What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-23 compared with 2025-02-20 · 155 added, 132 removed, 331 unchanged (46% of the section changed)

5 unchanged sentences

We develop, manufacture and sell high-performance fiber lasers, fiber amplifiers, diode lasers and laser-based systems that are used for diverse applications, primarily in materials processing, medical and advanced applications.

We also manufacture and sell complementary products used with our lasers including optical delivery cables, fiber couplers, beam switches, optical processing heads, in-line sensors and chillers.

manufacture and sell complementary products used with our lasers including optical delivery cables, fiber couplers, beam switches, optical processing heads, in-line sensors and chillers.

We sell our products globally to original equipment manufacturers ("OEMs"), system integrators and end users.

We market our products internationally, primarily through our

direct sales force.

We market our products internationally, primarily through our direct sales force.

Our major manufacturing facilities are located in the United States and Germany.

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Our cost of sales consists primarily of the cost of raw materials and components, direct labor expenses and manufacturing overhead.

We are vertically integrated and currently manufacture all critical components for our products as well as assemble finished products.

We are vertically integrated and currently manufacture all critical components for our products and assemble finished products.

We believe our vertical integration allows us to increase efficiencies, leverage our scale and lower our cost of sales.

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Research and development.

Our research and development expense consists primarily of compensation, development expenses related to the design of our products and certain components, the cost of materials and components to build prototype devices for testing, facilities costs and depreciation of equipment and facilities that have an alternative future use used for research and development purposes.

Costs related to product development are recorded as research and development expenses in the period in which they are incurred.

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In reading our financial statements, you should be aware of the following factors and trends that our management believes are important in understanding our financial performance.

Recently announced U.S.

Government Tariffs.

We continue to closely monitor changes in international trade relations and economic and monetary policies, including recently announced tariffs on imports into the U.S.

from China, Germany and other countries, as well as retaliatory tariffs in affected countries, which could adversely impact the global economy and our operating results.

On February 20, 2026, the U.S.

Supreme Court rendered a decision invalidating tariffs imposed under the International Emergency Economic Powers Act.

This decision introduces uncertainty regarding potential refund processes and future trade policy actions.

We continue to monitor developments around the Supreme Court’s decision and evaluate its potential impact on our future financial results and business.

The Supreme Court's ruling has no direct impact on the tariffs in place under Section 232, including tariffs on steel and aluminum.

The impact to gross margin related to higher tariffs for the year ended December 31, 2025 was approximately 120 basis points, respectively, as compared to the year ended December 31, 2024.

Sale of our Russian Operations.

On August 29, 2024, we completed the sale of our Russian subsidiary, Scientific and Technical Association “IRE-Polus”, pursuant to a share purchase agreement with a purchaser entity associated with Softline

Projects LLC and existing management of IRE-Polus for $51.1 million.

We recorded a loss on divestiture of $197.7 million for the quarter ended September 30, 2024, which was included in Net loss (gain) from divestiture and sale of assets in our Consolidated Statements of Operations.

We recorded a loss on divestiture of $197.7 million for the quarter ended September 30, 2024, which was included in Net loss from divestiture and sale of assets in our Consolidated Statements of Operations.

The loss included $59.3 million related to the carrying value of net assets of our Russian subsidiary that was in excess of net proceeds received on the sale.

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In response to the Russia-Ukraine conflict, the EU issued additional sanctions impacting commerce with Belarus on June 29, 2024, which restricted the supply of laser cabinets and other mechanical components from our factory in Belarus to our Germany operations after October 2, 2024.

As a result of the sanctions and their impact on our Belarus operations, we completed an impairment analysis of our Belarus assets during the third quarter of 2024 and recorded $26.6 million of impairment of long-lived asset in our Consolidated Statements of Operations.

At December 31, 2024, the remaining value of the long-lived assets in Belarus was $3.8 million, net working capital excluding cash was immaterial and cash was $4.7 million.

At December 31, 2025, the remaining value of the long-lived assets in Belarus was $4.4 million, net working capital deficit excluding cash was $0.8 million and cash on hand was $1.5 million.

The net asset value of our Belarus subsidiary has been reduced by $17.4 million due to the cumulative translation effect of the Belarusian ruble compared to the U.S.

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Our Board of Directors monitors and continues to assess risks associated with our Belarusian operations.

Supply Chain .

We experienced supply chain issues related to the Covid epidemic and related to sanctions that affected the flow of goods to and from our factories in Russia and Belarus.

These issues caused us to maintain higher levels of inventory in order to minimize the risk of disruption in production.

While these supply chain issues are no longer having a significant impact on our operations, we have experienced increases in our provisions for excess and obsolete inventory as a result of higher inventory levels.

In 2024, we recorded additional inventory provisions of $29.5 million attributed to items previously considered safety stock and items that became technologically obsolete.

Net sales decreased by 24% in 2024, decreased by 10% in 2023 and decreased 2% in 2022.

Net sales increased by 3% in 2025, decreased by 24% in 2024, and decreased by 10% in 2023.

Our growth rates are subject to several factors, many of which are not under our control.

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The secular shift to fiber laser technology in large materials processing applications, such as welding and cutting applications, had a positive effect on our sales trends in the past such that our sales trends were often better than other capital equipment manufacturers in both positive and negative economic cycles.

As the secular shift to fiber laser technology matures in such applications, our sales trends are more susceptible to economic cycles, which can broadly affect the demand for capital

equipment including machine tools and industrial lasers, and competition from other fiber laser manufacturers.

