COGNEX CORP 10-Q

ITEM 1: FINANCIAL STATEMENTS COGNEX CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Three-months Ended April 5, 2026 March 30, 2025 (unaudited) Revenue $ 268,437 $ 216,036 Cost of revenue 77,498 71,713 Gross profit 190,939 144,323 Research, development, and engineering expenses 37,025 34,727 Selling, general, and administrative expenses 94,041 83,504 Operating income 59,873 26,092 Foreign currency gain (loss) ( 1,345 ) ( 2,453 ) Investment income 4,836 3,990 Other income (expense) ( 1,607 ) 169 Income before income tax expense 61,757 27,798 Income tax expense 10,053 4,195 Net income $ 51,704 $ 23,603 Net income per weighted-average common and common-equivalent share: Basic $ 0.31 $ 0.14 Diluted $ 0.31 $ 0.14 Weighted-average common and common-equivalent shares outstanding: Basic 166,514 169,265 Diluted 168,386 170,391 Cash dividends per common share $ 0.085 $ 0.080 The accompanying notes are an integral part of these consolidated financial statements. 3 COGNEX CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) Three-months Ended April 5, 2026 March 30, 2025 (unaudited) Net income $ 51,704 $ 23,603 Other comprehensive income (loss), net of tax Available-for-sale investments: Net unrealized gain (loss), net of tax of $( 726 ) and $ 875 in the three-month periods, respectively ( 2,227 ) 2,711 Reclassification of net realized (gain) loss on the sale of available-for-sale investments into current operations ( 28 ) ( 27 ) Net change related to available-for-sale investments ( 2,255 ) 2,684 Net change related to foreign currency translation adjustments ( 4,983 ) 11,447 Other comprehensive income (loss), net of tax ( 7,238 ) 14,131 Total comprehensive income (loss) $ 44,466 $ 37,734 The accompanying notes are an integral part of these consolidated financial statements. 4 COGNEX CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) April 5, 2026 December 31, 2025 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 237,343 $ 262,925 Current investments 59,413 74,037 Accounts receivable, net of allowance for credit losses of $ 781 and $ 728 in 2026 and 2025, respectively 170,721 146,713 Unbilled revenue 16,401 16,980 Inventories 135,549 137,889 Prepaid expenses and other current assets 70,922 58,702 Total current assets 690,349 697,246 Non-current investments 325,186 305,339 Property, plant, and equipment, net 84,291 86,015 Operating lease assets 69,709 72,310 Goodwill 382,818 386,279 Intangible assets, net 67,140 81,100 Deferred income taxes 381,100 383,272 Other assets 5,025 4,994 Total assets 2,005,618 2,016,555 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 59,551 $ 50,203 Accrued expenses 77,399 91,397 Accrued income taxes 6,172 9,141 Deferred revenue and customer deposits 34,053 21,094 Operating lease liabilities 12,310 11,716 Total current liabilities 189,485 183,551 Non-current operating lease liabilities 61,707 64,870 Deferred income taxes 252,230 250,512 Reserve for income taxes 21,336 24,269 Other liabilities 1,891 1,452 Total liabilities 526,649 524,654 Commitments and contingencies (Note 7) Shareholders’ equity: Preferred stock, $ .01 par value – Authorized: 400 shares in 2026 and 2025, respectively; no shares issued and outstanding — — Common stock, $ .002 par value – Authorized: 300,000 shares in 2026 and 2025, respectively; issued and outstanding: 166,527 and 166,997 shares in 2026 and 2025, respectively 333 334 Additional paid-in capital 1,194,927 1,138,708 Retained earnings 344,443 406,355 Accumulated other comprehensive loss, net of tax ( 60,734 ) ( 53,496 ) Total shareholders’ equity 1,478,969 1,491,901 Total liabilities and shareholders' equity $ 2,005,618 $ 2,016,555 The accompanying notes are an integral part of these consolidated financial statements. 5 COGNEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three-months Ended April 5, 2026 March 30, 2025 (unaudited) Cash flows from operating activities: Net income $ 51,704 $ 23,603 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Stock-based compensation expense 11,933 9,939 Depreciation of property, plant, and equipment 4,703 5,306 Amortization of intangible assets 2,532 2,628 Excess and obsolete inventory charges 364 197 Loss on sale of business, net of transaction costs 1,539 — Deferred income taxes 4,740 ( 4,689 ) Other adjustments ( 380 ) ( 188 ) Change in operating assets and liabilities: Accounts receivable ( 23,711 ) ( 17,183 ) Unbilled revenue 593 307 Inventories 8 5,474 Prepaid expenses and other current assets ( 12,212 ) 2,526 Accounts payable 9,390 4,996 Accrued expenses ( 13,554 ) ( 6,055 ) Accrued income taxes ( 2,905 ) ( 3,153 ) Deferred revenue and customer deposits 12,889 14,761 Other ( 2,540 ) 2,033 Net cash provided by (used in) operating activities 45,093 40,502 Cash flows from investing activities: Purchases of investments ( 47,013 ) ( 113,297 ) Maturities and sales of investments 39,042 148,885 Net proceeds from sale of business 11,519 — Purchases of property, plant, and equipment, net of proceeds ( 2,757 ) ( 2,501 ) Net cash provided by (used in) investing activities 791 33,087 Cash flows from financing activities: Net payments from issuance of common stock under stock plans 44,290 ( 2,587 ) Repurchase of common stock ( 98,995 ) ( 102,233 ) Payment of dividends ( 14,196 ) ( 13,550 ) Net cash provided by (used in) financing activities ( 68,901 ) ( 118,370 ) Effect of foreign exchange rate changes on cash and cash equivalents ( 2,565 ) 2,431 Net change in cash and cash equivalents ( 25,582 ) ( 42,350 ) Cash and cash equivalents at beginning of period 262,925 186,094 Cash and cash equivalents at end of period $ 237,343 $ 143,744 The accompanying notes are an integral part of these consolidated financial statements. 