What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-05 compared with 2025-10-30 · 305 added, 149 removed, 452 unchanged (50% of the section changed)

7 unchanged sentences

Additionally, we operate a direct-to-consumer business across freestanding stores, our brands' websites and third-party online platforms.

Three Months Ended

September 30,

($ in millions)

Three Months Ended December 31, Six Months Ended December 31,

2025 2024 2025 2024

$ % $ % $ % $ %

Net sales $ 4,229 100.0 % $ 4,004 100.0 % $ 7,710 100.0 % $ 7,365 100.0 %

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Restructuring and other charges 207 4.9 181 4.5 296 3.8 278 3.8

Impairment of goodwill and other intangible assets

— — 861 21.5 — — 861 11.7

Talcum litigation settlement agreements — — — — — — 159 2.2

1 unchanged sentence

Operating income (loss) 401 9.5 (580) (14.5) 570 7.4 (701) (9.5)

169 4.9 (121) (3.6)

Interest expense 85 2.0 90 2.2 171 2.2 182 2.5

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Earnings (loss) before income taxes 333 7.9 (650) (16.2) 442 5.7 (830) (11.3)

109 3.1 (180) (5.4)

Provision (benefit) for income taxes 171 4.0 (60) (1.5) 233 3.0 (84) (1.1)

62 1.8 (24) (0.7)

Net earnings (loss) $ 162 3.8 % $ (590) (14.7) % $ 209 2.7 % $ (746) (10.1) %

$ 47 1.4 % $ (156) (4.6) %

Not adjusted for differences caused by rounding

THE ESTÉE LAUDER COMPANIES INC.

The following table is a comparative summary of operating results for the three months ended September 30, 2025 and 2024, for our product categories and geographic regions and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies and Note 13 – Segment Data and Related Information , for our product categories that meet the definition of reportable segments, for all periods presented.

The following table is a comparative summary of operating results for the three and six months ended December 31, 2025 and 2024, for our product categories and geographic regions and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies and Note 13 – Segment Data and Related Information , for our product categories that meet the definition of reportable segments, for all periods presented.

Royalty revenue from license arrangements, and products and services that do not fit within our definitions of skin care, makeup, fragrance and hair care have been included in the “other” category.

THE ESTÉE LAUDER COMPANIES INC.

Three Months Ended

September 30,

December 31, Six Months Ended

(In millions) 2025 2024 2025 2024

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Hair Care 168 159 297 298

Other 31 30 56 55

4,229 4,004 7,709 7,365

Returns associated with restructuring and other activities — — 1 —

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Europe, United Kingdom and Ireland and Emerging Markets ("EUKEM")

1,183 1,085 2,084 1,953

Asia/Pacific 900 888 1,773 1,694

Mainland China

928 822 1,460 1,312

4,229 4,004 7,709 7,365

Returns associated with restructuring and other activities — — 1 —

6 unchanged sentences

Hair Care 18 (3) 6 (21)

Other 13 (45) 22 (34)

608 (399) 863 (414)

Charges associated with restructuring and other activities (207) (181) (293) (287)

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The Americas $ 104 $ (771) $ 191 $ (856)

156 145 162 155

Asia/Pacific 200 152 350 228

Mainland China

148 75 160 59

608 (399) 863 (414)

Charges associated with restructuring and other activities (207) (181) (293) (287)

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(1) The net sales and operating results from the Company’s travel retail business are included in the Asia/Pacific region.

(2) Operating results by geographic region for the fiscal 2025 first quarter have been adjusted to reflect the correction of a regional misclassification in the amounts furnished in the Form 8-K on October 2, 2025 related to a one-time charge during the fiscal 2025 first quarter.

The misclassification was offset in the fiscal 2025 second quarter (quarter-to-date period) furnished amounts, and the adjusted amounts will be reflected in the fiscal 2026 second quarter Form 10-Q.

(2) Operating results by geographic region for the fiscal 2025 second quarter (quarter-to-date period) have been adjusted to reflect the correction of a regional misclassification in the amounts furnished in the Form 8-K on October 2, 2025 related to a one-time charge during the fiscal 2025 first quarter.

The misclassification was offset in the fiscal 2025 first quarter furnished amounts, and the adjusted amounts were reflected in the fiscal 2026 first quarter Form 10-Q.

No other periods were impacted and there is no impact on the consolidated financial results or results by product category.

THE ESTÉE LAUDER COMPANIES INC.

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 ESTÉE LAUDER COMPANIES INC.

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.

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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 introduction of new products often has some cannibalizing effect on sales of existing products, inclusive of potential sales returns, 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.

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We have experienced challenges within our business and we expect volatility and uncertainty to continue.

Although there are signs of stabilization in Mainland China, travel retail conversion continues to be weak and challenges persist in Western Europe, including subdued sentiment.

Additionally, within the United States we continue to experience headwinds from challenges in department stores.

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.

Although there are signs of stabilization in Mainland China, challenges persist in Western Europe, including subdued sentiment.

Within our Asia travel retail business, we continue to experience volatility, including the incremental transitory headwind from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses.

Additionally, within the United States we continue to experience headwinds from challenges in department stores, including the recent announcement of a retailer bankruptcy.

We continue to monitor and assess the impact that these challenges may have on 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.

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We have implemented and are continuing to implement and consider additional mitigation measures.

The impact was not material to fiscal 2026 first quarter profitability and cash flows, however, even if we can minimize some of these impacts, we anticipate higher tariff rates to have an adverse effect on fiscal 2026 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.

Our strategy remains optimizing our global supply chain network, by sourcing and manufacturing in the geography of sale where feasible.

We also continue to leverage trade programs where available and monitor for additional opportunities as countries continue to update their trade programs.

We continue to anticipate higher tariff rates to have an adverse effect on fiscal 2026 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.

THE ESTÉE LAUDER COMPANIES INC.

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Accordingly, our long-term strategy has numerous initiatives across product categories, brands, geographic regions, 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 which focuses on accelerating best-in-class consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies and reimagining the way we work, including through the expansion of the Profit Recovery and Growth Plan ("PRGP"), as discussed below.

With the transition of leadership in the second and third quarters of fiscal 2025, as previously announced we have embarked on "Beauty Reimagined," a strategic vision which focuses on accelerating best-in-class consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies and reimagining the way we work, including through the expansion of the Profit Recovery and Growth Plan ("PRGP") during the fiscal 2025 third quarter, as discussed below.

We continue to monitor the effects of the global macro environment, including the risk of recession;

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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 relating to these and other 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.

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Such valuation allowance could be material.

We are also monitoring certain provisions in global tax regulations that may expire during fiscal 2026, which, if not extended, could increase our effective tax rate.

Restructuring Program Component of the Profit Recovery and Growth Plan

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Specific initiatives under the Restructuring Program are expected to be approved by the end of fiscal 2026 and substantially completed by the end of fiscal 2027.

