ESTEE LAUDER COMPANIES INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS We manufacture, market and sell beauty products including those in the skin care, makeup, fragrance and hair care categories, which are distributed in approximately 150 countries and territories. The following table is a comparative summary of operating results for the three and nine months ended March 31, 2025 and 2024, and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies for all periods presented. Products and services that do not meet our definition of skin care, makeup, fragrance and hair care have been included in the “other” category. Three Months Ended March 31, Nine Months Ended March 31, (In millions) 2025 2024 2025 2024 NET SALES By Product Category: Skin Care $ 1,807 $ 2,060 $ 5,257 $ 5,873 Makeup 1,035 1,136 3,223 3,365 Fragrance 557 575 1,931 1,948 Hair Care 126 143 424 464 Other 25 26 80 88 3,550 3,940 10,915 11,738 Returns associated with restructuring and other activities — — — (1) Net sales $ 3,550 $ 3,940 $ 10,915 $ 11,737 By Region (1) : The Americas $ 1,052 $ 1,117 $ 3,462 $ 3,567 Europe, the Middle East & Africa 1,358 1,647 4,082 4,488 Asia/Pacific 1,140 1,176 3,371 3,683 3,550 3,940 10,915 11,738 Returns associated with restructuring and other activities — — — (1) Net sales $ 3,550 $ 3,940 $ 10,915 $ 11,737 OPERATING INCOME (LOSS) By Product Category: Skin Care $ 361 $ 468 $ 784 $ 920 Makeup 14 66 (382) 56 Fragrance 32 29 (354) 267 Hair Care (13) (25) (34) (50) Other 9 11 (25) 38 403 549 (11) 1,231 Charges associated with restructuring and other activities (97) (18) (384) (28) Operating income (loss) $ 306 $ 531 $ (395) $ 1,203 By Region (1) : The Americas $ 8 $ (6) $ (983) $ (243) Europe, the Middle East & Africa 239 302 645 825 Asia/Pacific 156 253 327 649 403 549 (11) 1,231 Charges associated with restructuring and other activities (97) (18) (384) (28) Operating income (loss) $ 306 $ 531 $ (395) $ 1,203 (1) The net sales from the Company's travel retail business are included in the Europe, the Middle East & Africa region, and operating income attributable to these net sales are included in that region and in The Americas. The exception is for net sales and operating income of Dr.Jart+ in the travel retail channel in Korea that are reflected in Korea in the Asia/Pacific region. During the fiscal 2025 second quarter, the Company exited Dr.Jart+ from the travel retail channel in Korea. 37 Table of Contents THE ESTÉE LAUDER COMPANIES INC. The following table presents certain consolidated earnings (loss) data as a percentage of net sales: Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales 25.0 28.1 25.4 28.4 Gross profit 75.0 71.9 74.6 71.6 Operating expenses: Selling, general and administrative 63.6 58.0 65.4 61.1 Restructuring and other charges 2.7 0.5 3.4 0.2 Impairment of goodwill and other intangible assets — — 7.9 — Talcum litigation settlement agreements — — 1.5 — Total operating expenses 66.3 58.4 78.2 61.4 Operating income (loss) 8.6 13.5 (3.6) 10.2 Interest expense 2.5 2.4 2.5 2.4 Interest income and investment income, net 0.8 1.1 0.8 1.1 Other components of net periodic benefit cost 0.1 (0.1) 0.1 (0.1) Earnings (loss) before income taxes 6.8 12.3 (5.4) 9.0 Provision (benefit) for income taxes 2.3 3.8 — 3.0 Net earnings (loss) 4.5 8.5 (5.4) 5.9 Net earnings attributable to redeemable noncontrolling interest — (0.1) — (0.2) Net earnings (loss) attributable to The Estée Lauder Companies Inc. 4.5 % 8.4 % (5.4) % 5.7 % Not adjusted for differences caused by rounding Period-over-period changes in our net sales are generally attributable to the impacts from (i) pricing on our base portfolio, including changes in mix and those due to strategic pricing actions, (ii) volume, including changes driven by the impact of new product innovation, (iii) acquisitions and/or divestitures, and/or (iv) foreign currency translation. The percentages disclosed for these impacts are calculated on an individual basis. The net sales impact from pricing consists of changes in list prices, due to strategic pricing actions, and mix shifts within and among product categories, geographic regions, brands and distribution channels. The prices at which we sell our products vary by brand, distribution channel (e.g., wholesale or direct-to-consumer) and may also vary by country. Our brands and products cover a broad array of pricing tiers. Prices of skin care and fragrance products are typically higher than makeup and hair care products. 38 Table of Contents THE ESTÉE LAUDER COMPANIES INC. New product innovation includes the introduction of new products, as well as changes related to existing products or where they are sold, including reformulations, regional expansion, repackaging and sets. A product is considered "new innovation" for the twelve-month period following the initial shipment date. Our innovation is launched at different price points than existing products and value derived from innovation may vary from year-to-year. We continually introduce new products, support new and established products through advertising, merchandising and sampling and phase out existing products that no longer meet the needs of our consumers or our objectives. The economics of developing, producing, launching, supporting and discontinuing products impact our sales and operating performance each period. The introduction of new products often has some cannibalizing effect on sales of existing products, which we take into account in our business planning. The impact of new product introductions, including timing compared to introductions in prior periods, also affects our results. Non-GAAP Financial Measures We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period-to-period helps investors and others compare operating performance between periods. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. See Reconciliations of Non-GAAP Financial Measures beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. We operate on a global basis, with the majority of our net sales generated outside the United States. Accordingly, fluctuations in foreign currency exchange rates affect our results of operations. Therefore, we present certain net sales, operating results and diluted net earnings (loss) per common share information excluding the effect of foreign currency rate fluctuations to provide a framework for assessing the performance of our underlying business outside the United States. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency information by translating current-period results using monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities. Overview We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with high quality products and services. Within prestige beauty, we are diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point. We also leverage consumer analytics and insights by deploying our brands to grow sales and pursue profitable opportunities. These analytics and insights, combined with our creativity, inform our innovation to provide a broad, locally-relevant and inclusive range of prestige products with the aim of competing effectively for a greater share of a consumer's beauty routine. Elements of our strategy are described below, as well as in the Overview on page 31 of our Annual Report on Form 10-K for the year ended June 30, 2024. • Our skin care net sales decreased 12% for the three months ended March 31, 2025, primarily driven by lower net sales from Estée Lauder and La Mer. The decrease in net sales from Estée Lauder and La Mer was primarily driven by our Asia travel retail business, reflecting the ongoing subdued sentiment and lower conversion from Chinese consumers, the difficult comparison to the prior-year period due to our resumption of replenishment orders in the fiscal 2024 third quarter and our strategic decision to reduce our exposure to reseller activity, as well as retailer shifts in strategies toward more profitable duty-free business models in both Korea and mainland China, which led to lower replenishment orders. • Our makeup net sales decreased 9% for the three months ended March 31, 2025, primarily reflecting lower net sales from M·A·C and Estée Lauder. The decrease in net sales from M·A·C was primarily driven by lower net sales in the face and eye subcategories and reflected softness in the brand's retail sales which led to elevated levels of inventory, resulting in retailer destocking. Net sales from Estée Lauder decreased, primarily driven by lower net sales in the face subcategory. 39 Table of Contents THE ESTÉE LAUDER COMPANIES INC. • Our fragrance net sales decreased 3% for the three months ended March 31, 2025, reflecting lower net sales from Jo Malone London, Clinique, TOM FORD and Estée Lauder. The decrease in net sales from Jo Malone London was primarily driven by lower net sales in the cologne and home subcategories. Net sales from Clinique decreased, primarily driven by lower net sales from the Clinique Happy franchise line of products. The decrease in net sales from TOM FORD was primarily driven by lower net sales in North America, reflecting softness in the brand's retail sales which led to elevated levels of inventory, resulting in retailer destocking, and an unfavorable year-over-year impact of prior-year launches. Net sales from Estée Lauder decreased across the fragrance portfolio, led by lower net sales from the Beautiful franchise. Partially offsetting the fragrance net sales decrease were higher net sales from Le Labo, primarily reflecting growth of hero products, including growth through targeted expanded consumer reach, and new product launches. • Our hair care net sales decreased 12% for the three months ended March 31, 2025 primarily attributable to lower net sales from Aveda, reflecting our softness in the Europe, the Middle East & Africa and North America salon channels, as well as softness in our direct-to-consumer business. Our global distribution capability and operations allow us to focus on targeted expanded consumer reach wherever consumer demographics and trends are attractive. Our regional organizations, and the expertise of our people there, enable our brands to be more locally and culturally relevant in both product assortment and communications. We are continually evolving the way we connect with our consumers in stores, online and where they travel, including by expanding our digital and social media presence and the engagement of global and local influencers to amplify brand or product stories. We tailor implementation of our strategy by market to drive consumer engagement, recruitment and loyalty. We strive to strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets. • Net sales in The Americas decreased 6% for the three months ended March 31, 2025, primarily driven by lower net sales in North America, reflecting ongoing retail softness for some brands and declines in consumer confidence and sentiment, which led to elevated inventory levels and destocking at certain retailers, as well as operational challenges at certain retailers and the timing of shipments, which further pressured net sales compared to the prior-year period. Partially offsetting the net sales decline for North America was the impact from the launch of nine brands to-date in Amazon's U.S. Premium Beauty store. • Net sales in Europe, the Middle East & Africa decreased 18% for the three months ended March 31, 2025, primarily driven by lower net sales in our Asia travel retail business, reflecting the ongoing subdued sentiment and lower conversion from Chinese consumers, the difficult comparison