As the secular shift to fiber laser technology matures in such applications, our sales trends are more susceptible to economic cycles, which can broadly affect the demand for capital equipment including machine tools and industrial lasers, and competition from other fiber laser manufacturers.

Additionally, as our technology matures, we become subject to more competition which can affect sales trends.

1 unchanged sentence

Our total gross margin in any period can be significantly affected by a number of factors, including net sales, production volumes, competitive factors, product mix, and by other factors such as changes in foreign exchange rates relative to the U.S.

dollar, tariffs and shipping costs.

Many of these factors are not under our control.

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• Persistent inflation leading to increases in average manufacturing salaries as well as an increase in the purchase price of components including, but not limited to, electronic components and metal parts could negatively impact gross margin if we are not able to pass those increases on to customers by increasing the selling price of our products;

• Tariffs and counter-tariffs added, increased, reduced or eliminated in any period;

• Changes in relative exchange rates between currencies we receive when selling our products and currencies we use to pay our manufacturing expenses;

4 unchanged sentences

We invested $78.8 million, $98.5 million and $110.5 million in capital expenditures in 2025, 2024 and 2023, respectively.

Most of this investment relates to expansion of our manufacturing capacity and, to a lesser extent, research and development and sales-related facilities.

Most of this investment relates to the expansion of our manufacturing capacity and, to a lesser extent, research and development and sales-related facilities.

We received $0.9 million, $28.6 million and $31.2 million in proceeds from the sale of property, plant and equipment in 2025, 2024 and 2023, respectively.

2 unchanged sentences

If we expand capacity faster than is required by sales growth, gross margins could be negatively affected.

Gross margins generally decline if production volumes are lower as a result of a decrease in sales or a reduction in inventory because the absorption of fixed manufacturing costs will be reduced.

Gross margins generally decline if production volumes are lower as a result of a decrease in sales or a reduction in inventory because the absorption of fixed manufacturing costs would be reduced.

Gross margins generally improve when the opposite occurs.

5 unchanged sentences

Inventory provisions of $29.5 million in 2024 were attributed to items previously considered safety stock and items that became technologically obsolete.

Inventory provision and related charges of $74.1 million in 2022 were attributable to Russian operations.

Selling and general and administrative expenses.

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Negative industry or economic trends, including reduced estimates of future cash flows, disruptions to our business, slower growth rates, lack of growth in our relevant business units, differences in the estimated product acceptance rates, or market prices below the carrying value of long-lived assets evaluated for sale could lead to impairment charges against our long-lived assets, including goodwill and other intangible assets.

As noted above, we recorded $26.6 million impairment of long-lived assets included in Impairment of long-lived assets in our Consolidated Statements of Operations.

After impairment, the remaining carrying value of the long-lived assets in Belarus is $3.8 million.

As noted above, during the year ended December 31, 2024, we completed an impairment analysis of the assets located in Belarus as a result of new EU sanctions that limited our ability to supply laser cabinets and other mechanical components from that facility.

Based on this analysis, we recorded a $26.6 million impairment of long-lived assets included in Impairment of long-lived assets in our Consolidated Statements of Operations.

At December 31, 2025, the remaining carrying value of the long-lived assets in Belarus is $4.4 million.

Our valuation methodology for assessing impairment requires management to make significant judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance at many points during the analysis.

8 unchanged sentences

and Germany) also affects our costs and earnings.

Certain currencies experiencing significant exchange rate fluctuations like the euro, the Russian ruble, the Chinese yuan and Japanese yen have had and could have an additional significant impact on our sales, costs and earnings.

Certain currencies experiencing significant exchange rate fluctuations like the euro, the Chinese yuan, and the Japanese yen have had and could have an additional significant impact on our sales, costs and earnings.

Our ability to adjust the foreign currency selling prices of products in response to changes in exchange rates is limited and may not offset the impact of the changes in exchange rates on the translated value of sales or costs.

3 unchanged sentences

The EU effective dates were January 1, 2024, and January 1, 2025, for different aspects of the directive.

The impact of the Pillar Two Framework on our income tax provision in 2024 was not material.

We are continuing to evaluate the potential impact of the Pillar Two Framework on future periods, pending legislative adoption by additional individual countries.

The impact of the Pillar Two Framework on our income tax provision in 2024 and 2025 was not material.

On January 5, 2026, the OECD released a comprehensive package introducing a “side-by-side arrangement” in relation to Pillar Two.

Importantly, once implemented, this guidance is intended to prevent other jurisdictions from imposing tax on the U.S.

profits of American companies.

We will continue to monitor U.S.

and international legislative developments, including additional guidance related to the Side-by-Side package, in order to evaluate any potential impact on our operations

On July 4, 2025, the U.S.

1 "A bill to provide for reconciliation pursuant to Title II of H.

14", commonly referred to as the One Big Beautiful Bill Act ("OBBBA").

OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the 2017 Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and our effective tax rate in the future.

The legislation does not have a material impact on our financial statements.

Major customers.

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One of our customers accounted for 11% and 12% of our net accounts receivable as of December 31, 2025 and 2024, respectively.

We seek to add new customers and to

expand our relationships with existing customers.

We seek to add new customers and to expand our relationships with existing customers.

We anticipate that the composition of our significant customers will continue to change.

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Write-downs are recorded to reduce the carrying value to the net realizable value with respect to any part with costs in excess of current market value.

