What changed in this filing

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Item 1A. Risk Factors

2026-02-10 compared with 2025-02-11 · 68 added, 29 removed, 242 unchanged (29% of the section changed)

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See NOTE 14, "COMMITMENTS AND CONTINGENCIES," to our Consolidated Financial Statements for additional information.

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

Our engines are subject to extensive statutory and regulatory requirements governing emissions and noise, including standards imposed by the EPA, the EU, state regulatory agencies (such as the CARB) and other regulatory agencies around the world.

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

Our engines are subject to extensive and evolving statutory and regulatory requirements governing emissions and noise, including standards imposed by the EPA, the EU, state regulatory agencies (such as the CARB) and other regulatory agencies around the world.

Regulatory agencies are making certification and compliance with emissions and noise standards more stringent and subjecting diesel engine products to an increasing level of scrutiny.

In addition, failure to comply with the terms and conditions of the Settlement Agreements will subject us to stipulated penalties.

The discovery of noncompliance issues could have a material adverse impact on our results of operations, financial condition and cash flows.

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If a release of hazardous substances occurs at or from any of our current or former properties or at a landfill or another location where we have disposed of hazardous materials, we may be held liable for the contamination and the amount of such liability could be material.

We may become subject to additional evolving regulations related to the cleanup of contaminated property, such as the EPA's proposal to designate two widely used PFAS as hazardous substances.

Concern over climate change has resulted in, and could continue to result in, new legal or regulatory requirements including those designed to reduce or mitigate carbon content or the effects of GHG emissions.

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Our failure to successfully comply with any such legislation, regulation or accord could also impact our ability to compete in our markets and decrease demand for our products.

We operate our business on a global basis and changes in tariffs and other trade disruptions could adversely impact the demand for our products and our competitive position.

We manufacture, sell and service products globally and rely upon a global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture and service our products.

There is currently significant uncertainty about the future relationship between the U.S.

and various other countries with respect to tariffs and other trade disruptions (such as embargoes, sanctions and export controls).

The uncertain tariff environment, marked by the U.S.

imposition of tariffs on certain countries, followed by the imposition of retaliatory tariffs on U.S.

goods and services by certain countries has introduced significant market volatility and raised concerns about potential economic impacts.

The extent to which tariffs and/or other trade disruptions will be enacted and the duration for which enacted tariffs and/or other trade disruptions will be in place remain uncertain and could adversely impact our production costs, customer demand and our relationships with customers and suppliers.

Any of these consequences could have a material adverse effect on our results of operations, financial condition and cash flows.

In addition, our compliance with any such newly enacted tariffs and/or other trade disruptions is likely to require significant resources and data management systems and could increase our cost of doing business, restrict our ability to operate our business or execute our strategies, and could result in fines and penalties or reputational harm if we are found to not be in full compliance.

We operate our business on a global basis and changes in international, national and regional trade laws, regulations and policies affecting and/or restricting international trade could adversely impact the demand for our products and our competitive position.

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customers to shift preferences toward domestically manufactured or branded products and impact the competitive position of our products or prevent us from being able to sell products in certain countries.

Our business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement and the U.S.

Our business benefits from international trade agreements, such as the United States-Mexico-Canada Agreement and the U.S.

trade relationships including those with China, Brazil, E.U.

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export controls and sanctions on China, as well as other restrictions affecting transactions involving China and Chinese parties, could affect our ability to collect receivables, access cash generated in China, provide aftermarket and warranty support for our products, sell products and otherwise impact our reputation and business, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.

Deregulation could impair our investments in future products and negatively impact our long-term growth and competitiveness.

Our strategy includes significant investments in the development of new products and technologies, particularly those designed to meet or exceed current and anticipated regulatory requirements related to emissions, safety and environmental performance.

Any significant reduction, delay, or elimination of, or failure to adopt or enforce, such regulatory requirements in key markets could reduce or delay demand for our products and services, increase our costs of producing or delay the introduction of new or modified products and services or restrict our existing activities, products, and services.

In addition, any discontinuation or reduction of incentives or benefits for the development of technologies limiting the impact of climate change, or significant uncertainty regarding such efforts, may cause demand for certain of our future products to be less than we anticipate.

Any such change in regulatory requirements or incentives may ultimately weaken or render obsolete the business case for certain research and development initiatives or capital investments.

As a result, we may be required to reassess, scale back or discontinue investments in future products that were originally intended to address more stringent regulatory standards, and may fail to realize the intended benefits of, or recover the investments we have already made in, developing new products and technologies.

In addition, the adoption of new regulations or industry standards which our products and services are not positioned to address, could adversely affect demand for our products and services.

Deregulation or reduction in incentives may also lead to reduced industry-wide innovation, as both we and our competitors could deprioritize or delay the introduction of advanced technologies that are no longer mandated.