to the prior-year period due to our resumption of replenishment orders in the fiscal 2024 third quarter and our strategic decision to reduce our exposure to reseller activity, as well as retailer shifts in strategies toward more profitable duty-free business models in both Korea and mainland China, which led to lower replenishment orders. • Net sales in Asia/Pacific decreased 3% for the three months ended March 31, 2025, primarily driven by lower net sales from Korea, Hong Kong SAR, Singapore, Taiwan and Australia, partially offset by higher net sales from mainland China and Japan. The decrease in net sales from Korea reflected the impact of political and social unrest, which reduced retail traffic and dampened retail sales, as well as the exit of Dr.Jart+ from the travel retail channel in Korea during the fiscal 2025 second quarter. Net sales from Hong Kong SAR and Singapore decreased, reflecting our strategic decision to reduce our exposure to reseller activity. The net sales decline from Taiwan reflected the temporary closure of a key retailer during the fiscal 2025 third quarter. Net sales from Australia decreased, reflecting lower net sales across all product categories. The increase in net sales in mainland China reflected the favorable timing of key shopping moments compared to the prior-year period, which contributed to prestige beauty stabilization, the partial recapture of consumer demand in mainland China from Asia travel retail, Hong Kong SAR and Singapore, as well as online net sales growth and the success of new product launches from La Mer. Partially offsetting the increase in net sales in mainland China, were lower shipments to some retailers due to retail softness, reflecting subdued consumer sentiment, and their efforts to manage working capital. The net sales increase from Japan reflected higher net sales in fragrance, driven by Le Labo and in skin care, driven by Estée Lauder and La Mer, including growth through tourism demand. 40 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Outlook We have experienced challenges within our business and we expect volatility and uncertainty to continue, including from ongoing, subdued consumer sentiment in China and the United States and the impact of political and social unrest in Korea. In addition, in our Asia travel retail business, the pressures from changes in strategies by certain retailers have impacted, and are expected to continue to impact, our business. These challenges are collectively expected to impact net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings. We are continuing to monitor and assess the potential effects of new and existing tariffs in the United States as well as in other markets in which we operate. These tariffs have led to significant volatility and uncertainty in global markets and difficulty in forecasting demand. We are implementing and considering additional mitigation measures. We do not anticipate a material impact to fiscal 2025 profitability, however, even if we can minimize some of the impacts, and unless meaningful resolution of trade negotiations is achieved, we anticipate a high rate of tariffs to have a material adverse effect on fiscal 2026 profitability and cash flows. We continue to believe that the best way to increase long-term stockholder value is to provide superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across geographic regions, product categories, brands, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths, such as our history of outstanding creativity and innovation, high quality products and services, and engaging communications, and make us more productive and profitable. With the transition of leadership in the second and third quarters of fiscal 2025, we have embarked on “Beauty Reimagined,” a strategic vision that aims to accelerate best-in-class consumer coverage, create transformative innovation, boost consumer-facing investments and enable growth through more efficiencies expected through the expansion of the Profit Recovery and Growth Plan ("PRGP"), as discussed below. We continue to monitor the effects of the global macro environment, including the risk of recession; currency volatility; inflationary pressures; supply chain challenges; social and political issues; competitive pressures; legal and regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. We are also mindful of inflationary pressures (including those caused by tariffs) on our cost base and are monitoring the impact on consumer preferences, the impact of changes being made in the organization, including those related to Beauty Reimagined and the PRGP, as well as the potential impact of changes expected to be made as part of the PRGP on suppliers, retailers and others, and challenges relating to successfully outsourcing select services. In our outlook, we have made assumptions regarding these internal and external factors and challenges. Declines in net sales and profitability have, and may continue to, adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments. Restructuring Program Component of the Profit Recovery and Growth Plan As announced on November 1, 2023, we launched the PRGP to help progressively rebuild our profit margins in fiscal years 2025 and 2026. The PRGP is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility. The plan is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities. Upon completion of this plan, we expect to have improved our gross margin and expense base to drive greater operating leverage for the future. As a component of the PRGP, on February 5, 2024, we announced a two-year restructuring program. The restructuring program’s main focus included the reorganization and rightsizing of certain areas of our business as well as simplification and acceleration of processes. We committed to this course of action on February 1, 2024. In connection with the restructuring program, we estimated a net reduction in the range of approximately 1,800 to 3,000 positions globally, which was about 3-5% of our positions including temporary and part-time employees as of June 30, 2023. This reduction took into account the elimination of some positions as well as retraining and redeployment of certain employees in select areas. 41 Table of Contents THE ESTÉE LAUDER COMPANIES INC. We planned to substantially complete specific initiatives under the restructuring program through fiscal 2026. We expected that the restructuring program would result in restructuring and other charges totaling between $500 million and $700 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs associated with implementing these initiatives. After reviewing additional potential initiatives and the progress of previously approved initiatives, on February 3, 2025, we committed to the expansion of the PRGP, including an expansion of the restructuring program. The expansion of the overall PRGP is focused on three key areas. First, we plan to adopt a more competitive approach to procurement, a key pillar of savings, by further consolidating spending and strategically re-evaluating key supplier relationships. Second, we plan to further improve efficiencies within our supply chain network through a zero-waste approach, aiming to improve demand forecasting and innovation planning to minimize excess inventory and product destruction. Third, we are outsourcing select services to proven global partners. The expanded component of the restructuring program began during our fiscal 2025 third quarter with all initiatives to be approved by the end of fiscal 2026. Specific initiatives under the expanded component of the restructuring program are expected to be substantially completed by the end of fiscal 2027. The focus of the now expanded restructuring program (now, collectively the “Restructuring Program”) includes (i) reorganization and rightsizing of certain areas and (ii) simplification and acceleration of processes, along with the newly added focus on (i) outsourcing of select services and (ii) evolution of go-to-market footprint and selling models. In connection with the Restructuring Program, we now estimate a net reduction in the range of approximately 5,800 to 7,000 positions globally, which is about 9-11% of our positions including temporary and part-time employees as of June 30, 2023. This net reduction takes into account the elimination of positions after retraining and redeployment of certain employees in select areas. We now expect that the Restructuring Program will result in restructuring and other charges totaling between $1,200 million and $1,600 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs associated with implementing these initiatives, which other than the non-cash charges, are expected to result in future cash expenditures funded from cash provided by operations. Once fully implemented, we now expect the Restructuring Program to yield annual target gross benefits of between $800 million and $1,000 million, before taxes, a portion of which is expected to be reinvested in consumer-facing activities. The net benefits of the PRGP, which includes the Restructuring Program, are expected to enable a return to a double-digit operating margin over the next few years. Further information about the Restructuring Program Component of the Profit Recovery and Growth Plan, is described in Notes to Consolidated Financial Statements, Note 3 – Charges Associated with Restructuring and Other Activities herein. Talcum Litigation Settlement Agreements From the end of August 2024 through October 2024, we reached agreements with certain plaintiff law firms (collectively, the “talcum litigation settlement agreements”) for: (i) the resolution of pending cosmetic talcum powder matters handled by those firms as well as (ii) a process for resolving potential future cosmetic talcum powder claims expected to be brought on behalf of plaintiffs by those firms from January 1, 2025 through December 31, 2029, with annual capped amounts per year for each participating law firm. To account for the talcum litigation settlement agreements, we recorded a charge of $159 million during the fiscal 2025 first quarter for the amount agreed to settle the current claims and an estimated amount for potential future claims. Further information about the talcum litigation settlement agreements, is described in Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies herein. 