi-year nature of investments made in certain technology programs and other initiatives.

We continuouslyregularly reassessassess our strategic resource allocation choices in response to the changing business environment. If we do not adequately adapt to the changing business environment, we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during a period of growth, or we may expand our capacity and resources too rapidly and/or beyond what is appropriate for the actual demand environment, resulting in excess fixed costs.

Fluctuating levels of investment by semiconductor manufacturers may materially affect our aggregate shipments, revenues, operating results, and earnings. Where appropriate, we will attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which sometimes result in restructuring charges. Even during periods of reduced revenues, we must continue to invest in R&D and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our profitability and other financial results.

Our revenues and operating results may fluctuate significantly from quarter to quarter or year to year due to a number of factors, not all of which are in our control. We manage our expense levels based in part on our expectations of future revenues. Because our operating expenses are based in part on anticipated future revenues, and a certain amount of those expenses are relatively fixed, a change in the timing of recognition of revenue and/or the level of gross profit from a small number of transactions can unfavorably affect operating results in a particular quarter or year. Factors that may cause our financial results to fluctuate unpredictably include, but are not limited to:

•transportation, communication, demand, information technology, or supply disruptions based on factors outside our control, such as strikes, acts of God, wars, terrorist activities, international conflict, widespreadepidemics, outbreakpandemics, outbreaks of illness,diseases or other global health emergencies, or natural or man-made disasters (including disasters resulting from climate change), including earthquakes, wildfires, hurricanes, flooding, and heat waves;

Non-U.S. sales, as reflected in Part I Item 2. Results of Operations of this quarterly report on Form 10-Q, accounted for approximately 95%,94%, 93%, and 93% of total revenue in the sixnine months ended DecemberMarch 28,29, 20252026 and fiscal years 2025, and 2024, respectively. We expect that international sales will continue to account for a substantial majority of our total revenue in future years.

Tariffs, export controls, additional taxes, trade barriers, sanctions, the termination or modification of trade agreements, trade zones, and other duty mitigation initiatives, and any reciprocal retaliatory actions, can increase our manufacturing costs, decrease margins, reduce the competitiveness of our products, disrupt our supply chain operations, or inhibit our ability to sell products or provide services, which has had and in the future could have a material adverse effect on our business, results of operations, or financial conditions. Certain of our international sales depend on our ability to obtain export licenses from the U.S. or foreign governments. Our inability to obtain such licenses, or an expansion of the number or kinds of sales for which export licenses are required, has limited and could in the future further limit the market for our products and has had and could in the future have an adverse impact on our revenues. As is discussed below under the heading “Our Sales to Customers in China, a Significant Region for Us, Have Been Impacted, and are Likely to Be Materially and Adversely Affected by Export License Requirements and Other Regulatory Changes, or Other Governmental Actions in the Course of the Trade Relationship Between the U.S. and China,” the U.S. government has in recent years imposed new controls, including expanded export license requirements and restrictions on sales to certain Chinese entities that significantly impact trade with China. In addition, the U.S. government has an ongoing process of assessing technologies that may be subject to new or additional export controls, and it is possible that such additional controls, if and when imposed, could further adversely impact our ability to sell our products outside the U.S. The implementation by the U.S. government of broad export controls restricting access to our technology (such as recent controls limiting exports to China) may cause customers with international operations to reconsider their use of and reliance on our products, which could adversely impact our future revenue and profits and strengthen competitors who are not subject to such restrictions. Furthermore, there are risks that foreign governments may, among other things, take retaliatory actions; insist on the use of local suppliers; compel companies to partner with local companies to design and supply equipment on a local basis, requiring the transfer of intellectual property rights and/or local manufacturing; utilize their influence over their judicial systems to respond to intellectual property disputes or issues; and provide special incentives to government-backed local customers to buy from local competitors, even if their products are inferior to ours; all of which could adversely impact our ability to compete as well as our revenues and margins. For example, recentlyChina is the primary source of supply of certain rare earth elements critical to the manufacture of certain of our products. The Chinese government has implemented (and then suspended)imposed export controls applicableand tolicense requirements on certain rare earth elements and on certain products containingthat contain Chinese-origin rare earth elements,elements which,that ifare implementedmanufactured outside of China (which have been suspended in theirpart currentuntil November 2026 (unless extended)) and could expand such controls or similarlicensing form,requirements mayin the future. Such measures could delay or prevent our suppliers from sourcing the materials, or producing the components, required for us to manufacture our products, and increase the costs of such materials or components. In addition, to the extent these controls require us to obtain export licenses for certain of our products that are manufactured outside of China, we would experience increased compliance burdens, may be unable to obtain the required licenses, and may havebe anunable adverseto impactobtain materials or components necessary to meet our production requirements or product specifications in a timely manner, or at all, or on commercially acceptable terms. The occurrence of any of these risks could materially and adversely affect our business, revenues,results of operations, financial condition, and margins.