In connection with the Restructuring Program, as of September 30, 2025 we 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.

THE ESTÉE LAUDER COMPANIES INC.

In connection with the Restructuring Program, as of December 31, 2025 we 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 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, asset-related costs, contract terminations 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.

3 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

($ in millions) 2025 2024 2025 2024

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GAAP measures.

Reported net sales increased for the three months ended September 30, 2025, driven by an increase in net sales in the fragrance and skin care product categories.

By geographic region, reported net sales increased across all geographic regions, with the exception of The Americas.

The increase in net sales was primarily driven by higher net sales in our travel retail business, and to a lesser extent, in Mainland China.

Reported net sales were impacted by approximately $25 million of favorable foreign currency translation for the three months ended September 30, 2025.

Reported net sales increased 4% for the three months ended September 30, 2025, driven by the increase from pricing of 2% reflecting the favorable impact from strategic price actions and changes in mix, the increase from volume of 1%, and the favorable impact from foreign currency translation of 1%.

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 a Company-wide initiative to redesign, resize and reorganize select areas of the business.

Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the impacts of return adjustments associated with restructuring and other activities of $1 million for the three months ended September 30, 2025.

There were no returns associated with restructuring and other activities for the three months ended September 30, 2024.

Reported net sales increased across all product categories for the three and six months ended December 31, 2025, with the exception of hair care, which remained virtually flat, for the six months ended December 31, 2025.

The increase in net sales in both periods was primarily driven by the skin care and fragrance product categories.

By geographic region, reported net sales increased across all geographic regions for the three and six months ended December 31, 2025, with the exception of The Americas, for the six months ended December 31, 2025.

The increase in net sales for the three and six months ended December 31, 2025 was primarily driven by Mainland China and EUKEM, and the increase in net sales for the six months ended December 31, 2025 was also driven by Asia/Pacific.

Reported net sales were impacted by approximately $74 million and $99 million of favorable foreign currency translation for the three and six months ended December 31, 2025, respectively.

Reported net sales increased 6% for the three months ended December 31, 2025, driven by the increase from volume of 3%, the favorable impact from foreign currency translation of 2% and the increase from pricing of 1%, reflecting the favorable impact from strategic price actions, partially offset by changes in mix.

Reported net sales increased 5% for the six months ended December 31, 2025, driven by the increase from volume of 2%, the increase from pricing of 1%, reflecting the favorable impact from strategic price actions and changes in mix, and the favorable impact from foreign currency translation of 1%.

THE ESTÉE LAUDER COMPANIES INC.

There were no returns associated with restructuring and other activities for the three months ended December 31, 2025 and the three and six months ended December 31, 2024.

Product Categories

Reported net sales for our product categories for the three months ended September 30, 2025 and 2024 were as follows:

Three Months Ended September 30,

Reported net sales for our product categories for the three and six months ended December 31, 2025 and 2024 were as follows:

Three Months Ended December 31, Six Months Ended December 31,

($ in millions) 2025 2024 $ Change

% Change in Constant Currency (1)

2025 2024 $ Change

% Change in Constant Currency (1)

Skin Care $ 2,054 $ 1,921 $ 133 7 % 6 % $ 3,629 $ 3,450 $ 179 5 % 4 %

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GAAP measures.

Reported skin care net sales increased $46 million, or 3%, for the three months ended September 30, 2025, reflecting higher net sales from La Mer and Estée Lauder, combined, of approximately $54 million.

Net sales from La Mer increased, primarily driven by higher net sales in our Asia travel retail business, attributable to the low prior-year period net sales base which reflected (i) the challenging retail environment, including low consumer sentiment and conversion from Chinese consumers, as well as (ii) our prior-year efforts to improve in-trade inventory levels.

The increase in net sales from Estée Lauder was primarily driven by higher net sales in our Asia travel retail business, as reflected above, and higher net sales in Mainland China, primarily driven by the impacts from new product launches, and reflecting an improvement in the retail environment, including improved consumer sentiment comparatively, to the prior-year period.

Skin care net sales were impacted by approximately $7 million of favorable foreign currency translation for the three months ended September 30, 2025.

Reported skin care net sales increased 3% for the three months ended September 30, 2025, driven by the increase from pricing of 3% reflecting the favorable impact from strategic pricing actions and changes in mix.

The impact from volume was flat period-over-period.

Reported makeup net sales decreased $8 million, or 1%, for the three months ended September 30, 2025, reflecting lower net sales from Bobbi Brown and Too Faced, combined, of approximately $17 million.

Reported skin care net sales increased $133 million, or 7%, and $179 million, or 5%, for the three and six months ended December 31, 2025, respectively, reflecting higher net sales from La Mer, Estée Lauder and The Ordinary, combined, of approximately $153 million and $214 million, for the respective periods.

Net sales from La Mer increased in both periods, primarily reflecting higher net sales in Mainland China and in our Asia travel retail business.

The increase in net sales in Mainland China was primarily driven by growth attributable to key shopping moments and holiday, reflecting the benefits from key campaigns to drive sales.

The increase in net sales in our Asia travel retail business was primarily attributable to the low net sales base in the prior-year periods which reflected (i) the challenging retail environment, including low consumer sentiment and conversion from Chinese consumers, as well as (ii) our prior-year efforts to improve in-trade inventory levels.

These increases in our Asia travel retail business were partially offset by impacts associated with the transitory headwind from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses.

Net sales from Estée Lauder increased in both periods, primarily driven by higher net sales in Mainland China and in our Asia travel retail business, reflecting the aforementioned growth as discussed above for La Mer.

Also contributing to the increase in net sales in Mainland China for Estée Lauder was the impact from new product launches which benefited the growth during key shopping moments and holiday.

The increase in net sales from The Ordinary in both periods primarily reflected targeted expanded consumer reach.

Skin care net sales were impacted by approximately $27 million and $34 million of favorable foreign currency translation for the three and six months ended December 31, 2025, respectively.

THE ESTÉE LAUDER COMPANIES INC.

Reported skin care net sales increased 7% for the three months ended December 31, 2025, driven by the increase from volume of 4%, the increase from pricing of 2%, reflecting the favorable impact from strategic pricing actions and changes in mix, and the favorable impact from foreign currency translation of 1%.

Reported skin care net sales increased 5% for the six months ended December 31, 2025, driven by the increase from pricing of 2%, reflecting the favorable impact from strategic pricing actions and changes in mix, the increase from volume of 2% and the favorable impact from foreign currency translation of 1%.

Reported makeup net sales increased slightly for the three and six months ended December 31, 2025, increasing by $14 million, or 1%, and $6 million, or less than 1%, respectively, including the favorable impact of foreign currency translation of 2% in both periods.

The increase in makeup net sales reflected higher net sales from M·A·C and Clinique in both periods, combined, of approximately $50 million and $53 million, respectively.