In the fourth quarter of 2022, we performed a review of the inventory in Russia in light of new sanctions which restricted our Russian factory's ability to supply components and finished goods to other IPG locations.

We recorded $74.1 million of additional inventory provision and related charges as a result of that review in 2022.

In the third quarter of 2024, we recorded $29.5 million of additional inventory provision that was attributed to items previously considered safety stock and items that became technologically obsolete.

Judgments and Uncertainties:

Estimating demand and current market values is inherently difficult, particularly given that we make highly specialized components and products.

Estimating demand and net realizable value is inherently difficult, particularly given that we make highly specialized components and products.

We determine the valuation of excess and obsolete inventory by making our best estimate considering the current quantities of inventory on hand and our forecast of the need for this inventory to support future sales of our products.

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Because our calculation of slow-moving, excess or obsolete inventory is based on historical and estimated future use of inventory items, the calculation is affected by sales trends.

In 2025, we recorded an inventory provision of $30.1 million to reflect changes in our estimates of future usage and recoverability of inventory items.

In 2024, we recorded inventory provision of $29.5 million for items previously considered safety stock and items that became technologically obsolete.

In 2023, as sales decreased the inventory provision related to slow-moving, excess or obsolete inventory increased.

In 2022, we recorded inventory provision and related charges of $74.1 million as a

result of the review of the inventory in Russia.

For the rest of our operations, as safety stock increased excess and obsolete inventory reserves increased during 2022.

In 2023, as sales decreased from prior year, the inventory provision related to slow-moving, excess or obsolete inventory increased.

Long-lived Asset Impairment.

Long-lived assets including definite-lived intangible assets are amortized on a straight-line basis over the estimated useful life.

Long-lived assets including definite-lived intangible assets are depreciated or amortized on a straight-line basis over the estimated useful life.

We review these assets for impairment when conditions exist that indicate the carrying amount of the assets may not be recoverable.

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If an impairment is determined to exist, the loss is calculated based on estimated fair value based on a probability-weighted average of valuations using the discounted cash flow method under the income approach.

We recorded long-lived asset impairment charge of $27.0 million, $1.2 million, and $79.9 million in 2024, 2023 and 2022, respectively.

Impairment charges in 2022 and 2024 primarily related to the impairment of our Russian and Belarus long-lived assets, respectively, as a result of new sanctions that impacted our business there.

We recorded long-lived asset impairment charges of $27.0 million, and $1.2 million in 2024 and 2023, respectively.

Impairment charges in 2024 primarily related to the impairment of our Belarus long-lived assets as a result of new sanctions that impacted our business there.

The 2023 impairment related to the right‑of‑use asset for a leased building associated with our Submarine Network Division that was previously divested.

There was no impairment during the year ended December 31, 2025.

Judgments and Uncertainties:

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Significant judgment is required in determining the pricing of inter-company transactions, our annual tax expense and in evaluating our tax positions in the various jurisdictions in which we operate.

As we continue to expand globally, there is a risk that, due to complexity within and diversity among the various jurisdictions in which we do business, a governmental agency may disagree with the manner in which we have computed our taxes.

As we continue to expand globally, there is a risk that, due to complexity within

and diversity among the various jurisdictions in which we do business, a governmental agency may disagree with the manner in which we have computed our taxes.

Additionally, due to the lack of uniformity among all of the foreign and domestic taxing authorities, there may be situations where the tax treatment of an item in one jurisdiction is different from the tax treatment in another jurisdiction or that the transaction causes a tax liability to arise in another jurisdiction.

1 unchanged sentence

Where it is more likely than not that some portion of the deferred tax assets will not be realized, we record a valuation allowance against the deferred tax assets.

The decision to establish a valuation allowance or reverse it is based on management’s judgment based on the weight of available evidence including forecasts of future taxable income and the future reversal of existing taxable temporary differences.

The decision to establish a valuation allowance or reverse it is based on management’s judgment, which considers the weight of available evidence, including forecasts of future taxable income and the future reversal of existing taxable temporary differences.

Sensitivity of Estimate to Change:

We provide reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues.

Reserves recorded are based on a determination of tax benefits claimed in our tax filings and whether these positions are more likely than not to be realized following the resolution of any potential tax audits related to the tax benefit, assuming that the matter in question will be reviewed by the tax authorities.

Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense.

Potential interest and penalties a ssociated with such uncertain tax positions are recorded as a component of income tax expense.

As of December 31, 2025, we had $15.1 million of unrecognized tax benefits, excluding interest and penalties, recorded in other long-term liabilities and deferred income taxes on our Consolidated Balance Sheets.

This tax liability increased by $0.2 million for tax positions taken in the current year offset by reductions of $3.4 million for changes in prior period positions.

This tax liability increased by $0.2 million for tax positions taken in the current year and $1.4 million for changes in prior period positions.