6 COGNEX CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands of dollars, except per share amounts) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Par Value Balance as of December 31, 2025 166,997 $ 334 $ 1,138,708 $ 406,355 $ ( 53,496 ) $ 1,491,901 Net issuance of common stock under stock plans 1,905 4 44,286 — — 44,290 Repurchase of common stock ( 2,375 ) ( 5 ) — ( 98,990 ) — ( 98,995 ) Excise tax on repurchase of common stock — — — ( 430 ) — ( 430 ) Stock-based compensation expense — — 11,933 — — 11,933 Payment of dividends ($ 0.085 per common share) — — — ( 14,196 ) — ( 14,196 ) Net income — — — 51,704 — 51,704 Net unrealized gain (loss) on available-for-sale investments, net of tax of $( 726 ) — — — — ( 2,227 ) ( 2,227 ) Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — ( 28 ) ( 28 ) Foreign currency translation adjustment — — — — ( 4,983 ) ( 4,983 ) Balance as of April 5, 2026 (unaudited) 166,527 $ 333 $ 1,194,927 $ 344,443 $ ( 60,734 ) $ 1,478,969 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Par Value Balance as of December 31, 2024 170,434 $ 341 $ 1,090,638 $ 499,303 $ ( 72,777 ) $ 1,517,505 Net issuance of common stock under stock plans 478 1 ( 2,588 ) — — ( 2,587 ) Repurchase of common stock ( 3,047 ) ( 6 ) — ( 103,407 ) — ( 103,413 ) Stock-based compensation expense — — 9,939 — — 9,939 Payment of dividends ($ 0.080 per common share) — — — ( 13,550 ) — ( 13,550 ) Net income — — — 23,603 — 23,603 Net unrealized gain (loss) on available-for-sale investments, net of tax of $ 875 — — — — 2,711 2,711 Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — ( 27 ) ( 27 ) Foreign currency translation adjustment — — — — 11,447 11,447 Balance as of March 30, 2025 (unaudited) 167,865 $ 336 $ 1,097,989 $ 405,949 $ ( 58,646 ) $ 1,445,628 The accompanying notes are an integral part of these consolidated financial statements. 7 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1: Summary of Significant Accounting Policies As permitted by the rules of the Securities and Exchange Commission applicable to Quarterly Reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by accounting principles generally accepted in the United States ("GAAP"). Reference should be made to the consolidated financial statements and related notes included in Cognex Corporation's ("Cognex" or the "Company") Annual Report on Form 10-K for the year ended December 31, 2025 for a full description of other significant accounting policies. In the opinion of the management of the Company, the accompanying consolidated unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments and financial statement reclassifications necessary to present fairly the Company’s financial position as of April 5, 2026, and the results of its operations for the three-month periods ended April 5, 2026 and March 30, 2025, and changes in shareholders’ equity, comprehensive income, and cash flows for the periods presented. The results disclosed in the Consolidated Statements of Operations for the three-month period ended April 5, 2026 are not necessarily indicative of the results to be expected for the full year. NOTE 2: New Pronouncements Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) This ASU aims to enhance transparency for users of financial statements by requiring public business entities to disaggregate specific expense categories. ASU 2024-03 mandates disclosures in the notes to financial statements detailing the composition and trends of key expense categories within major income statement captions. These enhanced disclosures are intended to help investors more effectively assess the entity’s performance, understand its cost structure, and make more accurate forecasts of future cash flows. For public business entities, ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The adoption will result in disclosure changes only. Management is currently evaluating the impact that adopting ASU 2024-03 would have on the Company's financial statement disclosures. Accounting Standards Update (ASU) 2025-06 - Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software The amendments in this ASU update the accounting and disclosure guidance for internal-use software to better reflect modern, iterative development practices. The amendments replace the former “development stage” model with a judgment-based framework and require entities to evaluate whether significant development uncertainty exists before capitalizing costs. The ASU also incorporates website development guidance into Subtopic 350-40 and aligns disclosures for capitalized software with those for property, plant, and equipment. For public business entities, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. Management is currently evaluating the impact that adopting ASU 2025-06 would have on the Company's financial statements and disclosures. Accounting Standards Update (ASU) 2025-11 - Interim Reporting (Topic 270): Narrow-Scope Improvements The amendments in this ASU improve the navigability and clarity of interim reporting requirements without changing the fundamental nature or scope of existing disclosures. The ASU also clarifies when Topic 270 applies, specifies the form and content of interim financial statements and notes, and introduces