We are exposed to potentially adverse movements in foreign currency exchange rates. The majority of our sales and expenses are denominated in U.S. dollars. However, we are exposed to foreign currency exchange rate fluctuations primarily related to revenues denominated in Japanese yen and expenses denominated in euro, Korean won, Malaysian ringgit, and Indian rupee. Currently, we hedge certain anticipated foreign currency cash flows, primarily anticipated revenues denominated in Japanese yen and expenses denominated in euro, Korean won, Malaysian ringgit, and Indian rupee. In addition, we enter into foreign currency hedge contracts to minimize the short-term impact of the foreign currency exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities, primarily third-party accounts receivables, accounts payables, and intercompany receivables and payables. We believe these are our primary exposures to currency rate fluctuation. We expect to continue to enter into hedging transactions, for the purposes outlined, for the foreseeable future. However, these hedging transactions may not achieve their desired effect because differences between the actual timing of the underlying exposures and our forecasts of those exposures may leave us either over or under hedged on any given transaction. Moreover, by hedging these foreign currency denominated revenues, expenses, monetary assets, and liabilities, we may miss favorable currency trends that would have been advantageous to us but for the hedges. Additionally, we are exposed to short-term foreign currency exchange rate fluctuations on non-U.S. dollar-denominated monetary assets and liabilities (other than those currency exposures previously discussed), and currently we do not enter into foreign currency hedge contracts against these exposures. Therefore, we are subject to potential unfavorable foreign currency exchange rate fluctuations to the extent that we transact business (including intercompany transactions) in these currencies.

Our supply chain has played and will continue to play a key role in our product development, manufacturing operations, field installation and support. Our business depends on our timely supply of products and services to meet the demand from our customers, which depends in significant part on the timely delivery of parts, materials and services, including components and subassemblies, from our direct suppliers to us, and to our direct suppliers by other companies. In addition, outsource providers have played and will continue to play a key role both in the manufacturing and customer-focused operations described above, and in many of our transactional and administrative functions, such as information technology, facilities management, and certain elements of our finance organization. These providers and suppliers might suffer financial setbacks, be acquired by third parties that restrict or preclude further business with us, become subject to exclusivity arrangements that preclude further business with us, or be unable to meet our requirements or expectation due to their independent business decisions or force majeure events that could interrupt or impair their continued ability to perform as we expect. We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver or install products or perform services or to recognize revenue, increased costs or customer order cancellations as a result of:

Although we attempt to select reputable providers and suppliers and we attempt to secure their performance on terms documented in written contracts, it is possible that one or more of these providers or suppliers could fail to perform as we expect, or fail to secure or protect intellectual property rights, and such failure could have an adverse impact on our business. In some cases, the requirements of our business mandate that we obtain certain components and sub-assemblies included in our products from a single supplier or a limited group of suppliers. Where practical, we endeavor to establish alternative sources to mitigate the risk that the failure of any single provider or supplier will adversely affect our business, but this is not feasible in all circumstances. Some key parts are subject to long lead-times or available only from a single supplier or limited group of suppliers, and some sourcing or subassembly is provided by suppliers located in countries other than the countries where we conduct our manufacturing. There is therefore a risk that a prolonged inability to obtain certain components or secure key services could impair our ability to manage operations, ship products, and generate revenues, which could adversely affect our operating results and damage our customer relationships.