42 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Impairment Analysis During the Nine Months Ended March 31, 2025 During the fiscal 2025 second quarter, the TOM FORD brand experienced lower-than-expected growth within key geographic regions and channels, including in mainland China, Asia travel retail and Hong Kong SAR. Also during the fiscal 2025 second quarter, the Too Faced reporting unit experienced lower-than-expected results in key geographic regions and channels. As a result, we made revisions to the internal forecasts relating to our TOM FORD brand and Too Faced reporting unit. Additionally, there were increases in the weighted average cost of capital for both the TOM FORD brand and Too Faced reporting unit as compared to the prior-year annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2024. We concluded that the changes in circumstances in the TOM FORD brand and Too Faced reporting unit, along with increases in the weighted average cost of capital, triggered the need for interim impairment reviews of the TOM FORD trademark and the Too Faced trademark and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, we performed interim impairment tests for the TOM FORD and Too Faced trademarks and Too Faced goodwill as well as a recoverability test for the Too Faced long-lived assets as of December 31, 2024. We concluded that the carrying value of the trademark intangible assets exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method, and recorded an impairment charge of $773 million for TOM FORD and $75 million for Too Faced. We concluded that the carrying amounts of the long-lived assets for Too Faced were recoverable. Additionally, as a result of the interim impairment review, the remaining carrying value of Too Faced’s goodwill was not recoverable and we recorded an impairment charge of $13 million, reducing the carrying value to zero. The significant assumptions used in the relief-from-royalty method include revenue growth rates and profit margins, terminal values, weighted-average cost of capital used to discount future cash flows and royalty rates. The most significant unobservable input used to estimate the fair value of the TOM FORD and Too Faced trademark intangible assets was the weighted average cost of capital, which was 11.5% and 14%, respectively. A summary of the impairment charges for the nine months ended March 31, 2025 and the remaining trademark and goodwill carrying values as of March 31, 2025, for the TOM FORD brand and Too Faced reporting unit, are as follows: Impairment Charges (1) Carrying Value (In millions) Nine Months Ended March 31, 2025 As of March 31, 2025 Brand/Reporting Unit Geographic Region Trademark Goodwill Trademark (2) Goodwill TOM FORD The Americas $ 773 $ — $ 1,805 $ — Too Faced The Americas 75 13 112 — Total $ 848 $ 13 $ 1,917 $ — (1) The date of the fair value measurement for the TOM FORD and Too Faced trademark intangible assets and Too Faced reporting unit was December 31, 2024. (2) The carrying values of the trademark intangible assets, immediately subsequent to the impairment charges, are equal to their fair values. The impairment charge related to the TOM FORD trademark intangible asset for the nine months ended March 31, 2025 of $773 million was reflected in the fragrance, makeup and other product categories of $549 million, $170 million and $54 million, respectively. The trademark and goodwill impairment charges related to Too Faced were reflected in the makeup product category. The fair value of the TOM FORD and Too Faced trademarks were equal to their carrying values subsequent to the impairment charges taken as of December 31, 2024. The key assumptions used to determine the estimated fair value of the trademarks are primarily predicated on the success of future new product launches, the ability to secure strategic price increases, the achievement of distribution expansion plans, and the realization of cost reduction and other efficiency efforts. If such plans do not materialize, or if there are further challenges in the business environments in which the TOM FORD brand or Too Faced reporting unit operates, resulting changes in the key assumptions could have negative impacts on the estimated fair value of the trademarks, and it is possible we could recognize additional impairment charges in the future. 43 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NET SALES Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Net sales $ 3,550 $ 3,940 $ 10,915 $ 11,737 $ Change from prior-year period (390) (822) % Change from prior-year period (10) % (7) % Non-GAAP Financial Measure (1) : % Change from prior-year period in constant currency (8) % (7) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported net sales decreased for the three and nine months ended March 31, 2025, driven by a decrease across all product categories, primarily reflecting lower net sales in skin care and makeup. By geographic region, reported net sales decreased for the three and nine months ended March 31, 2025, reflecting lower net sales across all geographic regions, primarily driven by Europe, the Middle East & Africa for the three-month period, reflecting lower net sales in our Asia travel retail business, and for the nine months ended March 31, 2025, primarily driven by Europe, the Middle East & Africa, reflecting lower net sales in our Asia travel retail business, and Asia/Pacific, reflecting lower net sales in mainland China, Hong Kong SAR and Korea. Reported net sales decreased 10% for the three months ended March 31, 2025, driven by the decrease from volume of 9% and the unfavorable impact from foreign currency translation of 1%. Partially offsetting these decreases was an increase from pricing of 1% due to the favorable impact from strategic pricing actions, partially offset by changes in mix. Reported net sales decreased 7% for the nine months ended March 31, 2025, driven by the decrease from volume of 9%. Partially offsetting this decrease was an increase from pricing of 3% due to the favorable impact from strategic pricing actions, partially offset by changes in mix. Returns associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business. For the three and nine months ended March 31, 2025, and for the three months ended March 31, 2024, there were no returns associated with restructuring and other activities. For the nine months ended March 31, 2024, there were $1 million in returns associated with restructuring and other activities. 44 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Product Categories Skin Care Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Net sales $ 1,807 $ 2,060 $ 5,257 $ 5,873 $ Change from prior-year period (253) (616) % Change from prior-year period (12) % (10) % Non-GAAP Financial Measure (1) : % Change from prior-year period in constant currency (11) % (10) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported skin care net sales decreased for the three and nine months ended March 31, 2025, reflecting lower net sales from Estée Lauder and La Mer, combined, of approximately $215 million and $533 million, respectively, primarily driven by declines in our Asia travel retail business. The decrease in net sales from our Asia travel retail business in both periods reflected the ongoing subdued sentiment and lower conversion from Chinese consumers, the difficult comparison to the prior-year period due to our resumption of replenishment orders in the fiscal 2024 third quarter and our strategic decision to reduce our exposure to reseller activity, as well as retailer shifts in strategies toward more profitable duty-free business models in both Korea and mainland China, which led to lower replenishment orders. The decrease in net sales from Estée Lauder for the nine months ended March 31, 2025 also included lower net sales in mainland China, reflecting the overall challenging retail environment, including the ongoing pressure from subdued consumer sentiment. Skin care net sales were impacted by approximately $24 million and $13 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2025, respectively. Reported skin care net sales decreased 12% for the three months ended March 31, 2025, driven by the decrease from volume of 10%, a decrease from pricing of 1%, due to changes in mix, partially offset by the favorable impact from strategic pricing actions, and the unfavorable impact from foreign currency translation of 1%. Reported skin care net sales decreased 10% for the nine months ended March 31, 2025, driven by the decrease from volume of 11%. Partially offsetting this decrease was an increase from pricing of 1% due to the favorable impact from strategic pricing actions, partially offset by changes in mix. 45 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Makeup Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Net sales $ 1,035 $ 1,136 $ 3,223 $ 3,365 $ Change from prior-year period (101) (142) % Change from prior-year period (9) % (4) % Non-GAAP Financial Measure (1) : % Change from prior-year period in constant currency (7) % (3) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported makeup net sales decreased for the three months ended March 31, 2025, primarily driven by lower net sales from M·A·C and Estée Lauder, combined, of approximately $85 million. The decrease in net sales from M·A·C was primarily driven by lower net sales in the face and eye subcategories and reflected softness in the brand's retail sales which led to elevated levels of inventory, resulting in retailer destocking. Net sales from Estée Lauder decreased, primarily driven by lower net sales in the face subcategory. Reported makeup net sales decreased for the nine months ended March 31, 2025, reflecting lower net sales from M·A·C, and to a lesser extent, Estée Lauder, Smashbox and Bobbi Brown, combined, of approximately $158 million. The decrease in net sales from M·A·C was primarily driven by lower net sales in the face and eye subcategories and reflected softness in the brand's retail sales which led to elevated levels of inventory, resulting in retailer destocking. The decrease in net sales from Estée Lauder was primarily driven by lower net sales in the face subcategory. Net sales from Smashbox decreased, primarily reflecting lower net sales in the face and, to a lesser extent, eye subcategories. The decrease in net sales from Bobbi Brown was driven by lower net sales in the face subcategory. Partially offsetting the makeup net sales decrease for the nine months ended March 31, 2025 were higher net sales from Clinique across all geographic regions, led by North America, reflecting higher net sales associated with the fiscal 2024 third quarter launch in Amazon's U.S. Premium Beauty store, as well as the success of hero products and new product launches. Makeup net sales were impacted by approximately $19 million and $28 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2025, respectively. Reported makeup net sales decreased 9% for the three months ended March 31, 2025, driven by the decrease from volume of 10% and the unfavorable impact from foreign currency translation of 2%. Partially offsetting these decreases was an increase from pricing of 2% due to the favorable impact from strategic pricing actions, partially offset by changes in mix. Reported makeup net sales decreased 4% for the nine months ended March 31, 2025, driven by the decrease from volume of 8% and the unfavorable impact from foreign currency translation of 1%. Partially offsetting these decreases was an increase from pricing of 5% due to the favorable impact from strategic pricing actions and changes in mix. 46 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Fragrance Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Net sales $ 557 $ 575 $ 1,931 $ 1,948 $ Change from prior-year period (18) (17) % Change from prior-year period (3) % (1) % Non-GAAP Financial Measure (1) : % Change from prior-year period in constant currency (1) % — % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported fragrance net sales decreased for the three months ended March 31, 2025, reflecting lower net sales from Jo Malone London, Clinique, TOM FORD and Estée Lauder, combined, of approximately $30 million, and decreased for the nine months ended March 31, 2025, reflecting lower net sales from TOM FORD, Estée Lauder and Clinique, combined, of approximately $71 million. The decrease in net sales from Jo Malone London for the three months ended March 31, 2025 was primarily driven by lower net sales in the cologne and home subcategories. Net sales from Clinique decreased in both periods, primarily driven by lower net sales from the Clinique Happy franchise line of products. The decrease in net sales from TOM FORD in both periods was primarily driven by lower net sales in North