a comprehensive list of required interim disclosures compiled from across the Codification. The ASU also adds a disclosure principle requiring entities to disclose events occurring after the most recent annual reporting period that have a material impact on the entity. For public business entities, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2027, and for interim periods within annual reporting periods beginning after December 15, 2028, with early adoption permitted. Management is currently evaluating the impact that adopting ASU 2025-11 would have on the Company's disclosures. Accounting Standards Update (ASU) 2025-12 - Codification Improvements The amendments in this ASU make incremental improvements to clarify, correct, and enhance the usability of the Accounting Standards Codification. The amendments address technical corrections, unintended application issues, 8 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) and minor improvements across numerous topics, and are not expected to significantly affect current accounting practice. Key areas of clarification include diluted earnings per share calculations, disclosure requirements for lease receivables, guidance on beneficial interests, methods for accounting for treasury stock retirements, and the treatment of receivables transferred from contracts with customers. For public business entities, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and for interim periods within those annual reporting periods, with early adoption permitted. Management is currently evaluating the impact that adopting ASU 2025-10 would have on the Company's financial statements and disclosures. NOTE 3: Financial Instruments Cash, Cash Equivalents, and Investments The following table summarizes the Company’s cash, cash equivalents, and investments as of April 5, 2026 (in thousands): Fair Value Level Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Current Investments Non-current Investments Cash $ 178,191 $ — $ — $ 178,191 $ 178,191 $ — $ — Money market instruments Level 1 59,152 — — 59,152 59,152 — — Corporate bonds Level 2 360,314 1,399 ( 1,304 ) 360,409 — 58,428 301,981 Treasury notes Level 2 20,365 26 ( 26 ) 20,365 — 985 19,380 Asset-backed securities Level 2 4,116 — ( 291 ) 3,825 — — 3,825 Total $ 622,138 $ 1,425 $ ( 1,621 ) $ 621,942 $ 237,343 $ 59,413 $ 325,186 The following table summarizes the Company’s cash, cash equivalents, and investments as of December 31, 2025 (in thousands): Fair Value Level Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Current Investments Non-current Investments Cash $ 199,755 $ — $ — $ 199,755 $ 199,755 $ — $ — Money market instruments Level 1 63,170 — — 63,170 63,170 — — Corporate bonds Level 2 342,442 3,149 ( 240 ) 345,351 — 66,625 278,726 Treasury notes Level 2 29,676 167 — 29,843 — 7,412 22,431 Asset-backed securities Level 2 4,471 — ( 289 ) 4,182 — — 4,182 Total $ 639,514 $ 3,316 $ ( 529 ) $ 642,301 $ 262,925 $ 74,037 $ 305,339 The Company’s money market instruments are reported at fair value based upon the daily market price for identical assets in active markets and are therefore classified as Level 1. Money market instruments consist of treasury bills, corporate commercial paper, and certificates of deposit that are highly liquid and mature in three months or less. Corporate bonds consist of debt securities issued by both domestic and foreign companies; treasury notes consist of debt securities issued by the U.S. government; and asset-backed securities consist of debt securities collateralized by pools of receivables or loans with credit enhancement. All of the Company's securities as of April 5, 2026 and December 31, 2025 were denominated in U.S. Dollars, with the exception of certain certificates of deposit. The Company’s debt securities are reported at fair value based on model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability and are therefore classified as Level 2. Management is responsible for estimating the fair value of these financial instruments, and in doing so, considers valuations provided by a large, third-party pricing service. This service maintains regular contact with market makers, brokers, dealers, and analysts to gather information on market movement, direction, trends, and other specific data. They use this information to structure yield curves for various types of debt securities and arrive at the daily valuations. Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheets and amounted to $ 3,793,000 and $ 3,852,000 as of April 5, 2026 and December 31, 2025, 9 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) respectively. Realized Gains (Losses) on Debt Securities The following table summarizes the Company's gross realized gains and losses on the sale of debt securities for the three-month periods ended April 5, 2026 and March 30, 2025 (in thousands): Three-months Ended April 5, 2026 March 30, 2025 Gross realized gains $ 28 $ 27 Gross realized losses — — Net realized gains (losses) $ 28 $ 27 Realized gains and losses are included in "Investment income" on the Consolidated Statements of Operations. Prior to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, were recorded in shareholders’ equity as accumulated other comprehensive income (loss). Unrealized Losses on Debt Securities The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of April 5, 2026 (in thousands): Unrealized Loss Position For: Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Corporate bonds $ 138,944 $ ( 1,242 ) $ 11,537 $ ( 62 ) $ 150,481 $ ( 1,304 ) Treasury notes 7,167 ( 26 ) — — 7,167 ( 26 ) Asset-backed securities — — 3,825 ( 291 ) 3,825 ( 291 ) $ 146,111 $ ( 1,268 ) $ 15,362 $ ( 353 ) $ 161,473 $ ( 1,621 ) The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of December 31, 2025 (in thousands): Unrealized Loss Position For: Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Corporate bonds $ 30,602 $ ( 73 ) $ 22,412 $ ( 167 ) $ 53,014 $ ( 240 ) Asset-backed securities — — 4,182 ( 289 ) 4,182 ( 289 ) $ 30,602 $ ( 73 ) $ 26,594 $ ( 456 ) $ 57,196 $ ( 529 ) Management monitors debt securities that are in an unrealized loss position to determine whether a loss exists related to the credit quality of the issuer. When developing an estimate of expected credit losses, management considers all relevant information including historical experience, current conditions, and reasonable forecasts of expected future cash flows. Based on this evaluation, no allowance for credit losses on debt securities was recorded as of April 5, 2026 or December 31, 2025. Management currently intends to hold these securities to full value recovery at maturity. 10 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Debt Securities Maturities The following table presents the effective maturity dates of the Company’s available-for-sale investments as of April 5, 2026 (in thousands): <1 year 1-2 Years 2-3 Years 3-4 Years 4-5 Years Total Corporate bonds $ 58,428 $ 82,557 $ 115,212 $ 53,935 $ 50,277 $ 360,409 Treasury notes 985 17,389 1,991 — — 20,365 Asset-backed securities — — — 3,728 97 3,825 $ 59,413 $ 99,946 $ 117,203 $ 57,663 $ 50,374 $ 384,599 Derivative Instruments The Company’s foreign currency risk management strategy is designed to mitigate the potential financial impact of changes in the value of transactions and balances denominated in foreign currencies resulting from changes in foreign currency exchange rates. The Company enters into economic hedges utilizing foreign currency forward contracts with maturities of generally up to three months but not greater than one year to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and payables. The gains and losses on these derivatives are intended to be offset by the changes in the fair value of the assets and liabilities being hedged. These economic hedges are not designated as hedging instruments for hedge accounting treatment. The Company had the following outstanding forward contracts (in thousands): April 5, 2026 December 31, 2025 Currency Notional Value USD Equivalent Notional Value USD Equivalent Derivatives Not Designated as Hedging Instruments: Singapore Dollar 34,000 $ 27,335 — $ — Chinese Renminbi 170,000 24,734 20,000 2,865 Euro 15,000 17,343 — — Mexican Peso 150,000 8,380 160,000 8,881 Hungarian Forint 2,500,000 7,517 2,500,000 7,600 British Pound 4,000 5,297 4,000 5,383 Japanese Yen 800,000 5,034 400,000 2,563 Swiss Franc 2,000 2,515 — — Indian Rupee 225,000 2,399 400,000 4,436 Korean Won 3,000,000 1,988 9,000,000 6,239 11 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Information regarding the fair value of the outstanding forward contracts was as follows (in thousands): Asset Derivatives Liability Derivatives Fair Value Fair Value Balance Sheet Location Fair Value Level April 5, 2026 December 31, 2025 Balance Sheet Location Fair Value Level April 5, 2026 December 31, 2025 Derivatives Not Designated as Hedging Instruments: Economic hedge forward contracts Prepaid expenses and other current assets Level 2 $ 985 $ 791 Accrued expenses Level 2 $ 1,856 $ 367 Activity: Gross amounts recognized $ 985 $ 791 $ 1,856 $ 367 Gross amounts offset — — — — Net amounts presented on the Consolidated Balance Sheets $ 985 $ 791 $ 1,856 $ 367 The Company’s forward contracts are reported at fair value based on model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability and are therefore classified as Level 2. The Company's forward contracts are typically traded or executed in over-the-counter markets with a high degree of pricing transparency. The market participants are generally large commercial banks. Information regarding the effect of derivative instruments on the Consolidated Statements of Operations was as follows (in thousands): Statement of Operations Location Three-months Ended April 5, 2026 March 30, 2025 Derivatives Not Designated as Hedging Instruments: Gains (losses) recognized in current operations Foreign currency gain (loss) $ ( 761 ) $ ( 547 ) Activities related to derivative instruments are reflected within "Net cash provided by (used in) operating activities" on the Consolidated Statements of Cash Flows. NOTE 4: Inventories Inventories consisted of the following (in thousands): April 5, 2026 December 31, 2025 Raw materials $ 69,896 $ 75,417 Work-in-process 6,446 4,877 Finished goods 59,207 57,595 $ 135,549 $ 137,889 12 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 5: Goodwill and Intangible Assets The changes in the carrying value of goodwill were as follows (in thousands): Balance as of December 31, 2025 $ 386,279 Business disposal (refer to Note 13) ( 541 ) Foreign exchange rate changes ( 2,920 ) Balance as of April 5, 2026 $ 382,818 Amortized intangible assets as of April 5, 2026 consisted of the following (in thousands): Gross Carrying Value Accumulated Amortization Net Carrying Value Customer relationships $ 54,907 $ ( 13,760 ) $ 41,147 Completed technologies 58,175 ( 32,320 ) 25,855 Trademarks 799 ( 666 ) 133 Non-compete agreements 