What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-29 compared with 2026-04-29 · 165 added, 58 removed, 110 unchanged (67% of the section changed)

19 unchanged sentences

Global economic and geopolitical conditions impact our operations and financial results, although we believe our vertically integrated and diversified business model enables us to be resilient and flexible in a dynamic business environment.

Recent global supply constraints of memory chips have increased operational complexities and costs, which may unfavorably impact our future gross margin.

Foreign currency fluctuations and rapidly changing global trade policies, particularly those affecting the United States (“U.S.”), increase the economic and operational uncertainties that could significantly impact our business and results of operations.

On February 20, 2026, the U.S.

Supreme Court ruled that the tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unauthorized.

As of March 28, 2026, we had not recognized a benefit or receivable related to any potential refund related to previously paid IEEPA tariffs.

Refer to Part II, Item 1A, “Risk Factors” of this Quarterly Report for further discussion of the risks and uncertainties facing our Company.

Results of Operations

The following tables and discussion provides an analysis of our results of operations for the first quarter of 2026 compared to the first quarter of 2025.

Comparison of 13-Weeks Ended March 28, 2026 and March 29, 2025

The following tables and discussion provide an analysis of our results of operations for the second quarter of 2026 compared to the second quarter of 2025 and the first half of 2026 compared to the first half of 2025.

Comparison of 13-Weeks Ended June 27, 2026 and June 28, 2025

13-Weeks Ended

March 28, 2026

June 27, 2026

Year-over-Year Change

13-Weeks Ended

March 29, 2025

June 28, 2025

Percentage of Total Net Sales

3 unchanged sentences

Percentage of Total Net Sales

Net sales (or “revenue”) increased 14% for the 13-week period ended March 28, 2026 when compared to the year-ago quarter.

Total unit sales in the first quarter of 2026 increased by approximately 9% to 4,765 when compared to total unit sales of 4,362 in the first quarter of 2025, which differs from the percent increase in revenue primarily due to shifts in segment and product mix.

Fitness was the largest portion of our revenue mix in the first quarter of 2026 at 31%, while outdoor was the largest portion of our revenue mix in the first quarter of 2025 at 29%.

Net sales (or “revenue”) increased 11% for the 13-week period ended June 27, 2026 when compared to the year-ago quarter.

Total unit sales in the second quarter of 2026 increased by approximately 9% to 5,686 when compared to total unit sales of 5,203 in the second quarter of 2025, which differs from the percent increase in revenue primarily due to shifts in segment and product mix.

Fitness was the largest portion of our revenue mix in the second quarter of 2026 at 37% compared to 33% in the second quarter of 2025.

The increase in fitness revenue was driven by growth across all product categories, led by strong demand for advanced wearables.

The increase in aviation revenue was driven by sales growth in OEM and aftermarket product categories.

The increase in marine revenue was driven by sales growth across multiple product categories.

The increase in auto OEM revenue was primarily driven by growth in infotainment programs.

Outdoor revenue decreased primarily due to the adventure watch product category comparing against a strong prior year product launch.

The increase in aviation revenue was driven by growth in OEM and aftermarket product categories.

The increase in marine revenue was driven by growth across multiple product categories.

The increase in auto OEM revenue was primarily driven by growth in domain controllers.

The outdoor revenue decrease was primarily due to declines in consumer auto and adventure watches.

13-Weeks Ended

March 28, 2026

June 27, 2026

Year-over-Year Change

13-Weeks Ended

March 29, 2025

June 28, 2025

Percentage of Segment Net Sales

4 unchanged sentences

Percentage of Total Net Sales

Gross profit dollars in the first quarter of 2026 increased 18%, primarily due to the increase in net sales when compared to the year-ago quarter, as described above.

Consolidated gross margin as a percent of net sales increased 180 basis points when compared to the year-ago quarter, primarily due to favorable foreign currency impacts on sales.