America, reflecting softness in the brand's retail sales which led to elevated levels of inventory, resulting in retailer destocking, and an unfavorable year-over-year impact of prior-year launches. In both periods, net sales from Estée Lauder decreased across the fragrance portfolio, led by lower net sales from the Beautiful franchise. Partially offsetting the decrease in reported fragrance net sales for the three and nine months ended March 31, 2025 were higher net sales from Le Labo, primarily reflecting growth of hero products, including growth through targeted expanded consumer reach, and new product launches. Fragrance net sales were impacted by approximately $10 million and $12 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2025, respectively. Reported fragrance net sales decreased 3% for the three months ended March 31, 2025, driven by the decrease from volume of 7% and the unfavorable impact from foreign currency translation of 2%. Partially offsetting these decreases was an increase from pricing of 6% due to the favorable impact from strategic pricing actions and changes in mix. Reported fragrance net sales decreased 1% for the nine months ended March 31, 2025, driven by the decrease from volume of 6% and the unfavorable impact from foreign currency translation of 1%. Partially offsetting these decreases was an increase from pricing of 6% due to the favorable impact from strategic pricing actions and changes in mix. 47 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Hair Care Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Net sales $ 126 $ 143 $ 424 $ 464 $ Change from prior-year period (17) (40) % Change from prior-year period (12) % (9) % Non-GAAP Financial Measure (1) : % Change from prior-year period in constant currency (10) % (8) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported hair care net sales decreased for the three and nine months ended March 31, 2025, driven by lower net sales from Aveda, primarily reflecting our softness in the Europe, the Middle East & Africa and North America salon channels, as well as softness in our direct-to-consumer business. Also contributing to the decrease in net sales for Aveda for the nine months ended March 31, 2025 was the unfavorable impact of timing of shipments compared to the prior-year period. Hair care net sales were impacted by approximately $2 million of unfavorable foreign currency translation in each of the three and nine months ended March 31, 2025. Reported hair care net sales decreased 12% for the three months ended March 31, 2025, driven by the decrease from volume of 10% and the unfavorable impact from foreign currency translation of 1%. The impact of pricing was flat period-over-period. Reported hair care net sales decreased 9% for the nine months ended March 31, 2025, driven by the decrease from volume of 7% and a decrease from pricing of 1%, due to changes in mix, partially offset by the favorable impact from strategic pricing actions. Geographic Regions The Americas Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Net sales $ 1,052 $ 1,117 $ 3,462 $ 3,567 $ Change from prior-year period (65) (105) % Change from prior-year period (6) % (3) % Non-GAAP Financial Measure (1) : % Change from prior-year period in constant currency (5) % (2) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported net sales in The Americas decreased for the three and nine months ended March 31, 2025, primarily driven by lower net sales in North America. For the three and nine months ended March 31, 2025, the lower net sales in North America reflected ongoing retail softness for some brands and declines in consumer confidence and sentiment, which led to elevated inventory levels and destocking at certain retailers, as well as operational challenges at certain retailers and the timing of shipments, which further pressured net sales compared to the prior-year periods. Partially offsetting the net sales decline for North America for the three and nine months ended March 31, 2025 was the impact from the launch of nine brands to-date in Amazon's U.S. Premium Beauty store. 48 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Net sales in The Americas were impacted by approximately $12 million and $36 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2025, respectively. Reported net sales in The Americas decreased 6% for the three months ended March 31, 2025, driven by the decrease from volume of 9% and the unfavorable impact from foreign currency translation of 1%. These decreases were partially offset by an increase from pricing of 4%, due to the favorable impact of strategic pricing actions and changes in mix. Reported net sales in The Americas decreased 3% for the nine months ended March 31, 2025, driven by the decrease from volume of 9% and the unfavorable impact from foreign currency translation of 1%. These decreases were partially offset by an increase from pricing of 7%, due to the favorable impact of strategic pricing actions and changes in mix. Europe, the Middle East & Africa Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Net sales $ 1,358 $ 1,647 $ 4,082 $ 4,488 $ Change from prior-year period (289) (406) % Change from prior-year period (18) % (9) % Non-GAAP Financial Measure (1) : % Change from prior-year period in constant currency (16) % (9) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported net sales decreased in Europe, the Middle East & Africa for the three and nine months ended March 31, 2025, primarily driven by lower net sales in our Asia travel retail business, reflecting the ongoing subdued sentiment and lower conversion from Chinese consumers, the difficult comparison to the prior-year period due to our resumption of replenishment orders in the fiscal 2024 third quarter and our strategic decision to reduce our exposure to reseller activity, as well as retailer shifts in strategies toward more profitable duty-free business models in both Korea and mainland China, which led to lower replenishment orders. Net sales in Europe, the Middle East & Africa were impacted by approximately $22 million and $3 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2025, respectively. Reported net sales in Europe, the Middle East & Africa decreased 18% for the three months ended March 31, 2025, driven by the decrease from volume of 12%, a decrease from pricing of 4%, due to changes in mix, partially offset by the favorable impact from strategic pricing actions, and the unfavorable impact from foreign currency translation of 1%. Reported net sales in Europe, the Middle East & Africa decreased 9% for the nine months ended March 31, 2025, driven by the decrease from volume of 8% and a decrease from pricing of 1%, due to changes in mix, partially offset by the favorable impact from strategic pricing actions. 49 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Asia/Pacific Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Net sales $ 1,140 $ 1,176 $ 3,371 $ 3,683 $ Change from prior-year period (36) (312) % Change from prior-year period (3) % (8) % Non-GAAP Financial Measure (1) : % Change from prior-year period in constant currency (1) % (8) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported net sales decreased in Asia/Pacific for the three months ended March 31, 2025, primarily driven by lower net sales from Korea, Hong Kong SAR, Singapore, Taiwan and Australia, combined, of approximately $69 million. The decrease in net sales from Korea reflected the impact of political and social unrest, which reduced retail traffic and dampened retail sales, as well as the exit of Dr.Jart+ from the travel retail channel in Korea during the fiscal 2025 second quarter. Net sales from Hong Kong SAR and Singapore decreased, reflecting our strategic decision to reduce our exposure to reseller activity. The net sales decline from Taiwan reflected the temporary closure of a key retailer during the fiscal 2025 third quarter. Net sales from Australia decreased, reflecting lower net sales across all product categories. Partially offsetting the reported net sales decrease in Asia/Pacific for the three months ended March 31, 2025 were higher net sales from mainland China and Japan, combined, of approximately $37 million. The increase in net sales in mainland China reflected the favorable timing of key shopping moments compared to the prior-year period, which contributed to prestige beauty stabilization, the partial recapture of consumer demand in mainland China from Asia travel retail, Hong Kong SAR and Singapore, as well as online net sales growth and the success of new product launches from La Mer. Partially offsetting the increase in net sales in mainland China, were lower shipments to some retailers due to retail softness, reflecting subdued consumer sentiment, and their efforts to manage working capital. The net sales increase from Japan reflected higher net sales in fragrance, driven by Le Labo and in skin care, driven by Estée Lauder and La Mer, including growth through tourism demand. Reported net sales decreased in Asia/Pacific for the nine months ended March 31, 2025, primarily driven by lower net sales from mainland China, Hong Kong SAR, Korea and Singapore, combined, of approximately $332 million. The decrease in net sales from mainland China and Hong Kong SAR both reflected the overall challenging retail environments, including the ongoing pressure from subdued consumer sentiment. Additionally, the decline in net sales in Hong Kong SAR, as well as the decrease in net sales in Singapore reflected our strategic decision to reduce our exposure to reseller activity. The net sales decline in Korea reflects the impact of political and social unrest, which reduced retail traffic and dampened retail sales, as well as the exit of Dr.Jart+ from the travel retail channel in Korea during the fiscal 2025 second quarter. Partially offsetting the reported net sales decrease in Asia/Pacific for the nine months ended March 31, 2025 were higher net sales from Japan, reflecting higher net sales in fragrance, driven by Le Labo and Jo Malone London, and in skin care, driven by La Mer, including growth through tourism demand. Net sales in Asia/Pacific were impacted by approximately $21 million and $16 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2025, respectively. Reported net sales in Asia/Pacific decreased 3% for the three months ended March 31, 2025, driven by the decrease from volume of 6% and the unfavorable impact from foreign currency translation of 2%. Partially offsetting these decreases was an increase from pricing of 4% due to the favorable impact from strategic pricing actions and changes in mix. 50 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Reported net sales in Asia/Pacific decreased 8% for the nine months ended March 31, 2025, driven by the decrease from volume of 12%. Partially offsetting this decrease was an increase from pricing of 4% due to the favorable impact from strategic pricing actions and changes in mix. GROSS MARGIN Gross margin increased to 75.0% and 74.6% for the three and nine months ended March 31, 2025, as compared with 71.9% and 71.6% in the prior-year periods. Favorable (Unfavorable) Basis Points March 31, 2025 Three Months Ended Nine Months Ended As Reported: Mix of business (95) (5) Obsolescence charges 90 145 Manufacturing costs and other 305 175 Foreign exchange transactions 10 (5) Charges associated with restructuring and other activities — (10) As Reported Gross Margin Basis Point Variance 310 300 Non-GAAP Financial Measure Adjustments Charges associated with restructuring and other activities — 10 Non-GAAP Gross Margin Basis Point Variance 310 310 The increase in gross margin for the three and nine months ended March 31, 2025 was driven by the impact from manufacturing costs and other, reflecting the favorable impact of the recognition of manufacturing variances associated with reduced manufacturing volumes on our standard cost within cost of sales in the fiscal 2024 third quarter, partially offset by the impact of a similar charge recorded in the fiscal 2025 third quarter, as well as the favorable impact of cost efficiencies within our global supply chain network. Also contributing to the increase in gross margin in both periods was lower obsolescence charges, due to a reduction in excess inventory. Partially offsetting the increase in gross margin for the three months ended March 31, 2025 was the unfavorable impact from our mix of business, reflecting the impact of lower net sales, partially offset by the benefit of net strategic pricing. 