Results of Operations

10 unchanged sentences

General and administrative 143,140 14.3 124,313 12.7 125,749 9.7

Net loss (gain) from divestitures and sale of assets 190,201 19.5 — — (31,846) (2.2)

Net loss from divestitures and sale of assets

— — 190,201 19.5 — —

Impairment of long-lived assets — — 27,006 2.7 1,237 0.1

3 unchanged sentences

Total operating expenses 368,359 36.7 546,409 55.9 309,725 24.1

Operating (loss) income (208,254) (21.3) 231,973 18.0 169,500 11.8

Operating income (loss)

13,104 1.3 (208,254) (21.3) 231,973 18.0

Interest income, net 29,857 3.0 45,467 4.7 41,735 3.2

Other income, net 2,135 0.2 899 0.1 1,167 0.1

(Loss) income before provision for income taxes (161,888) (16.5) 274,875 21.3 183,351 12.8

Income (loss) before provision for income taxes

45,096 4.5 (161,888) (16.5) 274,875 21.3

Provision for income taxes 14,000 1.4 19,638 2.0 55,997 4.3

Net (loss) income (181,526) (18.5) 218,878 17.0 110,762 7.7

net income attributable to non-controlling interest — — — — 853 0.1

Net (loss) income attributable to IPG Photonics Corporation common stockholders $ (181,526) (18.5) % $ 218,878 17.0 % $ 109,909 7.6 %

Net (loss) income attributable to IPG Photonics Corporation per common share:

Net income (loss)

31,096 3.1 % $ (181,526) (18.5) % $ 218,878 17.0 %

Net income (loss) per common share:

Basic $ 0.73 $ (4.09) $ 4.64

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Comparison of Year Ended December 31, 2025 to Year Ended December 31, 2024

Net sales decreased by $310.3 million, or 24.1%, to $977.1 million in 2024 from $1,287.4 million in 2023.

Net sales increased by $26.7 million, or 2.7%, to $1,003.8 million in 2025 from $977.1 million in 2024.

The table below sets forth sales by application:

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$ 1,003,777 100.0 % $ 977,134 100.0 % $ 26,643 2.7 %

Materials Processing

Sales for materials processing applications decreased primarily due to lower sales of high power CW lasers, pulsed lasers, and other laser products and services.

• High power CW laser sales decreased due to lower sales for cutting and welding applications, and were primarily impacted by softer industrial demand and a decrease in e-mobility investments.

Pulsed laser sales decreased due to lower demand in foil cutting and micro-machining applications.

Other Applications

Sales from other applications decreased primarily due to decreased demand for lasers used in medical procedures.

Our net sales were derived from customers in the following geographic regions:

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Other Europe 138,543 13.8 % 197,152 20.1 % (58,609) (29.7) %

Total Europe (2)

243,703 24.3 % 284,952 29.1 % (41,249) (14.5) %

China 291,905 29.1 % 244,996 25.1 % 46,909 19.1 %

1 unchanged sentence

Other Asia 121,805 12.1 % 113,232 11.6 % 8,573 7.6 %

480,079 47.8 % 420,580 43.1 % 59,499 14.1 %

Rest of World 12,812 1.3 % 12,714 1.3 % 98 0.8 %

1 unchanged sentence

(1) The substantial majority of sales in North America are to customers in the United States.

(2) Revenue in Europe declined year over year primarily due to lower sales in cutting and welding applications and the impact of the divestiture of our Russian operations, partially offset by increased sales in cleaning applications, driven largely by the cleanLASER acquisition, as well as increased sales in additive manufacturing.

Materials processing sales accounted for 85.7% of total revenue and increased 0.3% year over year, as a result of increased sales in cleaning, mainly due to the cleanLASER acquisition, additive manufacturing, micromachining, drilling, and annealing, partially offset by decreased sales in cutting, service and parts, and other material processing applications.

Other applications sales increased 19.9% year over year driven by higher revenue in advanced applications and medical procedures.

Cost of sales and gross margin.

Cost of sales decreased by $16.7 million, or 2.6%, to $622.3 million in 2025 from $639.0 million in 2024.

Our gross margin decreased to 34.6% in 2024 from 42.1% in 2023.

Gross margin decreased mainly due to increased provisions for excess and obsolete inventory, specifically additional inventory provisions of $29.5 million attributed to items previously considered safety stock and items that became technologically obsolete.

In addition to provisions for inventory reserves, gross margin declined due to an increase in unabsorbed manufacturing costs, partially offset by a decrease in cost of product sold from inventory and shipping costs and tariffs, as a percentage of sales.

Expenses related to provisions for excess or obsolete inventory and other valuation adjustments increased by $37.0 million to $82.5 million, or

8.4% of sales, for the year ended December 31, 2024, as compared to $45.5 million, or 3.5% of sales, for the year ended December 31, 2023.

Our gross margin increased to 38.0% in 2025 from 34.6% in 2024.

The prior year costs of sales included additional inventory provisions of $29.5 million attributed to items previously considered safety stock and items that became technologically obsolete.

Additionally, the increase in gross margin was due to a decrease in unabsorbed manufacturing costs of $20.9 million, partially offset by an increase in cost of products sold of $4.3 million, primarily as a result of higher product costs due to product and geographic mix, and import duties driven by tariffs, partially offset by lower inventory provisions.

Expenses related to provisions for excess or obsolete inventory and other valuation adjustments decreased by $52.4 million to $30.1 million, or 3.0% of sales, for the year ended December 31, 2025, as compared to $82.5 million, or 8.4% of sales, for the year ended December 31, 2024.

Sales and marketing expense.

Sales and marketing expense increased by $8.3 million, or 9.3%, to $97.9 million in 2025 from $89.6 million in 2024.

This change was primarily a result of an increase of $3.5 million in personnel and related costs and $2.3 million in premises expense, partially offset by $2.2 million in lower depreciation and amortization expense.

This change was primarily a result of an increase of $5.8 million in personnel and related costs, reflecting higher performance-based compensation associated with improved financials results.

In addition, the increase in sales and marketing expense was also due to an increase of $3.2 million in amortization expense, primarily related to cleanLASER, and an increase of $0.5 million in trade fairs and exhibits expense, partially offset by a decrease of $1.2 million in premises expense.

As a percentage of sales, sales and marketing expense was 9.7% and 9.2% of sales in 2025 and 2024, respectively.

1 unchanged sentence

Research and development expense increased by $7.6 million, or 6.9%, to $117.4 million in 2025 from $109.8 million in 2024.

This change was primarily a result of an increase of $8.3 million in personnel and related costs, an increase of $5.8 million in premises expense, partially offset by a decrease of $3.6 million in materials and other R&D expense.

This change was primarily a result of an increase of $5.5 million in personnel and related costs, reflecting higher performance-based compensation associated with improved financials results.

In addition, the increase in research and development expense was also due to an increase of $3.3 million in consultant fees, and an increase of $1.4 million in materials expense, partially offset by a decrease of $0.9 million in premises expense, a decrease of $0.7 million in lease expense, a decrease of $0.6 million in other R&D expenses, and an increase of $0.4 million in grant income.

As a percentage of sales, research and development expense increased to 11.7% in 2025 from 11.2% in 2024.

We expect to continue to invest in research and development efforts for new and continuing products.

We expect to continue investing in research and development efforts to support new product initiatives and enhancements to existing products, including those targeted for medical, micromachining, and advanced applications.

General and administrative expense.

General and administrative expense decreased by $1.4 million, or 1.1%, to $124.3 million in 2024 from $125.7 million in 2023.

This change was primarily a result of a decrease of $3.8 million in personnel and related costs, partially offset by an increase of $1.0 million in legal, $0.8 million in information systems, and $0.6 million in accounting expense.

General and administrative expense increased by $18.8 million, or 15.1%, to $143.1 million in 2025 from $124.3 million in 2024.

This change was primarily a result of an increase of $14.5 million in personnel and related costs, reflecting higher performance-based compensation associated with improved financial results and increased compensation expense from the addition of new leadership positions.

In addition, the increase in general and administrative expense was also due to an increase of $6.9 million in acquisition and integration charges, an increase of $1.2 million in information systems expense, an increase of $0.6 million in accounting expense, and an increase of $0.5 million in travel expense, partially offset by a decrease of $1.4 million in other G&A expense, a decrease of $1.2 million in bad debt expense, a decrease of $1.0 million in premises expense, a decrease of $0.6 million in insurance expense, a decrease of $0.6 million in legal expense, and a decrease of $0.6 million in consultant fees.

As a percentage of sales, general and administrative expense increased to 14.3% in 2025 from 12.7% in 2024.

Effect of exchange rates on sales, gross margin and operating expenses.

We estimate that if exchange rates had been the same as one year ago, sales in 2024 would have been $15.6 million higher, gross margin would have been $9.2 million higher and sales and marketing, research and development and general and administrative expenses would have been $3.8 million higher.

These estimates assume constant exchange rates between fiscal year 2024 and fiscal year 2023 and are calculated using the average exchange rates for the twelve-month period ended December 31, 2023 for the respective currencies, which were US$1=Euro 0.92, US$1=Japanese yen 141, US$1=Chinese yuan 7.08 and US$1=Russian ruble 85.

Net loss (gain) from divestiture and sale of assets.

We estimate that if exchange rates had been the same as one year ago, sales in 2025 would have been $8.1 million lower, gross margin would have been $1.5 million lower and sales and marketing, research and development and general and administrative expenses would have been $2.7 million lower.

These estimates assume constant exchange rates between fiscal year 2025 and fiscal year 2024 and are calculated using the average exchange rates for the twelve-month period ended December 31, 2024 for the respective currencies, which were US$1=euro 0.92, US$1=Japanese yen 151, and US$1=Chinese yuan 7.19.

Net loss from divestiture and sale of assets.

We incurred a net loss of $190.2 million in 2024 as compared to no loss or gain in 2025.

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Impairment of long-lived assets.

We recorded a non-cash long-lived asset impairment charge of $27.0 million in 2024 as compared to $1.2 million in 2023.

The impairment of long-lived assets in 2024 was primarily related to an impairment of the assets in Belarus of $26.6 million as a result of new EU sanctions that will limit our ability to supply laser cabinets and other mechanical components from our factory in Belarus.

The impairment of long-lived assets in 2023 was related to the right-of-use ("ROU") asset for a leased building associated with our Submarine Network Division business that was previously divested.

Attempts to sublease the space have been unsuccessful.

As of December 31, 2023, the ROU asset related to this lease has been reduced to zero.

During the during the year ended December 31, 2024, we completed an impairment analysis of the assets located in Belarus as a result of new EU sanctions that limited our ability to supply laser cabinets and other mechanical components from that facility.

Based on this analysis, we recorded $26.6 million of impairment of long-lived assets.

There was no impairment during the year ended December 31, 2025.

Restructuring charges (recoveries), net.

We recorded no restructuring charges nor recoveries in 2024 as compared to a net restructuring gain of $0.3 million in 2023 primarily related to the completion of our restructuring program at our Russian subsidiary.

We incurred $0.6 million in restructuring charges during the year ended December 31, 2025, related to an assessment and further oversight of our Belarusian operations.

There were no restructuring charges during the year ended December 31, 2024.

Loss (gain) on foreign exchange.

We incurred a foreign exchange loss of $5.5 million in 2024 as compared to a gain of $1.4 million in 2023.

The losses in 2024 was primarily attributable to depreciation of the Chinese yuan and Korean won, partially offset by the gain from depreciation of the Euro, as compared to the U.S.

We incurred a foreign exchange loss of $9.4 million in 2025 as compared to a loss of $5.5 million in 2024.

The loss in 2025 was primarily driven by unfavorable foreign currency movements relative to the U.S.

dollar, including appreciation of the euro, depreciation of the Chinese yuan at certain points during the year and depreciation of the Indian rupee.

These movements impacted the remeasurement and settlement of foreign currency-denominated monetary assets and liabilities.

Interest income, net.

Interest income, net was $29.9 million in 2025 compared to $45.5 million in 2024.

The change in interest income, net, was driven by an increase in yields on cash equivalents and short term investments as a result of higher market interest rates as compared to prior year rates.

The change in interest income, net was primarily due to a reduction in average cash and investment balances, lower weighted average interest rates across our investment portfolio and geographic mix in the current period as compared to the prior year.

Provision for income taxes.

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The decrease in tax expense was due primarily to a reduction in taxable income.

In 2025, discrete items resulted in a $6.0 million increase in tax primarily due to equity-based compensation deductions reflected in book income in excess of deductions allowed for tax purposes.

In 2024 we had tax expense on a loss before income due to the effect of discrete items.

Total discrete adjustments in 2024 increased tax expense by $46.0 million.

Discrete items include an increase in tax expense of $43.2 million related the loss on divestiture of Russian operations that had no tax benefit.

Discrete items include an increase in tax expense of $43.2 million related to the loss on divestiture of Russian operations that had no tax benefit.

Other discrete items for 2024 included a $3.2 million benefit related to a decrease in uncertain tax positions and the results of tax audits.

This benefit was offset by an increase in tax expense of $5.4 million for equity-based compensation deductions reflected in book income in excess of the deductions allowed for tax purposes.

Discrete adjustments in 2023 resulted in a $5.7 million decrease in tax expense, which includes (i) $4.3 million decrease in the valuation allowance primarily due to current year profits in our Russian subsidiary and

(ii) $3.5 million related to a decrease in uncertain tax positions and the results of tax audits.

These benefits were partly offset by an increase in tax expense of $1.8 million for equity-based compensation deductions reflected in book income in excess of the deductions allowed for tax purposes.

Net (loss) income attributed to IPG Photonics Corporation.

Net (loss) income attributable to IPG Photonics Corporation decreased by $400.4 million to a net loss of $181.5 million in 2024 from a net income of $218.9 million in 2023.

Net loss attributable to IPG Photonics Corporation as a percentage of our net sales decreased by 35.6% to (18.6)% in 2024 from 17.0% in 2023 due to the factors described above.

Net income (loss).

Net income (loss) increased by $212.6 million to a net income of $31.1 million in 2025 from a net loss of $181.5 million in 2024.

Net income (loss) as a percentage of our net sales increased by 21.6% to 3.1% in 2025 from (18.5)% in 2024 due to the factors described above.

Liquidity and Capital Resources

We believe that our existing cash and cash equivalents, short-term investments, our cash flows from operations and our existing lines of credit provide us with the financial flexibility to meet our liquidity and capital needs.

We expect to continue making investments in capital expenditures, assess acquisition opportunities, carry out research and development and investment in resources to strengthen our organization.

We believe that our existing cash and cash equivalents, short and long-term investments, our cash flows from operations and our existing lines of credit provide us with the financial flexibility to meet our liquidity and capital needs.

We expect to continue making investments in capital expenditures, evaluate acquisition opportunities, repurchase shares of our stock in accordance with our repurchase program, carry out research and development and invest in resources to strengthen our organization.

The extent and timing of such expenditures may vary from period to period.

Our future long-term capital requirements will depend on many factors including our level of sales, the impact of the economic environment on our growth, the timing and extent of spending to support development efforts, expansion of global sales and marketing activities, government regulation including trade sanctions, the timing and introductions of new products, the need to ensure access to adequate manufacturing capacity and the market acceptance of our current and future products.

Our future long-term capital requirements will depend on many factors including our level of sales, the impact of the economic environment on our growth, the timing and extent of spending to support development efforts, expansion of global sales and marketing activities, government regulation including trade sanctions and tariffs, the timing and introductions of new products, the need to ensure access to adequate manufacturing capacity and the continuing market acceptance of our products.

In the near term, we will incur capital expenditures related to the expansion of capacity outside of Russia and Belarus.

As of December 31, 2025, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

5 unchanged sentences

Unused credit lines and overdraft facilities 224,432 78,115

Working capital (excluding cash and cash equivalents and short-term investments) 295,784 522,312

Working capital (defined as current assets, excluding cash and cash equivalents and short-term investments, minus current liabilities)

350,075 295,784

Included in cash and cash equivalents is $1.5 million of cash located in Belarus, as of December 31, 2025.

Short-term investments at December 31, 2025 consist of liquid investments including commercial paper, corporate bonds, U.S.

Treasury and agency obligations, and term deposits with original maturities of greater than three months but less than one year.

Treasury and agency obligations, and term deposits with original maturities of greater than three months but less than one

See Note 3, "Fair Value Measurements" in the notes to the consolidated financial statements for further information about our short-term investments.

