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

Our business involves numerous risks and uncertainties, including but not limited to the material risks described below. This section should be read in conjunction with all of the other information in this Annual Report on Form 10-K and our other filings with the SEC. If any of these risks materialize from time to time, then our business, reputation, financial condition, operating results, and growth prospects could be materially and adversely affected. In such an event, the trading price of our common stock could decline, and you could lose all or part of your investment in our common stock. Additional risks, trends and uncertainties may arise that could also harm our business, reputation, financial condition, operating results, and growth prospects.

We derive most of our revenue from customers located in Asia through direct sales or indirect sales under distribution arrangements and value-added reseller agreements with parties located in Asia. As a result, we are subject to significant risks due to this geographic concentration of business and operations. For the year ended December 31, 2024,2025, 94%92% of our total revenue was from customers in Asia. There are risks inherent in doing business in Asia, and internationally in general, including:

Any additional regulations or the amendmentamendment, or reinterpretation of previously implemented regulations could require us and our manufacturing partners and suppliers to change our business plans, increase our costs, or limit our ability to manufacture or sell products and conduct business activities in China, which could materially and adversely affect our business and operating results.

The Chinese government and provincial and local governments have also provided, and may continue to provide, various incentives to encourage the development of the semiconductor industry in China. Such incentives include cash awards, tax rebates, reduced tax rates, favorable lending policies and other measures, some or all of which may be available to our manufacturing partners, suppliers and us. Any of these incentives could be reduced or eliminated by governmental authorities at any time, which could materially and adversely affect our business and operating results.

We are subject to U.S. laws and regulations that could limit or restrict the export of some of our products, supplies and services and may restrict our transactions with certain customers, business partners and other individuals, including, in certain cases, dealings with or between us and our employees and subsidiaries. In certain circumstances, export controls and economic sanctions may prohibit the export of certain products, services and technologies, and in other circumstances we may be required to obtain an export license before exporting the controlled item. Compliance with these laws and regulations has not materially limited our operations or our sales, but could in the future, which would materially and adversely affect our business and results of operations. We maintain an export compliance program, but our compliance controls could be circumvented, exposing us to legal liabilities, sanctions and restrictions on our business. We must also comply with export restrictions and laws imposed by other countries affecting trade and investments. Although these restrictions and laws have not materially restricted our operations in the past, they could do so in the future, which would materially and adversely affect our business and results of operations. In addition, U.S. laws and regulations and sanctions, or threat of sanctions, that could limit or restrict the export of some of our products and services may also encourage our customers to develop their own solutions to replace our products, or seek to obtain a greater supply of similar or substitute products from our competitors that are not subject to these restrictions, which could materially and adversely affect our business, financial condition and results of operations. Furthermore, our customers’ end products and systems that incorporate our components could be subject to export laws, trade policies and other sales restrictions, which could indirectly affect our business, financial conditions and results of operations. For example, the increasing focus on the risks and strategic importance of AI technologies has resulted in regulatory restrictions that target products and services capable of enabling or facilitating AI, and may in the future result in additional restrictions impacting the sales of AI technologies or products. Any of such regulatory restrictions could, in turn, impact the sales of our products supporting AI applications. We are also subject to U.S. laws restricting or prohibiting investments in certain countries, that may harm our ability to purchase from, invest in, or collaborate with, companies in those countries and could subject us to fines, penalties or other enforcement action.

There has been increasing rhetoric, in some cases coupled with legislative or executive action, from several U.S. and foreign leaders regarding tariffs against foreign imports of certain products and materials. Specifically, there have been several rounds of U.S. tariffs on Chinese goods that have taken effect in the past few years, as well as additional tariffs imposed by the new U.S. administration in January 2025, some of which prompted, and could prompt additional, retaliatory Chinese tariffs on U.S. goods. The institution of trade tariffs both globally and between the U.S. and China specifically carries the risk of negatively affecting both countries’ overall economic condition, as well as our business and financial results. If these tariffs continue or additional tariffs are imposed in the future, they could have a negative impact on us as we have significant operations in China and the U.S.

Additionally, the imposition of tariffs is dependent upon the classification of goods under the U.S. Harmonized Tariff System (“HTS”) and the country of origin of the goods. Determination of the HTS and the origin of the goods is a technical matter that can be subjective in nature. Accordingly, although we believe our classifications of both HTS and origin are appropriate, there is no certainty that our assessment will be consistent with that of the U.S. government, particularly under the new U.S. administration.government. If the U.S. government does not agree with our determinations, we could be required to pay additional amounts, our ability to sell products in the U.S. may be restricted or eliminatedeliminated, we may be required to change our suppliers or supply routes and we may incur substantial additional costs or potential penalties.

A significant portion of our manufacturing, testing, assembly and packaging capacity comes from suppliers in China, which exposes us to political, cultural, regulatory, economic, foreign exchange, operational risks and operationalcapacity shortage risks.

A significant portion of our manufacturing, testing, assembly and packaging capacity comes from key suppliers located in China. As a result, we are subject to significant political, regulatory, tax, economic, foreign exchange, and operational risks due to this geographic concentration in our business. Although ourwe managementhave hasmade establishedsignificant aprogress long-termin strategy to diversifydiversifying capacity outside of China, there is no guarantee that our progress is sufficient or will be sufficient to mitigate these risks. Furthermore, we cannot guarantee that our new manufacturing, testing, assembly and packaging partners will not be costlier than our legacy partners in China. In addition, as we pivot our manufacturing, testing, assembly and packaging capacity concentration from China to another region, we will be subject to the risks of doing business in that particular region. If we decide to further diversify our capacity, it could be costly due to lost pricing benefits from production volume, as well as the time and cost to qualify new partners. Furthermore, there is no guarantee that the quality of the products from new suppliers will be acceptable to us, or that these suppliers will be able to identify, qualify and engage additional foundry partners and other suppliers in other regions in a timely manner or at all in order to mitigate these risks, or that the quality, price or terms of such production will be sufficient or acceptable to us, any of which could negatively and materially harmmeet our business and results of operations.demand.

In the past, our revenue increased significantly in certain years due to increased sales of certain of our products. We are subject to numerous risks and factors that could cause a decrease in our growth rates, or a decline in revenue compared to past periods, including increased competition, loss of, or reductions in demand or the growth rate of demand from, certain of our customers, unfavorable changes in our operations, changing technologies and customer requirements and demand, reduced global electronics demand, a deterioration in market conditions including as a result of the global economic uncertainties and tariffs, end-customerend customer market downturns, market acceptance and penetration of our current and future products, and litigation. A decrease in our rate of growth, or a decline,decline in revenue, could materially and adversely affect our business and results of operations.

Due to the nature of our business as a component and solution supplier, we may have difficulty both in accurately predicting our future revenue and appropriately managing our expenses.

Because we provide components and solutions for end products and systems, demand for our products is influenced by our customers’ end product demand. As a result, we may have difficulty in accurately forecasting our revenue and expenses. Our expenses and revenue depend on the timing, size, and speed of commercial introductions of end products and systems that incorporate our products, all of which are inherently difficult to forecast, as well as the ongoing demand for previously introduced end products and systems. In addition, demand for our products is influenced by our customers’ ability to manage their inventory. Our sales to distributors are also subject to higher volatility because they service demand from multiple levels of the supply chain which, in itself, is inherently difficult to forecast. All of these factors continue to be exacerbated by the adverse effects of macroeconomic factors, including inflation, increased interest rates, decreased economic output, fluctuations in currency rates, and geopolitical tensions, suchglobal astariffs and retaliatory measures and announcements regarding the Russia-Ukraine conflict and the Middle East conflict.same. If our customers reduce their orders from us, do not manage their inventory correctly or misjudge their customers’ demand, our shipments to and orders from our customers may vary significantly or decline on a quarterly basis, and we may have difficulty forecasting our expenses and inventory levels, which could reduce our revenue or revenue opportunities, result in inventory write-offs, and adversely affect our financial condition and results of operations.

The success of a new product depends on our ability to achieve design wins with key distributors and end-customers,end customers, as well as our ability to accurately forecast long-term market demand and future technological developments, as well as on a variety of other factors, including:

We market our products either through distribution arrangements and value-added resellers, or through our direct sales to customers that include OEMs and ODMs.customers. A relatively small number of distributors account for a significant portion of our revenues. Specifically, our top three customers, all of which are distributors, accounted for 61%,an 55%aggregate of 54%, 61% and 52%55% of our revenue in each of the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. OurConcentration revenuein froma indirectsmall salesnumber of distributors increases our exposure to onetheir customercredit wasprofiles, 17%inventory practices, covenant constraints, and strategic priorities, any of ourwhich totalcan revenueamplify inorder 2024.volatility or returns. If we lose a major customer or a major customer changes their products or technologies or chooses to purchase our competitors’ products such that they decrease, or eliminate the amount of our products they purchase, and we are not able to replace such customers with additional orders from existing customers or newother customers, this could result in a material adverse impact on our financial condition and results of operations. Significant deterioration in the liquidity or financial condition of any of our major customers or any group of our customers could have a material adverse impact on the collectability of our accounts receivable and our future financial condition and operating results. While we could partner with other distributors or value-added resellers to replace any of our customers, the change in business partners could interrupt our operations, causerequire us to have to identify and qualify new partners, and have a materially adverse impact on our business, financial condition and results of operations.

Moreover, we believe a high percentage of our products are eventually sold to a number of original equipment manufacturers (“OEMs”) and ODMs.original design manufacturers (“ODMs”). Although we communicate with OEMs and/or ODMs in an attempt to achieve “design wins,” which are decisions by OEMs and/or ODMs to incorporate our products, we do not have purchase commitments from these customers. Therefore, there can be no assurance that the OEMs and/or ODMs will continue to incorporate our ICs into their products, even if we may have secured a design win with them. OEM and ODM technical specifications and requirements can change rapidly, and we may not have products that fit new specifications from an end customer for whom we have had previous design wins. We cannot be certain that we will continue to achieve design wins from large OEMs,OEMs and ODMs, or that the OEMs and ODMs will be successful in selling products that incorporate our ICs.

Our customers generally establish demanding specifications for quality, performance, energy efficiency and reliability that our products must meet. ICs as complex as ours often encounter development delays and may contain undetected defects or failures when first introduced or after commencement of commercial shipments, which might require product replacement or recall. Further, our third-party manufacturing processes or changes thereto, or changes in the materials used in the manufacturing processes may cause our products to fail. From time to time, we have experienced product quality, performance or reliability problems. Our standard warranty period is generally one or two years, which exposes us to significant risks of claims for defects and failures. If defects and failures occur in our products, we could experience a loss of customersrevenue and/or a decrease in revenue,customers, increased costs, including warranty expense and costs associated with customer support, cancellations or rescheduling of orders or shipments, and product returns or discounts, any of which would harm our operating results.

In addition, product liability claims may be asserted by our customers. Although we currently have insurance, there can be no assurance that we have obtained sufficient insurance coverage or that asserted claims will be within the scope of coverage. Our insurance providers could deny or challenge these claims, and as a result, reimbursement to us is not guaranteed or could be delayed. If coverage is denied, we may not have sufficient resources to pay for these claims. Furthermore, we may experience a significant increase in premiums and therefore decide to self-insure, which may not meet the expectations or requirements of certain customers.customers, and could result in significant costs to us. All of these factors could have a material and adverse impact on our business, financial condition and results of operations.

The introduction of new products presents significant business challenges because product development plans and expenditures may be made up to two years or more in advance of any sales. It generally takes us up to 12 months or more for us to design and manufacture a new product prototype. Only after we have a prototype do we introduce the product to the market and begin selling efforts in an attempt to achieve design wins. This sales process requires us to expend significant sales and marketing resources without any assurance of success. Volume production of products that use our ICs, if any, may not be achieved for an additional period of time after an initial sale. Sales cycles for our products are lengthy for a number of reasons, including:

As a result of our lengthy sales cycles, we may incur substantial expenses before we earn associated revenue because a significant portion of our operating expenses is relatively fixed and based on expected revenue. The lengthy sales cycles of our products also make forecasting the volume and timing of orders difficult. In addition, the delays inherent in lengthy sales cycles raise additional risks that customers may cancel or change their orders, particularly as our customers are exposed to economic risks in connection with global economic uncertainty and political tensions, including tariffs, or move to another supplier, in whole or in part, as well as the risks inherent in introducing new products or entering new markets. Our sales are made by purchase orders. Because industry practice allows customers to reschedule or cancel orders on relatively short notice, backlog is not always a good indicator of our future sales. If customer cancellations or purchase order changes occur, we could lose anticipated salessales. Furthermore, if our customers cancel orders after we submit a committed forecast to our suppliers, we may be required to purchase supplies or materials that we are unable to resell or utilize in our other products, which could adversely affect our financial condition, results of operations and notcash have sufficient time to reduce our inventory and operating expenses.flows.

Although we provide our suppliers with rolling forecasts of our production requirements, their ability to provide wafers to us is limited by their available capacity, particularly capacity in the geometries we require, at the facilities in which they manufacture wafers for us. As a result, thisThis lack of capacity has at times constrained our product sales and revenue growth. In addition, an increased need for capacity to meet internal demands or demands of other customers could cause our suppliers to reduce capacity available to us. Our suppliers may also require us to pay amounts in excess of contracted or anticipated amounts for wafer deliveries or require us to make other concessions in order to acquire the wafer supply necessary to meet our customer requirements. Such concessions can include long‑term capacity reservations, prepayments, take‑or‑pay terms, or tool funding, which may increase working capital needs and reduce flexibility across product cycles. If our suppliers extend lead times, limit supplies or the types of capacity we require, or increase prices due to capacity constraints or other factors, our revenues and our gross margin may materially anddecline unexpectedlyin decline.the future. In addition, if we experience supply delays or limitations, our customers may reduce their purchase levels with us and/or seek alternative solutions to meet their demand, which could materially and adversely impact our revenue and results of operations.

These and other risks may affect the ultimate cost and timing of any expansion of our third-party supplier capacity. If our manufacturing costs increase, including as a result of inflationary pressure,pressure and global tariffs, or we experience supply constraints, we may be required to raise the prices of our products to remain profitable, which could result in a loss of customers or a decline in orders from customers. If we are unable to increase or maintain our manufacturing capacity, we may be unable to meet demand, which would harm our revenue and results of operations and may result in a loss of customers as they seek supply from other sources.

We currently depend on third-party suppliers to provide us with wafers and other key components for our products. If any of our wafer suppliers are acquired, become insolvent or capacity constrained, or are otherwise unable to provide us with sufficient wafers and other key components at acceptable yields or at anticipated costs, our revenue and gross margin may decline or we may not be able to fulfill our customer orders.

We do not have direct control over product delivery schedules or product quality because all of our products are assembled by third-party subcontractors and a portion of our testing is currently performed by third-party subcontractors. Also, due to the amount of time typically required to qualify assembly and test subcontractors, we could experience delays in the shipment of our products if we were forced to find alternate third parties to assemble or test our products. In addition, eventscurrent suchand aspotential theglobal Russia-Ukraine conflict, the Middle East conflictconflicts and supply chain disruptions may materially impact our assembly or testing suppliers’ ability to operate. Any future product delivery delays or disruptions in our relationships with our subcontractors could have a material adverse effect on our financial condition, results of operations and cash flows.

As a fabless semiconductor company, we purchase our inventory from third-party manufacturers. We place orders with our manufacturers based on existing and expected orders from our customers for particular products. While most of our contracts with our customers and distributors include lead time requirements and cancellation penalties that are designed to protect us from misalignment between customer orders and inventory levels, we must nonetheless make some predictions when we place orders with our manufacturers. Some of our customers and distributors may nevertheless cancel orders as a result of economic conditions, their own specific business challenges or for other reasons. In the event that our predictions are inaccurate due to unexpected increases in orders or unavailability of products within the timeframe that is required, we may have insufficient inventory to meet our customers’ demands. In addition, a negative trend in market conditions could lead us to decrease the manufacturing volume of our products to avoid excess inventory. If we inaccurately assess market conditions for our products, we could have insufficient inventory to meet our customer demands resulting in potential lost potential revenue. In the event that we order products that we are unable to sell due to a decrease in orders, unexpected order cancellations, injunctions due to patent litigation, import/export restrictions or product returns, we may have excess inventory which, if not sold, may need to be written down or would result in a decrease in our revenue in future periods as the excess inventory at our distributors is sold. If any of these situations were to arise, it could have a material impact on our business, financial condition and results of operations.

The price and availability of commodities,commodities used in our products, such as gold, copper and silicon, may adversely impact our ability to deliver our products in a timely and cost-effective manner, and may adversely affect our business and results of operations.

OurWe productswork incorporatewith our engineers and suppliers to continuously seek opportunities to reduce our product costs. However, the price and availability of these commodities suchis asbeyond gold,our coppercontrol. andA silicon. Ansignificant increase in the pricepricing or a decrease in the availability of these commodities and similar commodities that we use could negatively impact our business and results of operations.

Historically, the semiconductor industry has been highly cyclical and, at various times, has experienced significant downturns and wide fluctuations in supply and demand. Certain segments of the semiconductor market may also experience significant downturns while other segments arecould be growing. These conditions have caused significant variances in product demand and production capacity, as well as rapid erosion of average selling prices, which have resulted, and could in the future result, in lower demand for our products, downward pressure on the price of our products, and/or increased inventory due to our customers’ delayed production schedule. Because a significant portion of our expenses are fixed in the short term or incurred in advance of anticipated sales, we may not be able to decrease our expenses in a timely manner to offset any sales shortfall. Any significant or prolonged downturns, whether in the overall semiconductor industry or in a specific market segment, would have a material adverse effect on our business, financial condition and results of operations.

In recent years, there has been a trend towardThe semiconductor industry consolidation.has Wea expecthistory thisof trend to continueconsolidation as companies attempt to improve the leverage of growing research and development costs, strengthen or hold their market positions in an evolving industry, or become unable to continue operations unless they find an acquirer or consolidate with another company. In addition, companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that semiconductor industry consolidation may result in stronger competitors that are better able to compete as sole-source suppliers of multiple products for customers. This could harm our operating results and could have a material adverse effect on our business, financial condition and results of operations.

The analog and mixed-signal semiconductor industry is highly competitive, and we expect competitive pressures to continue. Our ability to compete effectively and to expand our business will depend on our ability to continue to recruit application engineers and design talent,engineers, introduce new products, and maintain the rate at which we introduce new products. We compete with domestic and foreign semiconductor companies, many of which have substantially greater financial and other resources with which to pursue engineering, manufacturing, marketing, and distribution of their products, and, in some cases, may have broader product offerings that enable them to more effectively market and sell to customers and engage sales partners. We are in direct and active competition, with respect to one or more of our product lines,competition with many manufacturers of varying size and financial strength. The number of our competitors has grown due to the expansion of the market segments in which we participate.

We cannot guarantee that our products will continue to compete favorably, or that we will be successful in the face of increasing competition from new products and enhancements introduced by existing competitors or new companies entering our markets ,markets, which would materially and adversely affect our results of operations and our financial condition.

In addition, from time to time, governments may provide subsidies or make other investments that could give competitive advantages to competing semiconductor companies. For example, in August 2022, the U.S. enacted the CHIPS Act, which, among other things, provides funding to increase domestic production and research and development in the semiconductor industry. Because we operate a fabless business model, we wereare not eligible for such investments. Many of our competitors benefittedbenefit from thethese and other investments, which will helphelps increase their production capacities, shorten their lead times and gain market share. These competitive pressures could materially and adversely affect our business, financial condition and results of operations.

Our customers generally have substantial technological capabilities and financial resources. Some customers have traditionally usedused, and continue to use, these resources to develop their own products internally. The prospects for our products in these markets are dependent in part upon our customers’ acceptance of our products as an alternative to their internally developed products. FutureOur future sales prospects also are dependent upon acceptance and qualification of third-party sourcing for products as an alternative to in-house development. Customers may continue to increase their use of internally developed components. They may also decide to develop or acquire components, technologies or products that are similar to, or that may be substituted for, our products.products, or acquire companies that compete with us. If any of these situations were to occur, our business, financial condition and results of operations could be materially and adversely affected.

System securityCybersecurity risks, data protection or privacy breaches, cyberattacks, systems integration issues and unauthorized use of AI tools could disrupt our internal operations and/or harm our reputation, and any such disruption or harm could cause a reduction in our expected revenue, increase our expenses, negatively impact our results of operation or otherwise adversely affect our stock price.

ExperiencedThreat hackersactors may be able to penetrate our network security and misappropriate or compromise our confidential and proprietary information, create system disruptions or cause shutdowns.shutdowns, Asamong other things. Further, as AI capabilities improve, threat actors may quickly develop more sophisticated and convincing attacks. TheseCybersecurity incidents, attacks couldand threats are increasingly sophisticated, constantly evolving and originate from many sources globally and often cannot be crafted with an AI tool to directly attack information systems with increased speed and efficiencyrecognized or createunderstood moreuntil effectivethe phishingtarget emails.has already been attacked. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions and delays that may impede our sales, manufacturing, distribution, financial reporting or other critical functions. Despite our efforts to prevent these threats and disruptions to our information technology systems, these systems and those of our third-party providers may be affected by damage or interruption resulting from, among other causes, cybersecurity incidents, attacks, security breaches, power outages, system or operational failures or malware (including ransomware and other programs that operate with malicious intent).

In the ordinary course of business, we store sensitive data on our internal systems, network and servers, such as proprietary intellectual property, business and financial information, and confidential data pertaining to our customers, suppliers and business partners. In addition, we also use third-party cloud services. Maintaining security of sensitive information on our and third-party networks and the protection features of ourthe solutions and services we use are both critical to our operations and business strategy. We devote significant resources to network security, data encryption, and other security measures to protect ourthe systems and data. However, these security measures cannot provide absolute security. Although we make significant efforts to maintain the security and integrity of ourthe systems and solutions,solutions that we use, any destructive or intrusive breach could compromise our or third-party networks, creating system disruptions or slowdowns, and the information stored on our or third-party networks could be accessed, publicly disclosed, lost or stolen. Remote working arrangements, thecurrent Russia-Ukraineand conflict,potential theglobal Middle East conflict,conflicts, and AI-powered cybersecurity threats have also heightened our potential exposure to cyberattacks, which could put the sensitive data we store on our internal or third-party systems at risk. If any of these types of cybersecurity incidents, security breachesbreaches, or other attacks were to occur and we were unable to protect sensitiveour data, our reputation and relationships with our business partners and customers could be materially harmed, and we could be exposed to risks of litigation and possible significant liability.

While we attempt to restrict the use of third-party and open-sourceopen source AI tools, such as ChatGPT, our employees and consultants may use these tools on an unauthorized basis and our partners may also use these tools,tools. whichSuch use of AI tools poses potential risks relating to theintellectual potentialproperty and data protection, including cybersecurity risks, exposure of our proprietary confidential information to unauthorized recipients andrecipients, the misuse of our or third-party intellectual property.property, and the inability to claim ownership of intellectual property rights in outputs of AI tools. AI tools may also produce inaccurate responses that could lead to errors in our decision-making, product development or other business activities, which could have a negative impact on our business, operating results and financial condition. Our ability to mitigate these risks will depend on our continued effective maintaining,maintenance, training, monitoring and enforcement of appropriate policies and procedures governing the use of AI tools, and the results of any such use,use by us or our partners.partners, and the compliance with such policies and procedures by our workforce.

AI technology may also give rise to significant legal and regulatory liability.liability and risk. Governments around the world have adopted, and may continue to adopt, laws and regulations related to AI, including the European Union’s AI(“EU”) Act,Artificial Intelligence Act. Federal and severalstate agencies in the U.S. governmenthave agenciesenacted haveor are considering enacting new laws and regulations regarding the use of AI, and there are increased investigations and enforcement efforts related to the use of AI technology, all of which could increase our compliance costs and limitaffect our ability to use AI in the development of our products and in our operations. In addition to AI regulations under general consumer protection and privacy laws, legislations specifically aimed at regulating the development, deployment and use of AI have been enacted in several states and have also been proposed at the federal level. Recent Executive Orders have further addressed federal regulation and policies related to AI. These laws, proposed laws, and Executive Orders may create inconsistent and evolving compliance obligations, which may be costly and difficult to resolve. While the incomingcurrent U.S. administration has signaled that AI policy will be a priority, the scope and impact of any such policies cannot yet be determined. Any failure or perceived failure by us to comply with any legal or regulatory requirement could subject us to legal liability, damage our reputation or otherwise adversely affect our business.

Our success depends on us investing significant amounts of resources in research and development. We expect to continue investing heavily in research and development in the future in order to keep innovating and introducing new products in a timely manner and increase our revenue and profitability. Increased investments in research and development will increase our operating expenses and may divert investment from other areas of our business, which may negatively impact our operating results, and we may not achieve the return on these investments that we anticipate, or be able to reduce such expenses in a timely manner if we experience a downturn in sales. Also, if we are unable to properly manage and effectively utilize our research and development resources, we could seeexperience material adverse effects on our business, financial condition and operating results.

As part of our business strategy, from time to time we review acquisition prospects that would complement our current product offerings, enhance our design capability or offer other business opportunities. As a result of completing acquisitions, we could use a significant portion of our available cash, cash equivalents and short-term investments, issue equity securities that would dilute current stockholders’ percentage ownership,ownership or incur substantial debt or contingent liabilities. Such actions could impact our financial condition, operating results and the price of our common stock.

In addition, we may be unable to identify or complete prospective acquisitions for various reasons, including competition from other companies inor thefinancial semiconductor industry,investors, the valuation expectations of acquisition candidates and applicable antitrust or other policies, laws or regulations. If we are unable to identify and complete acquisitions, we may not be able to successfully expand our business and product offerings.

Our future worldwide tax rates, financial position and operating results may be affected by changes in the relevant tax laws, interpretation of such tax laws or the influence of certain tax policy efforts.

The Organization for Economic Co-operation and Development (“OECD”) has proposedcreated the framework of a global minimum tax of 15% under the Pillar Two framework. Many countries have already implemented or are taking steps to implement Pillar Two. It is under each country’s own discretion to adopt Pillar Two. Many aspects of Pillar Two arewere effective for tax years beginning2024 in January 2024, with certain impacts to be effective inand 2025. Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent that the effective tax rate is less than the minimum rate. The potentialimpact impact, if any, toon our provision for income taxes, net income, and cash flows could be materially impacted by the implementationglobal minimum tax of the Pillar Two15% in our international jurisdictions where we have significant business operations.

In 2024, one of our foreign subsidiaries was granted a ten-year tax incentive, beginning in tax year 2025. A deferred tax benefit of approximately $1.3$1.1 billion, net of $0.2 billion of deferred tax liability and $0.1 billion of valuation allowance, was recorded in the year ended December 31, 2024 to reflect the estimated future reductions in cash tax paid in that jurisdiction associated with the incentive. In January 2025, the OECD released new Administrative Guidance on the application of the Global Anti-Base Erosion Model Rules affecting Pillar Two. If the new Administrative Guidance released by the OECD in January 2025 is adopted by the jurisdiction that granted the tax incentive, it may materially impact our global tax provision. We cannot predict the timing and how that foreign jurisdiction would adopt the new Administrative Guidance, or whether the OECD will release additional guidance in the future.

The challenging, subjective or complex judgments of certain accounting areas may resultnot inbe errorsaccurate, thatand could result in restatements of our financial statements.

Certain areas of our accounting, including but not limited to our income tax provision and inventory reserves,valuation require a significant amount of management judgmentsjudgment orand couldare complex. We base our management judgements on historical experience and on various other assumptions that we believe to be complex.reasonable under the circumstances, as provided in the section titled Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. For example, due to the complexity associated with the calculation of our tax provision, including the effects of the enactment of new tax laws, we engage third-party tax advisors to assist us in the calculation. If we or our tax advisors fail to resolve or fully understand certain issues that we may have had in the past and issues that may arise in the future, we could be subject to errors, which, if material, would result in a restatement of our financial statements. Restatements are generally costly and could adversely impact our results of operations, damage our reputation, and/or have a negative impact on the trading price of our common stock. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.

Discussions of 20222023 results and year-to-year comparisons between 20232024 and 20222023 that are omitted in this Annual Report on 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 year ended December 31, 2023,2024, filed with the SEC on FebruaryMarch 29,3, 2024.2025.

We are a fabless global company that provides high-performance, semiconductor-based power electronics solutions. MPS’sOur mission is to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future. Founded in 1997 by our CEO Michael Hsing, MPSwe hashave three core strengths: deep system-level knowledge, strong semiconductor design expertise, and innovative proprietary technologies in the areas of semiconductor processes, system integration, and packaging. These combined advantages are designed to enable MPSus to deliver reliable, compact, and monolithic solutions that are highly energy-efficient, cost-effective, and environmentally responsible while providing a consistent return on investment to our stockholders.

We operate in the cyclical semiconductor industry. We are subject to industry downturns, but we have targeted product and market areas that we believe allow us to operate at above average industry performance levels over the long term. Historically, our revenue has generally been higher in the second half of the year than in the first half although various factors, such as market conditions and the timing of key product introductions, could impact this trend.

We work with third parties to manufacturemanufacture, assemble and assembletest our ICs. This has enabled us to limit our capital expenditures and fixed costs, while focusing our engineering and design resources on our core strengths.

Following the introduction of a product, our sales cycle generally takes a number of quarters after we receive an initial customer order for a new product to ramp up. Typical supply chain lead times for orders are generally 16 to 26 weeks. These factors, combined with the fact that our customers can cancel or reschedule orders without incurring a significant penalty to the customer,penalty, make the forecasting of our orders, revenue and expenses difficult.

We derive most of our revenue from sales through distribution arrangements and direct sales to customers in Asia, where our products are incorporated into end-user products. Our revenue from direct or indirect sales to customers in Asia was 94%,92%, 87%94% and 86%87% for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. We believe our ability to achieve revenue growth will depend, in part, on our ability to develop new products, enter new market segments,markets, gain market share, manage litigation risk, diversify our customer base and continue to secure manufacturing capacity.

The semiconductor industry has historically beenis impacted by various macro-economicmacroeconomic challenges including fluctuations in consumer spending, fluctuations in demand for semiconductors, rising inflation, global tariffs and retaliatory measures and announcements regarding the same, increased interest rates, and fluctuations in currency rates. We remain cautious in light of continued challenging global macroeconomic conditions and will continue to monitor the potential impact on our operations. The extent and duration of the direct and indirect impact of macroeconomic events on our business, results of operations and overall financial position remain uncertain and depend on future developments.

We closely monitor changes to export control laws, tariffs, trade regulations and other trade requirements. AsFor ofthe year ended December 31, 20242025 and through the date we filed this Annual Report, no restrictions or requirements have had a material impact on our revenue and operationsoperations. We believe that our diverse, agile and resilient supply chain is structured in a way to minimize the impact of tariffs; however, such restrictions or requirements can be enacted quickly and unexpectedly and could impact our business in the future. WeTo willthe continueextent to monitor any changes or developments to export control laws,tariffs, trade regulations andor otherretaliatory trade requirements,measures or interpretationsannouncements thereofregarding the same that affect us are implemented, we will seek to take mitigating actions in the near- and medium-term, as necessary, but there can be no assurance we will be successful. We are committed to complying with all applicable trade laws, regulations and other requirements.

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an on-going basis, including those related to income taxes valuation allowances, inventory valuationallowances and stock-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and judgments used in the preparation of our financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control,control. includingThese factors include demand for our products, economic conditions and other current and future events, such as macroeconomic factors, global economic uncertaintiesuncertainties, current and geopoliticalpotential tensions.global conflicts and global tariffs, export controls and retaliatory measures and announcements regarding the same. Actual results could differ from these estimates and assumptions, and any such differences may be material to our consolidated financial statements. See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements.

As of both December 31, 20242025 and 2023,2024, we had a valuation allowance of $3.6 billion and $35.0 million, respectively, attributable to management’s determination that it is more likely than not that certain deferred tax assets will not be fully realized. In 2024, one of the Company’s foreign subsidiaries was granted a ten-year tax incentive, beginning in tax year 2025. In the event we determine that it is more likely than not that we would be able to realize the deferred tax assets in the future in excess of our net recorded amount, an adjustment to the valuation allowance for the deferred tax assets would increase income in the period such determination is made. Likewise, should it be determined that additional amounts of the net deferred tax assets will not be realized in the future, an adjustment to increase the deferred tax assets valuation allowance will be charged to income in the period such determination is made. For example, a change in forecasted income could impact the expected utilization of our tax incentive and result in an income tax benefit or additional income tax expense in our financial statements in the period such determination is made.

For equity awards with performance conditions, as well as awards containing both market and performance conditions, we recognize compensation expense when it becomes probable that the performance goals will be achieved. Management performs the probability assessment on a quarterly basis by reviewing external factors, such as macroeconomic conditions and the analog industry revenue forecasts, and internal factors, such as our business and operational objectives and revenue forecasts. Changes in the probability assessment of achievement of the performance conditions are accounted for in the period of change by recording a cumulative catch-up adjustment as if the new estimate had been applied since the service inception date. If the projected achievement was revised upward or if the actual results were higher than the projected achievement, additional compensation expense would be recorded for the awards due to the cumulative catch-up adjustment, which would have an adverse impact on our results of operations. Conversely, if the projected achievement was revised downward or if the actual results were lower than the projected achievement, previously accrued compensation expense would be reversed for the awards, which would have a favorable impact on our results of operations. As a result, our stock-based compensation expense is subject to volatility and may fluctuate significantly each quarter due to changes in our probability assessment of achievement of the performance conditions or actual results being different from projections made by management.

See Note 1 of the Notes to Consolidated Financial Statements regarding a recently adopted accounting pronouncement and a recent accounting pronouncementspronouncement not yet adopted as of December 31, 2024.2025.

The following table summarizes our results of operations for the periods presented:

The following table summarizes our revenue by end market for the periods presented:

Revenue for the full year ended December 31, 20242025 was $2.2$2.8 billion, an increase of $386.0$583.4 million, or 21.2%,26.4%, from $1.8$2.2 billion for the year ended December 31, 2023.2024. The increase in revenue was primarily due to increases in shipment volume and average selling prices resulting primarily from product mix.volume.

ForBy end market, full year 2025 revenue for storage and computing of $732.5 million increased $230.9 million, or 46.0%, from the yearsame endedperiod Decemberin 31,2024. 2024,This revenueincrease was primarily driven by increased sales of power solutions for memory, storage, notebooks and graphic cards. Revenue from the enterprise data market increaseddecreased $393.3$14.4 million, or 121.8%,2.0%, from the same period in 2023.2024. ThisFull increaseyear was2025 primarilyautomotive due to higher salesrevenue of our$592.5 power management solutions for AI applications. Revenue from the communications marketmillion increased $21.0$178.5 million, or 10.2%,43.1%, from the same period in 2023. The increase was a result of higher sales of power solutions for optical modules and routers, partially offset by lower sales of networking solutions. Revenue from the automotive market increased $19.3 million, or 4.9%, from the same period in 2023.2024. This increase was broad-based and primarily driven by increased sales of our highly integrated applications supporting advanced driver assistance systems, partially offset by lower sales of applications supporting body electronicssystems and infotainment. RevenueCommunications fromrevenue theof storage$309.1 and computing marketmillion increased $10.4$83.2 million, or 2.1%,36.8%, from the same period in 2023.2024 Thisdue increaseto was primarily driven by increasedhigher sales of productspower solutions for notebooks.optical Revenuemodules fromand therouters. Full year 2025 consumer marketrevenue decreasedof $32.6$255.2 million increased $53.2 million, or 13.9%,26.3%, from the same period in 2023.2024. This decreaseincrease was a result of broadhigher marketsales weakness.of products for home appliances and gaming. Revenue of $199.4 million from the industrial market decreasedincreased $25.4$52.0 million, or 14.7%,35.3%, from the same period in 2023.2024 Thisdue decreaseto primarily reflected lowerhigher sales offor productspower related to industrial metersources and securityinstrumentation applications.

Cost of revenue was $1,250.7 million, or 44.8% of revenue, for the year ended December 31, 2025, and $986.2 million, or 44.7% of revenue, for the year ended December 31, 2024, and $800.0 million, or 43.9% of revenue, for the year ended December 31, 2023.2024. The $186.2$264.5 million increase in cost of revenue was primarily driven by increases inhigher shipment volume and the average costs due to product mix.volume.

Gross margin was 55.2% for the year ended December 31, 2025, compared with 55.3% for the year ended December 31, 2024, compared with 56.1% for the year ended December 31, 2023.2024. The decrease in gross margin was mainly driven by higher warranty expenses as a percentage of revenue, partially offset by lower inventory write-downs as a percentage of revenue.

R&D expenses primarily consist of cashcash-based compensation and benefits, stock-based compensation and deferred compensation for design and product engineers, expenses related to new product development and supplies, and facility costs.

R&D expenses were $382.3 million, or 13.7% of revenue, for the year ended December 31, 2025, and $324.7 million, or 14.7% of revenue, for the year ended December 31, 2024, and $263.6 million, or 14.5% of revenue, for the year ended December 31, 2023.2024. The $61.1$57.6 million increase in R&D expenses was primarily due to a $27.7$30.1 million increase in cashcash-based compensation expenses and benefits, an $11.0 million increase in stock-based compensation expenses and related payroll taxes, a $7.6$9.1 million increase in new product development expensesexpenses, a $5.8 million increase in laboratory and other supplies, and a $5.0$4.1 million increase consistingin mostlystock-based ofcompensation softwareand licensingrelated fees.payroll taxes.

SG&A expenses primarily include cashcash-based compensation and benefits, stock-based compensation and deferred compensation for sales, marketing and administrative personnel, sales commissions, travel expenses, facilities costs, third partythird-party service fees and legal expenses.

SG&A expenses were $428.8 million, or 15.4% of revenue, for the year ended December 31, 2025, and $356.8 million, or 16.2% of revenue, for the year ended December 31, 2024, and $275.7 million, or 15.1% of revenue, for the year ended December 31, 2023.2024. The $81.0$72.0 million increase in SG&A expenses was primarily driven by a $50.1$37.3 million increase in cash-based compensation and benefits, and a $23.8 million increase in stock-based compensation expenses and related payroll taxes, a $16.4 million increase in cash compensation expenses and benefits, and a $6.7 million increase in professional services.taxes.

Other Income (Expense),Income, Net

The income tax expense for the year ended December 31, 20232025 was $78.5$144.7 million, or 15.5%18.9% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to income generated by our subsidiaries in lower statutory tax rates at certain of our foreign subsidiariesjurisdictions and a return to provision true-up adjustment which primarily resulted from a calculation refinement of our capitalization of research andtax experimental expenditures under Section 174 of the Internal Revenue Code (the “IRC”).credits. The lower effective tax rate relative to the federal statutory rate was partially offset by the inclusionU.S. taxation of the GILTI tax, the addition of a valuation allowance against foreign subsidiaries’ deferred tax assets arising from the indefinite extension of an R&D super deduction policy,earnings and excess tax benefits fromnon-deductible stock-based compensation.

In December 2024, we completed an intercompany transaction that resulted in one of our foreign subsidiaries recording a step up in the tax basis of intangible assets of approximately $23.2 billion. This resulted in a deferred tax difference between the U.S. GAAP basis and local tax basis of the specified intangibles. We do not expect to realize the deferred tax asset for U.S. GAAP purposes; therefore, we have recorded a full valuation allowance of $23.2 billion as of December 31, 2024.2024 which remains the same as of December 31, 2025.

In January 2025, the OECD released new Administrative Guidance on the application of the Global Anti-Base Erosion Model Rules. We will continue to evaluate the impact of this release orand of other prospectivefuture guidance on our future global tax provision.

As of December 31, 2024,2025, we had cash and cash equivalents of $1.1 billion and short-term investments of $157.2 million, compared with cash and cash equivalents of $691.8 million and short-term investments of $171.1 million, compared with cash and cash equivalents of $527.8 million and short-term investments of $580.6 million as of December 31, 2023.2024. As of December 31, 2024,2025, $611.9$672.9 million of cash and cash equivalents and $164.4$157.2 million of short-term investments were held by our foreign subsidiaries. For the years ended December 31, 20242025 and 2023,2024, we repatriated $642$275 million and $140$642 million, respectively, of cash from acertain of our foreign subsidiarysubsidiaries to the U.S. with minimalimmaterial tax impact. The proceeds are primarily used to fund our stock repurchase program, dividend program and ongoing business operations. We may repatriate additional cash from certain of our foreign subsidiaries to fund our expenditures in future periods. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

The following table summarizes our cash flow activities for the periods presented:

For the year ended December 31, 2024,2025, the $150.2$49.8 million increase in net cash provided by operating activities compared to the prior period was primarily due to increased accounts receivable collections, partially offset by increased inventory purchases. The increase was also contributed by the receipt of prepaid wafer expenses in the year ended December 31, 2024purchases and other changes in working capital.

For the year ended December 31, 2024,2025, the $688.5 $380.3 million increasedecrease in net cash usedprovided inby financinginvesting activities compared to the prior period was primarily due to a $632.5$403.3 million increase in stocklower repurchasesnet andsales aof $54.8 million increase in dividends and dividend equivalent payments.investments.

Although consequences of economic uncertainties and macroeconomic conditionsconditions, including tariffs and retaliatory measures and announcements regarding the same, and many other factors could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of $862.9$1.3 millionbillion as of December 31, 2024,2025, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months and beyond.months.

As of December 31, 2024,2025, total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $60.0 million prepayment,parties were $616.8$442.2 million, of which $569.6$389.8 million was due within a year.

In OctoberFebruary 2023,2025, our Board of Directors approved a new stock repurchase program authorizing us to repurchase up to $640.0$500.0 million of our common stock through OctoberFebruary 29,2028. 2026.Shares are retired upon repurchase. We repurchased approximately 8,000 shares of our common stock for an aggregate purchase price of $6.6 million during the year ended December 31, 2025. As of December 31, 2024,2025, $493.4 million remained available for future repurchases under the authorized amount under this program was utilized.program.

Other long-term obligations primarily include payments for deferred compensation plan liabilities and accrued dividend equivalents. As of December 31, 2024,2025, these obligations totaled $98.6$107.9 million.

We derive most of our revenue from sales through distribution arrangements and direct sales to customers in Asia, where our products are incorporated into end-user products. Our revenue from sales to direct customers in Asia was 92%94% and 94%93% of our total revenue for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Our revenue from sales to direct customers in Asia was 93% of our total revenue for each of the six months ended June 30, 2026 and 2025. We believe our ability to achieve revenue growth will depend, in part, on our ability to develop new products, enter new markets, gain market share, manage litigation risk, diversify our customer base and continue to secure manufacturing capacity.

We closely monitor changes to export control laws, tariffs, trade regulations and other trade requirements. For the three months ended MarchJune 31,30, 2026 and through the date we filed this Quarterly Report on Form 10-Q, no restrictions or requirements have had a material impact on our revenue and operations. We believe that our diverse, agile and resilient supply chain is structured in a way to minimize the impact of tariffs; however, such restrictions or requirements can be enacted quickly and unexpectedly and could impact our business in the future. To the extent tariffs, trade regulations or retaliatory measures or announcements regarding the same that affect us are implemented, we will seek to take mitigating actions in the near- and medium-term, as necessary, but there can be no assurance we will be successful. We are committed to complying with all applicable trade laws, regulations and other requirements.

There have been no material changes during the threesix months ended MarchJune 31,30, 2026 to our critical accounting estimates from the information provided in the “Critical Accounting Estimates” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2025.

Revenue for the three months ended MarchJune 31,30, 2026 was $804.2$980.6 million, an increase of $166.6$316.1 million, or 26.1%,47.6%, from $637.6$664.6 million for the three months ended MarchJune 31,30, 2025. The increase in revenue was primarily due to increased demand for products serving our enterprise data and communications end markets. In addition, a higher shipmentproduct volumemix andof power solutions, which generally carry higher average selling prices resultingthan primarilydiscrete fromICs, productalso mix.contributed to the increase in year over year revenue.

By end market, firstsecond quarter 2026 revenue for the enterprise data end market increased $129.9$236.6 million, or 97.7%,164.3%, from the same period in 2025. This increase was primarily due to higher sales of power management solutions for artificial intelligence (“AI”) and server applications. Revenue from the storage and computing end market of $174.4$199.8 million decreasedincreased $14.1$4.5 million, or 7.5%,2.3%, from the same period in 2025. Second quarter 2026 automotive end market revenue of $157.1 million increased $11.9 million, or 8.2%, from the same period in 2025 primarily due to decreasedhigher sales of powerapplications solutionssupporting for notebooksinfotainment and graphicslighting cards,systems. partiallyCommunications offsetend by increased sales of memory and storage applications. First quarter 2026 automotivemarket revenue of $152.3$131.6 million increased $7.4$57.8 million, or 5.1%, from the same period in 2025. Communications revenue of $111.5 million increased $39.8 million, or 55.5%,78.3%, from the same period in 2025 due to higher sales of power solutions for optical modules and switches. FirstSecond quarter 2026 consumer end market revenue decreased $2.4$2.9 million, or 4.2%,4.8%, from the same period in 2025. Revenue of $48.6$54.8 million from the industrial end market increased $6.0$8.1 million, or 14.2%,17.3%, from the same period in 2025.

Cost of revenue was $359.1$439.6 million, or 44.7%44.8% of revenue, for the three months ended MarchJune 31,30, 2026, and $284.3$298.6 million, or 44.6%44.9% of revenue, for the three months ended MarchJune 31,30, 2025. The $74.8$141.0 million increase in cost of revenue was primarily driven by product mix and higher shipment volume.volume and product mix.

Gross margin was 55.3%55.2% for the three months ended MarchJune 31,30, 2026, compared with 55.4%55.1% for the three months ended MarchJune 31,30, 2025. The decrease in gross margin was mainly driven by higher warranty expenses as a percentage of revenue, partially offset by lower manufacturing overhead costs as a percentage of revenue.

R&D expenses were $100.6$118.6 million, or 12.4%12.1% of revenue, for the three months ended MarchJune 31,30, 2026, and $92.2$96.3 million, or 14.4%14.5% of revenue, for the three months ended MarchJune 31,30, 2025. The $8.4$22.3 million increase in R&D expenses was primarily due to aan $4.3$11.2 million increase in cash-based compensation and benefits, a $1.3$6.6 million increase in laboratorynew andproduct otherdevelopment supplies,expenses, and a $1.3 million increase in facilities costs.

SG&A expenses were $103.3$118.6 million, or 12.9%12.1% of revenue, for the three months ended MarchJune 31,30, 2026, and $92.2$105.0 million, or 14.5%15.8% of revenue, for the three months ended MarchJune 31,30, 2025. The $11.1$13.6 million increase in SG&A expenses was primarily driven by aan $10.0$11.5 million increase in cash-based compensation and benefits, a $5.1 million increase in stock-based compensation related payroll taxes,benefits and a $4.4$5.7 million increase in legal expenses, partially offset by ana $11.1$6.8 million decrease in stock-based compensation.

Other income, net, was $6.0$17.8 million for the three months ended MarchJune 31,30, 2026, compared with $5.1$12.2 million for the three months ended MarchJune 31,30, 2025. The increase in other income, net was primarily due to $3.4 million related to changes in the value of the deferred compensation plan investments.

The income tax expense for the three and six months ended MarchJune 31,30, 2026 and 2025, was $54.0$64.4 million and $38.8$118.4 millionmillion, respectively, or an effective tax rate of 21.8%20.0% and 22.3%20.8%, respectively. The income tax expense for the three and six months ended June 30, 2025 was $42.0 million and $80.8 million, respectively, or an effective tax rate of 23.7% and 23.0%, respectively. The reduction in raterates from the comparable periods was primarily due to athe reductionimpact inof higher non-deductible stock-based compensation.compensation reported in the periods in 2025 than in 2026.

As of MarchJune 31,30, 2026, we had cash and cash equivalents of $1,062.9$1,005.6 million and short-term investments of $304.2$408.2 million, compared with cash and cash equivalents of $1,099.3 million and short-term investments of $157.2 million as of December 31, 2025. As of MarchJune 31,30, 2026, $683.0$659.5 million of cash and cash equivalents and $304.2$309.2 million of short-term investments were held by our foreign subsidiaries. WeFor maythe continuesix tomonths repatriateended cashJune 30, 2026, we repatriated $140 million from certain of our foreign subsidiaries to the U.S. towith fundminimal ourtax expenditures in future periods.impact. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

For the threesix months ended MarchJune 31,30, 2026, the $6.1$15.9 million decrease in net cash provided by operating activitiesactivities, compared to the same period in 20252025, was primarily due to increasedan inventoryoverall purchases and other changesincrease in working capital,capital partially offset by increased accounts receivable collections.needs.

For the threesix months ended MarchJune 31,30, 2026, the $45.2$123.6 million decreaseincrease in net cash used in investing activitiesactivities, compared to the same period in 20252025, was primarily due to $69.2$67.4 million higher net purchases of investments,investments partiallyand offset by $24.1$64.8 million higher net purchases of property and equipment.

For the threesix months ended MarchJune 31,30, 2026, the $19.4$43.3 million increase in net cash used in financing activitiesactivities, compared to the same period in 20252025, was primarily due to an increase of $18.4$44.4 million in dividend and dividend equivalent payments.

Although consequences of economic uncertainties and macroeconomic conditions, including tariffs and retaliatory measures and announcements regarding the same, and many other factors could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of $1,367.1$1,413.8 million as of MarchJune 31,30, 2026, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months.

As of MarchJune 31,30, 2026, total estimated future unconditional purchase commitments to all suppliers and other parties were $588.7$571.0 million, of which $557.5$542.1 million was due within a year.

In February 2025, our Board of Directors approved a new stock repurchase program authorizing us to repurchase up to $500.0 million of our common stock through February 2028. Shares are retired upon repurchase. TheWe Companyrepurchased did3,000 notshares makeof anyour repurchasescommon understock thisfor programan aggregate purchase price of $4.0 million during the three and six months ended MarchJune 31,30, 2026. As of MarchJune 31,30, 2026, $493.4$489.3 million remained available for future repurchases under the program. In July 2026, our Board of Directors increased the authorized amount of the repurchase program by an additional $500.0 million.

We currently have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock. Based on our historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month. As of MarchJune 31,30, 2026, accrued dividends totaled $98.3 million. The declaration of any future cash dividends is at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, capital requirements, business conditions and other factors that our Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of our stockholders.

Other long-term obligations primarily include deferred compensation plan liabilities and accrued dividend equivalents. As of MarchJune 31,30, 2026, these obligations totaled $99.2$108.6 million.