The increase in net sales from M·A·C in both periods reflects higher net sales from shipments to support the launch of the brand in select U.S.

Sephora locations as well as online and in Sephora at Kohl's expected in the March 2026, as well as higher net sales in the lip subcategory, driven by the success of Lip Pencil and Lipglass Air.

Net sales from Clinique increased in both periods, reflecting higher net sales in the face and eye subcategories.

Partially offsetting the makeup net sales increase for the three months ended December 31, 2025 were lower net sales from Estée Lauder, primarily driven by the impact of estimated returns for the existing Double Wear Stay-in-Place Long-Wear Matte Foundation in advance of the February 2026 launch of its next-generation of Double Wear matte innovation.

Partially offsetting the makeup net sales increase for the six months ended December 31, 2025 were lower net sales from Estée Lauder, Bobbi Brown Cosmetics and Too Faced, combined, of approximately $46 million.

The decrease in net sales from Estée Lauder was primarily driven by the aforementioned impact of estimated returns as discussed above.

The decrease in net sales from Bobbi Brown was primarily driven by lower net sales in the face subcategory reflecting the unfavorable year-over-year impact of new product launch shipments and lower net sales in the eye subcategory reflecting a reduction in color palettes.

Net sales from Too Faced decreased, primarily driven by North America, reflecting lower net sales in the face and eye subcategories.

Partially offsetting the makeup net sales decrease were higher net sales from Estée Lauder, primarily driven by higher net sales in our Asia travel retail business, attributable to the low prior-year period net sales base which reflected (i) the challenging retail environment, including low consumer sentiment and conversion from Chinese consumers, as well as (ii) our prior-year efforts to improve in-trade inventory levels.

Net sales from Too Faced decreased, reflecting lower net sales in the face and eye subcategories.

Makeup net sales were impacted by approximately $26 million and $36 million of favorable foreign currency translation for the three and six months ended December 31, 2025, respectively.

Reported makeup net sales increased 1% for the three months ended December 31, 2025, driven by the increase from volume of 4% and the favorable impact from foreign currency translation of 2%.

Partially offsetting these increases was the decrease from pricing of 5%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions.

Reported makeup net sales increased slightly, less than 1%, for the six months ended December 31, 2025, driven by the increase from volume of 2% and the favorable impact from foreign currency translation of 2%.

Largely offsetting these increases was the decrease from pricing of 3%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions.

Reported fragrance net sales increased $68 million, or 9%, and $159 million, or 12%, for the three and six months ended December 31, 2025, respectively, primarily driven by higher net sales from TOM FORD and Le Labo, combined, of approximately $55 million and $112 million, for the respective periods.

Net sales from TOM FORD increased in both periods, primarily driven by growth in the Private Blend and Signature franchises, reflecting the benefit from new product launches which created halo benefits on existing products.

Le Labo net sales increased in both periods, led by the Classic Collection, reflecting growth from targeted expanded consumer reach and new product launches.

Fragrance net sales were impacted by approximately $20 million and $28 million of favorable foreign currency translation for the three and six months ended December 31, 2025, respectively.

Reported fragrance net sales increased 9% for the three months ended December 31, 2025, driven by the increase from pricing of 5%, reflecting changes in mix and the favorable impact from strategic pricing actions, the favorable impact from foreign currency translation of 3% and the increase from volume of 1%.

THE ESTÉE LAUDER COMPANIES INC.

Makeup net sales were impacted by approximately $10 million of favorable foreign currency translation for the three months ended September 30, 2025.

Reported makeup net sales decreased 1% for the three months ended September 30, 2025, driven by the decrease from pricing of 1% reflecting changes in mix partially offset by the favorable impact from strategic pricing actions.

Partially offsetting the decrease was the favorable impact from foreign currency translation of 1%.

The impact from volume was flat period-over-period.

Reported fragrance net sales increased $91 million, or 14% for the three months ended September 30, 2025, primarily driven by higher net sales from Le Labo, TOM FORD, and Jo Malone London, combined, of approximately $76 million.

The increase in net sales for Le Labo reflected growth from targeted expanded consumer reach and the success of hero products.

Net sales from TOM FORD increased, primarily driven by growth in the Private Blend and Signature franchises, reflecting the benefit from new product launches which created halo benefits on existing products.

Net sales from Jo Malone London increased reflecting higher net sales in the cologne subcategory, including success from hero franchises and holiday campaigns, as well as new product launches.

Fragrance net sales were impacted by approximately $8 million of favorable foreign currency translation for the three months ended September 30, 2025.

Reported fragrance net sales increased 14% for the three months ended September 30, 2025, driven by the increase from volume of 8%, an increase from pricing of 5% reflecting changes in mix and the favorable impact from strategic pricing actions, and the favorable impact from foreign currency translation of 1%.

Reported hair care net sales decreased $10 million, or 7%, for the three months ended September 30, 2025, driven by lower net sales from Aveda, reflecting the brand’s strategies to improve long-term performance, including (i) planned reductions in online promotional activity and (ii) the exit from underperforming doors, including freestanding stores.

Also contributing to the decrease in Aveda net sales was continued softness in the salon channel.

Reported fragrance net sales increased 12% for the six months ended December 31, 2025, driven by the increase from pricing of 5%, reflecting changes in mix and the favorable impact from strategic pricing actions, the increase from volume of 4% and the favorable impact from foreign currency translation of 2%.

Reported hair care net sales increased $9 million, or 6%, for the three months ended December 31, 2025, primarily driven by higher net sales from The Ordinary, reflecting the impacts from targeted expanded consumer reach, including the launch in Amazon's U.S.

Premium Beauty store during the fiscal 2025 third quarter, and growth from the Multi-Peptide Serum for Hair Density.

Reported hair care net sales decreased slightly, $1 million, or less than 1%, for the six months ended December 31, 2025, primarily reflecting lower net sales from Aveda and higher net sales from The Ordinary.

The decrease in net sales from Aveda reflected the brand’s strategies to improve long-term performance, including (i) planned reductions in online promotional activity and (ii) the exit from underperforming doors, including freestanding stores.

These declines were partially offset by the impact from its launch in Amazon's U.S.

Premium Beauty store during the fiscal 2025 fourth quarter.

Reported hair care net sales decreased 7% for the three months ended September 30, 2025, driven by the decrease from volume of 14%, partially offset by an increase from pricing of 6% reflecting changes in mix and the favorable impact from strategic pricing actions.

The increase in net sales from The Ordinary reflected the aforementioned growth as discussed above.

Hair care net sales were impacted by approximately $1 million of favorable foreign currency translation for each of the three and six months ended December 31, 2025.

Reported hair care net sales increased 6% for the three months ended December 31, 2025, driven by the increase from pricing of 8%, reflecting changes in mix and the favorable impact from strategic pricing actions, and the favorable impact from foreign currency translation of 1%.

These increases were partially offset by the decrease from volume of 3%.