We have in the past undertaken, and may in the future undertake, business restructuring, realignment and transformation plans or initiatives. While such plans or initiatives would generally have the goal of strengthening our operations and/or achieving operational efficiencies, there can be no assurance that we will be successful in these plans and initiatives. Implementation of such plans and initiatives may be costly and disruptive to our business, we may not be able to complete them at the cost or within the time frame contemplated, and we may not be able to obtain the anticipated benefits within the projected timing or at all. Restructuring and transformation may adversely affect our internal programs and our ability to recruit and retain skilled and motivated personnel, may result in a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods, may require a significant amount of management and other employees' time and focus, and may be distracting to employees and management, which may divert attention from operating and growing our business. Additionally, reductions in our workforce may cause a reduction in our production output capabilities which could impact our ability to manufacture or ship products to customers within a mutually beneficial timeline. If we fail to achieve some or all of the expected benefits, it could have a material adverse effect on our business, operations, financial condition, results of operations and competitive position.

While we maintain business continuity plans, our manufacturing and R&D facilities are concentrated in a limited number of locations. These locations are subject to disruption for a variety of reasons, such as natural or man-made disasters (including disasters resulting from climate change), including earthquakes, wildfires, hurricanes, flooding, and heat waves, widespreadepidemics, pandemics, outbreaks of illness,diseases or other global health emergencies, war, terrorist activities, political or governmental unrest or instability, disruptions of our information technology resources, utility interruptions, international conflict, or other events beyond our control. Such disruptions may cause delays in developing or shipping our products, in engaging with customers on new product applications, or in supporting customers, which could result in the loss of business or customer trust, adversely affecting our business and operating results.

Our ability to compete successfully depends in large part on our ability to attract, retain, and motivate key employees with the appropriate skills, experiences and competencies. This has been and may continue to be an ongoing challenge due to intense competition for top talent, fluctuations in industry or business economic conditions, as well as increasing geographic expansion, and these factors in combination may result in cycles of hiring activity and workforce reductions. Our success in hiring depends on a variety of factors, including the attractiveness of our compensation and benefit programs, global economic or political and industry conditions, our organizational structure, global competition for talent and the availability of qualified employees, the availability of career development opportunities, the ability to obtain necessary authorizations for workers to provide services outside their home countries, and our ability to offer a challenging and rewarding work environment. We periodically evaluate our overall compensation and benefit programs and make adjustments, as appropriate, to maintain or enhance their competitiveness. If we are not able to successfully attract, retain, and motivate key employees, we may be unable to capitalize on market opportunities and our operating results may be materially and adversely affected.