2 unchanged sentences

Revolving Line of Credit (1)

$75.0 million SOFR plus 0.9% to 1.6%, depending on our performance April 2025 Unsecured

Euro Credit Facility (Germany) (2)

Euro 5.0 million

($5.2 million) €STR rate plus 0.97% December 2028 Unsecured, guaranteed by parent company

$200.0 million SOFR plus 1.25% to 1.45%, depending on our performance June 2030 Unsecured

Other Lines of Credit (2)

$21.7 million Various Various Unsecured

Euro Credit Facilities (Germany) (3)

Euro 5.9 million ($6.9 million)

Various Various Unsecured, guaranteed by parent company

Euro Facility (4)

Euro 1.5 million

($1.6 million) 4.3% September 2025 Common pool of assets of Italian subsidiary

(1) This facility is available to certain foreign subsidiaries in their respective local currencies.

At December 31, 2024, there were no amounts drawn on this line, however, there were $2.1 million of guarantees issued against the line which reduces total availability.

(2) This facility is available to certain foreign subsidiaries in their respective local currencies.

At December 31, 2024, there were no amounts drawn on this line, however, there were $1.5 million of guarantees issued against the line which reduces total availability.

(3) At December 31, 2024, there were no drawings.

This facility renews annually.

Our largest committed credit line is with Bank of America N.A.

in the amount of $75.0 million, which is not syndicated.

We are required to meet certain financial covenants associated with our U.S.

revolving line of credit.

These covenants, tested quarterly, include an interest coverage ratio and a funded debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio.

The interest coverage covenant requires that we maintain a trailing twelve-month ratio of EBITDA to interest on all obligations that is at least 3.0:1.0.

The funded debt to EBITDA covenant requires that the sum of all indebtedness for borrowed money on a consolidated basis be less than three times our trailing twelve months EBITDA.

Funded debt is decreased by our cash and available marketable securities not classified as long-term investments in the U.S.

in excess of $50 million up to a maximum of $500 million.

We were in compliance with all such financial covenants as of and for the three months ended December 31, 2024.

($1.8 million)

3M EURIBOR plus 1.25% (5)

Common pool of assets of Italian subsidiary

(1) At December 31, 2025, there were no drawings and no guarantees issued.

(2) Other lines of credit available to certain foreign subsidiaries in U.S.

dollars and their respective local currencies.

At December 31, 2025, there was $1.1 million drawn on these lines;

and there were $1.8 million of guarantees issued against the lines which reduces total availability.

(3) The facilities are available to certain foreign subsidiaries in their respective local currencies.

At December 31, 2025, there were no amounts drawn on this line;

however, there were $3.1 million of guarantees issued against the lines which reduces total availability.

(4) At December 31, 2025, there were no drawings and no guarantees issued.

(5) The facility does not have a stated maturity date.

The interest rate in effect as of December 31, 2025 is fixed through September 2026.

After that date, the interest rate may be renegotiated and availability may be terminated in accordance with the terms of the facility.

At December 31, 2025, our committed credit line is with Bank of America N.A.

in the amount of $200 million.

Under the credit agreement, we are required to meet certain financial covenants, which are tested quarterly and include an interest coverage ratio and a net leverage ratio.

The interest coverage covenant requires we maintain a trailing twelve-month ratio of consolidated EBITDA to consolidated interest expense on all obligations that is at least 3.0 times.

The net leverage covenant requires we maintain a trailing twelve-month ratio, which is the sum of all indebtedness for borrowed money on a consolidated basis, less cash and available marketable securities not classified as long-term investments in the U.S.

in excess of $50 million up to a maximum of $500 million, to consolidated EBITDA that is less than 3.0 times.

We were in compliance with the financial covenants as of December 31, 2025.

In addition to the financial covenants, the credit facility includes additional customary events of default, including non-payment of principal, interest or fees, violation of covenants, cross default to certain other indebtedness, invalidity of any loan document, material judgments, bankruptcy and insolvency events and change of control, subject, in certain instances, to cure periods.

Upon the occurrence of an event of default, the lenders may elect to declare amounts outstanding under the Credit Agreement immediately due and payable.

The financial covenants in our loan documents may cause us to not make or to delay investments and actions that we might otherwise undertake because of limits on capital expenditures and amounts that we can borrow or lease.

In the event that we do not comply with any one of these covenants, we would be in default under the loan agreement or loan agreements, which may result in acceleration of the debt, cross-defaults on other debt or a reduction in available liquidity, any of which could harm our results of operations and financial condition.

See Note 11, "Financing Arrangements" in the notes to the consolidated financial statements for further information about our facilities.

The following table summarizes our material cash commitments at December 31, 2025 and the effect such commitments are expected to have on our liquidity and cash flows in future periods.

We intend to use our existing cash, cash equivalents and short term investments as well as cash generated from operations as sources of funds for these material commitments.

We intend to use our existing cash, cash equivalents and investments as well as cash generated from operations as sources of funds for these material commitments.

Payments Due in

10 unchanged sentences

Cash provided by operating activities $ 75,344 $ 247,896

Cash provided by (used in) investing activities 208,732 (237,554)

Cash (used in) provided by investing activities

(265,230) 208,732

Cash used in financing activities (54,192) (339,621)

Operating activities.

Net cash provided by operating activities decreased by $48.1 million to $247.9 million in 2024 from $296.0 million in 2023 primarily due to a decrease in net income after adding back non-cash expenses, partially offset by an increase in cash provided by working capital.

Net cash provided by operating activities decreased by $172.6 million to $75.3 million in 2025 from $247.9 million in 2024 primarily due to a decrease in net income after adding back non-cash expenses and an increase in cash used by working capital.

Our largest working capital items are inventory and accounts receivable.

Items such as accounts payable to third parties, prepaid expenses and other current assets and accrued expenses and other liabilities are not as significant as our working capital investment in accounts receivable and inventory because of the amount of value added within IPG due to our vertically integrated structure.

Items such as accounts payable to third parties, prepaid expenses and other current assets and accrued expenses and other current liabilities are not as significant as our working capital investment in accounts receivable and inventory because of the amount of value added within IPG due to our vertically integrated structure.

Accruals and payables for personnel costs including bonuses and income and other taxes payable are largely dependent on the timing of payments for those items.

The decrease in cash flow from operating activities in 2025 primarily resulted from:

• a decrease in cash provided by net income after adjusting for non-cash operating activities, mainly due to lower sales;

• an increase in cash used by income and other taxes payable due to the timing of estimated tax payments made and refunds received from filing tax returns, an installment due on the transition tax liability from the Tax Reform Act of 2017, and excise tax paid on our stock repurchase program.

• an increase in cash used by inventory as we manufactured more in 2025 compared to 2024 when we reduced our investments in inventory;

• an increase in cash used by accounts receivable due to higher sales at the end of 2025 not yet collected as compared to 2024;

• an increase in cash used by income and other taxes payable due to the timing of estimated tax payments made;

• an increase in cash used by prepaid expenses and other assets due to timing of bank acceptance drafts and interest received.

The decrease in cash provided by operating activities were partially offset by:

• an increase in cash provided by accounts receivable due to the timing of collections and lower sales;

• an increase in cash provided by inventory as supply chain disruptions moderated requiring less investment in safety stock and due to a targeted plan to reduce inventory levels;

• an increase in cash provided by the timing of payments made for accounts payable and prepayments;

• a decrease in cash used by accrued expenses from lower payouts related to accrued compensation and bonuses.

• an increase in cash provided by accrued expenses and other current liabilities due to timing of payments for accrued personnel costs, increase in cash provided by customer deposits, and an increase in billings in excess of cost and estimated earnings on customized systems under contract, partially offset by an increase in lease payments and other activities;

• an increase in cash provided by accounts payable due to timing of payments.

Investing activities.

Net cash provided by investing activities was $208.7 million in 2024 as compared to cash used in investing activities of $237.6 million in 2023.

The cash provided by investing activities in 2024 primarily related to $370.3 million of net proceeds of short-term investments and $28.6 million of proceeds from the sale of property, plant and equipment, partially offset by $98.5 million of cash used for property, plant and equipment, $66.7 million of cash used for the acquisition of cleanLASER and $25.3 million of net cash outflow from the divestiture of our Russian operation.

Net cash used in investing activities was $265.2 million in 2025 as compared to cash provided by investing activities of $208.7 million in 2024.

The cash used in investing activities in 2025 primarily related to $187.9 million of net purchases of investments and $78.8 million of cash used for property, plant and equipment, partially offset by $0.9 million of proceeds from the sale of property, plant and equipment, and a $0.5 million inflow from the final net working capital settlement in connection with the cleanLASER acquisition.

The cash provided by investing activities in 2024 primarily related to $370.3 million of net proceeds from the net maturities of short-term investments and $28.6 million of proceeds from the sale of property, plant and equipment, partially offset by $98.5 million of cash used for property, plant and equipment, $66.7 million of cash used for the acquisition of cleanLASER and $25.3 million of net cash outflow from the divestiture of our Russian operation.

The cash proceeds from the sale of our Russian operation were lower than the cash and cash equivalents on hand, resulting in a cash outflow from divestiture.

The cash used in investing activities in 2023 primarily related to $158.9 million of net cash used for purchases of short-term investments, and $110.5 million of proceeds from the sale of property, plant and equipment, partially offset by $31.2 million of proceeds from the sale of property, plant and equipment.

In 2025, we expect to incur approximately $105.0 million to $115.0 million in capital expenditures.

Capital expenditures include investments in property, facilities and equipment to replace capacity in Russia or increase redundant capacity for critical components and upgrade or replace equipment at other facilities that is beyond its useful life.

The timing and extent of any capital expenditures in and between periods can have a significant effect on our cash flow.

Many of the capital expenditure projects that we undertake have long lead times and are difficult to cancel or defer to a later period.

We intend to finance our capital expenditures with existing cash, cash equivalents and short term investments as well as with cash generated from operations.

Financing activities.

Net cash used in financing activities was $54.2 million and $339.6 million in 2025 and 2024, respectively.

The cash used in financing activities in 2025 was primarily related to the purchase of $53.1 million of treasury stock and the net cash outflow from amounts disbursed in relation to shares withheld to cover employee income taxes due upon the vesting and release of restricted stock units of $1.1 million.

The cash used in financing activities in 2024 was primarily related to the purchase of $343.8 million of treasury stock, partially offset by net proceeds of $4.2 million from the exercise of stock options net of amounts disbursed in relation to shares withheld to cover employee income taxes due upon the vesting and release of restricted stock units and shares issued under our employee stock purchase plan.

The cash used in financing activities in 2023 was primarily related to the purchase of $223.5 million of treasury stock, $16.0 million of principal payments on our long-term borrowings;

partially offset by net proceeds of $3.1 million from the exercise of stock options net of amounts disbursed in relation to shares withheld to cover employee income taxes due upon the vesting and release of restricted stock units and shares issued under our employee stock purchase plan.

Recent Accounting Pronouncements

1 unchanged sentence

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

What changed 10-K

Item 7. Management’s Discussion and Analysis