51 Table of Contents THE ESTÉE LAUDER COMPANIES INC. OPERATING EXPENSES Operating expenses as a percentage of net sales were 66.3% and 78.2% for the three and nine months ended March 31, 2025, as compared with 58.4% and 61.4% in the prior-year periods. Favorable (Unfavorable) Basis Points March 31, 2025 Three Months Ended Nine Months Ended As Reported: General and administrative expenses (160) (150) Advertising, merchandising, sampling and product development (280) (180) Selling (110) (120) Shipping 20 20 Store operating costs (70) (30) Stock-based compensation 20 10 Foreign exchange transactions — 20 Charges associated with restructuring and other activities (220) (320) Goodwill and other intangible asset impairments — (790) Talcum litigation settlement agreements — (150) Changes in fair value of DECIEM acquisition-related stock options 10 10 As Reported Operating Expense Margin Basis Point Variance (790) (1,680) Non-GAAP Financial Measure Adjustments: Impact of restructuring and other activities 220 320 Goodwill and other intangible asset impairments — 790 Talcum litigation settlement agreements — 150 Changes in fair value of DECIEM acquisition-related stock options (10) (10) Non-GAAP Operating Expense Margin Basis Point Variance (580) (430) The unfavorable change in operating expense margin for the three and nine months ended March 31, 2025 reflects the impact of the decrease in net sales. Also contributing to the unfavorable change in operating expense margin for the three months ended March 31, 2025 was higher advertising, merchandising, sampling and product development expenses, reflecting investments to support sales, including through key shopping moments, campaigns and launches, and higher store operating costs, to support targeted expanded consumer reach. General and administrative expenses increased for the three and nine months ended March 31, 2025, reflecting the year-over-year unfavorable impact of a change in policy related to local government subsidies in China. Also contributing to the unfavorable change in operating expense margin for the nine-month period was higher selling expenses, reflecting higher staffing costs to support sales, targeted expanded consumer reach and key campaigns. As a result of our net sales performance, we were disciplined in our overall expense strategy across the business to manage profitability, which partially offset the unfavorable change in operating expense margin for the three and nine months ended March 31, 2025. 52 Table of Contents THE ESTÉE LAUDER COMPANIES INC. OPERATING RESULTS Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Operating income (loss) $ 306 $ 531 $ (395) $ 1,203 $ Change from prior-year period (225) (1,598) % Change from prior-year period (42) % (100+)% Operating margin 8.6 % 13.5 % (3.6) % 10.2 % Non-GAAP Financial Measure (1) : % Change in operating income (loss) from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, the impact of goodwill and other intangible asset impairments, talcum litigation settlement agreements and the change in fair value of DECIEM acquisition-related stock options (27) % (19) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. The decrease in reported operating margin for the three and nine months ended March 31, 2025 primarily reflects a decrease in net sales and an increase in operating expense margin, which for the nine months ended March 31, 2025 was driven by goodwill and other intangible asset impairments relating to TOM FORD and Too Faced, combined, of $861 million, included in the makeup, fragrance and other product categories, partially offset by an increase in gross margin, as discussed above. Charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Operating income (loss) by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities for the three months ended March 31, 2025 and 2024 of $97 million and $18 million, respectively, and for the nine months ended March 31, 2025 and 2024 of $384 million and $28 million, respectively. 53 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Product Categories Skin Care Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Operating income $ 361 $ 468 $ 784 $ 920 $ Change from prior-year period (107) (136) % Change from prior-year period (23) % (15) % Non-GAAP Financial Measure (1) : % Change in operating income from the prior-year period adjusting for the change in fair value of DECIEM acquisition-related stock options (24) % (16) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported skin care operating income decreased for the three and nine months ended March 31, 2025, primarily driven by lower operating income from Estée Lauder and La Mer, combined, of approximately $210 million and $368 million, respectively. Operating income from Estée Lauder decreased in both periods, primarily driven by a decrease in net sales, partially offset by lower cost of sales. Also partially offsetting the lower operating income from Estée Lauder for the nine months ended March 31, 2025 was disciplined advertising and promotional expense management. Operating income from La Mer decreased in both periods, primarily driven by decreases in net sales and increases in advertising and promotional activities to support key shopping moments and new product launches, partially offset by lower cost of sales. Partially offsetting the decline in skin care operating income for the product category overall in both periods was lower cost of sales. Makeup Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Operating income (loss) $ 14 $ 66 $ (382) $ 56 $ Change from prior-year period (52) (438) % Change from prior-year period (79) % (100+)% Non-GAAP Financial Measure (1) : % Change in operating income (loss) from the prior-year period adjusting for the impact of goodwill and other intangible asset impairments and talcum litigation settlement agreements (79) % (38) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. 54 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Reported makeup operating income decreased for the three months ended March 31, 2025, primarily driven by lower operating income from Estée Lauder and M·A·C, and to a lesser extent, an increase in operating loss from Bobbi Brown, combined, of approximately $81 million. The decrease in operating income from Estée Lauder was primarily driven by a decrease in net sales and higher advertising and promotional activities to support key campaigns and key shopping moments, partially offset by lower cost of sales. Operating income from M·A·C decreased, primarily driven by a decrease in net sales, partially offset by lower cost of sales and lower advertising and promotional activities due to disciplined advertising and promotional expense management and a favorable year-over-year impact of increased advertising and promotional activities in the prior-year period to support new product launches. The increase in operating loss from Bobbi Brown was primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management. Partially offsetting the decline in makeup operating income for the product category overall was lower cost of sales. Reported makeup operating results decreased for the nine months ended March 31, 2025, primarily driven by the unfavorable year-over-year impacts of other intangible asset impairment charges relating to TOM FORD and Too Faced, combined, of $245 million and a goodwill impairment charge relating to Too Faced of $13 million, as well as the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million. Also contributing to the reported makeup operating results decrease for the nine months ended March 31, 2025 was a decrease in operating income from M·A·C, primarily driven by a decrease in net sales, partially offset by lower cost of sales. Partially offsetting the decline in makeup operating results for the product category overall was lower cost of sales. Fragrance Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Operating income (loss) $ 32 $ 29 $ (354) $ 267 $ Change from prior-year period 3 (621) % Change from prior-year period 10 % (100+)% Non-GAAP Financial Measure (1) : % Change in operating income (loss) from the prior-year period adjusting for the impact of other intangible asset impairments 10 % (27) % (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported fragrance operating income increased slightly for the three months ended March 31, 2025, reflecting favorability in cost of sales for the category overall, as well as higher operating income from Le Labo. The increase in operating income from Le Labo was driven by an increase in net sales, partially offset by an increase in selling costs and store operating costs to support targeted expanded consumer reach, as well as an increase in cost of sales. Partially offsetting the increase in reported fragrance operating income for the three months ended March 31, 2025 was lower operating income from Jo Malone London, lower operating income from TOM FORD and lower operating results from Clinique, combined, of approximately $42 million. Operating income from Jo Malone London decreased, primarily driven by a decrease in net sales and higher selling expenses, including higher staffing costs to support targeted expanded consumer reach. The decrease in operating income from TOM FORD was primarily driven by an increase in advertising and promotional activities to support new product launches, a decrease in net sales, and higher selling expenses which included increased demonstration costs, partially offset by lower cost of sales. Operating results from Clinique decreased, primarily driven by a decrease in net sales, partially offset by lower cost of sales. 