60 ( 55 ) 5 Balance as of April 5, 2026 $ 113,941 $ ( 46,801 ) $ 67,140 Amortized intangible assets as of December 31, 2025 consisted of the following (in thousands): Gross Carrying Value Accumulated Amortization Net Carrying Value Customer relationships $ 68,241 $ ( 14,843 ) $ 53,398 Completed technologies 58,603 ( 31,110 ) 27,493 Trademarks 812 ( 610 ) 202 Non-compete agreements 60 ( 53 ) 7 Balance as of December 31, 2025 $ 127,716 $ ( 46,616 ) $ 81,100 Future amortization expense related to intangible assets as of April 5, 2026 is as follows (in thousands): Amount Remainder of fiscal 2026 $ 6,611 2027 7,968 2028 7,238 2029 7,238 2030 6,695 2031 6,695 Thereafter 24,695 $ 67,140 On April 1, 2026, the Company completed the divestiture of its Japan-focused trading business, which was originally acquired as part of the acquisition of Moritex Corporation in 2023. In connection with the divestiture, the Company derecognized $ 541,000 of goodwill and $ 10,636,000 of customer relationship intangible assets, representing the net carrying amounts attributable to the disposed business. 13 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 6: Warranty Obligations The Company records the estimated cost of fulfilling product warranties at the time of sale based upon historical costs to fulfill claims. Obligations may also be recorded subsequent to the time of sale whenever specific events or changes in circumstances impacting product quality become known that would not have been taken into account using historical data. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers and third-party contract manufacturers, the Company’s warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. An adverse change in any of these factors may result in the need for additional warranty provisions. Warranty obligations are included in “Accrued expenses” on the Consolidated Balance Sheets. The changes in the warranty obligation for the three-month periods ended April 5, 2026 and March 30, 2025 were as follows (in thousands): Balance as of December 31, 2025 $ 5,474 Provisions for warranties issued during the period 1,301 Fulfillment of warranty obligations ( 1,127 ) Balance as of April 5, 2026 $ 5,648 Balance as of December 31, 2024 $ 5,140 Provisions for warranties issued during the period 1,453 Fulfillment of warranty obligations ( 873 ) Foreign exchange rate changes 8 Balance as of March 30, 2025 $ 5,728 NOTE 7: Commitments and Contingencies As of April 5, 2026, the Company had outstanding purchase orders totaling $ 50,616,000 to procure inventory from various vendors. Certain of these purchase orders may be canceled by the Company, subject to cancellation penalties. These purchase commitments relate primarily to expected sales in the next twelve months. A significant portion of the Company's outstanding inventory purchase orders as of April 5, 2026, as well as additional preauthorized commitments to procure strategic components based on the Company's expected customer demand, are placed with the Company's primary contract manufacturer for the Company's assembled products. The Company has the obligation to purchase any non-cancelable and non-returnable components that have been purchased by the contract manufacturer with the Company's preauthorization, when these components have not been consumed within the period defined in the terms of the Company's agreement with this contract manufacturer. While the Company typically expects such purchased components to be used in future production of Cognex finished goods, these components are considered in the Company's reserve estimate for excess and obsolete inventory. Furthermore, the Company accrues for losses on commitments for the future purchase of non-cancelable and non-returnable components from this contract manufacturer at the time that circumstances, such as changes in demand, indicate that the value of the components may not be recoverable, the loss is probable, and management has the ability to reasonably estimate the amount of the loss. The Company's accrual for such losses was not material as of April 5, 2026 and March 30, 2025. Various claims and legal proceedings generally incidental to the normal course of business are pending or threatened on behalf of or against the Company. While we cannot predict the outcome of these matters, we believe that any liability arising from them will not have a material adverse effect on our financial position, liquidity, or results of operations. 14 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 8: Stockholders' Equity Stock Repurchase Program In March 2022, the Company's Board of Directors (the "Board") authorized a program providing for the repurchase of $ 500,000,000 of the Company's common stock (the "Program"). Under the Program, in addition to repurchases made in prior periods, the Company repurchased 3,047,000 shares at a total cost of $ 103,413,000 during the three-month period ended March 30, 2025 and 2,375,000 shares at a total cost of $ 98,995,000 during the three-month period ended April 5, 2026, leaving a remaining balance of $ 16,025,000 as of April 5, 2026. On February 11, 2026, the Board authorized the repurchase of an additional $ 500,000,000 of the Company's common stock upon completion of the Program. The Company may repurchase shares under these programs in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions. Stock-Based Compensation Expense The Company’s stock-based awards that result in compensation