Reported hair care net sales decreased slightly, less than 1%, for the six months ended December 31, 2025, driven by the decrease from volume of 8%, largely offset by the increase from pricing of 7%, reflecting changes in mix and the favorable impact from strategic pricing actions.

Geographic Regions

Reported net sales by geographic region for the three months ended September 30, 2025 and 2024 were as follows:

Three Months Ended September 30,

Reported net sales by geographic region for the three and six months ended December 31, 2025 and 2024 were as follows:

Three Months Ended December 31, Six Months Ended December 31,

($ in millions) 2025 2024 $ Change

% Change in Constant Currency (2)

2025 2024 $ Change % Change % Change in Constant Currency (2)

The Americas $ 1,218 $ 1,209 $ 9 1 % — % $ 2,392 $ 2,406 $ (14) (1) % (1) %

11 unchanged sentences

THE ESTÉE LAUDER COMPANIES INC.

Reported net sales increased for the three months ended September 30, 2025, primarily driven by higher net sales in Asia/Pacific and in Mainland China, combined, of approximately $109 million.

The increase in net sales in Asia/Pacific was primarily driven by higher net sales in our travel retail business, led by Asia travel retail, attributable to the low prior-year period net sales base which reflected (i) the challenging retail environment, including low consumer sentiment and conversion from Chinese consumers, as well as (ii) our prior-year efforts to improve in-trade inventory levels.

Also contributing to the increase in net sales from our travel retail business was higher net sales from our Europe, the Middle East & Africa travel retail business, primarily driven by growth in fragrance.

The increase in net sales in Mainland China for the three months ended September 30, 2025 was primarily driven by the impact from new product launches and the expansion of The Ordinary into the region during the fiscal 2025 third quarter, and also reflected an improvement in the retail environment, including improved consumer sentiment comparatively, to the prior-year period.

Partially offsetting the reported net sales increase was lower net sales in North America, primarily reflecting continued challenges in department stores, including the impact from store closures related to a retailer bankruptcy as well as softness in certain retailers, and elevated levels of inventory for some brands that continued through the quarter.

Partially offsetting the net sales decline for North America was growth from shipments in support of our Amazon Premium Beauty stores in the U.S.

and Canada, including ongoing brand expansion on the platform.

Reported net sales in The Americas decreased 2% for the three months ended September 30, 2025, driven by the decrease from volume of 3%, partially offset by an increase from pricing of 2% reflecting changes in mix and the favorable impact from strategic pricing actions.

Reported net sales in EUKEM increased 4% for the three months ended September 30, 2025, driven by the favorable impact of foreign currency translation of 4% and an increase from pricing of 3% reflecting the favorable impact from strategic pricing actions and changes in mix.

Partially offsetting these increases was the decrease from volume of 3%.

Reported net sales in Asia/Pacific increased 8% for the three months ended September 30, 2025, driven by an increase from pricing of 5% reflecting the favorable impact from strategic pricing actions and changes in mix, and the increase from volume of 4%.

Reported net sales in Mainland China increased 9% for the three months ended September 30, 2025, driven by an increase from volume of 12%, partially offset by a decrease in pricing of 3%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions.

Reported net sales increased for the three months ended December 31, 2025, primarily driven by higher net sales in Mainland China, our Priority Emerging Markets and the United Kingdom, combined, of approximately $181 million.

The increase in net sales in Mainland China was primarily driven by growth attributable to key shopping moments and holiday, reflecting the benefits from key campaigns to drive sales and new product launches.

Net sales in our Priority Emerging Markets within The Americas and EUKEM increased collectively, reflecting growth in all product categories, supported by targeted expanded consumer reach, successful campaigns and new product launches.

The increase in net sales in the United Kingdom reflected the favorable impact from foreign currency translation and growth from The Ordinary, reflecting targeted expanded consumer reach.

Reported net sales increased for the six months ended December 31, 2025, reflecting higher net sales in Mainland China, primarily driven by the aforementioned growth as discussed above, and higher net sales in our travel retail business, combined, of approximately $244 million.

The increase in net sales in our travel retail business was driven by Asia travel retail, reflecting favorability attributable to the low prior-year period net sales base which reflected (i) the challenging retail environment, including low consumer sentiment and conversion from Chinese consumers, as well as (ii) our prior-year efforts to improve in-trade inventory levels.

These increases were partially offset by impacts associated with the transitory headwind from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses.

Also contributing to the increase in net sales in our travel retail business were higher net sales from our Europe, the Middle East & Africa travel retail business, primarily driven by growth in fragrance.

Reported net sales in The Americas increased 1% for the three months ended December 31, 2025, driven by the increase from volume of 6%, partially offset by the decrease from pricing of 6%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions.

Reported net sales in EUKEM increased 9% for the three months ended December 31, 2025, driven by the increase from volume of 7% and the favorable impact of foreign currency translation of 7%.

These increases were partially offset by the decrease from pricing of 4%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions.

Reported net sales in Asia/Pacific increased 1% for the three months ended December 31, 2025, driven by the increase from pricing of 9%, reflecting changes in mix and the favorable impact from strategic pricing actions, partially offset by the decrease from volume of 8% and the unfavorable impact from foreign currency translation of 1%.

Reported net sales in Mainland China increased 13% for the three months ended December 31, 2025, driven by the increase from pricing of 9%, reflecting changes in mix and the favorable impact from strategic pricing actions, and the increase from volume of 4%.

Reported net sales in The Americas decreased 1% for the six months ended December 31, 2025, driven by the decrease from pricing of 2%, reflecting changes in mix, partially offset by the favorable impact of strategic pricing actions.

This decrease was partially offset by the increase from volume of 2%.

Reported net sales in EUKEM increased 7% for the six months ended December 31, 2025, driven by the favorable impact of foreign currency translation of 5% and the increase from volume of 2%.

These increases were partially offset by the decrease from pricing of 1%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions.

Reported net sales in Asia/Pacific increased 5% for the six months ended December 31, 2025, driven by an increase from pricing of 7%, reflecting changes in mix and the favorable impact from strategic pricing actions, partially offset by the decrease from volume of 2% and the unfavorable impact of foreign currency translation of 1%.

Reported net sales in Mainland China increased 11% for the six months ended December 31, 2025, driven by the increase from volume of 7% and the increase from pricing of 4%, reflecting changes in mix and the favorable impact from strategic pricing actions.

THE ESTÉE LAUDER COMPANIES INC.

Gross margin increased to 73.4% for the three months ended September 30, 2025, as compared with 72.4% in the prior-year period.

Gross margin increased to 76.5% and 75.1% for the three and six months ended December 31, 2025, as compared with 76.1% and 74.4% in the prior-year periods.