55 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Reported fragrance operating results decreased for the nine months ended March 31, 2025, primarily driven by lower operating results from TOM FORD, and to a lesser extent, lower operating income from Jo Malone London, combined, of approximately $637 million. The decrease in operating results from TOM FORD was primarily driven by an unfavorable year-over-year impact of the other intangible asset impairment charge of $549 million, as well as a decline in net sales, an increase in advertising and promotional activities to support key campaigns and an increase in selling expenses including to support targeted expanded consumer reach, partially offset by lower cost of sales. The decrease in operating income from Jo Malone London was due to higher selling expenses, including higher staffing costs to support key campaigns and targeted expanded consumer reach, a decrease in net sales, higher advertising and promotional activities to support key campaigns and higher store operating costs to support targeted expanded consumer reach, partially offset by lower cost of sales. Partially offsetting the decline in fragrance operating results for the product category overall for the nine months ended March 31, 2025 was lower cost of sales. Hair Care Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Operating loss $ (13) $ (25) $ (34) $ (50) $ Change from prior-year period 12 16 % Change from prior-year period 48 % 32 % Reported hair care operating loss decreased for the three and nine months ended March 31, 2025, primarily reflecting a decrease in operating expenses and lower cost of sales, partially offset by a decrease in net sales. Geographic Regions The Americas Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Operating income (loss) $ 8 $ (6) $ (983) $ (243) $ Change from prior-year period 14 (740) % Change from prior-year period 100+% (100+)% Non-GAAP Financial Measure (1) : % Change in operating income (loss) from the prior-year period adjusting for the impact of goodwill and other intangible asset impairments, talcum litigation settlement agreements and change in fair value of DECIEM acquisition-related stock options 100+% 100+% (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. Reported operating results increased in The Americas for the three months ended March 31, 2025, primarily driven by higher operating results in North America of approximately $18 million. The higher operating results were primarily driven by lower cost of sales and lower general and administrative expenses, partially offset by the unfavorable year-over-year impact relating to net intercompany activity and a decrease in net sales. 56 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Reported operating loss increased for the nine months ended March 31, 2025, primarily reflecting an increase in operating loss in North America of approximately $726 million. The increase in operating loss was primarily driven by the unfavorable year-over-year impacts of other intangible asset impairment charges relating to TOM FORD and Too Faced of $848 million and a goodwill impairment charge relating to Too Faced of $13 million, the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million and the unfavorable year-over-year impact relating to net intercompany activity, partially offset by lower cost of sales. Europe, the Middle East & Africa Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Operating income $ 239 $ 302 $ 645 $ 825 $ Change from prior-year period (63) (180) % Change from prior-year period (21) % (22) % Reported operating income decreased in Europe, the Middle East & Africa for the three months ended March 31, 2025, primarily driven by lower operating income in the United Kingdom, in our travel retail business, and in Russia, as well as lower operating results in Italy, combined, of approximately $47 million. The decrease in operating income in the United Kingdom was primarily driven by a decrease in net sales and higher advertising and promotional activities to support sales, partially offset by lower cost of sales. Operating income decreased in our travel retail business, reflecting a decrease in net sales, partially offset by a favorable year-over-year impact of net intercompany activity, lower cost of sales and lower shipping costs reflecting the decrease in net sales. Operating income decreased in Russia and Italy, primarily driven by decreases in net sales. Reported operating income decreased in Europe, the Middle East & Africa for the nine months ended March 31, 2025, primarily driven by lower operating income in our travel retail business and in the United Kingdom, combined, of approximately $144 million. Operating income decreased in our travel retail business, reflecting a decrease in net sales, partially offset by a decrease in cost of sales, a favorable year-over-year impact of net intercompany activity, disciplined advertising and promotional expense management and lower shipping costs reflecting the decrease in net sales. Operating income in the United Kingdom decreased, primarily driven by an unfavorable year-over-year impact of net intercompany activity, a decrease in net sales and an increase in advertising and promotional activities to support sales, partially offset by lower cost of sales. Asia/Pacific Three Months Ended March 31, Nine Months Ended March 31, ($ in millions) 2025 2024 2025 2024 As Reported: Operating income $ 156 $ 253 $ 327 $ 649 $ Change from prior-year period (97) (322) % Change from prior-year period (38) % (50) % Reported operating income decreased in Asia/Pacific for the three months ended March 31, 2025, primarily driven by lower operating income from mainland China, reflecting the year-over-year unfavorable impact of a change in policy related to local government subsidies in China, an increase in advertising and promotional activities to support new product launches and key shopping moments and higher cost of sales, partially offset by an increase in net sales. 57 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Reported operating income decreased in Asia/Pacific for the nine months ended March 31, 2025, primarily driven by lower operating income in mainland China, and to a lesser extent Hong Kong SAR and Korea, combined, of approximately $276 million. The decrease in operating income from mainland China was primarily driven by a decrease in net sales and the year-over-year unfavorable impact of a change in policy related to local government subsidies in China, partially offset by a year-over-year favorable impact of net intercompany activity, disciplined advertising and promotional expense management and lower cost of sales. Operating income in Hong Kong SAR decreased, primarily driven by a decrease in net sales, partially offset by lower cost of sales and a year-over-year favorable impact of net intercompany activity. The decrease in operating income in Korea was primarily driven by a decrease in net sales, partially offset by lower cost of sales and lower store operating costs relating to the exit of Dr.Jart+ from the travel retail channel during the fiscal 2025 second quarter. INTEREST AND INVESTMENT INCOME Three Months Ended March 31, Nine Months Ended March 31, (In millions) 2025 2024 2025 2024 Interest expense $ 87 $ 94 $ 269 $ 287 Interest income and investment income, net $ 27 $ 45 $ 85 $ 126 Interest expense decreased for the three and nine months ended March 31, 2025, primarily reflecting a lower average debt balance compared to the prior-year periods. Interest income and investment income, net decreased for the three and nine months ended March 31, 2025, primarily reflecting a lower average cash balance and lower interest rates compared to the prior-year periods. PROVISION FOR INCOME TAXES The provision or benefit for income taxes represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of stock-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations. Our effective tax rate will change from quarter-to-quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of stock-based compensation, the interaction of various global tax strategies and the impact from certain acquisitions. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change. Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Effective rate for income taxes 34.0 % 31.1 % 0.3 % 33.9 % Basis-point change from the prior-year period 290 (3,360) For the three months ended March 31, 2025, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on our foreign operations due to our full year geographical mix of earnings in the current and prior-year periods, as well as an unfavorable impact associated with previously issued stock-based compensation. For the nine months ended March 31, 2025, the decrease in the effective tax rate was primarily attributable to the impact of the discrete treatment of charges associated with restructuring and other activities, the impairment of goodwill and other intangible assets, the charge associated with the talcum litigation settlement agreements (See Note 8 - Commitments and Contingencies for further discussion) and an unfavorable impact associated with previously issued stock-based compensation. 58 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC. Three Months Ended March 31, Nine Months Ended March 31, ($ in millions, except per share data) 2025 2024 2025 2024 As Reported: Net earnings (loss) attributable to The Estée Lauder Companies Inc. $ 159 $ 330 $ (587) $ 674 $ Change from prior-year period (171) (1,261) % Change from prior-year period (52) % (100+)% Diluted net earnings (loss) per common share $ .44 $ .91 $ (1.63) $ 1.87 % Change from prior-year period (52) % (100+)% Non-GAAP Financial Measure (1) : % Change in diluted net earnings per common share from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, goodwill and other intangible asset impairments, talcum litigation settlement agreements and the change in fair value of DECIEM acquisition-related stock options (33) % (27) % (1) See “ Reconciliations of Non-GAAP Financial Measures” below for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period-to-period, or do not reflect the Company’s underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period-to-period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. The following tables present Net sales, Operating income and Diluted net earnings per common share adjusted to exclude the impact of charges associated with restructuring and other activities; goodwill and other intangible asset impairments; talcum litigation settlement agreements; the change in fair value of DECIEM acquisition-related stock options; and the effects of foreign currency translation. The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures. 59 Table of Contents THE ESTÉE LAUDER COMPANIES INC. ($ in millions, except per share data) Three Months Ended March 31, Variance % Change % Change in constant currency 2025 2024 Net sales, as reported $ 3,550 $ 3,940 $ (390) (10) % (8) % Returns associated with restructuring and other activities — — — Net sales, as adjusted $ 3,550 $ 3,940 $ (390) (10) % (9) % Operating income, as reported $ 306 $ 531 $ (225) (42) % (40) % Charges associated with restructuring and other activities 97 18 79 Change in fair value of DECIEM acquisition-related stock options — 5 (5) Operating income, as adjusted $ 403 $ 554 $ (151) (27) % (24) % Diluted net earnings per common share, as reported $ .44 $ .91 $ (.47) (52) % (49) % Charges associated with restructuring and other activities .21 .04 .17 Change in fair value of DECIEM acquisition-related stock options (less portion attributable to redeemable noncontrolling interest) — .02 (.02) Diluted net earnings per common share, as adjusted $ .65 $ .97 $ (.32) (33) % (30) % 60 Table of Contents THE ESTÉE LAUDER COMPANIES INC. ($ in millions, except per share data) Nine Months Ended March 31, Variance % Change % Change in constant currency 2025 2024 Net sales, as reported $ 10,915 $ 11,737 $ (822) (7) % (7) % Returns associated with restructuring and other activities — 1 (1) Net sales, as adjusted $ 10,915 $ 11,738 $ (823) (7) % (7) % Operating income (loss), as reported $ (395) $ 1,203 $ (1,598) (100+)% (100+)% Charges associated with restructuring and other activities 384 28 356 Goodwill and other intangible asset impairments 861 — 861 Talcum litigation settlement agreements 159 — 159 Change in fair value of DECIEM acquisition-related stock options — 8 (8) Operating income, as adjusted $ 1,009 $ 1,239 $ (230) (19) % (18) % Diluted net earnings (loss) per common share, as reported $ (1.63) $ 1.87 $ (3.50) (100+)% (100+)% Charges associated with restructuring and other activities .83 .06 .77 Goodwill and other intangible asset impairments 1.88 — 1.88 Talcum litigation settlement agreements .34 — .34 Change in fair value of DECIEM acquisition-related stock options (less portion attributable to redeemable noncontrolling interest) — .02 (.02) Diluted net earnings per common share, as adjusted $ 1.42 $ 1.95 $ (.53) (27) % (26) % As diluted net earnings per common share, as adjusted, is used as a measure of the Company’s performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items. 