The fitness and outdoor gross margin percentage increases of 470 basis points and 210 basis points, respectively, were primarily attributable to favorable foreign currency impacts on sales when compared to the year-ago quarter.

Gross margin remained relatively flat within the aviation and auto OEM segments when compared to the year-ago quarter.

The marine gross margin percentage decrease of 200 basis points when compared to the year-ago quarter was primarily attributable to higher tariff costs.

Gross profit dollars in the second quarter of 2026 increased 18% when compared to the year-ago quarter primarily due to the increase in net sales as described above.

Consolidated gross margin as a percent of net sales increased 360 basis points when compared to the year-ago quarter with higher margins across all segments.

The consolidated gross margin increase was primarily attributable to favorable product mix within certain segments and a favorable 100 basis point impact related to approximately $21 million in refunds of previously paid tariffs, of which approximately $14 million was attributable to marine.

The fitness and outdoor gross margin percentage increases of 330 basis points and 270 basis points, respectively, were primarily attributable to favorable product mix when compared to the year-ago quarter.

The aviation gross margin percentage remained relatively flat with an 80 basis point increase when compared to the year-ago quarter.

The marine gross margin percentage increase of 630 basis points when compared to the year-ago quarter was primarily attributable to refunds of previously paid tariffs and favorable product mix.

The auto OEM gross margin percentage increase of 560 basis points when compared to the year-ago quarter was primarily attributable to year-to-date cost recoveries recognized as revenue during the current quarter.

Operating Expense

1 unchanged sentence

13-Weeks Ended

March 28, 2026

June 27, 2026

Year-over-Year Change

13-Weeks Ended

March 29, 2025

June 28, 2025

Research and development expense

3 unchanged sentences

Percentage of Total Net Sales

Total operating expense in the first quarter of 2026 increased 11% in absolute dollars and decreased 110 basis points as a percent of revenue when compared to the year-ago quarter.

Operating expense, as a percent of segment net sales, decreased in the fitness, aviation, and auto OEM segments by 390 basis points, 570 basis points, and 90 basis points, respectively, when compared to the year-ago quarter primarily due to increased sales and greater leverage of expenses.

Operating expense, as a percent of segment net sales, remained relatively flat in the marine segment when compared to the year-ago quarter.

Operating expense, as a percent of segment net sales, increased in the outdoor segment by 300 basis points when compared to the year-ago quarter as decreased sales and increased expenses were partially offset by improved gross margin percentage.

Total operating expense in the second quarter of 2026 increased 9% in absolute dollars and decreased 80 basis points as a percent of revenue when compared to the year-ago quarter.

Operating expense, as a percent of segment net sales, decreased in the fitness, aviation, marine, and auto OEM segments by 70 basis points, 70 basis points, 190 basis points, and 170 basis points, respectively, when compared to the year-ago quarter primarily due to increased revenue and greater leverage of expenses.

Operating expense, as a percent of segment net sales, increased in the outdoor segment by 100 basis points when compared to the year-ago quarter as decreased revenue and increased expenses were offset by improved gross margin percentage.

Research and development expense increased 10% in absolute dollars when compared to the year-ago quarter.

5 unchanged sentences

13-Weeks Ended

March 28, 2026

June 27, 2026

Year-over-Year Change

13-Weeks Ended

March 29, 2025

June 28, 2025

Percentage of Segment Net Sales

5 unchanged sentences

NM - Represents that the percentage change is not meaningful.

Total operating income in the first quarter of 2026 increased 30% in absolute dollars and increased 290 basis points as a percent of revenue when compared to the year-ago quarter.

The increase in operating income as a percent of revenue was driven by increased sales, gross margin improvements and lower operating expenses as a percent of revenue, as described above.

The improved operating income dollar performance in fitness, aviation, marine and auto OEM was partially offset by the decrease in outdoor.

Total operating income in the second quarter of 2026 increased 30% in absolute dollars and increased 440 basis points as a percent of revenue when compared to the year-ago quarter.