expense consist of stock options, restricted stock units ("RSUs"), and performance restricted stock units ("PRSUs"). The following table summarizes the number of stock-based awards granted by the Company and the weighted-average grant-date fair value per unit for the three-month periods ended April 5, 2026 and March 30, 2025: Three-months Ended April 5, 2026 March 30, 2025 Stock-Based Awards Granted (in thousands) Weighted- Average Grant-Date Fair Value Stock-Based Awards Granted (in thousands) Weighted- Average Grant-Date Fair Value Stock options 326 $ 22.13 1,360 $ 12.32 Restricted stock units 745 $ 56.36 1,248 $ 32.35 Performance restricted stock units 71 $ 56.13 184 $ 32.14 1,142 2,792 During the three-month periods ended April 5, 2026 and March 30, 2025, the Company granted PRSUs that vest upon the achievement of (1) a service condition of three years of continuous employment and (2) a performance condition established by the Compensation Committee of the Board as of the grant date. The number of shares earned could range between 0 % and 120 % based on achievement of the performance condition, which includes certain financial targets. The fair value of these PRSUs is calculated based on the observable market price of the Company's stock on the grant date less the present value of expected future dividends. Compensation expense for these PRSUs is recognized based on the probable outcome of the performance condition with a cumulative catch-up adjustment for prior periods in the period that the probable outcome changes. The Company stratifies its employee population into two groups: one consisting of senior management and members of the Board and another consisting of all other employees. The Company currently applies an estimated annual forfeiture rate of 12 % to all stock-based awards for senior management and a rate of 13 % for all other employees. Each year during the first quarter, the Company revises its forfeiture rate based on updated estimates of employee turnover. Credits of $ 1,576,000 and $ 4,789,000 were recorded in 2026 and 2025, respectively, to true up previously recorded compensation expense for this forfeiture rate revision. Additionally in the first quarter of 2026, the Company revised its forfeiture rate applied specifically to stock-based awards for its former chief executive officer to 100% due to his retirement from the Board effective March 2, 2026, resulting in credits of $ 5,031,000 . As of April 5, 2026, total unrecognized compensation expense, net of estimated forfeitures, related to non-vested equity awards, including stock options, RSUs, and PRSUs, was $ 68,857,000 , which is expected to be recognized over a weighted-average period of 1.8 years. 15 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands): Three-months Ended April 5, 2026 March 30, 2025 Cost of revenue $ 925 $ 668 Research, development, and engineering 5,094 $ 4,696 Selling, general, and administrative 5,914 $ 4,575 Total stock-based compensation expense $ 11,933 $ 9,939 No compensation expense was capitalized as of April 5, 2026 or December 31, 2025. NOTE 9: Revenue Recognition The following table summarizes disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands): Three-months Ended April 5, 2026 March 30, 2025 Americas $ 121,301 $ 99,374 Europe 63,815 46,790 Greater China 37,759 26,946 Other Asia 45,562 42,926 268,437 216,036 The following table summarizes disaggregated revenue information by revenue type (in thousands): Three-months Ended April 5, 2026 March 30, 2025 Standard products and services 254,439 204,510 Application-specific customer solutions 13,998 11,526 268,437 216,036 Costs to Fulfill a Contract Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheets and amounted to $ 17,224,000 and $ 10,592,000 as of April 5, 2026 and December 31, 2025, respectively. Accounts Receivable, Contract Assets, and Contract Liabilities Accounts receivable represent amounts billed and currently due from customers which are reported at their net estimated realizable value. The Company maintains an allowance against its accounts receivable for credit losses. Contract assets consist of unbilled revenue which arises when revenue is recognized in advance of billing for certain application-specific customer solutions contracts. Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition. 16 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table summarizes the deferred revenue and customer deposits activity for the three-month periods ended April 5, 2026 and March 30, 2025 (in thousands): Balance as of December 31, 2025 $ 21,094 Deferral of revenue billed in the current period, net of recognition 21,134 Recognition of revenue deferred in prior period ( 8,042 ) Reclassified to accounts receivable ( 203 ) Foreign exchange rate changes 70 Balance as of April 5, 2026 $ 34,053 Balance at December 31, 2024 $ 25,035 Deferral of revenue billed in the current period, net of recognition 22,175 Recognition of revenue deferred in prior period ( 7,414 ) Foreign exchange rate changes 62 Balance as of March 30, 2025 $ 39,858 As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations for our contracts that have an original expected duration of less than one year. The remaining unsatisfied performance obligations for our contracts that have an original expected duration of more than one year, primarily related to extended warranties, are not material. NOTE 10: Income Taxes The Company's effective tax rate was 16 % and 15 % for