61 Table of Contents THE ESTÉE LAUDER COMPANIES INC. The following tables reconcile the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation: As Reported Impact of foreign currency translation Variance, in constant currency % Change, as reported % Change, in constant currency Three Months Ended March 31, ($ in millions) 2025 2024 Variance By Product Category: Skin Care $ 1,807 $ 2,060 $ (253) $ 24 $ (229) (12) % (11) % Makeup 1,035 1,136 (101) 19 (82) (9) (7) Fragrance 557 575 (18) 10 (8) (3) (1) Hair Care 126 143 (17) 2 (15) (12) (10) Other 25 26 (1) — (1) (4) (4) 3,550 3,940 (390) 55 (335) (10) (9) Returns associated with restructuring and other activities — — — 1 1 Total $ 3,550 $ 3,940 $ (390) $ 56 $ (334) (10) % (8) % By Region: The Americas $ 1,052 $ 1,117 $ (65) $ 12 $ (53) (6) % (5) % Europe, the Middle East & Africa 1,358 1,647 (289) 22 (267) (18) (16) Asia/Pacific 1,140 1,176 (36) 21 (15) (3) (1) 3,550 3,940 (390) 55 (335) (10) (9) Returns associated with restructuring and other activities — — — 1 1 Total $ 3,550 $ 3,940 $ (390) $ 56 $ (334) (10) % (8) % 62 Table of Contents THE ESTÉE LAUDER COMPANIES INC. As Reported Impact of foreign currency translation Variance, in constant currency % Change, as reported % Change, in constant currency Nine Months Ended March 31, ($ in millions) 2025 2024 Variance By Product Category: Skin Care $ 5,257 $ 5,873 $ (616) $ 13 $ (603) (10) % (10) % Makeup 3,223 3,365 (142) 28 (114) (4) (3) Fragrance 1,931 1,948 (17) 12 (5) (1) 0 Hair Care 424 464 (40) 2 (38) (9) (8) Other 80 88 (8) — (8) (9) (9) 10,915 11,738 (823) 55 (768) (7) (7) Returns associated with restructuring and other activities — (1) 1 1 2 Total $ 10,915 $ 11,737 $ (822) $ 56 $ (766) (7) % (7) % By Region: The Americas $ 3,462 $ 3,567 $ (105) $ 36 $ (69) (3) % (2) % Europe, the Middle East & Africa 4,082 4,488 (406) 3 (403) (9) (9) Asia/Pacific 3,371 3,683 (312) 16 (296) (8) (8) 10,915 11,738 (823) 55 (768) (7) (7) Returns associated with restructuring and other activities — (1) 1 1 2 Total $ 10,915 $ 11,737 $ (822) $ 56 $ (766) (7) % (7) % 63 Table of Contents THE ESTÉE LAUDER COMPANIES INC. The following tables reconcile the change in operating results by product category and geographic region, as reported, to the change in operating income excluding the change in fair value of DECIEM acquisition-related stock options for the three and nine months ended March 31, 2025, as well as the impact of goodwill and other intangible asset impairments and the talcum litigation settlement agreements for the nine months ended March 31, 2025: As Reported Add: Change in fair value of DECIEM acquisition-related stock options Variance, as adjusted % Change, as reported % Change, as adjusted Three Months Ended March 31 ($ in millions) 2025 2024 Variance By Product Category: Skin Care $ 361 $ 468 $ (107) $ (5) $ (112) (23) % (24) % Makeup 14 66 (52) — (52) (79) (79) Fragrance 32 29 3 — 3 10 10 Hair Care (13) (25) 12 — 12 48 48 Other 9 11 (2) — (2) (18) (18) 403 549 (146) $ (5) $ (151) (27) % (27) % Charges associated with restructuring and other activities (97) (18) (79) Total $ 306 $ 531 $ (225) By Region: The Americas $ 8 $ (6) $ 14 $ (5) $ 9 100+% 100+% Europe, the Middle East & Africa 239 302 (63) — (63) (21) (21) Asia/Pacific 156 253 (97) — (97) (38) (38) 403 549 (146) $ (5) $ (151) (27) % (27) % Charges associated with restructuring and other activities (97) (18) (79) Total $ 306 $ 531 $ (225) 64 Table of Contents THE ESTÉE LAUDER COMPANIES INC. As Reported Add: Changes in goodwill and other intangible asset impairments Add: Talcum litigation settlement agreements Add: Change in fair value of DECIEM acquisition-related stock options Variance, as adjusted % Change, as reported % Change, as adjusted Nine Months Ended March 31 ($ in millions) 2025 2024 Variance By Product Category: Skin Care $ 784 $ 920 $ (136) $ — $ — $ (8) $ (144) (15) % (16) % Makeup (382) 56 (438) 258 159 — (21) (100+) (38) Fragrance (354) 267 (621) 549 — — (72) (100+) (27) Hair Care (34) (50) 16 — — — 16 32 32 Other (25) 38 (63) 54 — — (9) (100+) (24) (11) 1,231 (1,242) $ 861 $ 159 $ (8) $ (230) (100+)% (19) % Charges associated with restructuring and other activities (384) (28) (356) Total $ (395) $ 1,203 $ (1,598) By Region: The Americas $ (983) $ (243) $ (740) $ 861 $ 159 $ (8) $ 272 (100+)% 100+% Europe, the Middle East & Africa 645 825 (180) — — — (180) (22) (22) Asia/Pacific 327 649 (322) — — — (322) (50) (50) (11) 1,231 (1,242) $ 861 $ 159 $ (8) $ (230) (100+)% (19) % Charges associated with restructuring and other activities (384) (28) (356) Total $ (395) $ 1,203 $ (1,598) FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES Overview Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad. At March 31, 2025, we had cash and cash equivalents of $2,631 million compared with $3,395 million at June 30, 2024. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure. Based on past performance and current expectations, we believe that cash on hand, cash generated from operations, available credit lines and access to credit markets will be adequate to support seasonal working capital needs, currently planned business operations, information technology enhancements, capital expenditures, acquisitions, dividends, stock repurchases, restructuring initiatives, commitments and other contractual obligations on both a near-term and long-term basis. The Tax Cuts and Jobs Act resulted in the Transition Tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional U.S. federal income tax. We continue to analyze the indefinite reinvestment assertion on our applicable foreign earnings. We do not believe continuing to reinvest these applicable foreign earnings impairs our ability to meet our domestic debt or working capital obligations. If these reinvested earnings were repatriated into the United States as dividends, we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions. 65 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Inflation impacted our overall operating results in the fiscal 2025 third quarter and we expect it to continue. Generally, we have plans to introduce new products at higher prices, increase prices and implement other operating efficiencies which we expect to offset some of these cost increases. Credit Ratings Changes in our credit ratings will likely result in changes in our borrowing costs. Our credit ratings also impact the cost of our revolving credit facility. Downgrades in our credit ratings may reduce our ability to issue commercial paper and/or long-term debt and would likely increase the relative costs of borrowing. A credit rating is not a recommendation to buy, sell, or hold securities, is subject to revision or withdrawal at any time by the assigning rating organization, and should be evaluated independently of any other rating. As of April 24, 2025, our long-term debt is rated A- with a negative outlook by Standard & Poor’s and A2 with a negative outlook by Moody’s. 66 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Debt At March 31, 2025, our outstanding borrowings were as follows: ($ in millions) Long-term Debt Current Debt Total Debt 5.150% Senior Notes, due May 15, 2053 ("2053 Senior Notes") (1), (15) $ 591 $ — $ 591 3.125% Senior Notes, due December 1, 2049 (“2049 Senior Notes”) (2), (15) 637 — 637 4.150% Senior Notes, due March 15, 2047 (“2047 Senior Notes”) (3), (15) 494 — 494 4.375% Senior Notes, due June 15, 2045 (“2045 Senior Notes”) (4), (15) 454 — 454 3.700% Senior Notes, due August 15, 2042 (“2042 Senior Notes”) (5), (15) 247 — 247 6.000% Senior Notes, due May 15, 2037 (“2037 Senior Notes”) (6), (15) 295 — 295 5.000% Senior Notes, due February 14, 2034 ("2034 Senior Notes) (7), (15) 644 — 644 5.75% Senior Notes, due October 15, 2033 (“October 2033 Senior Notes”) (8), (15) 198 — 198 4.650% Senior Notes, due May 15, 2033 ("May 2033 Senior Notes") (9), (15) 696 — 696 1.950% Senior Notes, due March 15, 2031 ("2031 Senior Notes") (10), (15) 559 — 559 2.600% Senior Notes, due April 15, 2030 ("2030 Senior Notes") (11), (15) 615 — 615 2.375% Senior Notes, due December 1, 2029 (“2029 Senior Notes”) (12), (15) 645 — 645 4.375% Senior Notes, due May 15, 2028 ("2028 Senior Notes") (13), (15) 697 — 697 3.150% Senior Notes, due March 15, 2027 (“2027 Senior Notes”) (14), (15) 499 — 499 Other long-term borrowings 27 — 27 Other current borrowings — 3 3 $ 7,298 $ 3 $ 7,301 (1) Consists of $600 million principal, unamortized debt discount of $3 million and debt issuance costs of $6 million. (2) Consists of $650 million principal, unamortized debt discount of $7 million and debt issuance costs of $6 million. (3) Consists of $500 million principal, unamortized debt discount of $1 million and debt issuance costs of $5 million. (4) Consists of $450 million principal, net unamortized debt premium of $8 million and debt issuance costs of $4 million. (5) Consists of $250 million principal, unamortized debt discount of $1 million and debt issuance costs of $2 million. (6) Consists of $300 million principal, unamortized debt discount of $3 million and debt issuance costs of $2 million. (7) Consists of $650 million principal, unamortized debt discount of $2 million and debt issuance costs of $4 million. (8) Consists of $200 million principal, unamortized debt discount of $1 million and debt issuance costs of $1 million. (9) Consists of $700 million principal, unamortized debt discount of $1 million and debt issuance costs of $3 million. (10) Consists of $600 million principal, unamortized debt discount of $2 million, debt issuance costs of $3 million and a $36 million loss to reflect the fair value of interest rate swaps. (11) Consists of $700 million principal, unamortized debt discount of $1 million, debt issuance costs of $2 million and a $82 million loss to reflect the fair value of interest rate swaps. (12) Consists of $650 million principal, unamortized debt discount of $3 million and debt issuance costs of $2 million. (13) Consists of $700 million principal and debt issuance costs of $3 million. (14) Consists of $500 million principal and debt issuance costs of $1 million. (15) The Senior Notes contain certain customary covenants, including limitations on indebtedness secured by liens. In April 2025, the Company issued commercial paper under its existing commercial paper program, and as of April 24, 2025, $242 million was outstanding. The notes have maturities ranging from 10 to 17 days with weighted average interest rates between 4.62% to 4.68%. The proceeds from the issuance are intended for general corporate purposes. In December 2024, the Company repaid the outstanding principal balance of its $500 million, 2.000% Senior Notes ("2024 Senior Notes") at maturity with cash from operations. Total debt as a percent of total capitalization was 63% and 59% at March 31, 2025 and June 30, 2024, respectively. 