The increase in operating income as a percent of revenue was driven by gross margin improvements and lower operating expenses as a percent of revenue, as described above.

Operating performance improved across all segments when compared to the year-ago quarter.

Other Income (Expense)

1 unchanged sentence

13-Weeks Ended

March 28, 2026

June 27, 2026

13-Weeks Ended

March 29, 2025

June 28, 2025

Interest income

Foreign currency losses

Other (expense) income

The average interest rate return on cash and investments during the second quarter of 2026 was 3.5%, compared to 3.2% during the same quarter of 2025.

Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S.

The Taiwan Dollar is the functional currency of Garmin Corporation, the Euro is the functional currency of several subsidiaries, and the U.S.

Dollar is the functional currency of Garmin (Europe) Ltd., although some transactions and balances are denominated in British Pounds.

Other notable currency exposures include the Polish Zloty and Swiss Franc.

The majority of the Company’s consolidated foreign currency gain or loss is typically driven by the significant cash, receivables and payables held in a currency other than the functional currency at a given legal entity.

The $2.5 million currency loss recognized in the second quarter of 2026 was primarily due to the U.S.

Dollar strengthening against the Euro and weakening against the Taiwan Dollar, partially offset by the U.S.

Dollar strengthening against the Swiss Franc, within the 13-week period ended June 27, 2026.

During this period, the U.S.

Dollar strengthened 1.1% against the Euro and weakened 0.6% against the Taiwan Dollar, resulting in losses of $3.8 million and $2.7 million, respectively, while the U.S.

Dollar strengthened 1.8% against the Swiss Franc, resulting in a gain of $4.6 million.

The remaining net currency loss of $0.6 million was related to the impacts of other currencies, each of which was individually immaterial.

The $23.5 million currency loss recognized in the second quarter of 2025 was primarily due to the U.S.

Dollar weakening against the Taiwan Dollar, partially offset by the U.S Dollar weakening against the Euro and British Pound Sterling, within the 13-week period ended June 28, 2025.

During this period, the U.S.

Dollar weakened 14.1% against the Taiwan Dollar, resulting in a loss of $67.7 million, while the U.S Dollar weakened 8.2% against the Euro and 6.0% against the British Pound Sterling, resulting in gains of $36.5 million and $2.9 million, respectively.

The remaining net currency gain of $4.8 million was related to the impacts of other currencies, each of which was individually immaterial.

Income Tax Provision

The Company recorded income tax expense of $109.1 million in the 13-week period ended June 27, 2026, compared to income tax expense of $79.4 million in the 13-week period ended June 28, 2025.

The effective tax rate was 16.8% in the second quarter of 2026, compared to 16.5% in the second quarter of 2025.

The increase in effective tax rate between comparative periods was primarily due to changes in income mix by jurisdiction.

As a result of the above, net income for the 13-week period ended June 27, 2026 was $541.9 million compared to $400.8 million for the 13-week period ended June 28, 2025, an increase of $141.1 million.

Comparison of 26-Weeks Ended June 27, 2026 and June 28, 2025

26-Weeks Ended

June 27, 2026

Year-over-Year Change

26-Weeks Ended

June 28, 2025

Percentage of Total Net Sales

Net sales increased 13% for the 26-week period ended June 27, 2026 when compared to the year-ago period.

Total unit sales in the first half of 2026 increased by approximately 9% to 10,451 when compared to total unit sales of 9,565 in the first half of 2025, which differs from the percent increase in revenue primarily due to shifts in segment and product mix.

Fitness was the largest portion of our revenue mix in the first half of 2026 at 35% compared to 30% in the first half of 2025.

The increase in fitness revenue was driven by growth across all product categories, led by strong demand for advanced wearables.

The increase in aviation revenue was driven by growth in OEM and aftermarket product categories.

The increase in marine revenue was driven by growth across multiple product categories.