China represents a large and fast-developing market for the semiconductor equipment industry and therefore is important to our business. Revenue in China, which includes global customers and domestic Chinese customers with manufacturing facilities in China, represented approximately 39%,37%, 34%, and 42% of our total revenue for the sixnine months ended DecemberMarch 28,29, 20252026 and fiscal years 2025 and 2024, respectively. The U.S. and China have historically had a complex relationship that has included actions that have impacted trade between the two countries. In recent years, these actions have included an expansion of export license requirements imposed by the U.S. government, which have limited the market for our products, adversely impacted our revenues, and increased our exposure to foreign competition, and could potentially do so to an even greater extent in the future. Additionally, the U.S. government has enacted rules aimed at restricting China’s ability to manufacture advanced semiconductors, which include restrictions on exports, reexports or transfers to, or shipping, transmitting, transferring, or facilitating such movement to, or performing services at, customer facilities in China engaged in certain technology end-uses, without appropriate authorizations obtained from U.S. authorities. The U.S. Department of Commerce has also enacted rules that have expanded export license requirements for U.S. companies to sell certain items to companies and other end-users in China that are designated as military end-users or have operations that could support military end uses; has added additional Chinese companies to its restricted entity list and unverified list under suspicion of military-civil fusion, support of Russia, or other factors associated with a broadening scope of national security concerns; and has expanded an existing rule (referred to as the foreign direct product rule) in a manner that could cause foreign-made wafers, chipsets, and certain related items produced with many of our products to be subject to U.S. licensing requirements if Huawei Technologies Co. Ltd (“Huawei”) or its affiliates are parties to a transaction involving the items. These rules have required and may require us to apply for and obtain additional export licenses to supply certain of our products to customers in China, and there is no assurance that we will be issued licenses that we apply for on a timely basis or at all. In addition, our customers (including, but not limited to, Chinese customers) may require U.S. export licenses for the use of our products in order to manufacture products, including semiconductor wafers and integrated circuits, for those of their customers (i.e. Huawei and its affiliates) that are subject to the expanded foreign direct product rule, which may adversely impact the demand for our products. The U.S. Department of Commerce could in the future add additional Chinese companies to its restricted entity list or unverified list or take other actions that could expand licensing requirements or otherwise impact the market for our products and our revenue. The implementation, interpretation, and impact on our business of these rules and other regulatory actions taken by the U.S. government is uncertain and evolving, and these rules, other regulatory actions or changes, and other actions taken by the governments of either the U.S. or China, or both, that have occurred and may occur in the future could weaken our competitive position and materially and adversely affect our results of operations.

Our Leverage and Debt Service Obligations May Adversely Affect Our Financial Condition,Condition and Results of Operations, and Earnings per ShareOperations

We have $4.5$3.75 billion in aggregate principal amount of senior unsecured notes outstanding (the “Senior Notes”). Additionally, we have funding available to us under our $1.5$2.00 billion commercial paper program and our $2.0$2.00 billion revolving credit facility, which serves as a backstop to our commercial paper program. Our revolving credit facility also includes an option to increase the amount up to an

to an additional $750.0 million, for a potential total commitment of $2.75 billion. We may, in the future, decide to enter into additional debt arrangements.

As part of our hedging activities, we enter into transactions involving derivative financial instruments, which may include forward contracts, option contracts, collars and swaps with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions both in and outoutside of the United States. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions, which may be heightened during economic downturns and periods of uncertainty or volatility in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default, or our assets deposited or held in accounts with such counterparty, may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operationsoperations, financial condition, and financial condition.liquidity.

With the exception of historical facts, the statements contained in this discussion are forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Certain, but not all, of the forward-looking statements in this report are specifically identified as forward-looking, by use of phrases and words such as “believe,” “estimated,” “anticipate,” “expect,” “probable,” “intend,” “plan,” “aim,” “may,” “should,” “could,” “would,” “will,” “continue,” and other future-oriented terms. The identification of certain statements as “forward-looking” does not mean that other statements not specifically identified are not forward-looking. Forward-looking statements include, but are not limited to, statements that relate to: trends and opportunities in the global economic environment; trends and opportunities in the semiconductor industry, including in the end markets and applications for semiconductors, in device complexity, and in the complexity of device manufacturing; growth or decline in the industry and the market for, and spending on, wafer fabrication equipment; the anticipated levels of, and rates of change in, margins, market share, served available market, capital expenditures, research and development expenditures, international sales, revenue (actual and/or deferred), operating expenses and earnings generally; management’s plans and objectives for our current and future operations and business focus; restructuring activities; business process improvements and initiatives; volatility in our quarterly results; the makeup of our customer base; customer and end user requirements and our ability to satisfy those requirements; the performance and benefits of our products and services; customer spending and demand for our products and services, and the reliability of indicators of change in customer spending and demand; the effect of variability in our customers’ business plans or demand for our products and services; our competition, and our ability to defend our market share and to gain new market share; the success of joint development and collaboration relationships with customers, suppliers, or others; outsourced activities; our supply chain and the role of suppliers in our business, including the impacts of supply chain constraints and material costs; our leadership and competency, and our ability to facilitate innovation; our research and development programs; the opportunities in our industry for, and our ability to create sustainable differentiation; technology inflections in the industry and our ability to identify those inflections and to invest in research and development programs to meet them; our ability to deliver multi-product solutions; the resources invested to comply with evolving standards and the impact of such efforts; changes in state, federal and international tax laws, our estimated annual tax rate and the factors that affect our tax rates; legal and regulatory compliance; the estimates we make, and the accruals we record, in order to implement our critical accounting policies (including, but not limited to, the adequacy of prior tax payments, future tax benefits or liabilities, and the adequacy of our accruals relating to them); hedging transactions; debt or financing arrangements; our investment portfolio; our access to capital markets; uses of, payments of, and impact of interest rate fluctuations on, our debt; our intention to pay quarterly dividends and the amounts thereof, if any; our ability and intention to repurchase our shares; credit risks; controls and procedures; recognition or amortization of expenses; our ability to manage and grow our cash position; our ability to scale our operations to respond to changes in our business; our goals and initiatives with respect to environmental, social and governance matters, including emissions, and human capital, the value of our patents; the materiality of potential losses arising from legal proceedings; the probability of making payments under our guarantees; and the sufficiency of our financial resources or liquidity to support future business activities (including, but not limited to, operations, investments, debt service requirements, dividends, and capital expenditures). Such statements are based on current expectations and are subject to risks, uncertainties, and changes in condition, significance, value, and effect, including without limitation those discussed below under the heading “Risk Factors” within Part II Item 1A and elsewhere in this report and other documents we file from time to time with the Securities and Exchange Commission (“SEC”), such as our annual report on Form 10-K for the year ended June 29, 2025 (our “2025 Form 10-K”), and our current reports on Form 8-K. Such risks, uncertainties, and changes in condition, significance, value, and effect could cause our actual results to differ materially from those expressed in this report and in ways not readily foreseeable. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on information currently and reasonably known to us. We do not undertake any obligation to release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances that occur after the date of this report or to reflect the occurrence or effect of anticipated or unanticipated events.

For a full understanding of our financial position and results of operations for the three and sixnine months ended DecemberMarch 28,29, 2025,2026, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations below, you should also read the Condensed Consolidated Financial Statements and notes presented in this Form 10-Q and the financial statements and notes in our annual report on form 10-K for the year ended June 29, 2025 (our “2025 Form 10-K.10-K”).

Demand from cloud computing, artificial intelligence,intelligence (“AI”), 5G, the Internet of Things, and other markets is driving the need for increasingly powerful and cost-efficient semiconductors. At the same time, there are growing technical challenges with traditional two-dimensional scaling. These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical scaling strategies like three-dimensional architecture as well as multiple patterning to enable shrinks.

Wafer fabrication equipment spending levelsinvestments were strong in the 2025 calendar yearyear, drivenand bywe believe there will be continued growth in 2026 with the AI market driving higher levels of semiconductor demandindustry leadingspending to an increase inacross both the memory and non-memory market segments. In the short term, volatility in the semiconductor industry environment from trade restrictions, tariffs, as well as other direct and indirect risks and uncertainties,uncertainties discussed in Part II, Item 1A, “Risk Factors,” have had, and in the future may have, a negative impact on our revenue and operating margin. Over the longer term, we believe that secular demand for semiconductors, combined with technology inflections in our industry, including 3D device scaling, multiple patterning, process flow, and advanced packaging chip integration, will drive sustainable growth and lead to an increase in the served available market for our products and services in the deposition, etch, and clean businesses.

In the DecemberMarch 20252026 quarter, revenue wasincreased up slightly9% compared to the three months ended SeptemberDecember 28, 2025 (the “SeptemberDecember 2025 quarter”), driven by an increase in systems revenue primarily resulting from increased customer investments in the DRAM market segment as increaseswell as an increase in customer support-related revenue weremainly largelytied to our expanding installed base and higher spares, upgrades and services revenue, partially offset by decreases in systems revenue due to timing ofdecreased customer investments.spend on non-leading-edge equipment. The deferred revenue balance was $2.25$2.22 billion at the end of the DecemberMarch 20252026 quarter, down slightly relative to the balance at the end of the SeptemberDecember 2025 quarter of $2.77$2.25 billion,billion. due to aThe decrease in the deferred revenue balance included approximately $300 million of decreases in customer down payments.payments that were largely offset by increases across other components of deferred revenue balance associated with growing business levels.

The decreaseincrease in gross margin as a percentage of revenue in the DecemberMarch 20252026 quarter compared to the SeptemberDecember 2025 quarter was primarily a result of unfavorableimproved changesfactory efficiencies. The increase in customer mix. The operating expenses in the DecemberMarch 20252026 quarter were relatively flat compared to the SeptemberDecember 2025 quarter.quarter was primarily driven by an increase in employee-related costs as a result of beginning of calendar year seasonality and higher headcount, as well as higher costs associated with workforce optimization, partially offset by lower elective deferred compensation plan-related costs and decreased outside service spend.

Our cash, cash equivalents, and restricted cash balances decreased to $6.2$4.77 billion at the end of the March 2026 quarter compared to $6.20 billion at the end of the December 2025 quarter compared to $6.7 billion at the end of the September 2025 quarter. This decrease was primarily the result of $1,466.2$1.16 millionbillion of share repurchases, including net share settlement of employee stock-based compensation and excise tax; $327.5$751.2 million of principal payments on debt instruments and debt issuance costs; $331.6 million of capital expenditures; and $325.8 million of dividends paid to stockholders; and $260.9 million of capital expenditures,stockholders, partially offset by $1,480.0$1.14 millionbillion of cash generated from operating activities. Employee headcount as of DecemberMarch 28,29, 20252026 was approximately 19,700.20,600.

The decrease in the foundry market segment for the DecemberMarch 20252026 quarter compared to the SeptemberDecember 2025 quarter was primarily driven by lower mature node investments, while the memory market segment saw strengthened investments across both DRAM investments offset by lowerand non-volatile memory spending.memory.

Gross margin as a percentage of revenue decreasedincreased in the DecemberMarch 20252026 quarter compared to the SeptemberDecember 2025 quarterquarter, driven primarilymainly by unfavorableimproved changesfactory in customer mix.efficiencies.

The increase in gross margin as a percentage of revenue in the sixnine months ended DecemberMarch 28,29, 20252026 compared to the same period in the prior year was primarily due to favorable changes in customer mix, partiallyslightly offset by reduced factory efficiencies from higher tariff-related spend.

We continued to make significant R&D investments in the DecemberMarch 20252026 quarter focused on leading-edge deposition, etch, clean and other semiconductor manufacturing processes. R&D expense in the DecemberMarch 20252026 quarter was relatively flatincreased compared to the SeptemberDecember 2025 quarter.quarter primarily driven by employee-related spend as a result of beginning of calendar year seasonality and higher headcount as well as increased costs related to workforce optimization, partially offset by lower elective deferred compensation plan-related costs.

R&D expense in the sixnine months ended DecemberMarch 28,29, 20252026 increased compared to the same period in the prior year, drivenmainly bytied higherto employee-related costs as a result of increasedhigher headcountheadcount, and increased spendingsupplies onspending, supplies.and depreciation expense.

SG&A expense in the sixnine months ended DecemberMarch 28,29, 20252026 increased compared to the same period in the prior year, primarily as a result of higher employee-related costs due to increasedhigher headcount.

Interest income decreased in the DecemberMarch 20252026 quarter compared to the SeptemberDecember 2025 quarter, primarily due to lower cash balances and lower interest rates. Interest income decreased in the sixnine months ended DecemberMarch 28,29, 20252026 compared to the same period in the prior year, primarily due to lower interest rates, partially offset by higher cash balances.rates.

Interest expense was flatdecreased in the DecemberMarch 20252026 quarter compared to the SeptemberDecember 2025 quarter.quarter, primarily due to the maturity of $750.0 million of the Company’s senior notes in March 2026. Interest expense decreased in the sixnine months ended DecemberMarch 28,29, 20252026 compared to the same period in the prior year primarily due to the maturity of $500$500.0 million of the Company’s senior notes in March 2025.

The gains and losses on deferred compensation plan-related assets, net were driven by fluctuations in the fair market value of the underlying funds for all periods presented.

The variation in other, net in the DecemberMarch 20252026 quarter and the sixnine months ended DecemberMarch 28,29, 20252026 compared to the SeptemberDecember 2025 quarter and to the same nine-month period in the prior year was primarily driven by fluctuations in the fair market value of equity investments.

The decrease in the effective tax rate for the DecemberMarch 20252026 quarter compared to the SeptemberDecember 2025 quarter was primarily due to higher stock-based compensation excess tax benefits and the revaluationrecognition of deferredpreviously taxesunrecognized duetax to changesbenefits in the U.S.March taxation of non-U.S. income under OBBBA in the September 20252026 quarter.

Total gross cash, cash equivalents, and restricted cash balances were $6.2$4.77 billion at DecemberMarch 28,29, 20252026 compared to $6.4$6.41 billion as of June 29, 2025. The decrease was primarily driven by $2.44$3.60 billion of share repurchases, including net share settlement on employee stock-based compensation and excise tax; $619.5$945.3 million in dividends paid; and $446.0$777.6 million in capital expenditures, and $754.1 million of principal payments on debt instruments and debt issuance costs, partially offset by cash generated from operating activities totaling $3.26$4.40 billion.

Net cash provided by operating activities of $3.26$4.40 billion during the sixnine months ended DecemberMarch 28,29, 20252026 consisted of (in thousands):

Changes in operating asset and liability accounts, net of foreign exchange impact, included the following sources of cash: decreases in inventory of $211.8$224.2 million and prepaid expenses and other current assets of $118.5$136.0 million, and increasesan increase in accounts payable of $110.7$223.8 million. These sources of cash were offset by the following uses of cash: decreasesan increase in deferredaccounts gross profitreceivable of $400.8$756.2 million and decreases in accrued expenses and other liabilities of $103.5$407.5 million,million and increasesdeferred ingross accounts receivableprofit of $116.0$474.3 million.

Net cash used for investing activities during the sixnine months ended DecemberMarch 28,29, 20252026 was $443.8$778.4 million, primarily consisting of capital expenditures.expenditures for manufacturing capacity and lab infrastructure investments.

Net cash used for financing activities during the sixnine months ended DecemberMarch 28,29, 20252026 was $3.01$5.24 billion, primarily consisting of $2.44$3.60 billion in treasury stock repurchases, including net share settlement on employee stock-based compensation and excise taxtax, and $619.5$945.3 million in dividends paid.paid, and $754.1 million of principal payments on debt instruments and debt issuance costs.

Given that the semiconductor industry is highly competitive and has historically experienced rapid changes in demand, we believe that maintaining sufficient liquidity reserves is important to support sustaining levels of investment in R&D and capital infrastructure. Anticipated cash flows from operations based on our current business outlook, combined with our current levels of cash and cash equivalents as of DecemberMarch 28,29, 2025,2026, are expected to be sufficient to support our anticipated levels of operations, investments, debt service requirements, capital expenditures, capital redistributions, and dividends through at least the next twelve months. However, factors outside of our control, including uncertainty in the global economy and the semiconductor industry, as well as disruptions in credit markets, have in the past, are currently, and could in the future, impact customer demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers, and creditors.