Favorable (Unfavorable) Basis Points

September 30, 2025

Three Months Ended

December 31, 2025

Three Months Ended Six Months Ended

Mix of business (35) —

7 unchanged sentences

Non-GAAP Gross Margin Basis Point Variance

The increase in gross margin for the three months ended September 30, 2025 reflected net benefits from the PRGP, which included favorable impacts across our mix of business, obsolescence charges and manufacturing costs and other.

The favorability within mix of business was driven by reductions in promotional activity, and the favorability within obsolescence charges was driven by reductions in excess inventory.

Manufacturing costs and other reflects the favorable impact of cost efficiencies within our global supply chain network, partially offset by the impact of inflation on our costs.

The increase in gross margin for the three and six months ended December 31, 2025 reflected net benefits from the PRGP, largely offset by unfavorable impacts in manufacturing costs and other, reflecting the impact of tariffs and inflation on our costs, as well as changes in our mix of business.

The PRGP benefits were driven by the favorable impact of cost efficiencies within our global supply chain network and reductions in excess inventory.

THE ESTÉE LAUDER COMPANIES INC.

OPERATING EXPENSES

Operating expenses as a percentage of net sales was 68.5% for the three months ended September 30, 2025, as compared with 76.0% in the prior-year period.

Operating expenses as a percentage of net sales was 67.0% and 67.7% for the three and six months ended December 31, 2025, as compared with 90.6% and 83.9% in the prior-year periods.

Favorable (Unfavorable) Basis Points

September 30, 2025

Three Months Ended

December 31, 2025

Three Months Ended Six Months Ended

General and administrative expenses 100 110

Advertising, marketing, promotion and product development

Selling 40 30

Shipping 10 20

Store operating costs (10) (10)

2 unchanged sentences

Charges associated with restructuring and other activities (40) —

Impairment of goodwill and other intangible assets

Talcum litigation settlement agreements

2 unchanged sentences

Impact of restructuring and other activities

Impairment of goodwill and other intangible assets

(2,150) (1,170)

Talcum litigation settlement agreements — (220)

Non-GAAP Operating Expense Margin Basis Point Variance 250 240

The favorability in our operating expense margin reflects lower expenses within non-consumer-facing areas of the business, primarily within general and administrative, marketing and product development expenses.

These reductions were driven by lower employee-related costs realized through initiatives as part of the PRGP, with the general and administrative favorability partially offset by the year-over-year increase in employee incentive costs.

Partially offsetting these expense reductions were increased investments in consumer-facing areas of the business to drive sales, including advertising, selling, promotion and store operating expenses.

The favorability in our operating expense margin for the three and six months ended December 31, 2025 reflected the impact of the increase in net sales, as well as lower expenses within non-consumer-facing areas of the business collectively, primarily within marketing, product development and general and administrative expenses, reflecting lower employee-related costs realized through initiatives as part of the PRGP.

The decrease in general and administrative expenses also includes the favorable year-over-year impact of a change in policy related to local government subsidies in China, which negatively impacted the fiscal 2025 second quarter, partially offset by higher employee incentive costs.

Partially offsetting these expense reductions were increased investments in consumer-facing areas of the business to drive sales, including advertising, store operating costs, selling and promotion expenses.

THE ESTÉE LAUDER COMPANIES INC.

1 unchanged sentence

Three Months Ended

September 30,

December 31, Six Months Ended

($ in millions) 2025 2024 2025 2024

5 unchanged sentences

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 and talcum litigation settlement agreements

% 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 impairment of goodwill and other intangible assets and talcum litigation settlement agreements

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 56 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

The increase in reported operating margin for the three months ended September 30, 2025 was driven by the favorable year-over-year impact of the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million, reflected within the favorable operating expense margin, as well as the increase in net sales and increase in gross margin, as discussed above.

The increase in reported operating margin for the three and six months ended December 31, 2025 was driven by the favorable operating expense margin, which includes the year-over-year impact of the goodwill and other intangible asset impairment charges in the fiscal 2025 second quarter of $861 million, as well as the increase in net sales and 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 a Company-wide initiative 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 September 30, 2025 and 2024 of $86 million and $106 million, respectively.

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 December 31, 2025 and 2024 of $207 million and $181 million, respectively, and for the six months ended December 31, 2025 and 2024 of $293 million and $287 million, respectively.

THE ESTÉE LAUDER COMPANIES INC.

Product Categories

Reported Operating income (loss) for our product categories for the three months ended September 30, 2025 and 2024 were as follows:

Three Months Ended September 30,

Reported Operating income (loss) for our product categories for the three and six months ended December 31, 2025 and 2024 were as follows:

Three Months Ended December 31,

($ in millions) 2025 2024 $ Change % Change

3 unchanged sentences

Skin Care $ 454 $ 306 $ 148 48 % 48 %

Makeup (15) (185) 170 92 42 Adjusted for the impact of talcum litigation settlement agreements.

Fragrance 86 60 26 43 43

Makeup 18 (211) 229 100+ (62) Adjusted for the impact of impairment of goodwill and other intangible assets

Fragrance 105 (446) 551 100+ 2 Adjusted for the impact of other intangible asset impairments

Hair Care 18 (3) 21 100+ 100+

Other 9 11 (2) (18) (18)

Other 13 (45) 58 100+ 44 Adjusted for the impact of other intangible asset impairments

608 (399) 1,007 100+ 32

5 unchanged sentences

GAAP measures.

Six Months Ended December 31,

($ in millions) 2025 2024 $ Change % Change

(As reported) % Change

(Non-GAAP) (1)

Non-GAAP Financial Measure (1)

Skin Care $ 641 $ 423 $ 218 52 % 52 %

Makeup 3 (396) 399 100+ (86) Adjusted for the impact of impairment of goodwill and other intangible assets and talcum litigation settlement agreements

Fragrance 191 (386) 577 100+ 17 Adjusted for the impact of other intangible asset impairments

Hair Care 6 (21) 27 100+ 100+

Other 22 (34) 56 100+ 10 Adjusted for the impact of other intangible asset impairments

863 (414) 1,277 100+ 42

Charges associated with restructuring and other activities

(293) (287) (6) (2) 78

Operating income (loss)

$ 570 $ (701) $ 1,271 100+% 100+%

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 56 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported skin care operating income increased $148 million, or 48%, and $218 million, or 52%, for the three and six months ended December 31, 2025, respectively, reflecting an increase in net sales, as well as lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP, partially offset by an increase in investments in consumer-facing areas of the business, including to support key campaigns, new product launches and targeted expanded consumer reach.

THE ESTÉE LAUDER COMPANIES INC.

Reported skin care operating income increased $70 million, or 60%, for the three months ended September 30, 2025, reflecting an increase in net sales, as well as lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP.

Reported makeup operating loss decreased $170 million, or 92%, for the three months ended September 30, 2025, primarily reflecting the favorable year-over-year impact of the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million, and to a lesser extent lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP.