This could limit our ability to differentiate our products, respond to evolving customer expectations or maintain leadership in markets where regulatory requirements remain in place or are later reinstated.

Furthermore, if we have already made substantial investments in anticipation of future regulations that are subsequently rolled back, we may not be able to recover those costs, which could result in asset impairments or reduced returns on investment.

Any of these outcomes could adversely affect our long-term growth prospects, competitive position and financial results.

Unanticipated changes in our effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities could adversely affect our profitability.

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and numerous international jurisdictions.

Our income tax provision and cash tax liability in the future could be adversely affected by the adoption of new tax legislation, changes in earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities and the discovery of new information in the course of our tax return preparation process.

Our income tax provision and cash tax liability in the future could be adversely affected by changes in tax laws or their interpretations, changes in earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities and the discovery of new information in the course of our tax return preparation process.

The carrying value of deferred tax assets, which are predominantly in the U.S., is dependent on our ability to generate future taxable income in the U.S.

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Due to the international scope of our operations, we are subject to additional regulatory frameworks, including a complex system of commercial and trade regulations, around the world.

In some cases, foreign regulatory frameworks are more stringent or complex than similar regimes in the United States.

In some cases, foreign regulatory frameworks are more stringent or complex than similar regimes in the U.S.

Recent years have seen an increase in the development and enforcement of laws regarding trade compliance and anti-corruption, such as the U.S.

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In an effort to limit GHG emissions and combat climate change, multiple countries and cities have announced that they plan to implement a ban on the use in their countries or cities of diesel-powered products in the near or distant future.

These countries include China, India and Germany.

These countries include

China, India and Germany.

In addition, California government officials have called for the state to phase out sales of certain diesel-powered vehicles by 2035.

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We are vulnerable to raw material, transportation and labor price fluctuations and supply shortages, which impacted and could continue to impact our results of operations, financial condition and cash flows.

We continue to experience pockets of supply chain disruptions and related challenges throughout the supply chain.

We continue to experience pockets of supply chain disruptions and related challenges throughout the supply chain which are further impacted by the current global tariff environment.

We single source a number of parts and raw materials critical to our business operations.

Any delay in our suppliers' deliveries may adversely affect our operations at multiple manufacturing locations, forcing us to seek alternative supply sources to avoid serious disruptions.

Delays may be caused by factors affecting our suppliers (including, but not limited to, raw material availability, capacity constraints, port congestion, labor disputes or unrest, shortages of labor, economic downturns, availability of credit, impaired financial condition, sanctions/tariffs, energy inflation/availability, suppliers' allocations to other purchasers, weather emergencies, natural disasters, acts of government or acts of war or terrorism).

Delays may be caused by factors affecting our suppliers (including, but not limited to, raw material availability, capacity constraints, port congestion, labor disputes or unrest, shortages of labor, economic downturns, availability of credit, impaired financial condition, sanctions/tariffs, restrictions on the sale or distribution of critical rare earth metals, energy inflation/availability, suppliers' allocations to other purchasers, weather emergencies, natural disasters, acts of government or acts of war or terrorism).

The effects of climate change, including extreme weather events, long-term changes in temperature levels and water availability may exacerbate these risks.

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We cannot guarantee that we will be able to adequately adjust our manufacturing capacity in response to significant changes in customer demand, which could harm our business.

For products where we are manufacturing at capacity, we cannot guarantee that we will be able to increase manufacturing capacity to a level that meets demand for our products and services, which could prevent us from meeting increased customer demand and could harm our business.

However, if we overestimate our demand and overbuild our capacity, we may have significantly underutilized assets and we may experience reduced margins.

If we do not accurately align our manufacturing capabilities with demand, it could have a material adverse effect on our results of operations, financial condition and cash flows.

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For 2025, we recognized $469 million of equity, royalty and interest income from investees, compared to $395 million in 2024.

In 2024, more than forty percent of our equity, royalty and interest income from investees is from three of our 50 percent owned joint ventures in China - Beijing Foton Cummins Engine Co., Ltd., Dongfeng Cummins Engine Company, Ltd.

and Chongqing Cummins Engine Company, Ltd.

In 2025, nearly fifty percent of our equity, royalty and interest income from investees was from three of our 50 percent-owned joint ventures in China - Chongqing Cummins Engine Company, Ltd., Dongfeng Cummins Engine Company, Ltd.

and Beijing Foton Cummins Engine Co., Ltd.

Although a significant percentage of our net income is derived from these unconsolidated entities, we do not unilaterally control their management or their operations, which puts a substantial portion of our net income at risk from the actions or inactions of these entities.

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Many are truck manufacturers or OEMs that manufacture engines for some of their own vehicles.

Despite their own engine manufacturing abilities, these customers have historically chosen to outsource certain types of engine production to us due to the quality of our engine products, our emission compliance capabilities, our systems integration, their customers' preferences, their desire for cost reductions, their desire for eliminating production risks and their desire to maintain company focus.

integration, their customers' preferences, their desire for cost reductions, their desire for eliminating production risks and their desire to maintain company focus.

However, there can be no assurance that these customers will continue to outsource, or outsource as much of, their engine production in the future.

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As a result, higher material and commodity costs could result in declining margins.

The development of new technologies may materially reduce the demand for our current products and services.

We are investing in new products and technologies, including electrolyzers for hydrogen production and electrified power systems and related components and subsystems.

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

We are investing in new products and technologies, including electrified power systems and related components and subsystems.

Given the early stages of development of some of these new products and technologies, there can be no guarantee of the future market acceptance and investment returns with respect to our planned products, which will face competition from an array of other technologies and manufacturers.

The ongoing energy transition away from fossil fuels and the increased adoption of electrified powertrains in some market segments could result in lower demand for current diesel or natural gas engines and components and, over time, reduce the demand for related parts and service revenues from diesel or natural gas powertrains.

Furthermore, it is possible that we may not be successful in developing segment-leading electrified or alternate fuel powertrains and some of our existing customers could choose to develop their own, or source from other manufacturers, and any of these factors could have a material adverse impact on our results of operations, financial condition and cash flows.

Furthermore, it is possible that we may not be successful in developing segment-leading electrified powertrains.

We may face technological challenges and evolving government and customer requirements, and we may not succeed in anticipating them and developing the desired technologies and products on a timely basis.

Some of our existing customers could choose to develop their own or source from other manufacturers.

Additionally, competitors may develop these technologies and products before we do, and they may be viewed by our customers to be superior to technologies and products we may develop.

If the energy transition landscape changes faster than anticipated or in a manner that we do not anticipate, demand for our products and services, as well as our relationships with various stakeholders, could be adversely affected.

Alternatively, if the energy transition occurs more slowly than anticipated, demand for our new products and technologies may be lower than expected or we may need to reassess, scale back or discontinue investments in future products, and as a result, we may fail to realize the anticipated benefits of our investments in new products and technologies.

Furthermore, if we fail or are perceived to not effectively implement an energy transition strategy, or if investors or financial institutions shift funding away from companies in fossil fuel-related industries, our access to capital or the market for our securities could be negatively impacted.

Any of these factors could have a material adverse impact on our results of operations, financial condition and cash flows.

Lower-than-anticipated market acceptance of our new or existing products or services could have a material adverse impact on our results of operations, financial condition and cash flows.

Although we conduct market research before launching new or refreshed engines and introducing new services, many factors both within and outside our control affect the success of new or existing products and services in the marketplace.

Offering engines and services that customers desire and value can mitigate the risks of increasing competition and declining demand, but products and services that are perceived to be less than desirable (whether in terms of price, quality, overall value, fuel efficiency or other attributes) can exacerbate these risks.

Offering engines and

services that customers desire and value can mitigate the risks of increasing competition and declining demand, but products and services that are perceived to be less than desirable (whether in terms of price, quality, overall value, fuel efficiency or other attributes) can exacerbate these risks.

With increased consumer interconnectedness through the internet, social media and other media, mere allegations relating to poor quality, safety, fuel efficiency, corporate responsibility or other key attributes can negatively impact our reputation or market acceptance of our products or services, even if such allegations prove to be inaccurate or unfounded.

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Also, our ability to effectively integrate any potential acquisition into our existing business and culture may not be successful, which could jeopardize future financial and operational performance for the combined businesses.

In addition, if an acquisition results in any additional goodwill or increase in other intangible assets on our balance sheet and subsequently becomes impaired, we would be required to record a non-cash impairment charge, which could result in a material adverse effect on our financial condition.

In addition, if an

acquisition results in any additional goodwill or increase in other intangible assets on our balance sheet and subsequently becomes impaired, we would be required to record a non-cash impairment charge, which could result in a material adverse effect on our financial condition.

Similarly, any strategic divestiture of a product line or business or exit of a product line or product category may reduce our revenue and earnings, reduce the diversity of our business, result in material costs and expenses and cause disruption to our employees, customers, vendors and communities in which we operate.

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As such, our IT environment faces information technology security threats, such as security breaches, computer malware, ransomware attacks and other "cyber attacks," which are increasing in both frequency and sophistication, along with power outages or hardware failures.

Increasing use of artificial intelligence may increase these risks.

Increasing use of AI may increase these risks.

These threats could result in unauthorized public disclosures of information, create financial liability, subject us to legal or regulatory sanctions, disrupt our ability to conduct our business, result in the loss of intellectual property or damage our reputation with customers, dealers, suppliers and other stakeholders.

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The impact of a significant IT event on either our IT environment or our products could have a material adverse effect on our competitive position, reputation, results of operations, financial condition and cash flows.

We may use artificial intelligence in our business and in our products, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations.

We may incorporate artificial intelligence solutions into our products, services and features, and we may leverage artificial intelligence, including generative artificial intelligence and machine learning, in our product development, operations and software programming.

Our competitors or other third parties may incorporate artificial intelligence into their products or operational processes more quickly or more successfully than us, which could have a material adverse effect on our competitive position, reputation and results of operations.

In addition, there are significant risks involved in developing and deploying artificial intelligence and there can be no assurance that the usage of artificial intelligence will enhance our products or services or be beneficial to our business, including our efficiency or profitability.

The rapid evolution of artificial intelligence, including the regulation of artificial intelligence by government or other regulatory agencies, will require significant resources to develop, test and maintain our platforms, offerings, services, and features to implement artificial intelligence ethically and minimize any unintended harmful impacts.

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

We are incorporating AI solutions into our business, products, services and features, and we are leveraging AI, including generative AI, machine learning and similar tools and technologies, in our product development, operations and software programming.

There is inherent risk and uncertainty involved in using AI.

The use of AI in the development of our products and services could cause loss or theft of intellectual property, as well as subject us to risks related to intellectual property infringement or misappropriation, data privacy and cybersecurity.

The use of AI by us, our vendors or our suppliers can lead to unintended consequences, including

generating content that appears correct but is factually inaccurate, misleading or otherwise flawed, or that results in unintended biases and discriminatory outcomes, which could harm our stakeholders, our reputation and our business and expose us to risks related to inaccuracies or errors in the output of such technologies.

If the AI tools that we use are deficient, inaccurate or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other adverse impacts on our business and financial results.

If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, data privacy, or other rights or contracts to which we are a party.

In addition, our personnel could, unbeknownst to us, improperly utilize AI and machine learning-technology while carrying out their responsibilities.

If we fail to keep pace with rapidly evolving technological developments in AI, our competitive position and business results may suffer.

Our competitors or other third parties may incorporate AI into their products or operational processes more quickly or more successfully than us, which could have a material adverse effect on our competitive position, reputation and results of operations.

In addition, there are significant risks involved in developing and deploying AI, and there can be no assurance that the usage of AI will enhance our products or services or be beneficial to our business, including our efficiency or profitability.

The rapid evolution of AI, including the regulation of AI by government or other regulatory agencies, will require significant resources to develop, test and maintain our platforms, offerings, services and features to implement AI ethically and minimize any unintended harmful impacts.

We are exposed to political, economic and other risks that arise from operating a multinational business.

Greater political, economic and social uncertainty and the evolving globalization of businesses could significantly change the dynamics of our competition, customer base and product offerings and impact our growth globally.

Greater political, economic and social uncertainty, among, between and within countries, and the evolving globalization of businesses could significantly change the dynamics of our competition, customer base and product offerings and impact our growth globally.

Our business is subject to the political, economic and other risks that are inherent in operating in numerous countries.

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Our products primarily compete on the basis of performance, price, total cost of ownership, fuel economy, emissions compliance, speed of delivery, quality and customer support.

We also face competitors in some emerging regions who have established local practices and long standing relationships with participants in these markets.

We also face competitors in some emerging regions who have established local practices and long standing relationships with participants in these

Additionally, we face increasing competition to develop innovative products that result in lower emissions.

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At December 31, 2025, we employed approximately 67,400 persons worldwide.

Approximately 22,000 of our employees worldwide were represented by various unions under collective bargaining agreements that expire between 2025 and 2029.

While we have no reason to believe that we will be materially impacted by work stoppages or other labor matters, there can be no assurance that future issues with our labor unions will be resolved favorably or that we will not encounter future strikes, work stoppages, or other types of conflicts with labor unions or our employees.

Approximately 20,000 of our employees worldwide were represented by various unions under collective bargaining agreements that expire between 2026 and 2030.While we have no reason to believe that we will be materially impacted by work stoppages or other labor matters, there can be no assurance that future issues with our labor unions will be resolved favorably or that we will not encounter future strikes, work stoppages, or other types of conflicts with labor unions or our employees.

Any of these consequences may have an adverse effect on us or may limit our flexibility in dealing with our workforce.

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We conduct operations in many areas of the world involving transactions denominated in a variety of currencies.

We are subject to foreign currency exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn revenues.

We are subject to foreign currency exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn

In addition, since our financial statements are denominated in U.S.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors