IPG PHOTONICS CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Under the supervision of our Chief Executive Officer and our Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this Annual Report on Form 10-K (the "Evaluation Date") utilizing the Committee of Sponsoring Organizations of the Treadway Commission's Internal Control - Integrated Framework ("COSO") Updated Framework issued in 2013. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. 47 Table of Contents Management's Annual Report on Internal Control Over Financial Reporting Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and its subsidiaries. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of the Evaluation Date based on criteria established in COSO utilizing the Updated Framework issued in 2013. Based on this assessment, our management concluded that, as of the Evaluation Date, our internal control over financial reporting was effective. Our independent registered public accounting firm, Deloitte & Touche LLP, has audited our internal control over financial reporting, as stated in their report below. Changes in Internal Controls There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Limitations on Effectiveness of Controls Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that the disclosure controls and procedures or internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, errors and instances of fraud, if any, within the company have been or will be detected. 48 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of IPG Photonics Corporation Control over Financial Reporting We have audited the internal control over financial reporting of IPG Photonics Corporation and subsidiaries (the “Company”) as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2025, of the Company and our report dated February 23, 2026, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Boston, Massachusetts February 23, 2026 49 Table of Contents ITEM 9B. OTHER INFORMATION None of our directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," in each case as defined in Item 408 of Regulation S-K during the quarter ended December 31, 2025. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 50 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Certain of the information required hereunder is incorporated herein by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the SEC within 120 days after December 31, 2025. Pursuant to General Instruction G(3) of Form 10-K, additional information required hereunder relating to our executive officers is contained in Part I of this Annual Report on Form 10-K under the caption "Executive Officers of the Registrant." ITEM 11. EXECUTIVE COMPENSATION The information required hereunder is incorporated herein by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the SEC within 120 days after December 31, 2025. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required hereunder is incorporated herein by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the SEC within 120 days after December 31, 2025, with the exception of the information regarding securities authorized for issuance under our equity compensation plans, which is set forth below. Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, RSUs and PSUs (a) Weighted-Average Exercise Price of Outstanding Options, RSUs and PSUs (b) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) Equity Compensation Plans Approved by Security Holders (1) 1,824,226 $ 100.68 2,366,752 Equity Compensation Plans Not Approved by Security Holders — — Total 1,824,226 2,366,752 (1) As of December 31, 2025, there were 2,133,891 shares available for future issuance under the 2025 Incentive Compensation Plan and 232,861 shares available for future issuance under the employee stock purchase plan. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required hereunder is incorporated herein by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the SEC within 120 days after December 31, 2025. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required hereunder is incorporated herein by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the SEC within 120 days after December 31, 2025. 51 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES a. The following documents are filed as part of this Annual Report on Form 10-K: 1. Financial Statements. See Index to Financial Statements on page F-1. 2. Financial Statement Schedules. All schedules are omitted because they are not applicable or the required information is shown on the financial statements or notes thereto. 3. Exhibits. 52 Table of Contents Exhibit Number Description 3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on August 1, 2023) 3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed with the Commission on January 23, 2023) 4.1 Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 333-136521 filed with the Commission on November 14, 2006) 4.2 Description of the Registrant's Securities Registered under Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K filed with the Commission on February 24, 2020) 10.1 † 20 25 Incentive Compensation Plan effective May 20, 2025 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8 - K filed with the Commission on May 2 1, 202 5 ) 10.2 † IPG Photonics Corporation Non-Employee Director Compensation Plan , as amended and restated effective September 30, 2025 (incorporated by reference to Exhibit 10. 5 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 3, 2025 ) 10.3 † IPG Photonics Corporation 2008 Employee Stock Purchase Plan, as amended and restated effective December 1, 2018 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on June 3, 2019) 10.4 † IPG Photonics Corporation Senior Executive Annual Incentive Plan, as amended and restated September 30, 2025 (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed with the Commission on October 3, 2025) 10.5 Form of Indemnification Agreement between the Registrant and each of its Directors and Executive Officers (incorporated by reference to Exhibit 10.3 to Registrant's Current Report on Form 8-K/A filed with the Commission on February 22, 2017) 10.6 † Confidentiality, Non-Competition and Confirmatory Assignment Agreement dated May 4, 2021 between the Registrant and Dr. Eugene Scherbakov (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on August 4, 2021) 10.7 † Advisor Agreement dated April 25, 2024 between the Registrant and Dr. Eugene Scherbakov (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed with the Commission on April 30, 2024) 10.8 † Employment Agreement dated April 25, 2024 between the Registrant and Dr. Mark Gitin (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on April 30, 2024) 10.9 † Amendment to Employment Agreement between the Registrant and Dr. Mark Gitin, dated September 30, 2025 (incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed with the Commission on October 3, 2025) 10.10 † Form of Confidentiality, Non-Competition and Confirmatory Assignment Agreement between the Registrant and each of the named executive officers and certain other executive officers, (incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed with the Commission on October 15, 2013) 10.11 † Form of Letter amending Confidentiality, Non-Competition and Confirmatory Assignment Agreements between the Registrant and each of the named executive officers and certain other executive officers (incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K/A filed with the Commission on February 22, 2017) 10.12 † IPG Photonics Corporation Executive Severance Plan, amended and restated on September 30, 2025 (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on October 3, 2025) 10.13 † Form of Severance Plan Participation Agreements dated September 30, 2025 between the Registrant and each of Angelo Lopresti, Timothy Mammen, Trevor Ness and Dr. Igor Samartsev (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed with the Commission on October 3, 2025) 53 Table of Contents 10.14 † Services Agreement dated August 15, 2024 between the Registrant and Dr. Alexander Ovtchinnikov (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on August 16, 2024) 10.15 † Amendment to Services Agreement dated April 8 , 202 5 between the Registrant and Dr. Alexander Ovtchinnikov (incorporated by reference to Exhibit 10. 4 to the Registrant's Current Report on Form 8 - K filed with the Commission on April 1 1 , 202 5 ) 10.16 † M an aging Director's Service Contract dated July 1, 2025 between IPG Photonics GmbH & Co. KG and Dr. Paulus Bucher (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on July 8, 2025) 10.17 Credit Agreement dated as of June 24, 2025 among the Registrant and certain subsidiaries, and Bank of America, N.A. , in its capacity as Administrative Age nt, Swing Line Lender and L/C Issuer, the other L/C Issuers, and the other Lenders from time to time a party thereto (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on June 30 , 202 5 ) 10.18 T he Registration Rights Agreement by and between IQ EQ Trust Company, U.S., LLC, as trustee of each of The Val entin Gap ontsev Trust I, and The Valentin Gapontsev Trust III and the Registrant dated February 20, 2025 (incorporated by reference to Exhibit 10.1 to the Form S-3 Registration Statement filed with the Commission on February 20, 2025) 19 Insider Trading Policy 21.1* List of Subsidiaries 23.1* Consent of Deloitte & Touche LLP 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended 32.1** Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350 97 IPG Photonics Corporation Incentive Based Compensation Recoupment Policy 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase 101.DEF* Inline XBRL Taxonomy Definition Linkbase 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase 104* Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) * Filed herewith. ** Furnished herewith. The certification attached as Exhibit 32.1 that accompanies this Annual Report on Form 10-K is deemed furnished and not filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation. † Identifies management contract or compensatory plans or arrangements required to be filed as an exhibit. b. Exhibits. See (a)(3) above. c. Additional Financial Statement Schedules. All schedules are omitted because they are not applicable or the required information is shown on the financial statements or notes thereto. 54 Table of Contents ITEM 16. FORM 10-K SUMMARY None. 55 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 23, 2026. IPG P HOTONICS C ORPORATION By: /s/ Mark M. Gitin Mark M. Gitin Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark M. Gitin and Angelo P. Lopresti, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Mark M. Gitin Mark M. Gitin Chief Executive Officer and Director (Principal Executive Officer) February 23, 2026 /s/ Timothy P.V. Mammen Timothy P.V. Mammen Senior Vice President, Chief Financial Officer (Principal Financial Officer) February 23, 2026 /s/ Mary E. Buttarazzi Mary E. Buttarazzi Vice President, Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) February 23, 2026 /s/ Gregory Beecher Gregory Beecher Director February 23, 2026 /s/ Jeanmarie Desmond Jeanmarie Desmond Director February 23, 2026 /s/ Gregory Dougherty Gregory Dougherty Director February 23, 2026 /s/ Kolleen Kennedy Kolleen Kennedy Director February 23, 2026 /s/ Eric Meurice Eric Meurice Director February 23, 2026 /s/ Natalia Pavlova Natalia Pavlova Director February 23, 2026 /s/ John Peeler John Peeler Non-Executive Chair of the Board and Director February 23, 2026 /s/ Eugene Scherbakov Eugene Scherbakov Director February 23, 2026 /s/ Agnes Tang Agnes Tang Director February 23, 2026 56 Table of Contents INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID: 34 ) F- 2 Consolidated Balance Sheets as of December 31, 2025 and 2024 F- 4 Consolidated Statements of Operations for the Years Ended December 31, 2025, 2024, and 2023 F- 5 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2025, 2024, and 2023 F- 6 Consolidated Statements of Equity for the Years Ended December 31, 2025, 2024, and 2023 F- 7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024, and 2023 F- 8 Notes to Consolidated Financial Statements F- 9 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of IPG Photonics Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of IPG Photonics Corporation and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Excess or Obsolete Inventory Reserve: Refer to Notes 1 and 4 to the financial statements Critical Audit Matter Description The Company evaluates inventory each reporting period for excess quantities and obsolescence, recording inventory provisions when necessary based upon historic usage, estimated future usage and age. Once recorded, these inventory provisions are considered permanent adjustments to the carrying value of inventory. The Company recorded inventory provisions of $30.1 million for the year ended December 31, 2025. We identified the provision for excess quantities and obsolete inventory as a critical audit matter because of the significant estimates and assumptions management makes to quantify the inventory provisions to be recorded, including the determination of expected demand, especially when considering the vertically integrated nature of the Company's operations, as well as parts subject to technological obsolescence. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the policy and the reasonableness of assumptions including expected demand. F-2 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s judgments underlying the calculation of excess or obsolete inventory provisions, included the following, among others: • We tested the effectiveness of controls over inventory, including those over the estimation of inventory provisions for excess quantities and obsolescence. • We evaluated the reasonableness of the Company's excess and obsolete inventory provisions policy, considering historical experience and the underlying assumptions. • We tested the calculation of the excess and obsolete inventory provisions pursuant to the Company’s policy, including the completeness and accuracy of the data used in the calculation. • We evaluated management’s ability to estimate future demand by comparing actual inventory usage to estimates made in prior years. • We considered the existence of contradictory evidence based on consideration of internal communication to management and the board of directors, Company press releases, and analysts’ reports, as well as any changes within the business. /s/ Deloitte & Touche LLP Boston, Massachusetts February 23, 2026 We have served as the Company's auditor since 1999. F-3 Table of Contents IPG PHOTONICS CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 2025 2024 (In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $ 403,790 $ 620,040 Short-term investments 435,538 310,152 Accounts receivable, net 181,734 171,131 Inventories 313,416 284,780 Prepaid income taxes 43,196 17,592 Prepaid expenses and other current assets 45,766 27,300 Total current assets 1,423,440 1,430,995 Long-term investments 76,533 — Deferred income taxes, net 123,889 115,031 Goodwill 71,735 67,241 Intangible assets, net 49,933 55,376 Property, plant and equipment, net 637,516 588,375 Other assets 41,234 32,246 Total assets $ 2,424,280 $ 2,289,264 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 39,288 $ 35,385 Accrued expenses and other current liabilities 184,849 152,048 Income taxes payable 9,900 17,586 Total current liabilities 234,037 205,019 Other long-term liabilities and deferred income taxes 62,113 59,774 Total liabilities 296,150 264,793 Commitments and contingencies (Note 13) IPG Photonics Corporation equity: Common stock, $ 0.0001 par value, 175,000,000 shares authorized; 56,964,939 and 42,127,067 shares issued and outstanding, respectively, at December 31, 2025; 56,632,974 and 42,548,561 shares issued and outstanding, respectively, at December 31, 2024. 6 6 Treasury stock, at cost, 14,837,872 and 14,084,413 shares held at December 31, 2025 and December 31, 2024, respectively. ( 1,555,629 ) ( 1,505,321 ) Additional paid-in capital 1,077,172 1,035,285 Retained earnings 2,644,964 2,613,868 Accumulated other comprehensive loss ( 38,383 ) ( 119,367 ) Total stockholders' equity 2,128,130 2,024,471 Total liabilities and stockholders' equity $ 2,424,280 $ 2,289,264 See notes to consolidated financial statements. F-4 Table of Contents IPG PHOTONICS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2025 2024 2023 (In thousands, except per share data) Net sales $ 1,003,777 $ 977,134 $ 1,287,439 Cost of sales 622,314 638,979 745,741 Gross profit 381,463 338,155 541,698 Operating expenses: Sales and marketing 97,862 89,582 85,679 Research and development 117,402 109,783 98,704 General and administrative 143,140 124,313 125,749 Net loss from divestitures and sale of assets — 190,201 — Impairment of long-lived assets — 27,006 1,237 Restructuring charges (recoveries), net 601 — ( 288 ) Loss (gain) on foreign exchange 9,354 5,524 ( 1,356 ) Total operating expenses 368,359 546,409 309,725 Operating income (loss) 13,104 ( 208,254 ) 231,973 Other income, net: Interest income, net 29,857 45,467 41,735 Other income, net 2,135 899 1,167 Total other income 31,992 46,366 42,902 Income (loss) before provision for income taxes 45,096 ( 161,888 ) 274,875 Provision for income taxes 14,000 19,638 55,997 Net income (loss) 31,096 ( 181,526 ) 218,878 Net income (loss) per common share: Basic $ 0.73 $ ( 4.09 ) $ 4.64 Diluted $ 0.73 $ ( 4.09 ) $ 4.63 Weighted average shares outstanding: Basic 42,345 44,336 47,154 Diluted 42,650 44,336 47,320 See notes to consolidated financial statements. F-5 Table of Contents IPG PHOTONICS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, 2025 2024 2023 (In thousands) Net income (loss) $ 31,096 $ ( 181,526 ) $ 218,878 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments and other 80,984 93,163 ( 7,854 ) Unrealized loss on derivatives — — ( 152 ) Total other comprehensive income (loss) 80,984 93,163 ( 8,006 ) Comprehensive income (loss) $ 112,080 $ ( 88,363 ) $ 210,872 See notes to consolidated financial statements. F-6 Table of Contents IPG PHOTONICS CORPORATION CONSOLIDATED STATEMENTS OF EQUITY Year Ended December 31, Common Stock Treasury Stock Additional Paid In Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Total Stockholders' Equity (In thousands, except share data) Shares Amount Shares Amount Balance, January 1, 2023 48,138,257 $ 6 ( 7,879,415 ) $ ( 938,009 ) $ 951,371 $ 2,576,516 $ ( 204,524 ) $ 2,385,360 Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options 241,782 — — — ( 1,891 ) — — ( 1,891 ) Common stock issued under employee stock purchase plan 57,984 — — — 5,038 — — 5,038 Purchased common stock ( 2,117,352 ) — ( 2,117,352 ) ( 223,496 ) — — — ( 223,496 ) Stock-based compensation — — — — 39,502 — — 39,502 Net income — — — — — 218,878 — 218,878 Foreign currency translation adjustments and other — — — — — — ( 7,854 ) ( 7,854 ) Unrealized loss on derivatives, net of tax — — — — — — ( 152 ) ( 152 ) Balance, December 31, 2023 46,320,671 $ 6 ( 9,996,767 ) $ ( 1,161,505 ) $ 994,020 $ 2,795,394 $ ( 212,530 ) $ 2,415,385 Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options 241,475 — — — ( 728 ) — — ( 728 ) Common stock issued under employee stock purchase plan 74,061 — — — 4,923 — — 4,923 Purchased common stock ( 4,087,646 ) — ( 4,087,646 ) ( 343,816 ) — — — ( 343,816 ) Stock-based compensation — — — — 37,070 — — 37,070 Net loss — — — — — ( 181,526 ) — ( 181,526 ) Foreign currency translation adjustments and other — — — — — — 93,163 93,163 Balance, December 31, 2024 42,548,561 $ 6 ( 14,084,413 ) $ ( 1,505,321 ) $ 1,035,285 $ 2,613,868 $ ( 119,367 ) $ 2,024,471 Vesting of RSUs and PSUs, net of shares withheld for taxes, and exercise of stock options 245,713 — — — ( 6,184 ) — — ( 6,184 ) Common stock issued under employee stock purchase plan 86,252 — — — 5,124 — — 5,124 Purchased common stock ( 753,459 ) — ( 753,459 ) ( 50,308 ) — — — ( 50,308 ) Stock-based compensation — — — — 42,947 — — 42,947 Net income — — — — — 31,096 — 31,096 Foreign currency translation adjustments and other — — — — — — 80,984 80,984 Balance, December 31, 2025 42,127,067 $ 6 ( 14,837,872 ) $ ( 1,555,629 ) $ 1,077,172 $ 2,644,964 $ ( 38,383 ) $ 2,128,130 See notes to consolidated financial statements. F-7 Table of Contents IPG PHOTONICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2025 2024 2023 (In thousands) Cash flows from operating activities: Net income (loss) $ 31,096 $ ( 181,526 ) $ 218,878 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 66,854 61,443 69,621 Deferred income taxes ( 13,680 ) ( 25,660 ) ( 13,789 ) Stock-based compensation 42,947 37,070 39,502 Impairment of long-lived assets and restructuring (recoveries), net — 27,006 ( 486 ) Unrealized (gain) loss on foreign currency transactions ( 822 ) 1,161 ( 4,334 ) Net loss from divestitures and sales of assets — 190,201 — Provisions for inventory, warranty and bad debt 43,314 90,377 61,058 Amortization of premium/discount on investments ( 14,017 ) ( 17,657 ) ( 25,102 ) Other 4,969 3,962 5,194 Changes in assets and liabilities that (used) provided cash, net of acquisitions: Accounts receivable ( 4,761 ) 46,827 ( 10,395 ) Inventories ( 52,918 ) 47,725 1,823 Prepaid expenses and other current assets ( 11,050 ) 6,527 ( 2,025 ) Accounts payable 4,334 ( 1,526 ) ( 16,319 ) Accrued expenses and other current liabilities 10,267 ( 37,355 ) ( 44,693 ) Income and other taxes payable ( 31,189 ) ( 679 ) 17,053 Net cash provided by operating activities 75,344 247,896 295,986 Cash flows from investing activities: Purchases of and deposits on property, plant and equipment ( 78,798 ) ( 98,524 ) ( 110,483 ) Proceeds from sales of property, plant and equipment 922 28,578 31,241 Purchases of investments ( 943,323 ) ( 713,151 ) ( 1,232,863 ) Proceeds from maturities of investments 755,421 1,083,464 1,073,993 Acquisitions of businesses, net of cash acquired 505 ( 66,738 ) — Net cash outflow from divestiture — ( 25,324 ) — Other 43 427 558 Net cash (used in) provided by investing activities ( 265,230 ) 208,732 ( 237,554 ) Cash flows from financing activities: Principal payments on long-term borrowings — — ( 16,031 ) Payments for taxes related to net share settlement of equity awards less proceeds from issuance of common stock under employee stock option and purchase plans ( 1,060 ) 4,195 3,147 Purchase of treasury stock, at cost including excise tax ( 53,132 ) ( 343,816 ) ( 223,496 ) Net cash used in financing activities ( 54,192 ) ( 339,621 ) ( 236,380 ) Effect of changes in exchange rates on cash and cash equivalents 27,828 ( 11,641 ) ( 5,587 ) Net (decrease) increase in cash and cash equivalents ( 216,250 ) 105,366 ( 183,535 ) Cash and cash equivalents — Beginning of year 620,040 514,674 698,209 Cash and cash equivalents — End of year $ 403,790 $ 620,040 $ 514,674 Supplemental disclosure of cash flow information: Cash paid for interest $ 226 $ 277 $ 1,284 Cash paid for income taxes $ 57,008 $ 40,632 $ 62,916 Cash paid for excise tax on net share repurchases $ 3,113 $ 1,893 $ — Non-cash transactions: Demonstration units transferred from inventory to other assets $ 8,379 $ 6,720 $ 5,404 Inventory transferred to machinery and equipment $ 2,691 $ 3,158 $ 2,767 Additions to property, plant and equipment included in accounts payable $ 3,769 $ 5,971 $ 3,251 Leased assets obtained in exchange for new operating lease liabilities $ 7,504 $ 6,195 $ 4,457 Excise tax on net share repurchases accrued in period $ 289 $ 3,197 $ 1,809 See notes to consolidated financial statements. F-8 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business — IPG Photonics Corporation (the "Company" or "IPG") develops, manufactures and sells high-performance fiber lasers, fiber amplifiers, and diode lasers that are used for diverse applications, primarily in materials processing. The Company was incorporated as a Delaware corporation in December 1998. Its world headquarters is located in Marlborough, Massachusetts. It also has facilities and sales offices elsewhere in North and South America, Europe and Asia. Principles of Consolidation — The accompanying financial statements include the accounts of the Company and its majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Change in Accounting Estimates — In December 2024, we completed an assessment of the useful lives of our machinery and equipment. Based on the Company's historical usage patterns and experience with these assets, we determined that the estimated useful life for most machinery and equipment should be increased from seven to ten years for most assets based upon the Company's experience of historical usage. The change in estimate resulted in a decrease of depreciation expense reflected in the Company's Consolidated Statements of Operations. As a result of this change, Operating income and Net income increased approximately $ 3,700 and $ 2,800 for the year ended December 31, 2025, respectively, and diluted net income per common share increased approximately $ 0.07 for the year ended December 31, 2025. The impact was immaterial for the year ended December 31, 2024. Foreign Currency — The financial information for entities outside the United States is measured using local currencies as the functional currency. Assets and liabilities are translated into U.S. dollars at the exchange rate in effect on the respective balance sheet dates. Income and expenses are translated into U.S. dollars based on the average rate of exchange for the corresponding period. Exchange rate differences resulting from translation adjustments are accounted for directly as a component of accumulated other comprehensive (loss) income. Cash and Cash Equivalents and Investments — Cash and cash equivalents consist primarily of highly liquid investments, such as money market fund deposits, commercial paper, U.S. government and government agency notes, term deposits, and corporate bonds with maturities of three months or less at the date of purchase with insignificant interest rate risk. Short-term investments consist of liquid investments including commercial paper, corporate bonds, U.S. government and government agency notes and term deposits with original maturities of greater than three months but less than one year with insignificant interest rate risk. Long-term investments consist of liquid investments including corporate bonds and U.S. government and government agency notes with original maturities of greater than one year with insignificant interest rate risk. Fixed-term securities included in cash equivalents and investments are held-to-maturity and accounted for at amortized cost. Accounts Receivable and Allowance for Credit Losses — Accounts receivable include $ 32,158 and $ 26,361 of bank acceptance drafts at December 31, 2025 and 2024, respectively. Bank acceptance drafts are bank guarantees of payment on specified dates. The weighted average maturity of these bank acceptance drafts is approximately 106 days. The Company maintains an allowance for credit losses to provide for the estimated amount of accounts receivable that will not be collected. The allowance is based upon an estimate of expected credit losses over the life of outstanding receivables. The estimate involves an assessment of customer creditworthiness, historical payment experience, an assumption of future expected credit losses, and the age of outstanding receivables. F-9 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Activity related to the allowance for credit losses was as follows: 2025 2024 2023 Balance at January 1 $ 2,462 $ 1,763 $ 2,639 Provision for credit losses, net of recoveries 156 1,370 36 Uncollectible accounts written off ( 554 ) ( 588 ) ( 840 ) Foreign currency translation 125 ( 83 ) ( 72 ) Balance at December 31 $ 2,189 $ 2,462 $ 1,763 Inventories — Inventories are stated at the lower of cost and net realizable value on a first-in, first-out basis. Inventories include parts and components that may be specialized in nature and subject to obsolescence. The Company periodically reviews the quantities and carrying values of inventories to assess whether the inventories are recoverable. The costs associated with provisions for excess quantities, technological obsolescence, or scrap related to out of specification components are charged to cost of sales as incurred. Business Combination — The fair value of the consideration exchanged in a business combination is allocated to tangible assets and identifiable intangible assets acquired and liabilities assumed at acquisition date fair value. Goodwill is measured as the excess of the consideration transferred over the net fair value of identifiable assets acquired and liabilities assumed. The accounting for an acquisition involves a considerable amount of judgment and estimation. Cost, income, market or a combination of approaches may be used to establish the fair value of consideration exchanged, assets acquired, and liabilities assumed, depending on the nature of those items. The valuation approach is determined in accordance with generally accepted valuation methods. Key areas of estimation and judgment may include the selection of valuation approaches, cost of capital, market characteristics, cost structure, impacts of synergies, and estimates of terminal value, among other factors. The Company's estimates and assumptions used as part of the purchase price allocation process are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. Upon conclusion of the measurement period, or final determination of the value of the assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recorded to results of operations. Goodwill — Goodwill is the amount by which the cost of the acquired net assets in a business acquisition exceeded the fair values of the net identifiable assets on the date of purchase. Goodwill is assessed for impairment at least annually, on a reporting unit basis, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis. If the carrying value of a reporting unit exceeds its fair value, the implied fair value of goodwill is compared with the carrying value of goodwill. If the carrying value of goodwill exceeds the implied fair value, an impairment loss is recorded in an amount equal to that excess. The results of the goodwill assessments for the years ended December 31, 2025 and 2024 are discussed in Note 7, "Goodwill and Intangible Assets." Intangible Assets — Intangible assets result from the Company's various business acquisitions. Intangible assets are reported at cost, less accumulated amortization, and are amortized on a straight-line basis either over their estimated useful lives of one year to thirteen years or over the period the economic benefits of the intangible asset are consumed. Property, Plant and Equipment — Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is determined using the straight-line method based on the estimated useful lives of the related assets. In the case of leasehold improvements, the estimated useful lives of the related assets do not exceed the remaining terms of the corresponding leases. The following table presents the assigned economic useful lives of property, plant and equipment: Category Economic Useful Life Buildings 20 - 30 years Machinery and equipment 5 - 10 years Office furniture and fixtures 5 - 7 years Expenditures for repairs and maintenance are charged to operating expenses when they are incurred. F-10 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Long-Lived Assets — Long-lived assets, which consist primarily of property, plant and equipment, identifiable intangible assets and right-of-use ("ROU") assets, are reviewed by management for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When undiscounted expected future cash flows are less than the carrying value, an impairment loss is recorded equal to the amount by which the carrying value exceeds the fair value of assets. The impact of the long-lived assets impairment for the years ended December 31, 2025 and 2024 are discussed in Note 5, "Divestiture, Impairment of Long-lived Assets and Sale of Assets." Included in other long-term assets is certain demonstration equipment. The demonstration equipment is amortized over the respective estimated economic lives, generally 3 years. The carrying value of the demonstration equipment totaled $ 7,215 and $ 5,480 at December 31, 2025 and 2024, respectively. Amortization expense of demonstration equipment for the years ended December 31, 2025, 2024 and 2023, was $ 4,307 , $ 3,111 and $ 3,480 , respectively. Authorized Capital — The Company has authorized capital stock consisting of 175,000,000 shares of common stock, par value $ 0.0001 per share, and 5,000,000 shares of preferred stock, par value $ 0.0001 per share. There are no shares of preferred stock outstanding as of December 31, 2025. Revenue Recognition — Revenue is recognized when transfer of control to the customer occurs in an amount reflecting the consideration that the Company expects to be entitled. In order to achieve this core principle, the Company applies the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be contracts with a customer. As part of its consideration of the contract, the Company evaluates certain factors including the customer's ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is identified as a distinct performance obligation. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. As the Company's standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on its relative standalone selling price. The Company often receives orders with the customer's schedule of delivery dates for products that may extend across several reporting periods. The Company allocates the transaction price of the contract to each delivery based on the product standalone selling price. As scheduled delivery dates are generally within one year , under the optional exemption provided by ASC 606-10-50-14 revenues allocated to future shipments of partially completed contracts are not disclosed. As the Company is typically required to fulfill customer orders within a year, the Company’s backlog of orders is generally not in excess of one year for products to be delivered. As allowed under ASC 606 – Revenue Contracts with Customers, the Company has elected not to disclose the Company’s remaining performance obligations, which represent the costs associated with the completion of the manufacturing process of in-process equipment related to contracts that have an original duration of one year or less. Rights of return are not generally included in customer contracts. Returns are infrequent and are recorded as a reduction of revenue. In certain subsidiaries the Company provides sales commissions to sales representatives based on sales volume. The Company has determined that the incentive portion of its sales commissions qualify as contract costs. The Company has elected the practical expedient in ASC 340-40-25-4 to expense sales commissions when incurred as the amortization period of the asset that would otherwise have been recognized is one year or less. Revenue Recognition at a Point in Time — Revenues recognized at a point in time consist primarily of product, installation and service sales. The Company recognizes revenue for laser and spare part sales following the transfer of control of such products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Installation revenue is recognized upon completion of the installation service, which typically occurs within 90 days of delivery. When sales contracts contain multiple performance obligations, such as the shipment or delivery of products and installation, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices and recognizes the related revenue as control of each individual product or service is transferred to the customer, in satisfaction of the corresponding performance obligations. F-11 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Revenue Recognition over Time — The Company offers extended warranty agreements, which extend the standard warranty periods. Extended warranties are sold separately from products and represent a distinct performance obligation. Revenue related to the performance obligation for extended warranties is recognized over time as the customer simultaneously receives and consumes the benefits provided by the Company. The customer receives the assurance that the product will operate in accordance with agreed-upon specifications evenly during the extended warranty period regardless of whether they make a claim during that period, and therefore, revenue at time of sale is deferred and recognized over the time period of the extended warranty period. The Company enters into contracts to sell customized large scale materials processing systems through its subsidiary Genesis Systems Group, LLC, for which revenue is generally recognized over time, depending on the terms of the contract. Recognizing revenue over time for these contracts is based on the Company’s judgment that the customized large scale materials processing systems do not have an alternative use and the Company has an enforceable right to payment for performance completed to date. The determination of the revenue to be recognized in a given period for performance obligations over time is based on the input method. The Company generally uses the total cost-to-cost input method of progress because it best depicts the transfer of control to the customer that occurs as costs are incurred. Under the cost-to-cost method, the extent of progress towards completion is measured based on the proportion of costs incurred to date to the total estimated costs at completion of the performance obligation. Customer Deposits and Deferred Revenue — When the Company receives consideration from a customer or such consideration is unconditionally due prior to transferring goods or services under the terms of a sales contract, the Company records customer deposits or deferred revenue, which represent contract liabilities. The Company recognizes deferred revenue as net sales after control of the goods or services has been transferred to the customer and all revenue recognition criteria are met. Warranties — The Company typically provides one to five-year warranties on lasers and amplifiers. Warranties are limited and provide that the product meets specifications and is free from defects in materials and workmanship. Most of the Company's sales offices provide support to customers in their respective geographic areas. The Company estimates the warranty accrual considering past claims experience, the number of units still covered by warranty and the average life of the remaining warranty period. The warranty accrual has generally been sufficient to cover product warranty repair and replacement costs. Stock-based Compensation — The Company accounts for stock-based compensation expense using the fair value of the awards granted. The Company issues equity incentive awards in the form of time-based restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs"). The fair value for RSUs and performance-based PSUs are based on the closing share price of the Company's common stock on the date of grant. The final number of shares delivered upon vesting of PSUs is determined based on the achievement of specified performance targets such as financial metrics or the relative return of the Company's common stock compared to an index ("TSR PSUs"). The fair value of TSR PSUs is based on a Monte Carlo simulation model. The Company recognizes stock-based compensation as an expense on a straight-line basis, over the requisite service period. The Company accounts for forfeitures as they occur. The Company has an employee stock purchase plan ("ESPP") offered to its U.S. and German employees. The Company uses the Black-Scholes model to calculate the purchase date fair value of the shares issued under the employee stock purchase plan and recognize expense related to shares purchased ratably over the offering period. The description of the Company's stock-based compensation plans and the assumptions it uses to calculate the fair value of stock-based compensation is described in Note 14, "Stock-based Compensation." Advertising Expense — The cost of advertising is expensed as incurred. The Company conducts substantially all of its sales and marketing efforts through trade shows, professional and technical conferences, direct sales and the Company's website. The Company's advertising costs were not material for the periods presented. Research and Development — Research and development costs are expensed as incurred. Government Grants — The Company receives government grants related to certain research and development activities and capital investments. The Company accounts for government grants by analogy to International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance. Grants related to research and development F-12 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) activities are recognized as a reduction of the related research and development expenses when there is reasonable assurance that the grants will be received and that the Company has complied with the applicable conditions. Grants related to the acquisition or construction of property, plant and equipment are recorded as a reduction of the cost of the related asset and are recognized in earnings over the useful life of the asset through reduced depreciation expense. Restructuring — The Company records charges associated with approved restructuring plans to reorganize operations, to remove redundant headcount and infrastructure associated with business acquisitions or to improve the efficiency of business processes. Restructuring charges can include severance costs to eliminate a specific number of positions, infrastructure charges to vacate facilities and consolidate operations and contract cancellation costs. The Company records restructuring charges when they are probable and estimable. The Company accrues for severance and other employee separation costs under these plans when the plan is communicated to employees and an amount per employee can be reasonably estimated either by the communicated terms, or by legal requirements, if applicable. Income Taxes — Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and credit carryforwards. These differences are valued using enacted rates in effect when those differences are expected to reverse. Valuation allowances are provided against deferred tax assets that are not deemed to be recoverable. The Company recognizes tax positions that are more likely than not to be sustained upon examination by relevant tax authorities. The tax positions are measured at the greatest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement. The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. The reserves are based on a determination of whether a tax benefit claimed in its tax filings is 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. Concentration of Credit Risk — Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. The Company maintains substantially all of its cash and cash equivalents and short-term investments in various financial institutions, which it believes to be high-credit quality financial institutions. The Company grants credit to customers in the ordinary course of business and provides a reserve for potential credit losses. Such losses historically have been within management's expectations. One of the Company's customers accounted for 11 % and 12 % of the Company's net accounts receivable as of December 31, 2025 and 2024, respectively. The Company has historically depended on a few customers for a significant percentage of its annual net sales. The composition of this group can change from year to year. Net sales derived from the Company's five largest customers as a percentage of its annual net sales were 16 %, 13 % and 13 % in 2025, 2024 and 2023, respectively. Comprehensive Income (Loss) — Comprehensive income (loss) includes charges and credits to equity that are not the result of transactions with stockholders. Included within comprehensive income or loss is the cumulative foreign currency translation adjustment, and unrealized gains or losses on derivatives. These adjustments are accumulated within the Consolidated Statements of Comprehensive Income (Loss). F-13 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Total components of accumulated other comprehensive loss were as follows: Foreign currency translation adjustments and other Unrealized (loss) gain on derivatives, net of tax Total Balance, January 1, 2023 $ ( 204,676 ) $ 152 $ ( 204,524 ) Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments and other before reclassification, net of tax of $ 151 ( 7,854 ) — ( 7,854 ) Unrealized loss on derivatives, net of tax benefit of $ 46 — ( 152 ) ( 152 ) Total other comprehensive loss ( 7,854 ) ( 152 ) ( 8,006 ) Balance, December 31, 2023 $ ( 212,530 ) $ — $ ( 212,530 ) Other comprehensive income, net of tax: Foreign currency translation adjustments and other before reclassification, net of tax of $ 161 ( 43,507 ) — ( 43,507 ) Reclassification for foreign currency translation adjustments related to the divestiture of Russian operations to net loss, net of tax expense of $ 1,324 136,670 — 136,670 Total other comprehensive income 93,163 — 93,163 Balance, December 31, 2024 $ ( 119,367 ) $ — $ ( 119,367 ) Other comprehensive income, net of tax: Foreign currency translation adjustments and other before reclassification, net of tax of $ 195 80,984 — 80,984 Total other comprehensive income 80,984 — 80,984 Balance, December 31, 2025 $ ( 38,383 ) $ — $ ( 38,383 ) Derivative Instruments — The Company's primary market exposures are to interest rates and foreign exchange rates. From time to time the Company may use certain derivative financial instruments to help manage these exposures. The Company executes these instruments with financial institutions it judges to be credit-worthy. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company recognizes all derivative financial instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets. Earnings (Loss) Per Share — Basic net income (loss) per common share is computed by dividing net income attributable to common shareholders of the Company by the weighted-average number of common shares outstanding during the reporting period. Diluted net income per common share is computed similarly to basic net income per common share, except that it includes the potential dilution that could occur if dilutive securities were exercised. Information about potentially dilutive and antidilutive shares for the reporting period is provided in Note 18, "Net Income (Loss) Attributable to IPG Photonics Corporation Per Share." Leases — The Company determines if an arrangement is a lease at inception. Operating leases are included in other assets, accrued expenses and other current liabilities, and other long-term liabilities and deferred income taxes on the Company's Consolidated Balance Sheets. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company's leases do not provide an implicit rate, IPG uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The ROU assets include any lease payments made and initial direct costs incurred and exclude lease incentives. Lease terms may include options to extend or terminate the lease that are included in calculating the net present value of the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. F-14 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Self-Insurance Reserves — The Company is self-insured for health insurance and dental insurance claims in the United States. The self-insurance liability is undiscounted and is based on claims filed and an actuarial estimate of claims not reported. These liabilities are included in accrued expenses and other current liabilities on the Company's Consolidated Balance Sheets. To limit the Company’s potential liabilities for these risks, the Company purchases insurance from a third party that provides stop-loss protection for medical costs in the United States that exceed $ 225 per person per annum. Recent Accounting Pronouncements Adopted Pronouncements — In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires an entity on an annual basis to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The guidance also requires an entity to disclose on an annual basis information about income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company has adopted ASU 2023-09 in 2025. Refer to Note 16, "Income Taxes." Pronouncements Currently Under Evaluation — In November 2024, the FASB issued ASU No. 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Aggregation Disclosures (Subtopic 220-40)" ("ASU 2024-03"), which requires more detailed disaggregated disclosure of income statement expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is evaluating the impact of this standard on its Consolidated Financial Statements. In July 2025, the FASB issued ASU No. 2025-05, "Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contract Assets" ("ASU 2025-05"), which provides a practical expedient to apply ASC 326 to current accounts receivable and current contract assets. The practical expedient allows the Company to make a policy election to assume that current conditions as of the balance sheet date will not change for the remaining lives of the assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those years. The Company does not expect that the adoption of this standard will have a material impact on its Consolidated Financial Statements. I n September 2025, the FASB issued ASU No. 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)" ("ASU 2025-06"), which updates guidance regarding the requirements to begin capitalizing internal-use software. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods with early adoption permitted. The Company is currently evaluating the impact of this standard on its Consolidated Financial Statements. In December 2025, the FASB issued ASU No. 2025‑10, “Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities” (“ASU 2025‑10”), which establishes authoritative guidance on the accounting for government grants received by business entities, including guidance for a grant related to an asset and a grant related to income. The new standard allows for a number of accounting policy elections to be made upon adoption and be applied to the subsequent grants received on a prospective basis. ASU 2025‑10 is effective for annual reporting periods beginning after December 15, 2028, and interim periods within those annual reporting periods. The Company is currently evaluating the impact of this standard on its Consolidated Financial Statements. In December 2025, the FASB issued ASU No. 2025‑11, “Interim Reporting (Topic 270): Narrow‑Scope Improvements” (“ASU 2025‑11”), which improves the navigability of the required interim disclosures and clarifies when that guidance is applicable. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. The amendments can be applied either (1) prospectively or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of the adoption of this amendment on its Consolidated Financial Statements. In December 2025, the FASB issued ASU No. 2025‑12, “Codification Improvements” (“ASU 2025‑12”), as part of its ongoing project to enhance the clarity and usability of the FASB Codification. The amendments address a broad range of topics and include technical corrections, clarifications, updates for unintended application issues, and other minor improvements. ASU 2025‑12 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods. The Company is currently evaluating the impact of this standard on its Consolidated Financial Statements. F-15 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) 2. REVENUE FROM CONTRACTS WITH CUSTOMERS Sales are derived from products for different applications: fiber lasers, diode lasers, systems and accessories for materials processing, fiber lasers, amplifiers and diodes for advanced applications, and fiber lasers, systems and fibers for medical applications. The following tables represent a disaggregation of revenue from contracts with customers for the years ended December 31, 2025, 2024 and 2023: Year Ended December 31, 2025 2024 2023 Sales by Application Materials processing $ 860,191 $ 857,336 $ 1,152,804 Other applications 143,586 119,798 134,635 Total $ 1,003,777 $ 977,134 $ 1,287,439 Sales by Product High Power Continuous Wave ("CW") Lasers $ 308,825 $ 332,743 $ 524,981 Medium Power CW Lasers 88,178 63,685 71,672 Pulsed Lasers 143,251 146,759 185,581 Quasi-Continuous Wave ("QCW") Lasers 51,772 48,016 48,648 Laser and Non-Laser Systems 147,243 139,145 161,177 Other Revenue including Other Lasers, Amplifiers, Service, Parts, Accessories 264,508 246,786 295,380 Total $ 1,003,777 $ 977,134 $ 1,287,439 Sales by Geography North America $ 267,183 $ 258,888 $ 313,986 Europe: Germany 105,160 87,800 88,026 Other Europe 138,543 197,152 291,336 Total Europe 243,703 284,952 379,362 Asia: China 291,905 244,996 355,321 Japan 66,369 62,352 72,333 Other 121,805 113,232 142,378 Total Asia 480,079 420,580 570,032 Rest of World 12,812 12,714 24,059 Total $ 1,003,777 $ 977,134 $ 1,287,439 Year Ended December 31, 2025 2024 2023 Timing of Revenue Recognition Goods and services transferred at a point in time $ 982,584 $ 942,209 $ 1,239,551 Goods and services transferred over time 21,193 34,925 47,888 Total $ 1,003,777 $ 977,134 $ 1,287,439 The Company recognizes revenue over time on contracts for the sale of large scale materials processing systems. The timing of customer payments on these contracts generally differs from the timing of revenue recognized. If revenue recognized exceeds customer payments, a contract asset is recorded and if customer payments exceed revenue recognized, a contract F-16 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) liability is recorded. Contract assets are included within prepaid expenses and other current assets on the Consolidated Balance Sheets. Contract liabilities are included within accrued expenses and other current liabilities on the Consolidated Balance Sheets. Certain deferred revenues related to extended warranties in excess of one year from the balance sheet date are included within other long-term liabilities and deferred income taxes on the Consolidated Balance Sheets. The following table reflects the changes in the Company's contract assets and liabilities for the years ended December 31, 2025 and 2024: December 31, January 1, December 31, January 1, 2025 2025 Change 2024 2024 Change Contract assets Contract assets $ 3,464 $ 4,737 $ ( 1,273 ) $ 4,737 $ 9,383 $ ( 4,646 ) Contract liabilities Contract liabilities - current 66,209 56,454 9,755 56,454 69,219 ( 12,765 ) Contract liabilities - long-term 3,336 2,882 454 2,882 2,851 31 During the years ended December 31, 2025 and 2024, the Company recognized revenue of $ 42,164 and $ 54,105 , respectively, that was included in the contract liabilities at the beginning of the period. The following table represents the Company's remaining performance obligations from contracts that are recognized over time as of December 31, 2025: Remaining Performance Obligations 2026 2027 2028 2029 2030 Thereafter Total Revenue expected to be recognized for extended warranty agreements $ 2,546 $ 1,703 $ 1,013 $ 491 $ 106 $ 23 $ 5,882 Revenue to be earned over time from contracts to sell large scale materials processing systems 24,995 4,403 — — — — 29,398 Total $ 27,541 $ 6,106 $ 1,013 $ 491 $ 106 $ 23 $ 35,280 3. FAIR VALUE MEASUREMENTS The Company's financial instruments consisted of cash equivalents, short-term and long-term investments, accounts receivable, accounts payable, and revolving lines of credit. The valuation techniques used to measure fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company classifies its financial instruments according to the prescribed criteria. The fair value of money market fund deposits, cash equivalent term deposits, accounts receivable, accounts payable and drawings on revolving lines of credit is reasonably close to their carrying amounts due to the short maturity of most of these instruments or as a result of the competitive market interest rates, which have been negotiated. The fair value of the Company's commercial paper, corporate bonds, U.S. Treasury and agency obligations and term deposits are based on Level 2 inputs. F-17 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) The following table presents fair value information related to the Company's assets and liabilities measured at amortized cost on the Consolidated Balance Sheets: Fair Value Measurements at December 31, 2025 Total Level 1 Level 2 Level 3 Assets Cash equivalents: Money market fund deposits $ 173,538 $ 173,538 $ — $ — Term deposits 58,782 — 58,782 — Total cash equivalents 232,320 173,538 58,782 — Short-term investments: Corporate bonds 264,431 — 264,431 — Commercial paper 101,922 — 101,922 — U.S. Treasury and agency obligations 66,469 — 66,469 — Term deposits 3,104 — 3,104 — Total short-term investments 435,926 — 435,926 — Long-term investments: Corporate bonds 52,294 — 52,294 — U.S. Treasury and agency obligations 24,300 — 24,300 — Total long-term investments 76,594 — 76,594 — Total $ 744,840 $ 173,538 $ 571,302 $ — Fair Value Measurements at December 31, 2024 Total Level 1 Level 2 Level 3 Assets Cash equivalents: Money market fund deposits $ 77,855 $ 77,855 $ — $ — Commercial paper 163,589 — 163,589 — U.S. Treasury and agency obligations 47,770 — 47,770 — Term deposits 45,079 — 45,079 — Corporate bonds 15,777 — 15,777 — Total cash equivalents 350,070 77,855 272,215 — Short-term investments: Commercial paper 219,355 — 219,355 — Corporate bonds 60,306 — 60,306 — U.S. Treasury and agency obligations 27,348 — 27,348 — Term deposits 3,048 — 3,048 — Total short-term investments 310,057 — 310,057 — Total $ 660,127 $ 77,855 $ 582,272 $ — There were no impairments for the investments considered held-to-maturity at December 31, 2025 and December 31, 2024. There were no current expected credit loss allowances for the investments considered held-to-maturity at December 31, 2025 and 2024. The Company holds highly-rated held-to-maturity instruments that are within five years of maturity. The following table presents the effective maturity dates of debt investments, which are held-to-maturity: F-18 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) December 31, 2025 December 31, 2024 Book Value Fair Value Book Value Fair Value Investment maturity Less than 1 year $ 435,538 $ 435,926 $ 310,152 $ 310,057 1 through 5 years 76,533 76,594 — — Total $ 512,071 $ 512,520 $ 310,152 $ 310,057 4. INVENTORIES Inventories consist of the following: December 31, 2025 2024 Components and raw materials $ 155,412 $ 150,257 Work-in-process 44,525 28,973 Finished goods 113,479 105,550 Total $ 313,416 $ 284,780 The Company recorded inventory provisions of $ 30,106 , $ 82,515 and $ 45,499 for the years ended December 31, 2025, 2024 and 2023, respectively. These provisions relate to the recoverability of the value of inventories due to excess quantities and technological changes. Within the inventory provision recorded in 2024, $ 29,487 was attributed to items previously considered safety stock and items that became technologically obsolete. These provisions are reported as a reduction to components and raw materials, work-in-process and finished goods. 5. DIVESTITURE, IMPAIRMENT OF LONG-LIVED ASSETS AND SALE OF ASSETS During the third quarter of 2024, the Company recorded a loss on divestiture of $ 197,651 , which is included in Net loss from divestiture and sale of assets in the Company's Consolidated Statements of Operations. As a result of the Russia-Ukraine conflict and related sanctions, the Company's ability to ship and receive components from its Russian operations was significantly curtailed. On August 29, 2024, the Company completed the sale of its Russian subsidiary, pursuant to a share purchase agreement with a purchaser entity associated with Softline Projects LLC and existing management of IRE-Polus for $ 51,096 . The loss mainly consisted of $ 59,293 related to the carrying value of net assets of the Russian subsidiary that was in excess of net proceeds received on the sale and $ 135,346 related to the cumulative translation adjustment component of other comprehensive income that was previously included in stockholders' equity of the Company's Consolidated Balance Sheets. During the third quarter of 2024, the Company also recorded an impairment of long-lived assets of $ 26,566 related to its Belarusian operations which is included in total impairment of long-lived assets in the Company's Consolidated Statements of Operations. On June 29, 2024, the European Union (“EU”) issued new sanctions for Belarus. The sanctions, effective July 1 2024, allowed shipments to the Company's German operations related to existing contracts to continue through October 2, 2024. The Company completed fulfillment of existing contracts in September 2024. The Company is no longer able to supply laser cabinets and other mechanical components from the Company's factory in Belarus. As a result, the Company completed an impairment analysis of the assets in Belarus during the third quarter of 2024. The long-lived asset impairment charge, which was primarily related to fixed assets, was based on a probability-weighted average of valuations using the discounted cash flow method under the income approach to estimate the fair value of the long-lived assets in Belarus. 6. BUSINESS COMBINATION During the fourth quarter of 2024, the Company acquired 100 % of the shares of Clean‐Lasersysteme GmbH ("cleanLASER"), a leader in laser cleaning systems for $ 66,738 , net of cash acquired. The purchase of cleanLASER strengthens IPG’s global position in high-precision laser systems for cleaning applications by bringing additional know-how, complementary market exposure, and product and technology synergies. As a result of the acquisition, the Company recorded intangible assets of $ 35,495 , with a weighted-average remaining useful life of 10 years. The intangible assets comprised of $ 17,233 related to developed technology and product know-how with a weighted-average estimated useful life of 9 years, $ 14,795 related to customer relationships and backlog with weighted-average remaining useful life of 11 years and $ 3,467 F-19 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) trademark and trade name with a weighted-average estimated useful life of 9 years. The excess of the acquisition consideration over the fair value of the assets acquired and liabilities assumed has been allocated to goodwill, which amounted to $ 29,652 , none of which will be deductible for tax purposes. During the fourth quarter of 2025, the Company completed the purchase price allocations in its Consolidated Financial Statements related to the cleanLASER acquisition, which resulted in a final net working capital reduction of $ 505 that was received from the former owners prior to year-end. The Company has a continued employment arrangement with one of the sellers subject to a potential earn-out payment based upon the achievement of certain financial and non-financial milestones. The Company has treated this potential payment as compensation expense that will be recorded pro-ratably over the employment arrangement period of 24 months. The Company has accrued $ 2,966 related to this arrangement within accrued expenses and other current liabilities on the Company's Consolidated Balance Sheet as of December 31, 2025. 7. GOODWILL AND INTANGIBLE ASSETS The following table sets forth the changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024: 2025 2024 Balance at January 1 $ 67,241 $ 38,540 Goodwill arising from business combination — 29,652 Foreign exchange adjustment 4,494 ( 951 ) Balance at December 31 $ 71,735 $ 67,241 The Company performed the 2025 and 2024 annual impairment test as of October 1, 2025 and 2024, respectively, and no impairments were recorded as a result of the tests. The carrying balance of goodwill at December 31, 2025, and 2024 was net of accumulated impairments of $ 44,589 . Intangible assets, subject to amortization, consisted of the following: December 31, 2025 December 31, 2024 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted- Average Lives Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted- Average Lives Customer relationships $ 64,815 $ ( 36,101 ) $ 28,714 11 years $ 62,671 $ ( 29,747 ) $ 32,924 11 years Technology, and Production know-how 43,267 ( 25,638 ) 17,629 8 years 40,823 ( 22,891 ) 17,932 8 years Trademarks and trade names 16,117 ( 12,527 ) 3,590 8 years 15,665 ( 11,145 ) 4,520 8 years Patents 8,034 ( 8,034 ) — 8 years 8,034 ( 8,034 ) — 8 years Total $ 132,233 $ ( 82,300 ) $ 49,933 $ 127,193 $ ( 71,817 ) $ 55,376 Amortization expense for the years ended December 31, 2025, 2024 and 2023 was $ 9,790 , $ 5,933 and $ 7,895 , respectively. The estimated future amortization expense for intangibles as of December 31, 2025 is as follows: 2026 2027 2028 2029 2030 Thereafter Total $ 8,054 $ 7,841 $ 7,468 $ 7,226 $ 4,281 $ 15,063 $ 49,933 F-20 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) 8. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following: December 31, 2025 2024 Land $ 44,612 $ 40,799 Buildings 462,301 419,641 Machinery and equipment 497,924 468,140 Office furniture and fixtures 95,598 81,538 Construction-in-progress 173,348 152,680 Total property, plant and equipment 1,273,783 1,162,798 Accumulated depreciation ( 636,267 ) ( 574,423 ) Total property, plant and equipment — net $ 637,516 $ 588,375 The Company recorded depreciation expense of $ 52,757 , $ 52,399 and $ 58,245 for the years ended December 31, 2025, 2024 and 2023, respectively. Long-lived assets include property, plant and equipment, related deposits on such assets and demonstration equipment. The geographic locations of the Company's long-lived assets, net, based on physical location of the assets, as of December 31, 2025 and 2024 are as follows: December 31, 2025 2024 United States $ 363,038 $ 375,757 Germany 229,636 167,867 Canada 17,014 13,520 Japan 11,139 11,919 Italy 9,667 9,539 Poland 9,398 8,703 China 5,578 4,396 Belarus 4,354 3,779 Other 9,349 9,320 Total $ 659,173 $ 604,800 9. OTHER LIABILITIES Accrued expenses and other current liabilities consist of the following: December 31, 2025 2024 Accrued compensation $ 81,943 $ 56,568 Contract liabilities 66,209 56,454 Current portion of accrued warranty 17,348 21,398 Short-term lease liabilities 5,074 4,835 Other 14,275 12,793 Total $ 184,849 $ 152,048 F-21 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Other long-term liabilities and deferred income taxes consist of the following: December 31, 2025 2024 Unrecognized tax benefits $ 15,111 $ 13,855 Accrued warranty 14,116 12,954 Long-term lease liabilities 12,176 13,124 Deferred income taxes 9,397 14,206 Other 11,313 5,635 Total $ 62,113 $ 59,774 10. PRODUCT WARRANTIES Activity related to the warranty accrual was as follows: 2025 2024 2023 Balance at January 1 $ 34,352 $ 47,209 $ 52,862 Provision for warranty accrual 11,828 5,810 13,596 Warranty claims ( 17,154 ) ( 15,611 ) ( 19,801 ) Warranty related to business divested — ( 1,603 ) — Foreign currency translation 2,438 ( 1,453 ) 552 Balance at December 31 $ 31,464 $ 34,352 $ 47,209 Accrued warranty reported in the accompanying Consolidated Balance Sheets as of December 31, 2025 and December 31, 2024 consists of $ 17,348 and $ 21,398 in accrued expenses and other current liabilities and $ 14,116 and $ 12,954 in other long-term liabilities and deferred income taxes, respectively. 11. FINANCING ARRANGEMENTS Revolving Line of Credit Facilities: On June 24, 2025, the Company entered into a new credit agreement with Bank of America, N.A. which matures on June 24, 2030. The credit agreement provides a $ 200,000 unsecured, revolving credit facility, of which $ 25,000 may be used for the issuance of letters of credit. The new facility replaced the previous $ 75,000 U.S. revolving line of credit with a scheduled maturity date of June 30, 2025. At December 31, 2025, there were no amounts drawn or guarantees issued on the credit facility. The remaining availability under the new line was $ 200,000 at December 31, 2025. At December 31, 2024, there were no amounts drawn on the prior credit facility, and there were $ 2,103 of guarantees issued, which reduced the amount of the availability under the facility. Under the new credit agreement, the Company is 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 the Company 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 the Company 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 $ 50,000 up to a maximum of $ 500,000 , to consolidated EBITDA that is less than 3.0 times. The Company was in compliance with the financial covenants as of December 31, 2025. In addition to the financial covenants, the Company's credit agreement contains 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. F-22 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) In addition, the Company maintains euro lines of credit with a total principal amount of € 7,400 and € 6,500 ($ 8,687 and $ 6,751 ) as of December 31, 2025 and December 31, 2024, respectively, which are available to certain European subsidiaries. At December 31, 2025 and December 31, 2024, there were no amounts drawn on the euro lines of credit, and there were $ 3,123 and $ 1,533 , respectively, of guarantees issued against the facilities, which reduces the amount of the availability under the facilities. Additionally, the Company has lines of credit totaling $ 21,723 in various countries, which are used for the issuance of letters of credit, guarantees and overdrafts. As of December 31, 2025, the amount drawn was $ 1,059 and there were $ 1,797 of guarantees issued against these facilities. 12. LEASES The Company leases certain warehouses, office spaces, land, vehicles and equipment under operating lease agreements. The remaining terms of these leases range from less than 1 year to 16 years. The operating lease expense for the years ended December 31, 2025, 2024 and 2023, totaled $ 6,040 , $ 6,364 and $ 4,529 , respectively. The cash paid for amounts included in the measurement of lease liabilities included in the operating cash flows from operating leases was $ 8,510 , $ 5,668 and $ 6,110 for the years ended December 31, 2025, 2024 and 2023, respectively. The Company does not have any finance lease arrangements. The Company's operating lease assets and lease liabilities consist of the following as of December 31, 2025 and 2024: December 31, Account Classification 2025 2024 Right-of-use assets Other assets $ 17,006 $ 14,524 Short-term lease liabilities Accrued expenses and other current liabilities 5,074 4,835 Long-term lease liabilities Other long-term liabilities and deferred income taxes 12,176 13,124 Total lease liabilities $ 17,250 $ 17,959 The table below presents the maturities of operating lease liabilities as of December 31, 2025: 2026 $ 5,692 2027 4,679 2028 3,324 2029 1,924 2030 1,045 Thereafter 2,330 Total future minimum lease payments 18,994 Less: imputed interest ( 1,744 ) Present value of lease liabilities $ 17,250 Other information relevant to the Company's operating leases consist of the following as of December 31, 2025 and 2024: Year Ended December 31, 2025 2024 Weighted-average remaining lease term 5.08 years 5.41 years Weighted-average discount rate 4.52 % 4.62 % 13. COMMITMENTS AND CONTINGENCIES Employment Agreements — The Company has entered into employment agreements with certain members of senior management. The terms of these agreements are up to two years and include non-competition, non-solicitation and F-23 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) nondisclosure provisions, as well as provisions for defined severance for terminations of employment under certain conditions and a change of control of the Company. The Company also maintains a severance plan for certain of its senior management providing for defined severance for terminations of employment under certain conditions and a change of control of the Company. Contractual Obligations — The Company has entered into various purchase obligations that include agreements for construction of buildings, raw materials, equipment, and IT services. Obligations under these agreements were $ 65,245 and $ 71,238 as of December 31, 2025 and 2024, respectively, and the obligations related to raw materials and equipment are generally expected to be fulfilled within one year. Legal Proceedings — In December 2024, affiliates of Trumpf SE & Co. KG (“Trumpf”) filed patent lawsuits in two different Unified Patent Courts located in Germany against IPG Laser GmbH & Co. KG alleging infringement of two patents granted by the European Patent Office by the Company's adjustable mode beam (AMB) lasers. The Company's AMB lasers are used in certain welding and cutting applications. Hearings in the two cases were held in January 2026 at Dusseldorf and Mannheim, Germany, and the courts announced their intent to issue decisions with respect to the Mannheim case on February 24, 2026 and with respect to the Dusseldorf case on March 16, 2026. The Company plans to vigorously defend this litigation. There can be no assurance that the outcome of either case will be favorable to the Company, and an adverse finding that the Company infringed one or more of the patents‑in‑suit could have a material adverse effect on the Company and its business. The Company is unable to reasonably estimate possible losses, because, among other things, of the uncertainty of the findings and decisions in the two cases. In January 2026, the Company filed a complaint in the U.S. District Court for the Eastern District of Texas against Trumpf alleging infringement of one U.S. Patent which covers IPG’s safety‑control electronics invention. This action is in its early stages. From time to time, the Company may be involved in certain legal proceedings not listed above, and claims, governmental and/or regulatory inspections, inquiries and investigations arising out of the ordinary course of its business, but does not consider such matters to be material either individually or in the aggregate at this time. The Company’s view of the matters not listed may change in the future as the litigation and events related thereto unfold. 14. STOCK-BASED COMPENSATION Stock-based compensation, including the employee stock purchase plan, is included in the following financial statement captions: Year Ended December 31, 2025 2024 2023 Cost of sales $ 8,955 $ 8,687 $ 7,929 Sales and marketing 6,138 5,941 5,421 Research and development 10,318 10,239 9,396 General and administrative 17,603 12,283 16,858 Total stock-based compensation 43,014 37,150 39,604 Tax effect of stock-based compensation ( 9,430 ) ( 8,191 ) ( 8,660 ) Net stock-based compensation $ 33,584 $ 28,959 $ 30,944 Incentive Plans — In 2025, the Company’s stockholders approved the 2025 Incentive Compensation Plan (the "2025 Plan"), which replaced the Company’s 2006 Incentive Compensation Plan (as amended, the "2006 Plan") and provides for the issuance of stock options, PSUs, RSUs, other equity-based awards and cash awards to the Company's directors, employees, consultants and advisors. The 2025 Plan provides for issuance of 2,100,000 shares of the Company's common stock, less one share of common stock for each share of common stock subject to an award granted under the 2006 Plan after March 10, 2025. Generally, subject to certain exceptions, any shares underlying an award under the 2006 Plan and 2025 Plan that expire without being exercised, or are forfeited, canceled or otherwise terminated without a distribution to a participant of shares, cash, or other benefit in lieu of shares or that are withheld by, or otherwise remitted to, the Company to satisfy a participant's tax withholding obligations will again be available for issuance under the 2025 Plan. Accordingly, the number of shares available for future grant under the 2025 Plan may differ from, and may exceed, the number of shares initially authorized for issuance under such F-24 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) plan. At December 31, 2025, 2,133,891 shares of the Company's common stock were available for future grant under the 2025 Plan. The Company may grant stock options only at an exercise price equal to or greater than the fair market value of its common stock on the date of grant. Equity awards generally vest over periods of one to three years and, in the case of stock options, generally expire ten years after the date of the grant. The vesting of awards under the 2025 Plan and the 2006 Plan accelerate following the occurrence of certain change of control events if the participant's employment is terminated within two years by the Company without cause or by the participant for good reason or if an entity acquires control of the Company and does not agree to assume existing awards or replace with equivalent value awards. Awards granted to non-employee directors automatically become vested upon a change of control. All shares issued under the 2025 Plan are registered shares, newly issued by the Company. The Company granted certain RSUs and PSUs to executive officers and other senior managers. The RSUs provide for time-based vesting of a fixed number of shares generally over three years . Non-executive directors of the Company receive RSUs for their board service, which vest generally one year after the grant date and provide for vesting of a fixed number of shares. The PSUs provide the holder with the right to receive shares of the Company's common stock after the applicable award vesting period, generally three years . The final number of shares, if any, delivered upon vesting of PSUs are determined over the relevant performance period, generally three years . Outstanding PSUs as of December 31, 2025 are based on internal financial metrics established by the Company's Board. The final number of shares to be delivered under the PSUs range from 0 % to 200 % of the target award amount. The Company has not granted stock options since 2020. The following table summarizes the option activity for the year ended December 31, 2025: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding at January 1, 2025 615,363 $ 153.29 Granted — — Exercised ( 9,383 ) 83.48 Canceled ( 105,879 ) 114.38 Outstanding at December 31, 2025 500,101 $ 162.84 1.97 years $ — Exercisable at December 31, 2025 500,101 $ 162.84 1.97 years $ — The intrinsic value of the options exercised during the years ended December 31, 2025, 2024 and 2023 was $ 34 , $ 1,747 and $ 4,085 , respectively. All options were vested during the year ended December 31, 2025. Cash received from option exercises during the year ended December 31, 2025 was $ 783 . Tax benefit received from option exercises during the year ended December 31, 2025 was $ 8 . The following table summarizes the RSU activity for the year ended December 31, 2025: Number of Shares Weighted-Average Grant-Date Fair Value Nonvested at January 1, 2025 743,266 $ 103.41 Granted 704,376 64.61 Vested ( 355,015 ) 113.11 Forfeited ( 64,488 ) 77.52 Nonvested at December 31, 2025 1,028,139 $ 75.07 The fair value of each RSU is the market price of Company stock on the date of grant. The weighted average grant date fair value of RSUs granted during the years ended December 31, 2025, 2024 and 2023 was $ 64.61 , $ 86.09 and $ 128.71 , respectively. The intrinsic value of the RSUs that vested during the years ended December 31, 2025, 2024 and 2023, was $ 21,352 , $ 19,634 and $ 23,082 , respectively. The total compensation cost related to nonvested RSUs not yet recorded at December 31, 2025 was $ 47,160 which is expected to be recognized over a weighted-average of 1.9 years. The aggregate fair value of RSUs vested during the years ended December 31, 2025, 2024 and 2023 was $ 40,156 , $ 32,386 and $ 28,319 , respectively. F-25 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) The following table summarizes financial metric-based PSUs activity for the year ended December 31, 2025: Number of Shares Weighted-Average Grant-Date Fair Value Nonvested at January 1, 2025 245,585 $ 107.97 Granted 82,875 65.23 Vested — — Forfeited ( 32,474 ) 95.76 Nonvested at December 31, 2025 295,986 $ 84.64 For the years ended December 31, 2025, 2024 and 2023, the weighted average grant date fair value for new grants was $ 65.23 , $ 86.54 , and $ 131.13 , respectively. Expense for the financial metric-based PSUs was recognized at 0 % to 100 % of the target goals. The total compensation cost related to nonvested PSUs not yet recorded at December 31, 2025 was $ 7,930 , which is expected to be recognized over a weighted average period of 2.1 years. The Company has not granted TSR PSUs since 2021. There were no TSR PSUs outstanding during the year ended December 31, 2025. The intrinsic value of the TSR PSUs vested during the years ended December 31, 2024 and 2023 was nil and $ 128 , respectively. The aggregate fair value of awards vested during the years ended December 31, 2024 and 2023 was nil and $ 331 , respectively. The Company has an employee stock purchase plan ("ESPP") offered to its U.S. and German employees. The plan allows employees who participate to purchase shares of common stock through payroll deductions at a 15 % discount to the lower of the closing stock price on the first day or the last day of the six-month purchase period. Payroll deductions may not exceed 10 % of the employee's compensation and are subject to other limitations. The assumptions used in the Black-Scholes model for the calculation of the ESPP fair values were as follows: 2025 2024 2023 Performance term (year) 0.5 0.5 0.5 Volatility 38 % - 53 % 36 % - 38 % 35 % - 37 % Risk-free rate of return 4.24 % - 4.29 % 5.26 % - 5.37 % 4.76 % - 5.47 % Dividend yield 0.00 % 0.10 % 0.10 % Fair value per share $ 18.30 - $ 20.95 $ 20.45 - $ 26.92 $ 23.42 - $ 33.55 Compensation expense related to the employee stock purchase plan was $ 1,689 , $ 1,602 and $ 1,595 for the years ended December 31, 2025, 2024 and 2023, respectively. During the years ended December 31, 2025, 2024 and 2023 the Company issued 86,252 , 74,061 and 57,984 shares, respectively, at an average price of $ 59.39 , $ 66.48 and $ 86.89 , respectively, under the employee stock purchase plan. As of December 31, 2025, there were 232,861 shares available for issuance under the employee stock purchase plan. 15. EMPLOYEE BENEFIT PLANS The Company maintains a defined contribution retirement plan offered to its eligible U.S. employees, as well as plans at certain foreign and domestic subsidiaries. The Company makes matching contributions to each plan, which amounted to approximately $ 6,487 , $ 6,069 and $ 6,496 for the years ended December 31, 2025, 2024 and 2023, respectively. Effective January 1, 2025, the Company is self-insured for employee medical benefits in the United States. The employee medical obligations are managed by a third-party provider and the Company has accrued $ 3,024 related to this arrangement in accrued expenses and other current liabilities within the Consolidated Balance Sheet as of December 31, 2025. To limit the Company’s potential liabilities for these risks, the Company purchases insurance from a third party that provides stop-loss protection for medical costs in the United States that exceed $ 225 per person per annum. F-26 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) 16. INCOME TAXES Income (loss) before the impact of income taxes consisted of the following: Year Ended December 31, 2025 2024 2023 U.S. $ 8,388 $ 4,879 $ 131,601 Foreign 36,708 ( 166,767 ) 143,274 Total $ 45,096 $ ( 161,888 ) $ 274,875 The Company's provision for income taxes consisted of the following: Year Ended December 31, 2025 2024 2023 Current: Federal $ 4,730 $ 13,992 $ 22,908 State ( 352 ) 2,906 4,623 Foreign 23,302 28,400 42,255 Total current 27,680 45,298 69,786 Deferred: Federal ( 8,494 ) ( 15,535 ) ( 10,306 ) State ( 1,494 ) ( 2,283 ) ( 1,635 ) Foreign ( 3,692 ) ( 7,842 ) ( 1,848 ) Total deferred ( 13,680 ) ( 25,660 ) ( 13,789 ) Provision for income taxes $ 14,000 $ 19,638 $ 55,997 A reconciliation of income tax expense at the U.S. federal statutory income tax rate to the recorded tax provision were as follows: Year Ended December 31, 2025 ($) (%) Tax at statutory rate $ 9,470 21.0 % Effect of Cross-Border Tax Laws: FDII ( 2,886 ) ( 6.4 ) % Other 173 0.4 % Total Effect of Cross-Border Tax Laws ( 2,713 ) ( 6.0 ) % Tax Credits: R&D Credit ( 3,638 ) ( 8.1 ) % Other 250 0.6 % Total Tax Credits ( 3,388 ) ( 7.5 ) % F-27 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Nontaxable or Nondeductible items: Stock Compensation 6,004 13.3 % 162(m) Limitation 769 1.7 % Other 132 0.3 % Total Nontaxable or Nondeductible items 6,905 15.3 % State and Local Income Taxes, Net of Federal Income Tax Effect ( 1,604 ) ( 3.6 ) % Foreign Tax Effects: Belarus: Losses not benefitted 1,329 2.9 % Other 108 0.2 % Total Belarus 1,437 3.2 % China: Stock Compensation 1,112 2.5 % Non-U.S. rate differential - net 427 0.9 % Total China 1,539 3.4 % Germany: Non-U.S. rate differential - net ( 1,059 ) ( 2.3 ) % Trade Tax 3,195 7.1 % Changes in tax laws or rates enacted in the current period ( 1,120 ) ( 2.5 ) % Profit in Ending Inventory ( 723 ) ( 1.6 ) % Stock Compensation 642 1.4 % Other 35 0.1 % Total Germany 970 2.2 % United Kingdom: Change in valuation allowance ( 614 ) ( 1.4 ) % Other ( 115 ) ( 0.3 ) % Total United Kingdom ( 729 ) ( 1.7 ) % Other Foreign Jurisdictions 160 0.4 % Worldwide changes in Unrecognized Tax Benefits 2,000 4.4 % Other ( 47 ) ( 0.1 ) % Total $ 14,000 31.0 % F-28 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) A reconciliation of income tax expense at the U.S. federal statutory income tax rate to the recorded tax provision for the years ended December 31, 2024 and 2023 were as follows: Year Ended December 31, 2024 2023 Tax at statutory rate $ ( 33,996 ) $ 57,724 Non-U.S. rate differential - net 8,676 12,685 State income taxes - net 2,949 3,380 Stock-based compensation - tax detriment 5,385 1,835 Foreign derived intangible income benefit ("FDII") ( 3,371 ) ( 9,322 ) Prior year and audit adjustments ( 636 ) ( 4,793 ) Tax effect of loss from divestiture 42,152 — Withholding and other taxes on intercompany dividends 3,360 — Federal and state tax credits ( 8,723 ) ( 6,375 ) Change in reserves, including interest and penalties ( 2,866 ) 2,379 Change in valuation allowance 6,470 ( 2,548 ) Other - net 238 1,032 Provision for income taxes $ 19,638 $ 55,997 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows: Year Ended December 31, 2025 2024 Property, plant and equipment $ ( 3,065 ) $ ( 6,166 ) Intangible assets 56,709 47,617 Inventory provisions 39,737 42,760 Allowances and accrued liabilities 4,544 1,880 Withholding and other taxes on intercompany dividends ( 504 ) ( 3,360 ) Other tax credits 26,964 24,115 Deferred compensation 20,409 20,728 Net operating loss carryforwards 6,913 6,401 Valuation allowance ( 37,215 ) ( 33,150 ) Net deferred tax assets $ 114,492 $ 100,825 The Company accrues taxes on dividend distributions to the extent that foreign subsidiaries have cash in excess of their operational needs. The Company has recorded $ 504 and $ 3,360 as a deferred tax liability on December 31, 2025 and 2024, respectively, for certain withholding and dividend taxes related to possible future distributions of excess cash from certain non-U.S. subsidiaries to their respective parent companies. In 2025 and 2024, the German subsidiary paid a dividend to the U.S. parent company of $ 42,468 and $ 80,282 , respectively. There were no federal or withholding taxes due on the distributions from Germany to the U.S., but in both years the Company accrued a nominal amount of state tax relating to the distribution. In 2025, the China subsidiary paid a dividend via the Hong Kong subsidiary to the U.S. parent company of $ 34,206 which was subject to withholding tax of $ 3,428 . There were no federal taxes due on the distribution from China to Hong Kong to the U.S., but the Company accrued a nominal amount of state tax relating to the distribution. The Company has accrued for net deferred tax assets within deferred income taxes,net and for deferred tax liabilities within other long-term liabilities and deferred income taxes on the Consolidated Balance Sheet as of December 31, 2025 and 2024, respectively. With regard to the other non-U.S. subsidiaries, the Company continues to consider the earnings from these entities to be indefinitely reinvested to the extent the cash balance in each subsidiary is not greater than the current needs for operations and F-29 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) expansion. At December 31, 2025 and 2024, the cumulative undistributed earnings in non-U.S. subsidiaries were approximately $ 643,869 and $ 687,579 , respectively, and excluded earnings for possible future distributions for which tax has been accrued. In determining the Company’s 2025 and 2024 tax provisions, the Company calculated the deferred tax assets and liabilities for each separate tax entity. The Company then considered a number of factors including the positive and negative evidence regarding the realization of deferred tax assets to determine whether a valuation allowance should be recognized with respect to the deferred tax assets. As of December 31, 2025 and 2024, the Company had state tax credit carryforwards (net of federal tax effect) of $ 26,983 and $ 24,133 , respectively. The state tax credit carryforwards begin expiring in 2026. The Company has determined that some of the state credits will more likely than not expire before they can be used and has recorded a valuation allowance of $ 24,275 and $ 21,425 as of December 31, 2025 and 2024, respectively. The Company has tax loss carryforwards in foreign jurisdictions totaling $ 48,123 and $ 46,486 as of December 31, 2025 and 2024, respectively. The Company believes it is more likely than not that most of the loss carryforwards will expire before they can be used and has provided a valuation allowance against the tax benefit of the losses in foreign jurisdictions of $ 11,886 and $ 11,484 at December 31, 2025 and 2024, respectively. The Company sold its Russian subsidiary in 2024 which decreased the valuation allowance on Russian deferred tax assets by $ 23,873 . There are no significant valuation allowances against other deferred tax assets as of December 31, 2025. The Company provides 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 the amount of a tax benefit taken by the Company that is more likely than not to be realized, assuming that the matter in question will be reviewed by the tax authorities. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits: 2025 2024 2023 Balance at January 1 $ 13,855 $ 17,176 $ 15,841 Reductions in prior period positions ( 6,675 ) ( 433 ) ( 1,820 ) Settlement of prior period positions — ( 3,347 ) — Additions for tax positions in prior period 8,096 341 514 Additions for tax positions in current period 230 225 3,041 Foreign exchange adjustments ( 395 ) ( 107 ) ( 400 ) Balance at December 31 $ 15,111 $ 13,855 $ 17,176 The liability for uncertain tax benefits is included in other long-term liabilities and deferred income taxes at December 31, 2025 and 2024. Substantially all of the uncertain tax benefits recorded as of December 31, 2025 will benefit the Company's effective tax rate, if recognized. Estimated penalties and interest related to the potential underpayment of income taxes were a net expense of $ 1,347 and $ 349 for the years ended December 31, 2025 and 2024, respectively, and are included within the provision for income taxes. Total accrued penalties and interest related to the underpayment of income taxes were $ 3,769 and $ 2,497 at December 31, 2025 and 2024, respectively. F-30 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) The Company's uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The Company is currently under a tax audit in China for tax years 2013 through 2022. Open tax years by major jurisdictions are: Jurisdiction Open Tax Years United States 2022 - 2025 Germany 2024 - 2025 China 2013 - 2025 The Company paid (net of refunds received) the following amount for income taxes, broken down by jurisdiction: Year Ended December 31, 2025 US federal $ 14,739 US state & local 2,277 Foreign: Germany federal 15,008 Germany local 14,795 China federal 6,120 Other 4,069 Total $ 57,008 Income taxes paid (net of refunds received) are disaggregated by U.S. federal, U.S. state and local, and foreign jurisdictions. For the year ended December 31, 2025, significant state jurisdictions included California, Massachusetts, and Minnesota. F-31 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) 17. NET INCOME (LOSS) PER COMMON SHARE The following table sets forth the computation of diluted net income (loss) per common share following the treasury stock method: Year Ended December 31, 2025 2024 2023 Net income (loss) $ 31,096 $ ( 181,526 ) $ 218,878 Basic weighted average common shares 42,344,616 44,335,857 47,154,217 Dilutive effect of common stock equivalents 305,096 — 165,858 Diluted weighted average common shares 42,649,712 44,335,857 47,320,075 Basic net income (loss) per common share $ 0.73 $ ( 4.09 ) $ 4.64 Diluted net income (loss) per common share $ 0.73 $ ( 4.09 ) $ 4.63 The computation of diluted weighted average common shares excludes certain common stock equivalents, including non-qualified stock options, PSUs, RSUs and the ESPP because the effect of including them would be anti-dilutive. The weighted average anti-dilutive shares outstanding for the years ended December 31, 2025, 2024 and 2023, respectively, were as follows: Year Ended December 31, 2025 2024 2023 Restricted stock units 94,041 715,728 246,481 Non-qualified stock options 539,338 696,189 533,402 Performance stock units 49,684 235,897 51,851 Employee stock purchase plan — 42,900 30,951 Total weighed average anti-dilutive shares outstanding 683,063 1,690,714 862,685 On February 13, 2024, the Company announced that its board of directors has authorized the purchase of up to $ 300,000 of IPG common stock. This authorization is in addition to the Company's previously authorized stock repurchase programs. For the years ended December 31, 2025, 2024 and 2023, respectively, the Company repurchased 753,459 shares, 4,087,646 shares, and 2,117,352 shares of its common stock with an average price of $ 66.36 , $ 83.30 and $ 104.68 per share in the open market, respectively. The May 2023 authorization to repurchase common stock was completed in 2024 and the February 2024 authorization was completed in 2025. The impact on the reduction of weighted average shares for years ended December 31, 2025, 2024 and 2023 was 407,542 shares, 2,195,177 shares and 1,167,412 shares, respectively. 18. SEGMENT REPORTING The Company operates in one segment which involves the design, development, production and distribution of fiber lasers, laser and non-laser systems, fiber amplifiers, and related optical components. The Company has a single, company-wide management team that administers all properties as a whole rather than as discrete operating segments. The CODM, who is the Company's chief executive officer, measures financial performance as a single enterprise, and not on geography, legal entity, or end market basis. Throughout the year, the chief operating decision maker allocates capital resources on a project-by-project basis across the Company's entire asset base, as reflected in the Company's Consolidated Balance Sheets, to maximize profitability without regard to geography, legal entity, or end market basis. The Company operates in a number of countries throughout the world in a variety of product lines. Information regarding product lines and geographic financial information is provided in Note 2, "Revenue from Contracts with Customers" and Note 8, "Property, Plant and Equipment." The accounting policies used in the Company's segment reporting are the same as those described in Note 1, "Nature of Business and Summary of Significant Accounting Policies." The CODM primarily utilizes "Net income (loss)" as well as "Net income (loss) per common share” included in the Company's Consolidated Statements of Operations as the key indicators in assessing the enterprise’s performance and F-32 Table of Contents IPG PHOTONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) allocating resources. In evaluating Net income (loss), the CODM also reviews gross profit as well the Company's income before foreign exchange and other segment items to set and evaluate performance targets. The following table presents the break-down of Net income (loss), including significant segment expenses. Year Ended December 31, 2025 2024 2023 (In thousands, except per share data) Net sales $ 1,003,777 $ 977,134 $ 1,287,439 Cost of product sold (a) 482,444 478,176 602,746 Manufacturing, service and other operations salaries, bonus, and benefits, including contractor costs 283,111 258,776 305,324 Other manufacturing expenses (b) 133,576 125,163 158,553 Capitalized labor and overhead ( 276,817 ) ( 223,136 ) ( 320,882 ) Cost of sales 622,314 638,979 745,741 Gross profit 381,463 338,155 541,698 Sales and marketing, research and development, and general and administrative (c) 358,404 323,678 310,132 Income before foreign exchange and other segment items 23,059 14,477 231,566 Less: Loss (gain) on foreign exchange 9,354 5,524 ( 1,356 ) Less: Other segment items (d) ( 1,534 ) 216,308 ( 218 ) Add: Interest income, net 29,857 45,467 41,735 Less: Provision for income taxes 14,000 19,638 55,997 Net income (loss) $ 31,096 $ ( 181,526 ) $ 218,878 (a) Includes cost materials, shipping costs, scrap, and inventory reserves. (b) Includes depreciation and amortization, service, warranty, and other manufacturing expenses. (c) Sales and marketing, research and development, and general and administrative expenses are disclosed by period in the Company's Consolidated Statements of Operations. (d) Other segment items include net loss on divestiture and sale of assets, impairment of long-lived assets, restructuring charges (recoveries), net, and other income, net. 19. SUBSEQUENT EVENTS On February 12, 2026, the Company announced that its board of directors has authorized the purchase of up to $ 100,000 of IPG common stock. Share repurchases may be made periodically in open-market transactions, and are subject to market conditions, legal requirements and other factors. The share repurchase program authorization does not obligate the Company to repurchase any dollar amount or number of its shares, and repurchases may be commenced or suspended from time to time without prior notice. F-33