The increase in auto OEM revenue was primarily driven by growth in domain controllers.

The outdoor revenue decrease was primarily due to declines in adventure watches.

26-Weeks Ended

June 27, 2026

Year-over-Year Change

26-Weeks Ended

June 28, 2025

Percentage of Segment Net Sales

Percentage of Total Net Sales

Gross profit dollars in the first half of 2026 increased 18% when compared to the year-ago period primarily due to the increase in net sales as described above.

Consolidated gross margin as a percent of net sales increased 280 basis points when compared to the year-ago period with higher margins across all segments.

The consolidated gross margin increase was primarily attributable to favorable product mix within certain segments.

The fitness and outdoor gross margin percentage increases of 380 basis points and 240 basis points, respectively, were primarily attributable to favorable product mix when compared to the year-ago period.

The aviation gross margin percentage remained relatively flat with a 20 basis point increase when compared to the year-ago period.

The marine gross margin percentage increase of 210 basis points when compared to the year-ago period was primarily attributable to refunds of previously paid tariffs.

The auto OEM gross margin percentage increase of 310 basis points when compared to the year-ago period was primarily attributable to year-to-date cost recoveries recognized as revenue during the current period.

Operating Expense

26-Weeks Ended

June 27, 2026

Year-over-Year Change

26-Weeks Ended

June 28, 2025

Research and development expense

Percentage of Total Net Sales

Selling, general and administrative expenses

Percentage of Total Net Sales

Total operating expense in the first half of 2026 increased 10% in absolute dollars and decreased 90 basis points as a percent of revenue when compared to the year-ago period.

Operating expense, as a percent of segment net sales, decreased in the fitness, aviation, marine, and auto OEM segments when compared to the year-ago period by 180 basis points, 300 basis points, 110 basis points, and 130 basis points, respectively, due to increased revenue and greater leverage of expenses.

Operating expense, as a percent of segment net sales, increased in the outdoor segment by 190 basis points when compared to the year-ago period as decreased revenue and increased expenses were offset by improved gross margin percentage.

Research and development expense increased 10% in absolute dollars when compared to the year-ago period.

The absolute dollar expense increase was primarily due to higher engineering personnel-related expenses.

Selling, general and administrative expense increased 9% in absolute dollars when compared to the year-ago period.

The absolute dollar expense increase was primarily due to higher personnel-related expenses.

Operating Income

Operating Income (Loss)

26-Weeks Ended

June 27, 2026

Year-over-Year Change

26-Weeks Ended

June 28, 2025

Percentage of Segment Net Sales

Percentage of Total Net Sales

NM - Represents that the percentage change is not meaningful.

Total operating income in the first half of 2026 increased 30% in absolute dollars and increased 370 basis points as a percent of revenue when compared to the year-ago period.

The increase in operating income as a percent of revenue was driven by gross margin improvements and lower operating expenses as a percent of revenue, as described above.

Operating performance improvements, when compared to the year-ago period, in fitness, aviation, marine, and auto OEM were partially offset by a decline in outdoor.

Other Income (Expense)

26-Weeks Ended

June 27, 2026

26-Weeks Ended

June 28, 2025

Interest income

Foreign currency gains

The average interest rate return on cash and investments during the first quarter of 2026 was 3.3%, compared to 3.2% during the same quarter of 2025.

The average interest returns on cash and investments during the 26-week periods ended June 27, 2026 and June 28, 2025 were 3.4% and 3.2%, respectively.

Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S.

3 unchanged sentences

The $3.1 million currency gain recognized in the first quarter of 2026 was primarily due to the U.S.

Dollar strengthening against the Taiwan Dollar and the Swiss Franc, partially offset by the U.S.

Dollar strengthening against the Euro, within the 13-week period ended March 28, 2026.

The $0.6 million currency gain recognized in the 26-week period ended June 27, 2026 was primarily due to the U.S.

Dollar strengthening against the Taiwan Dollar and Swiss Franc, partially offset by the U.S.

Dollar strengthening against the Euro, within the 26-week period ended June 27, 2026.

During this period, the U.S.

2 unchanged sentences

The remaining net currency loss of $1.4 million was related to the impacts of other currencies, each of which was individually immaterial.

The $24.8 million currency gain recognized in the first quarter of 2025 was primarily due to the U.S.

Dollar weakening against the Euro and Polish Zloty, and strengthening against the Taiwan Dollar, within the 13-week period ended March 29, 2025.

The $1.2 million currency gain recognized in the 26-week period ended June 28, 2025 was primarily due to the U.S.

Dollar weakening against the Euro, British Pound Sterling, and Polish Zloty, offset by the U.S.

Dollar weakening against the Taiwan Dollar, within the 26-week period ended June 28, 2025.

During this period, the U.S.

Dollar weakened 3.8% against the Euro, 5.6% against the Polish Zloty, and strengthened 1.1% against the Taiwan Dollar, resulting in gains of $12.6 million, $3.2 million, and $6.0 million, respectively.

Dollar weakened 12.4% against the Euro, 9.0% against the British Pound Sterling, and 12.8% against the Polish Zloty, resulting in gains of $49.1 million, $4.4 million, and $3.6 million, respectively, while the U.S.

Dollar weakened 12.8% against the Taiwan Dollar, resulting in a loss of $61.6 million.

The remaining net currency gain of $5.7 million was related to the impacts of other currencies, each of which was individually immaterial.

Income Tax Provision

The Company recorded income tax expense of $67.5 million in the 13-week period ended March 28, 2026, compared to income tax expense of $56.3 million in the 13-week period ended March 29, 2025.

The effective tax rate was 14.3% in the first quarter of 2026, which is comparable to 14.5% in the first quarter of 2025.

As a result of the above, net income for the 13-week period ended March 28, 2026 was $405.1 million compared to $332.8 million for the 13-week period ended March 29, 2025, an increase of $72.3 million.

The Company recorded income tax expense of $176.6 million in the first half of 2026, compared to income tax expense of $135.7 million in the first half of 2025.

The effective tax rate was 15.7% in the first half of 2026, compared to 15.6% in the first half of 2025 .

The increase in effective tax rate between comparative periods was primarily due to changes in income mix by jurisdiction.

As a result of the above, net income for the 26-week period ended June 27, 2026 was $947.0 million compared to $733.6 million for the 26-week period ended June 28, 2025, an increase of $213.4 million.

Liquidity and Capital Resources

We primarily use cash flow from operations, and expect that future cash requirements may be used, to fund our capital expenditures, support our working capital requirements, pay dividends, fund share repurchases, and fund strategic acquisitions.

We primarily use, and expect to use, cash flow from operations to fund our capital expenditures, support our working capital requirements, pay dividends, fund share repurchases, and fund strategic acquisitions.

We believe that our existing cash balances and cash flow from operations will be sufficient to meet our short- and long-term projected working capital needs, capital expenditures, and other cash requirements.

Cash, Cash Equivalents, and Marketable Securities

As of March 28, 2026, we had approximately $4.3 billion of cash, cash equivalents and marketable securities.

As of June 27, 2026, we had approximately $4.4 billion of cash, cash equivalents and marketable securities.

Management invests idle or surplus cash in accordance with the Company's investment policy, which has been approved by the Company’s Board of Directors.

The investment policy’s primary objectives are to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk.

Garmin’s average interest rate returns on cash and investments during the first quarter of 2026 and 2025 were 3.3% and 3.2%, respectively.

Garmin’s average interest rate returns on cash and investments during the first two quarters of 2026 and 2025 were 3.4% and 3.2%, respectively.

The fair value of our securities varies from period to period due to changes in interest rates, in the performance of the underlying collateral, and in the credit performance of the underlying issuer, among other factors.

See Note 4 – Marketable Securities in the Notes to Condensed Consolidated Financial Statements for additional information regarding marketable securities.

Cash provided by operating activities totaled $536.0 million for the first quarter of 2026, compared to $420.8 million for the first quarter of 2025.

The increase in cash received from customers primarily driven by higher net sales was partially offset by increases in cash paid for cost of goods sold and operating expenses, and an increase in cash paid for taxes in the first quarter of 2026 compared to the first quarter of 2025.

Cash used in investing activities totaled $252.4 million for the first quarter of 2026, compared to $132.6 million for the first quarter of 2025.

The increase was primarily due to an increase in net purchases of marketable securities and an increase in purchases of property and equipment in the first quarter of 2026 compared to the first quarter of 2025.

Cash used in financing activities totaled $260.1 million for the first quarter of 2026, compared to $204.8 million for the first quarter of 2025.

This increase was primarily due to higher cash dividend payments, an increase in the purchase of treasury shares related to equity awards, and higher purchases of treasury shares under share repurchase plans in the first quarter of 2026 compared to the first quarter of 2025.

Cash provided by operating activities totaled $939.5 million for the first half of 2026, compared to $594.0 million for the first half of 2025.

The increase in cash received from customers, primarily driven by higher net sales, was partially offset by increases in cash paid for cost of goods sold and operating expenses in the first half of 2026 compared to the first half of 2025.

Cash used in investing activities totaled $396.7 million for the first half of 2026, compared to $246.1 million for the first half of 2025.

This increase was primarily due to an increase in net purchases of marketable securities and an increase in purchases of property and equipment in the first half of 2026 compared to the first half of 2025.

Cash used in financing activities totaled $473.2 million for the first half of 2026, compared to $415.7 million for the first half of 2025.

This increase was primarily due to higher cash dividend payments in the first half of 2026 compared to the first half of 2025.

Operating Leases

1 unchanged sentence

Leased properties are typically used for office space, distribution, data centers, and retail.

As of March 28, 2026, the Company had fixed lease payment obligations of $242.6 million, with $48.5 million payable within 12 months.

As of June 27, 2026, the Company had fixed lease payment obligations of $258.8 million, with $48.9 million payable within 12 months.

Inventory Purchase Obligations

1 unchanged sentence

The Company’s inventory purchase obligations are primarily noncancelable commitments.

As of March 28, 2026, the Company had inventory purchase obligations of $1,116.1 million, with $862.5 million payable within 12 months.

As of June 27, 2026, the Company had inventory purchase obligations of $1,533.7 million, with $1,170.1 million payable within 12 months.

Other Purchase Obligations

The Company’s other purchase obligations primarily consist of noncancelable commitments for capital expenditures and other indirect purchases in connection with conducting our business.

As of March 28, 2026, the Company had other purchase obligations of $634.9 million, with $342.8 million payable within 12 months.

As of June 27, 2026, the Company had other purchase obligations of $540.4 million, with $277.9 million payable within 12 months.

Critical Accounting Policies and Estimates

5 unchanged sentences

For a description of the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements, refer to Note 1 – Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements in Part II, Item 8 and “Critical Accounting Policies and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2025.

There were no significant changes to the Company’s critical accounting policies and estimates in the 13-week period ended March 28, 2026.

There were no significant changes to the Company’s critical accounting policies and estimates in the 13-week and 26-week periods ended June 27, 2026.

Quantitative and Qualitat ive Disclosures About Market Risk

1 unchanged sentence

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 27, 2025.

There have been no material changes during the 13-week period ended March 28, 2026 in the risks described in our Annual Report on Form 10-K related to market sensitivity, inflation, foreign currency exchange rate risk and interest rate risk.

There have been no material changes during the 13-week and 26-week periods ended June 27, 2026 in the risks described in our Annual Report on Form 10-K related to market sensitivity, inflation, foreign currency exchange rate risk and interest rate risk.

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