the three-month periods ended April 5, 2026 and March 30, 2025, respectively. The Company has defined its major tax jurisdictions as the United States, Ireland, China, Japan, and Korea, and within the United States, Massachusetts. The statutory tax rate is 12.5 % in Ireland, 25 % in China, 34.7 % in Japan, and 22 % in Korea, compared to the U.S. federal statutory corporate tax rate of 21 %. These foreign tax rate differences resulted in a favorable impact to the effective tax rate for both the three-month periods ended April 5, 2026 and March 30, 2025. For the three-month period ended April 5, 2026, the Company recorded a net discrete tax benefit of $ 1,179,000 , primarily driven by excess tax benefits related to stock‑based compensation. For the three-month period ended March 30, 2025, the Company recorded a net discrete tax benefit of $ 307,000 , primarily driven by deferred tax adjustments partially offset by excess tax liabilities related to stock‑based compensation. The Company’s reserve for income taxes, including gross interest and penalties, was $ 24,195,000 as of April 5, 2026, of which $ 21,336,000 was classified as a non-current liability and $ 2,859,000 was classified as an offset to deferred tax assets. If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period. Within the United States, the tax years 2022 through 2025 remain open to examination by the Internal Revenue Service, and 2021 through 2025 remain open to examination by various state tax authorities. The tax years 2017 through 2025 remain open to examination by various international taxing authorities in other jurisdictions in which the Company operates. 17 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The Organization for Economic Cooperation and Development ("OECD") provided model rules for a 15% global minimum tax, known as Pillar Two. Pillar Two has now been enacted by most key non-United States jurisdictions where the Company operates. From 2024 to 2025, the Company met at least one of the tests under the transitional safe harbor exception for all jurisdictions except for the United States. During 2024 and 2025, the Company had favorable treatment under a safe harbor that exempted U.S. multinational entity exposure to top-up tax under Pillar Two, which expired at the end of 2025. In 2026, OECD released the framework for a side-by-side system, providing a permanent solution for multinational entities headquartered in jurisdictions that had not fully adopted the Pillar Two Model Rules into domestic law but have current domestic tax regimes meeting certain requirements, including a high statutory tax rates (at least 20%) that had not fully adopted the Pillar Two Model Rules into domestic law. However, uncertainty remains related to the implementation of this arrangement across the various jurisdictions in which the Company operates, and the Company is now subject to top-up tax effective January 1, 2026. This minimum tax is treated as a period cost but did not have a material impact on the Company's financial results of operations for the three-month period ended April 5, 2026. The Company continues to monitor legislative developments. NOTE 11: Earnings per Share The following table shows the computation of basic and diluted earnings per share for the three-month periods ended April 5, 2026 and March 30, 2025 (in thousands, except per share amounts): Three-months Ended April 5, 2026 March 30, 2025 Net income 51,704 23,603 Basic weighted-average common and common-equivalent shares outstanding 166,514 169,265 Effect of dilutive stock-based awards 1,872 1,126 Diluted weighted-average common and common-equivalent shares outstanding 168,386 170,391 Earnings per share Basic 0.31 0.14 Diluted 0.31 0.14 The computation of diluted weighted-average common shares outstanding excludes the following weighted average anti-dilutive stock-based awards outstanding for the three-month periods ended April 5, 2026 and March 30, 2025 (in thousands): Three-months Ended April 5, 2026 March 30, 2025 Stock options 5,945 9,765 Restricted stock units 376 — Performance restricted stock units 41 — Total weighted average anti-dilutive stock-based awards outstanding 6,362 9,765 NOTE 12: Segment Information The Company operates in one segment, machine vision technology. The Company has a single, company-wide management team that administers operations as a whole rather than as discrete operating segments. The Company’s chief operating decision maker is the chief executive officer, who assesses performance and allocates resources at the corporate level, as compared to the geography, product line, or end market levels. The Company offers a variety of machine vision products that have similar economic characteristics and are distributed by the same sales channels to the same types of customers. 18 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The measure of segment profit or loss for the Company's single segment is net income. Segment expenses were disaggregated based on the information the chief operating decision maker uses to assess performance and allocate resources considering both quantitative and qualitative factors. The following table summarizes significant segment expenses, which represents the difference between segment revenue and segment net income (in thousands): Three-months Ended April 5, 2026 March 30, 2025 Revenue $ 268,437 $ 216,036 Less: Cost of revenue (1) 77,498 71,713 Gross profit 190,939 144,323 Less: Research, development, and engineering expenses Salaries and fringe benefits 19,074 18,274 Incentive compensation (2) 2,024 1,071 Stock-based compensation 5,094 4,696 Depreciation and amortization 502 755 Other segment expenses (3) 10,331 9,931 Total research, development, and engineering expenses 37,025 34,727 Selling, general, and administrative expenses Salaries and fringe benefits 45,026 42,195 Incentive compensation (2) 14,326 10,882 Stock-based compensation 5,914 4,575 Depreciation and amortization 3,666 4,161 Other segment expenses (3) 25,109 21,691 Total selling, general, and administrative expenses 94,041 83,504 Operating income 59,873 26,092 Foreign currency gain (loss) ( 1,345 ) ( 2,453 ) Investment income 4,836 3,990 Other income (expense) ( 1,607 ) 169 Income before income tax expense 61,757 27,798 Income tax expense 10,053 4,195 Net income $ 51,704 $ 23,603 (1) Cost of revenue includes depreciation and amortization expense (including amortization of acquired technologies) of $ 3,067,000 and $ 3,018,000 for the three-month periods ended April 5, 2026 and March 30, 2025, respectively. (2) Incentive compensation includes company bonus and sales commissions. (3) Other segment expenses include outside services, prototyping materials, sales demonstration equipment, travel and entertainment, marketing programs, rent, and reorganization charges, among other less significant expenses. Segment assets amounted to $ 2,005,618,000 and $ 2,016,555,000 as of April 5, 2026 and December 31, 2025, respectively. 19 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 13: Business Disposal On April 1, 2026, the Company completed the divestiture of its Japan-focused trading business, which was originally acquired as part of the acquisition of Moritex Corporation ("Moritex") in 2023. The disposal group met the definition of a business under ASC 805 as it included inputs and substantive processes that together significantly contributed to the ability to create outputs. The transaction resulted in gross proceeds received from the buyer of ¥ 1,882,688,000 Japanese Yen ($ 12,049,000 U.S. Dollars based on the closing-date foreign exchange rate). Carrying amounts of major assets and liabilities included as part of the disposal group were as follows (in thousands): Amount Inventories $ 2,195 Goodwill 541 Intangible assets, net (customer relationships) 10,636 Total assets $ 13,372 Accrued expenses (retirement benefit obligation) $ 314 Total liabilities $ 314 The Company recognized a pre-tax loss of ¥ 240,445,000 Japanese Yen ($ 1,539,000 U.S. Dollars based on the closing-date foreign exchange rate), which includes direct costs associated with the divestiture incurred during the three-month period ended April 5, 2026 of ¥ 82,895,000 Japanese Yen ($ 530,000 U.S. Dollars based on the closing-date foreign exchange rate) and is presented within “Other income (expense)” in the Consolidated Statements of Operations for the three-month period ended April 5, 2026. The transaction did not have a material impact on the Company’s income tax expense or tax position. The divested business was not considered core to the Company’s operations and its sale does not represent a strategic shift that would have a major effect on the Company’s operations or financial results. For the year ended December 31, 2025, the divested business accounted for approximately 2 % of the Company’s overall revenue. Accordingly, the transaction does not meet the criteria for discontinued operations presentation and as a result, the results of operations of the disposal group are presented within continued operations for the three-month period ended April 5, 2026. The business was not a reportable segment and was included within the Company’s single operating segment as described in Note 13, Segment Information. The Company allocated ¥ 1,661,888,000 Japanese Yen ($ 10,636,000 U.S. Dollars based on the closing-date foreign exchange rate) of net customer relationships to the disposal group based on the relative fair value attributable to the disposal group using an income approach, which the Company determined to be the most appropriate basis for allocation as it best reflects the economic benefits and expected future cash flows associated with these relationships. The income approach is consistent with the valuation methodology used in the original acquisition‑date valuation and incorporates management’s best estimates and assumptions that a market participant would consider. The Company allocated ¥ 84,563,000 Japanese Yen ($ 541,000 U.S. Dollars based on the closing-date foreign exchange rate) of goodwill to the disposal group based on its relative fair value compared to the Company’s total fair value. Following the divestiture, the remaining goodwill associated with the continuing reporting unit was supported by a substantial excess of fair value of the reporting unit over its carrying value, and therefore no impairment charge was recognized. 20 COGNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 14: Subsequent Events On May 6, 2026, the Board declared a cash dividend of $ 0.085 per share. The dividend is payable on June 4, 2026 to all shareholders of record as of the close of business on May 21, 2026. Additionally, on April 29, 2026, the shareholders of the Company approved an amendment to the Cognex Corporation 2023 Stock Option and Incentive Plan (the “2023 Plan”) to increase the maximum amount of shares of common stock available to be issued under the plan by 4,600,000 shares. 21