67 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Cash Flows Nine Months Ended March 31, (In millions) 2025 2024 Net cash flows provided by operating activities $ 671 $ 1,471 Net cash flows used for investing activities $ (408) $ (735) Net cash flows used for financing activities $ (1,016) $ (1,059) The change in net cash flows provided by operating activities was primarily driven by lower net earnings for the nine months ended March 31, 2025, excluding non-cash items, and an unfavorable change in operating assets and liabilities variances, including the impact from the significant reduction in inventory in the prior-year period, as compared to the reduction in inventory in the current-year period. The change in net cash flows used for investing activities was primarily driven by a favorable year-over-year impact from capital expenditure payments made relating to the manufacturing facility in Japan, near Tokyo, in the prior-year period. The change in net cash flows used for financing activities primarily reflected the favorable year-over-year impact of repayments of commercial paper in the prior-year period and a decrease in dividends paid to stockholders in the current-year period, partially offset by an unfavorable year-over-year impact of the repayment of the outstanding principal balance of our 2024 Senior Notes that matured during the fiscal 2025 second quarter compared to proceeds from the issuance of the 2034 Senior Notes during the fiscal 2024 third quarter. Dividends For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the nine months ended March 31, 2025, see Notes to Consolidated Financial Statements, Note 11 – Equity and Redeemable Noncontrolling Interest . Pension and Post-retirement Plan Funding There have been no significant changes to our pension and post-retirement funding as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Commitments, Contractual Obligations and Contingencies There have been no significant changes to our commitments and contractual obligations as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 . For a discussion of contingencies, see Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies . Derivative Financial Instruments and Hedging Activities For a discussion of our derivative financial instruments and hedging activities, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments . Foreign Exchange Risk Management For a discussion of foreign exchange risk management, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments (Fair Value Hedges, Cash Flow Hedges and Net Investment Hedges) . Credit Risk For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments (Credit Risk) . 68 Table of Contents THE ESTÉE LAUDER COMPANIES INC. Market Risk We address certain financial exposures through a controlled program of market risk management that includes the use of foreign currency forward contracts to reduce the effects of fluctuating foreign currency exchange rates and to mitigate the change in fair value of specific assets and liabilities on the balance sheet. To perform a sensitivity analysis of our foreign currency forward contracts, we assess the change in fair values from the impact of hypothetical changes in foreign currency exchange rates. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our portfolio would have resulted in a net decrease in the fair value of our portfolio of approximately $275 million and $371 million as of March 31, 2025 and June 30, 2024, respectively. This potential change does not consider our underlying foreign currency exposures. We also enter into cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt and to hedge a portion of the net investment in certain foreign operations. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our cross-currency swap contracts would have resulted in a net decrease in the fair value of our cross-currency swap contracts of approximately $85 million and $49 million as of March 31, 2025 and June 30, 2024, respectively. In addition, we enter into interest rate derivatives to manage the effects of interest rate movements on our aggregate liability portfolio, including future debt issuances. Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $44 million and $48 million as of March 31, 2025 and June 30, 2024, respectively. Our sensitivity analysis represents an estimate of reasonably possible net losses that would be recognized on our portfolio of derivative financial instruments assuming hypothetical movements in future market rates and is not necessarily indicative of actual results, which may or may not occur. It does not represent the maximum possible loss or any expected loss that may occur, since actual future gains and losses will differ from those estimated, based upon actual fluctuations in market rates, operating exposures, and the timing thereof, and changes in our portfolio of derivative financial instruments during the year. We believe, however, that any such loss incurred would be offset by the effects of market rate movements on the respective underlying transactions for which the derivative financial instrument was intended. OFF-BALANCE SHEET ARRANGEMENTS We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations. CRITICAL ACCOUNTING POLICIES As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those financial statements. These estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies relate to goodwill and other indefinite-lived intangible assets - impairment assessment and income taxes. Since June 30, 2024, there have been no significant changes to the assumptions and estimates related to our critical accounting policies, except as disclosed within the Impairment Analysis During the Nine Months Ended March 31, 2025 section in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 43. RECENTLY ISSUED ACCOUNTING STANDARDS For a discussion regarding the impact of accounting standards that were recently issued but not yet effective, on the Company’s consolidated financial statements, see Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies . 69 Table of Contents THE ESTÉE LAUDER COMPANIES INC. CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION We and our representatives from time to time make written or oral forward-looking statements, including in this and other filings with the Securities and Exchange Commission, in our press releases and in our reports to stockholders, which may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may address our expectations regarding sales, earnings or other future financial performance and liquidity, other performance measures, product introductions, entry into new geographic regions, information technology initiatives, new methods of sale, our long-term strategy, restructuring and other charges and resulting cost savings, and future operations or operating results. These statements may contain words like “expect,” “will,” “will likely result,” “would,” “believe,” “estimate,” “planned,” “plans,” “intends,” “may,” “should,” “could,” “anticipate,” “estimate,” “project,” “projected,” “forecast,” and “forecasted” or similar expressions. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, actual results may differ materially from our expectations. Factors that could cause actual results to differ from expectations include, without limitation: (1) increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses; (2) our ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in our business; (3) consolidations, restructurings, bankruptcies and reorganizations in the retail industry causing a decrease in the number of stores that sell our products, an increase in the ownership concentration within the retail industry, ownership of retailers by our competitors or ownership of competitors by our customers that are retailers and our inability to collect receivables; (4) destocking and tighter working capital management by retailers; (5) the success, or changes in timing or scope, of new product launches and the success, or changes in timing or scope, of advertising, sampling and merchandising programs; (6) shifts in the preferences of consumers as to how they perceive value and where and how they shop; (7) social, political and economic risks to our foreign or domestic manufacturing, distribution and retail operations, including changes in foreign investment and trade policies and regulations of the host countries and of the United States; (8) changes in the laws, regulations and policies (including the interpretations and enforcement thereof) that affect, or will affect, our business, including those relating to our products or distribution networks, changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action we may take as a result; (9) foreign currency fluctuations affecting our results of operations and the value of our foreign assets, the relative prices at which we and our foreign competitors sell products in the same markets and our operating and manufacturing costs outside of the United States; (10) changes in global or local conditions, including those due to volatility in the global credit and equity markets, government economic policies, natural or man-made disasters, real or perceived epidemics, supply chain challenges, inflation, or increased energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase our products while traveling, the financial strength of our customers, suppliers or other contract counterparties, our operations, the cost and availability of capital which we may need for new equipment, facilities or acquisitions, the returns that we are able to generate on our pension assets and the resulting impact on funding obligations, the cost and availability of raw materials and the assumptions underlying our critical accounting estimates; (11) shipment delays, commodity pricing, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture our products or at our distribution or inventory centers, including disruptions that may be caused by the implementation of information technology initiatives, or by restructurings; 70 Table of Contents THE ESTÉE LAUDER COMPANIES INC. (12) real estate rates and availability, which may affect our ability to increase or maintain the number of retail locations at which we sell our products and the costs associated with our other facilities; (13) changes in product mix to products which are less profitable; (14) our ability to acquire, develop or implement new information technology, including operational technology and websites, on a timely basis and within our cost estimates; to maintain continuous operations of our new and existing information technology; and to secure the data and other information that may be stored in such technologies or other systems or media; (15) our ability to capitalize on opportunities for improved efficiency, such as publicly-announced strategies and restructuring and cost-savings initiatives, and to integrate acquired businesses and realize value therefrom; (16) consequences attributable to local or international conflicts around the world, as well as from any terrorist action, retaliation and the threat of further action or retaliation; (17) the timing and impact of acquisitions, investments and divestitures; and (18) additional factors as described in our filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended June 30, 2024. We assume no responsibility to update forward-looking statements made herein or otherwise. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The information required by this item is set forth in Item 2 of this Quarterly Report on Form 10-Q under the caption Liquidity and Capital Resources - Market Risk and is incorporated herein by reference.