Reported fragrance operating income increased $26 million, or 43%, for the three months ended September 30, 2025, reflecting higher net sales, partially offset by higher cost of sales, and an increase in investments in consumer-facing areas of the business, including selling expenses to support targeted expanded consumer reach, higher promotion expenses to support new product launches, and higher store operating costs to support targeted expanded consumer reach.

Reported hair care operating loss decreased $6 million, or 33%, for the three months ended September 30, 2025, primarily reflecting lower operating expenses and cost of sales, partially offset by lower net sales.

Reported makeup operating results increased $229 million, or over 100%, and $399 million, or over 100%, for the three and six months ended December 31, 2025, respectively, primarily reflecting the favorable year-over-year impacts of other intangible asset impairment charges in the prior-year periods relating to TOM FORD and Too Faced, combined, of $245 million and a goodwill impairment charge relating to Too Faced of $13 million.

Also contributing to the increase in makeup operating results for the six months ended December 31, 2025 was the favorable year-over-year impact of the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million.

Reported fragrance operating results increased $551 million, or over 100%, and $577 million, or over 100%, for the three and six months ended December 31, 2025, respectively, reflecting the favorable year-over-year impact of the other intangible asset impairment charge in the prior-year periods of $549 million relating to TOM FORD and an increase in net sales, partially offset by an increase in investments in consumer-facing areas of the business, including to support key campaigns, new product launches and targeted expanded consumer reach.

Reported hair care operating results increased $21 million, or over 100%, for the three months ended December 31, 2025, primarily reflecting an increase in net sales and lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP.

Reported hair care operating income increased $27 million, or over 100%, for the six months ended December 31, 2025, primarily reflecting lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP, and lower cost of sales.

Geographic Regions

Three Months Ended September 30,

Three Months Ended December 31,

($ in millions)

3 unchanged sentences

Non-GAAP Financial Measure (2)

The Americas $ 87 $ (85) $ 172 100+% 18 % Adjusted for the impact of talcum litigation settlement agreements

The Americas $ 104 $ (771) $ 875 100+% 15 % Adjusted for the impact of impairment of goodwill and other intangible assets

156 145 11 8 8

8 unchanged sentences

$ 401 $ (580) $ 981 100+% 100+%

(1) Operating results by geographic region for the fiscal 2025 first quarter have been adjusted to reflect the correction of a regional misclassification in the amounts furnished in the Form 8-K on October 2, 2025 related to a one-time charge during the fiscal 2025 first quarter.

The misclassification was offset in the fiscal 2025 second quarter (quarter-to-date period) furnished amounts, and the adjusted amounts will be reflected in the fiscal 2026 second quarter Form 10-Q.

(1) Operating results by geographic region for the fiscal 2025 second quarter (quarter-to-date period) have been adjusted to reflect the correction of a regional misclassification in the amounts furnished in the Form 8-K on October 2, 2025 related to a one-time charge during the fiscal 2025 first quarter.

The misclassification was offset in the fiscal 2025 first quarter furnished amounts, and the adjusted amounts were reflected in the fiscal 2026 first quarter Form 10-Q.

No other periods were impacted and there is no impact on the consolidated financial results or results by product category.

2 unchanged sentences

(3) The operating results from the Company’s travel retail business are included in the Asia/Pacific region.

Reported operating results in The Americas increased $172 million, or over 100%, for the three months ended September 30, 2025, reflecting the favorable year-over-year impact of the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million, and to a lesser extent, lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP, and lower cost of sales, partially offset by lower net sales.

THE ESTÉE LAUDER COMPANIES INC.

Reported operating income in EUKEM decreased $4 million, or 40%, for the three months ended September 30, 2025, reflecting an increase in investments in consumer-facing areas of the business, including to support targeted expanded consumer reach and to support key campaigns and activations, offset by higher net sales.

Reported operating income in Asia/Pacific increased $74 million, or 97%, for the three months ended September 30, 2025, reflecting higher net sales and lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP, partially offset by higher cost of sales.

Reported operating results in Mainland China increased $28 million, or over 100%, for the three months ended September 30, 2025, reflecting higher net sales, partially offset by higher cost of sales and the unfavorable year-over-year impact associated with the recognition of local government subsidies in the prior-year period.

Six Months Ended December 31,

($ in millions)

2025 2024 $ Change

(As Reported)

(Non-GAAP) (1)

Non-GAAP Financial Measure (1)

The Americas $ 191 $ (856) $ 1,047 100+% 16 % Adjusted for the impact of impairment of goodwill and other intangible assets and talcum litigation settlement agreements

162 155 7 5 5

Asia/Pacific (2)

350 228 122 54 54

Mainland China

160 59 101 100+ 100+

863 (414) 1,277 100+ 42

Charges associated with restructuring and other activities

(293) (287) (6) (2) 78

Operating income (loss)

$ 570 $ (701) $ 1,271 100+% 100+%

(1) See “Reconciliations of Non-GAAP Financial Measures” beginning on page 56 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

(2) The operating results from the Company’s travel retail business are included in the Asia/Pacific region.

Reported operating results in The Americas increased $875 million, or over 100%, and $1,047 million, or over 100%, for the three and six months ended December 31, 2025, respectively, reflecting the favorable year-over-year impacts of other intangible asset impairment charges in the prior-year periods relating to TOM FORD and Too Faced, combined, of $848 million and a goodwill impairment charge relating to Too Faced of $13 million.

Also contributing to the increase in The Americas operating results for the six months ended December 31, 2025 was the favorable year-over-year impact of the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million.

Reported operating income in EUKEM increased $11 million, or 8%, and $7 million, or 5%, for the three and six months ended December 31, 2025, respectively, including the favorable impact of foreign currency translation of 11% and 12% for the respective periods.

The increase in operating income reflected higher net sales, offset in part by higher cost of sales and an increase in investments in consumer-facing areas of the business, including to support targeted expanded consumer reach, key campaigns and new product launches.

Reported operating income in Asia/Pacific increased $48 million, or 32%, and $122 million, or 54%, for the three and six months ended December 31, 2025, respectively.

For the three months ended December 31, 2025, reported operating income increased, reflecting lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP.

For the six months ended December 31, 2025, reported operating income increased, reflecting higher net sales and lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP.

Reported operating income in Mainland China increased $73 million, or 97%, and $101 million, or over 100%, for the three and six months ended December 31, 2025, respectively, reflecting higher net sales, as well as the favorable year-over-year impact of a change in policy related to local government subsidies in China, which negatively impacted the fiscal 2025 second quarter, partially offset by an increase in investments in consumer-facing expenses, including to support key campaigns, new product launches and targeted expanded consumer reach.

THE ESTÉE LAUDER COMPANIES INC.

INTEREST AND INVESTMENT INCOME

Three Months Ended

September 30,

December 31, Six Months Ended

(In millions) 2025 2024 2025 2024

1 unchanged sentence

Interest income and investment income, net $ 21 $ 23 $ 51 $ 58

Interest expense decreased for the three months ended September 30, 2025, primarily reflecting a lower average debt balance compared to the prior-year period.

Interest income and investment income, net decreased, primarily reflecting a lower average cash balance and lower average interest rates compared to the prior-year period.

Interest expense decreased for the three and six months ended December 31, 2025, primarily reflecting a lower average debt balance compared to the prior-year period.

Interest income and investment income, net decreased for the three and six months ended December 31, 2025, reflecting lower average interest rates compared to the prior-year period, partially offset by the favorable year-over-year impact of cost method investment activity.

Also contributing to the decrease in Interest income and investment income, net for the six months ended December 31, 2025 was a lower average cash balance compared to the prior-year period.

PROVISION FOR INCOME TAXES

5 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2025 2024 2025 2024

Effective rate for income taxes 51.40 % 9.20 % 52.70 % 10.10 %

Basis-point change from the prior-year period 4,220 4,260

The increase in the effective tax rate of 4,360 basis points was attributable in part to the loss before income taxes in the fiscal 2025 first quarter as well as the estimated unfavorable impact of the newly enacted U.S.

tax legislation, 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 and an unfavorable impact associated with the establishment of a valuation allowance against current period foreign tax credit and research and development tax credit U.S.

deferred tax assets.

For the three months ended December 31, 2025, the increase in effective tax rate was primarily attributable to the loss before income taxes and the impact of the discrete treatment of the impairment of goodwill and other intangible assets, both during the fiscal 2025 second quarter.

Further contributing to the increase in the effective tax rate was the estimated unfavorable impact of the One Big Beautiful Bill Act, and a higher effective tax rate on the Company's foreign operations due to an unfavorable impact associated with the establishment of valuation allowances against certain net deferred tax assets, partially offset by the year-over-year favorable impact associated with previously issued stock-based compensation.

For the six months ended December 31, 2025, the increase in effective tax rate was primarily attributable to the loss before income taxes, the impact of the discrete treatment of charges associated with restructuring and other activities, the impairment of goodwill and other intangible assets, and the charge associated with the talcum litigation settlement agreements, each during the six months ended December 31, 2024.

Further contributing to the increase in the effective tax rate was the estimated unfavorable impact of the One Big Beautiful Bill Act, a higher effective tax rate on the Company’s foreign operations due to an unfavorable impact associated with the establishment of valuation allowances against certain net deferred tax assets, partially offset by the year-over-year favorable impact associated with previously issued stock-based compensation.

THE ESTÉE LAUDER COMPANIES INC.

1 unchanged sentence

Three Months Ended

September 30,

December 31, Six Months Ended

($ in millions, except per share data) 2025 2024 2025 2024

Net earnings (loss)

$ 162 $ (590) $ 209 $ (746)

$ Change from prior-year period 752 955

4 unchanged sentences

Non-GAAP Financial Measure (1) :

% Change in diluted net earnings (loss) per common share from the prior-year period adjusting for the impact of charges associated with restructuring and other activities and talcum litigation settlement agreements

% Change in diluted net earnings (loss) per common share from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, impairment of goodwill and other intangible assets and talcum litigation settlement agreements

(1) See “ Reconciliations of Non-GAAP Financial Measures” below for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

8 unchanged sentences

The following tables present Net sales, Operating income (loss) and Diluted net earnings (loss) per common share adjusted to exclude the impact of charges associated with restructuring and other activities;

impairment of goodwill and other intangible assets;

talcum litigation settlement agreements;

1 unchanged sentence

THE ESTÉE LAUDER COMPANIES INC.

The following table provides reconciliations between these non-GAAP financial measures and the most directly comparable U.S.

The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

($ in millions, except per share data) Three Months Ended

September 30, Variance % Change

($ in millions, except per share data) Three Months Ended December 31, Variance % Change

constant currency

5 unchanged sentences

Charges associated with restructuring and other activities 207 181 26

Impairment of goodwill and other intangible assets

Operating income, as adjusted $ 608 $ 462 $ 146 32 % 29 %

Diluted net earnings (loss) per common share, as reported

$ .44 $ (1.64) $ 2.08 100+% 100+%

Charges associated with restructuring and other activities .45 .39 .06

Impairment of goodwill and other intangible assets

— 1.87 (1.87)

Diluted net earnings per common share, as adjusted $ .89 $ .62 $ .27 43 % 40 %

THE ESTÉE LAUDER COMPANIES INC.

($ in millions, except per share data) Six Months Ended

December 31, Variance % Change

constant currency

Net sales, as reported $ 7,710 $ 7,365 $ 345 5 % 3 %

Returns associated with restructuring and other activities 1 — 1

Net sales, as adjusted $ 7,709 $ 7,365 $ 344 5 % 3 %

Operating income (loss), as reported

$ 570 $ (701) $ 1,271 100+% 100+%

Charges associated with restructuring and other activities 293 287 6

Impairment of goodwill and other intangible assets

Talcum litigation settlement agreements

3 unchanged sentences

Charges associated with restructuring and other activities .64 .63 .01

Impairment of goodwill and other intangible assets

— 1.87 (1.87)

Talcum litigation settlement agreements

Diluted net earnings per common share, as adjusted $ 1.21 $ .77 $ .44 58 % 56 %

As diluted net earnings (loss) 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.

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.

THE ESTÉE LAUDER COMPANIES INC.

The following table reconciles 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:

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

3 unchanged sentences

in constant currency

Three Months Ended

September 30,

Three Months Ended December 31,

($ in millions) 2025 2024 Variance

18 unchanged sentences

THE ESTÉE LAUDER COMPANIES INC.

The following table reconciles the change in operating results by product category and geographic region, as reported, to the change in operating results excluding the impact of talcum litigation settlement agreements:

As Reported Impact of foreign

currency translation Variance,

in constant currency % Change,

as reported % Change,

in constant currency

Six Months Ended

($ in millions) 2025 2024 Variance

By Product Category:

Skin Care $ 3,629 $ 3,450 $ 179 $ (34) $ 145 5 % 4 %

Makeup 2,194 2,188 6 (36) (30) — (1)

Fragrance 1,533 1,374 159 (28) 131 12 10

Hair Care 297 298 (1) (1) (2) — (1)

Other 56 55 1 — 1 2 2

7,709 7,365 344 (99) 245 5 3

Returns associated with restructuring and other activities 1 — 1 — 1

Total $ 7,710 $ 7,365 $ 345 $ (99) $ 246 5 % 3 %

By Geographic Region:

The Americas $ 2,392 $ 2,406 $ (14) $ — $ (14) (1) % (1) %

2,084 1,953 131 (107) 24 7 1

Asia/Pacific 1,773 1,694 79 9 88 5 5

Mainland China

1,460 1,312 148 (1) 147 11 11

7,709 7,365 344 (99) 245 5 3

Returns associated with restructuring and other activities 1 — 1 — 1

Total $ 7,710 $ 7,365 $ 345 $ (99) $ 246 5 % 3 %

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 results excluding the impact of impairment of goodwill and other intangible assets, as well as the talcum litigation settlement agreements for the six months ended December 31, 2025:

As Reported Add:

Changes in Impairment of goodwill and other intangible assets

Variance, as adjusted % Change, as reported % Change, as adjusted

Three Months Ended December 31,

($ in millions) 2025 2024 Variance

By Product Category:

Skin Care $ 454 $ 306 $ 148 $ — $ 148 48 % 48 %

Makeup 18 (211) 229 (258) (29) 100+ (62)

Fragrance 105 (446) 551 (549) 2 100+ 2

Hair Care 18 (3) 21 — 21 100+ 100+

Other 13 (45) 58 (54) 4 100+ 44

608 (399) 1,007 $ (861) $ 146 100+% 32 %

Charges associated with restructuring and other activities (207) (181) (26)

Total $ 401 $ (580) $ 981

By Geographic Region:

The Americas $ 104 $ (771) $ 875 $ (861) $ 14 100+% 15 %

EUKEM 156 145 11 — 11 8 8

Asia/Pacific 200 152 48 — 48 32 32

Mainland China 148 75 73 — 73 97 97

608 (399) 1,007 $ (861) $ 146 100+% 32 %

Charges associated with restructuring and other activities (207) (181) (26)

Total $ 401 $ (580) $ 981

THE ESTÉE LAUDER COMPANIES INC.

As Reported Add:

Impairment of goodwill and other intangible assets

Talcum litigation settlement agreements Variance, as adjusted % Change, as reported % Change, as adjusted

Three Months Ended

September 30,

Six Months Ended December 31,

($ in millions) 2025 2024 Variance

16 unchanged sentences

Total $ 570 $ (701) $ 1,271

The misclassification was offset in the fiscal 2025 second quarter (quarter-to-date period) furnished amounts, and the adjusted amounts will be reflected in the fiscal 2026 second quarter Form 10-Q.

No other periods were impacted and there is no impact on the consolidated financial results or results by product category.

FINANCIAL CONDITION

1 unchanged sentence

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 September 30, 2025, we had cash and cash equivalents of $2,219 million compared with $2,921 million at June 30, 2025.

At December 31, 2025, we had cash and cash equivalents of $3,082 million compared with $2,921 million at June 30, 2025.

Our cash and cash equivalents are maintained at a number of financial institutions.

1 unchanged sentence

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 ESTÉE LAUDER COMPANIES INC.

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.

3 unchanged sentences

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.

Inflation impacted our operating results in the fiscal 2026 first 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.

THE ESTÉE LAUDER COMPANIES INC.

Tariffs negatively impacted our operating results in the fiscal 2026 second quarter and we expect these impacts 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 impacts.

Credit Ratings

3 unchanged sentences

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 October 23, 2025, our long-term debt is rated A- with a negative outlook by Standard & Poor’s and A3 with a negative outlook by Moody’s.

THE ESTÉE LAUDER COMPANIES INC.

At September 30, 2025, our outstanding borrowings were as follows:

As of January 29, 2026, our long-term debt is rated A- with a negative outlook by Standard & Poor’s and A3 with a negative outlook by Moody’s.

At December 31, 2025, our outstanding borrowings were as follows:

($ in millions) Long-term

16 unchanged sentences

Other long-term borrowings 27 3 30

Other current borrowings — 3 3

$ 7,319 $ 3 $ 7,322

14 unchanged sentences

(15) The Senior Notes contain certain customary covenants, including limitations on indebtedness secured by liens.

Total debt as a percent of total capitalization was 65% at September 30, 2025 and June 30, 2025.

Three Months Ended

September 30,

THE ESTÉE LAUDER COMPANIES INC.

Total debt as a percent of total capitalization was 64.5% and 65.4% at December 31, 2025 and June 30, 2025, respectively.

Six Months Ended

(In millions) 2025 2024

Net cash flows used for operating activities

$ (340) $ (670)

Net cash flows provided by operating activities $ 785 $ 387

Net cash flows used for investing activities $ (208) $ (294)

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$ (419) $ (878)

THE ESTÉE LAUDER COMPANIES INC.

The change in net cash flows used for operating activities was primarily driven by higher net earnings in the fiscal 2026 first quarter and a favorable change in operating assets and liabilities variances.

The change in net cash flows provided by operating activities was primarily driven by higher net earnings, excluding non-cash items.

The change in net cash flows used for investing activities was primarily driven by a favorable year-over-year impact from lower capital expenditures compared to the prior-year period.

The change in net cash flows used for financing activities primarily reflected the payment of deferred consideration in the fiscal 2026 first quarter associated with the fiscal 2023 acquisition of TOM FORD, partially offset by a decrease in dividends paid to stockholders in the current-year period.

For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the three months ended September 30, 2025, see Notes to Consolidated Financial Statements, Note 11 – Equity and Redeemable Noncontrolling Interest .

The change in net cash flows used for financing activities primarily reflected a decrease in repayments of long-term debt due to the repayment of the outstanding principal balance of our $500 million, 2.000% Senior Notes that matured during the fiscal 2025 second quarter, and a decrease in dividends paid to stockholders in the current-year period.

These decreases were partially offset by the payment of deferred consideration in the fiscal 2026 first quarter associated with the fiscal 2023 acquisition of TOM FORD.

For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock for the six months ended December 31, 2025, see Notes to Consolidated Financial Statements, Note 11 – Equity and Redeemable Noncontrolling Interest .

Pension and Post-retirement Plan Funding

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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, 2025 .

There have been no other 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, 2025, except as disclosed in Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies.

For a discussion of contingencies, see Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies .

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For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments (Credit Risk) .

THE ESTÉE LAUDER COMPANIES INC.

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, anticipated transactions and receivables and payables and the net investment in certain foreign operations.

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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 $186 million and $223 million as of September 30, 2025 and June 30, 2025, respectively.

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 $137 million and $223 million as of December 31, 2025 and June 30, 2025, respectively.

This potential change does not consider our underlying foreign currency exposures.

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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 as of September 30, 2025 and June 30, 2025.

In addition, we enter into interest rate derivatives to manage the effects of interest rate movements on our funded indebtedness, 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 $63 million and $43 million as of September 30, 2025 and June 30, 2025, respectively.

THE ESTÉE LAUDER COMPANIES INC.

Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $60 million and $43 million as of December 31, 2025 and June 30, 2025, 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.

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For a discussion regarding the impact of accounting standards that were recently issued but not yet effective, on our consolidated financial statements, see Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies .

THE ESTÉE LAUDER COMPANIES INC.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

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(4) destocking and tighter working capital management by retailers;

THE ESTÉE LAUDER COMPANIES INC.

(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;

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(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;

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;

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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.

THE ESTÉE LAUDER COMPANIES INC.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis