Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains “forward-looking statements” w ithin the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on beliefs of our management as of the filing date of this Quarterly Report on Form 10-Q. These forward-looking statements include, among other things, statements related to:
• Our strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position;
• Our business strategy and investment priorities in relation to evolving consumer and enterprise demand trends, competitive landscape and current and future worldwide geopolitical, economic and capital market conditions, including fluctuations in currency exchange rates, inflation, economic downturns, and disruptions in global logistics;
• Changes in trade regulations, policies and agreements and the imposition of tariffs that affect our products or operations, including potential new tariffs that may be imposed on U.S. imports, and our ability to mitigate ;
• The availability and pricing of components used to manufacture our products;
• The impact of the incident in the manufacturing facilities of one of our semiconductor suppliers;
• Long-term, secular trends that impact our product categories;
• The evolution and adoption of artificial intelligence (“AI”), its impact on our industry and related risks and opportunities for our business;
• Our expectations regarding any restructuring efforts, including the timing or effectiveness thereof ;
• The scope, nature or impact of any acquisition, strategic alliance, and divestiture activities;
• Our expectations regarding the success of any strategic acquisitions, including integration of acquired operations, products, technology, internal controls, personnel and management teams;
• Our expectations regarding our effective tax rate, future tax benefits, tax settlements, the adequacy of our provisions for uncertain tax positions;
• Our expectations regarding our potential indemnification obligations, and the outcome of pending or future legal proceedings and tax audits;
• Our business development, product development and innovation, and their impact on future operating results and anticipated operating costs for fiscal year 2027 and beyond;
• Opportunities for growth and our ability to execute on and take advantage of them, including our marketing initiatives and strategy and our expectations regarding the success thereof;
• Our expectations regarding our share repurchase and dividend programs;
• The sufficiency of our cash and cash equivalents, cash generated from operations, and available borrowings under our Credit Agreement and our bank lines of credit to fund capital expenditures and working capital needs, and our ability to comply with our obligations under such debt agreements; and
• The effects of environmental and other laws and regulations in the United States and other countries in which we operate.
Forward-looking statements also include, among others, those statements including the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,” “should,” “will,” and similar language. These statements reflect our views and assumptions as of the date of this Quarterly Report on Form 10-Q. All forward-looking statements involve risks and uncertainties that could cause our actual performance to differ materially from those anticipated in the forward-looking statements depending on a variety of factors. Important information as to these factors can be found in this Quarterly Report on Form 10-Q under the headings of “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Company Overview,” “Critical Accounting Estimates,” and “Liquidity and Capital Resources,” among others. Factors that might cause or contribute to such differences include, but are not limited to, those discussed under Part II, Item 1A “Risk Factors” as well as elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended March 31, 2026, and in our other filings with the U.S. Securities and Exchange Commission, or “SEC.” You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
You should read the following discussion in conjunction with the interim unaudited condensed consolidated financial statements and related notes.
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Company Overview
Logitech designs software-enabled hardware solutions that help businesses thrive and bring people together when working, creating, and gaming. As the point of connection between people and the digital world, our mission is to extend human potential in work and play, in a way that is good for people and the planet. We sell the vast majority of our products under the Logitech and Logitech G brand names.
Our diverse, innovative portfolio includes: Gaming, Keyboards & Combos, Pointing Devices, Video Collaboration, Webcams, Tablet Accessories, and Headsets. These products are all classified under a single operating segment: Peripherals (see Note 12 to our condensed consolidated financial statements).
We sell our products to a broad range of international customers, in the Americas; Europe, the Middle East and Africa (“EMEA”); and Asia Pacific. This includes direct sales to retailers, e-tailers, businesses large and small and end consumers through our e-commerce platform, and indirect sales to end customers through distributors.
From time to time, we may seek to partner with or acquire, when appropriate, companies that have products, personnel, and technologies that complement our strategic direction. We continually review our product offerings and our strategic direction in light of our profitability targets, competitive conditions, changing consumer trends and the evolving nature of the interface between the consumer and the digital world.
Impacts of Macroeconomic, Geopolitical, and Other Factors on our Business
As we conduct operations globally, our business has continued to be impacted by ongoing macroeconomic and geopolitical conditions. These conditions include changes in inflation, interest rate and foreign currency fluctuations, uncertainty in consumer and enterprise demand, tariff and trade policies, component availability, volatile energy prices and geopolitical tensions, including the armed conflicts in the Middle East.
In 2025, the United States introduced trade policy actions that increased import tariffs across a wide range of countries at various rates, with certain exemptions. In February 2026, the U.S. Supreme Court issued a decision invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). In May 2026, the U.S. Customs and Border Protection ("CBP") began issuing refunds to companies that had applied for IEEPA tariff refunds. We received a full refund of $61 million for these tariffs invalidated by the Supreme Court, including $15 million during the first quarter of fiscal year 2027 and $46 million subsequent to quarter end. The $61 million refund was recorded as a reduction of cost of goods sold in our condensed consolidated statements of operations in the first quarter of fiscal year 2027.
Following the U.S. Supreme Court ruling, the U.S. government introduced temporary tariffs for a 150-day period beginning February 24, 2026, which were subsequently invalidated by the U.S. Court of International Trade, but remained in effect pending appeal. In July 2026, the U.S. government announced new tariffs under Section 301 of U.S. trade laws which became effective on July 24, 2026 when the temporary tariffs expired. U.S. tariff policies and international trade arrangements continue to evolve and have had, and may continue to have, a significant impact on our results of operations.
We have also been affected by the increases in demand for electronic components, including semiconductor chips, caused by the build out of new AI technologies and data centers, leading to shortages and rising prices for such components utilized in some of our products. In addition, in late June 2026, one of our semiconductor component suppliers experienced a serious incident at its manufacturing facilities, resulting in its temporary closure. We currently expect this facility closure will impact our ability to effectively meet demand for certain products in the second and third quarters of fiscal year 2027.
The global and regional macroeconomic, political and other conditions have caused and may continue to cause volatility in demand for our products, component availability, transit times and cost of our products including cost of tariffs, materials, and logistics, and as a result, have impacted and may continue to impact the pricing of our products, product availability and our results of operations.
For additional information, see Part II, Item 1A "Risk Factors."
Trends and Uncertainties
Several long-term secular trends offer long-term structural growth opportunities across Logitech’s product portfolio. We design, create and sell products that benefit from these secular trends which include the following:
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• AI: AI is reshaping expectations for product innovation, productivity improvements, and the evolution of digital technology ecosystems. AI is embedded in our innovation strategy and product development, enabling us to provide elevated audio, video, and other capabilities throughout our product portfolio, and we plan to continue to integrate AI into future products. Our products are also designed to help people increase productivity and improve performance, leveraging AI benefits across work and play. Logitech’s products are the connection between people and the digital world, providing a broad range of devices that facilitate interaction with AI. Our video collaboration products, webcams, headsets, mice and keyboards serve as the eyes, ears and hands of AI, providing the sensory channels through which our customers experience AI. In addition, we leverage AI internally to accelerate new product introductions, strengthen marketing effectiveness and optimize operational processes across our organization.
• Flexible work: As flexible work models continue to evolve, with employees working from offices, homes and various remote locations, Logitech is well-positioned to meet the demand for versatile and adaptive workplace technology. These working arrangements provide opportunities for Logitech to equip multiple workspaces with products across our portfolio including Pointing Devices, Keyboards & Combos, Tablet Accessories, Headsets and Webcams. Additionally, the rise in distributed teams and remote collaboration is driving increased adoption of video conferencing solutions among businesses and consumers. Our portfolio of video collaboration products are compatible with a variety of video conference platforms, including Zoom, Microsoft Teams and Google Meet.
• Gaming growth: The ongoing growth and evolution of gaming creates an opportunity for us to provide more tools to a wider community of gamers. Gaming is enjoyed by men and women of all ages; competitively as a sport or for fun; for active participation and passive consumption; for personal development or social interaction. As a mainstream activity, gaming continues to gain popularity through online gaming, multi-platform experiences and esports.
While we believe we will further benefit from these secular trends, we have experienced and will continue to experience challenges that impact our business and financial results. These challenges include (i) uncertainty in tariffs on goods imported into the U.S. and responsive policies enacted by other countries, (ii) uncertainty in supply and pricing of electronic components including semiconductor chips, (iii) the macroeconomic environment, including inflation, interest rate and foreign currency fluctuations, volatile energy prices, and geopolitical tensions, and (iv) the uncertainty of overall consumer and enterprise demand.
We expect these challenges to continue in the near-term. We have taken steps to mitigate the impact of these challenges, including but not limited to: (i) continued diversification of our manufacturing footprint and supplier ecosystem, (ii) increasing pricing for certain products, (iii) maintaining discipline in our operating expenses, (iv) managing inventory levels to align with demand and component availability, and (v) continued release of new products to increase the value proposition of our portfolio.
For additional information, see Part II, Item 1A "Risk Factors."
Seasonality
We experience seasonal trends related to our product sales. Sales are generally highest during our third fiscal quarter (October to December) primarily due to increased consumer demand during the holiday season and increased spending by businesses in the months nearing the calendar year-end. Cash flow is usually correspondingly lower in the first half of our fiscal year as we typically build inventories in advance of our third fiscal quarter and we also pay an annual dividend following our Annual General Meeting typically held in September.
Summary of Financial Results
Our sales were $1,227.2 million for the three months ended June 30, 2026, an increase of 7% compared to $1,147.7 million for the three months ended June 30, 2025, primarily due to an increase in sales of Gaming, Pointing Devices, and Video Collaboration as well as favorable changes in foreign currency exchange rates.
Sales for the three months ended June 30, 2026 increased 12% and 8% in the Americas and Asia Pacific regions, respectively, and decreased 1% in the EMEA region, compared to the three months ended June 30, 2025.
Gross margin was 49.5% for the three months ended June 30, 2026 and increased by 780 basis points from 41.7% for the three months ended June 30, 2025, primarily driven by a benefit from tariff refunds, favorable foreign currency exchange rate changes, favorable product mix and product cost reduction, partially offset by investment in strategic promotions.
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Operating expenses for the three months ended June 30, 2026 were $349.4 million, or 28.5% of sales, compared to $316.9 million, or 27.6% of sales, for the three months ended June 30, 2025, primarily driven by increases in marketing and selling expenses and research and development expenses .
We had an income tax provision of $39.9 million and $28.5 million for the three months ended June 30, 2026 and June 30, 2025 , respectively.
Net income for the three months ended June 30, 2026 was $235.7 million, compared to $146.0 million for the three months ended June 30, 2025.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make assumptions, judgments, and estimates that affect reported amounts of assets, liabilities, sales and expenses, and the disclosure of contingent assets and liabilities.
We consider an accounting estimate critical if it: (i) requires management to make judgments and estimates about matters that are inherently uncertain; and (ii) is important to an understanding of our financial condition and operating results.
We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates. We also discuss our critical accounting policies and estimates with the Audit Committee of the Board of Directors.
We believe that the assumptions, judgments and estimates involved in the accounting for accruals for customer incentives and related breakage, accrued sales return liability, inventory valuation, and uncertain tax positions have the greatest potential impact on our condensed consolidated financial statements. These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates, and consequently, we consider these to be our critical accounting estimates.
There have been no material changes in our critical accounting estimates during the three months ended June 30, 2026 compared with the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
New Accounting Pronouncements
Refer to Note 1 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for new accounting pronouncements adopted and to be adopted.
Constant Currency
We refer to our net sales growth rates excluding the impact of currency exchange rate fluctuations as "constant currency" sales growth rates. Percentage of constant currency sales growth is calculated by translating prior period sales in each local currency at the current period’s average exchange rate for that currency and comparing that to current period sales.
Given our global sales presence and the reporting of our financial results in U.S. Dollars, our financial results could be affected by significant shifts in currency exchange rates. See “Results of Operations” for information on the effect of currency exchange rate fluctuations on our sales. If the U.S. Dollar appreciates or depreciates in comparison to other currencies in future periods, this will affect our results of operations in future periods as well.
References to Sales
The term “sales” means net sales, except as otherwise specified and the sales growth discussion and sales growth rate percentages are in U.S. Dollars, except as otherwise specified.
Results of Operations
Net Sales
Our sales for the three months ended June 30, 2026 i ncreased 7%, compared to the three months ended June 30, 2025, primarily due to an increase in sales for Gaming, Pointing Devices, and Video Collaboration as well
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as favorable changes in foreign currency exchange rates . If currency exchange rates had been constant in the three months ended June 30, 2026 and 2025, our sales growth rate in constant currency would have been 5%.
Sales Denominated in Other Currencies
Although our financial results are reported in U.S. Dollars, a portion of our sales was generated in currencies other than the U.S. Dollar, such as the Euro, Chinese Renminbi, Japanese Yen, Australian Dollar, Canadian Dollar, Pound Sterling and New Taiwan Dollar. During the three months ended June 30, 2026, approximately 52% of our sales were denominated in currencies other than the U.S. Dollar.
Sales by Region
The following table presents the change in sales by region for the three months ended June 30, 2026, compared with the three months ended June 30, 2025:
Sales Growth Rate Constant Dollar
Sales Growth Rate
Three Months Ended June 30, 2026 Three Months Ended June 30, 2026
Americas 12 % 11 %
EMEA (1) % (4) %
Asia Pacific 8 % 5 %
Americas:
The increase in sales in the Americas region for the three-month period presented above was primarily driven by an increase in sales for Gaming, Keyboards & Combos, and Pointing Devices.
EMEA :
The decrease in sales in the EMEA region for the three-month period presented above was primarily driven by a decrease in sales for Keyboards & Combos, Webcams, and Headsets, partially offset by an increase in sales for Video Collaboration and Tablet Accessories. Sales in the EMEA region were negatively impacted by the conflict in the Middle East and an overall market decline.
Asia Pacific:
The increase in sales in the Asia Pacific region for the three-month period presented above was primarily driven by an increase in sales for Gaming and Pointing Devices, partially offset by a decrease in sales for Tablet Accessories.
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Sales by Product Category
Sales by product category for the three months ended June 30, 2026 and 2025 were as follows (Dollars in thousands):
Three Months Ended
June 30,
2026 2025 Change
Gaming (1)
$ 354,230 $ 315,875 12 %
Keyboards & Combos 227,798 222,492 2
Pointing Devices 227,312 195,780 16
Video Collaboration 185,260 166,716 11
Webcams 76,581 84,374 (9)
Tablet Accessories 89,395 91,227 (2)
Headsets 44,133 45,523 (3)
Other (2)
22,525 25,716 (12)
Total Sales $ 1,227,234 $ 1,147,703 7 %
(1) Gaming includes streaming services revenue generated by Streamlabs.
(2) Other primarily consists of mobile speakers and PC speakers.
Gaming
Our Gaming category includes PC gaming (mice, headsets, keyboards), steering wheels, console gaming headsets, microphones and Streamlabs services.
Sales of Gaming increased 12% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily driven by an increase in sales of PC gaming mice, particularly PRO X2 SUPERSTRIKE launched in the fourth quarter of fiscal year 2026, as well as an increase in sales of steering wheels .
Keyboards & Combos
Our Keyboards & Combos category includes PC keyboards and keyboard/mice combo products.
Sales of Keyboards & Combo s increased 2% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily driven by an increase in sales of wireless keyboards, partially offset by a decrease in sales of wired keyboards. The increase in sales for the three-month period was primarily driven by an increase in the Americas region, partially offset by a decrease in sales in the EMEA region.
Pointing Devices
Our Pointing Devices category includes PC- and Mac-related mice including trackballs, and presentation tools.
Sales of Pointing Devices increased 16% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily driven by an increase in sales of wireless mice, particularly MX Master 4 launched in the third quarter of fiscal year 2026. A continued mix shift to premium products in our portfolio contributed to sales growth in this category.
Video Collaboration
Our Video Collaboration category includes Logitech’s conference room cameras, which combine affordable enterprise-quality audio and high definition 4K video to bring video conferencing to a variety of room sizes.
Sales of Video Collaboration increased 11% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to an increase in sales of conference room cameras.
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Webcams
Our Webcams category includes webcams and streaming cameras. Our webcams turn any desktop into an instant collaboration space.
Sales of Webcams decreased 9% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to a decrease in sales in the EMEA region.
Tablet Accessories
Our Tablet Accessories category primarily includes tablet keyboards.
Sales of Tablet Accessories decreased 2% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to a decrease in sales in the Asia Pacific region, partially offset by an increase in sales in the EMEA region. The decline in Asia Pacific was primarily due to a large education deal in the prior year.
Headsets
Our Headsets category includes headsets, in-ear headphones, and premium wireless earbuds.
Sales of Headsets decreased 3% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to a decrease in sales in the EMEA region, partially offset by an increase in sales in the Americas region.
Other
Our Other category primarily consists of mobile speakers and PC speakers.
Sales in Other categor y decreased 12% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily driven by a decrease in sales of mobile speakers.
Gross Profit
Gross profit for the three months ended June 30, 2026 and 2025 was as follows (Dollars in thousands):
Three Months Ended
June 30,
2026 2025 Change
Net sales $ 1,227,234 $ 1,147,703 7 %
Gross profit $ 607,940 $ 478,962 27 %
Gross margin 49.5 % 41.7 %
Gross profit consists of sales, less cost of goods sold (which includes materials, direct labor and related overhead costs, costs of manufacturing facilities, royalties, costs of purchasing components from outside suppliers, distribution costs, warranty costs, customer support costs, shipping and handling costs, outside processing costs and write-down of inventories), and amortization of intangible assets.
Gross margin was 49.5% for the three months ended June 30, 2026 and increased by 780 basis points from 41.7% for the three months ended June 30, 2025, primarily driven by a benefit from tariff refunds, favorable foreign currency exchange rate changes, favorable product mix and product cost reduction, partially offset by investment in strategic promotions. We recognized $61 million of tariff refunds in our first quarter of fiscal year 2027, of which $15 million was received in cash within the quarter and $46 million was received subsequent to quarter end.
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Operating Expenses
Operating expenses for the three months ended June 30, 2026 and 2025 were as follows (Dollars in thousands):
Three Months Ended
June 30,
2026 2025
Marketing and selling $ 219,745 $ 195,796
% of sales 17.9 % 17.1 %
Research and development 84,623 74,587
% of sales 6.9 % 6.5 %
General and administrative 43,525 41,797
% of sales 3.6 % 3.6 %
Amortization of intangible assets and acquisition-related costs 926 2,646
% of sales 0.1 % 0.2 %
Restructuring charges, net 570 2,042
% of sales — % 0.2 %
Total operating expenses $ 349,389 $ 316,868
% of sales 28.5 % 27.6 %
The increase in total operating expenses during the three months ended June 30, 2026, compared to the three months ended June 30, 2025, was primarily driven by increases in marketing and selling expenses and research and development expenses.
Marketing and Selling
Marketing and selling expenses consist of personnel and related overhead costs, corporate and product marketing, advertising, trade s hows, technical support for customer experiences and facilities costs.
During the three months ended June 30, 2026, marketing and selling expense s increased $23.9 million, compared to the three months ended June 30, 2025, primarily driven by strategic marketing investments across our product portfolio.
Research and Development
Research and development expenses consist of personnel and related overhead costs, fees for contractors and outside consultants, supplies and materials, equipment depreciation and facilities costs, all associated with the design and development of new products and enhancements of existin g products.
During the three months ended June 30, 2026, research and development expenses increased $10.0 million, compared to the three months ended June 30, 2025, primarily driven by increased investment in product innovation.
General and Administrative
General and administrative expenses primarily consist of personnel and related overhead costs, information technology, and facilities costs for the infrastructure functions such as finance, information systems, executives, human resources and legal.
During the three months ended June 30, 2026, general and administrative expenses remained relatively flat, compared to the three months ended June 30, 2025 .
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Amortization of Intangible Assets and Acquisition-Related Costs
Amortization of intangible assets consists of amortization of acquired intangible assets, including developed technology, customer relationships, and trademarks and trade names. Acquisition-related costs include legal expenses, due diligence costs, and other professional costs incurred for business acquisitions.
During the three months ended June 30, 2026, amortization of intangible assets and acquisition-related costs decreased $1.7 million, compared to the three months ended June 30, 2025, driven by full amortization of certain intangible assets.
Restructuring Charges, Net
The restructuring charges, net, for the three months ended June 30, 2026 and June 30, 2025 were related to costs incurred as a result of our restructuring plan initiated during the fourth quarter of fiscal year 2025, which was substantially completed in fiscal 2026.
Interest Income
Interest income for the three months ended June 30, 2026 and 2025 was as follows (in thousands):
Three Months Ended
June 30,
2026 2025
Interest income
$ 14,099 $ 11,229
We invest in highly liquid instruments with an original maturity of three months or less at the date of purchase, which are classified as cash equivalents. During the three months ended June 30, 2026, interest income increased $2.9 million, compared to the three months ended June 30, 2025, primarily driven by interest income associated with IEEPA tariff refunds.
Other Income (Expense), Net
Other income (expense), net, for the three months ended June 30, 2026 and 2025 was as follows (in thousands):
Three Months Ended
June 30,
2026 2025
Investment gain related to the deferred compensation plan
$ 3,254 $ 2,060
Currency exchange loss, net (2,190) (2,003)
Gain (loss) on investments, net 557 (393)
Non-service cost net pension income and other 1,309 1,498
Total $ 2,930 $ 1,162
Investment gain related to the deferred compensation plan represents earnings, gains, and losses on marketable securities related to a deferred compensation plan offered by one of our subsidiaries. The increase in investment gain for three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily relates to the change in market performance of the underlying securities.
Currency exchange loss, net, relates to balances denominated in currencies other than the functional currency in our subsidiaries, as well as the sale of currencies, and gains or losses recognized on currency exchange forward contracts. We do not speculate in currency positions, but we are alert to opportunities to maximize currency exchange gains and minimize currency exchange losses. The loss for the three months ended June 30, 2026 was primarily due to fluctuations in currency exchange rates of the Chinese Renminbi and Swiss Franc against the U.S. Dollar. The loss for the three months ended June 30, 2025 was primarily due to fluctuations in the currency exchange rates of the Swiss Franc and New Taiwan dollar against the U.S. Dollar.
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Gain (loss) on investments, net, includes unrealized gain (loss) from the change in fair value of investments, income (loss) on equity-method investments and impairment of investments during the periods presented, as applicable. The gain (loss) on investments, net, for the three months ended June 30, 2026 and 2025 were not material.
During the three months ended June 30, 2026 , non-service cost net pension income and oth er remained relatively flat , compared to the three months ended June 30, 2025.
Provision for Income Taxes
The provision for income taxes and effective income tax rates for the three months ended June 30, 2026 and 2025 were as follows (Dollars in thousands):
Three Months Ended
June 30,
2026 2025
Provision for income taxes $ 39,883 $ 28,470
Effective income tax rate 14.5 % 16.3 %
The change in the effective income tax rate for the three months ended June 30, 2026, compared with the three months ended June 30, 2025, was primarily due to the change in the mix of income and losses in the various tax jurisdictions in which we operate and higher tax benefits from share-based compensation.
Following the enactment of the One Big Beautiful Bill Act ("OBBBA") on July 4, 2025, several corporate tax provisions became effective for us beginning in fiscal year 2027, including adjustments to domestic R&D expensing, bonus depreciation, and modified international frameworks. Based on our evaluation of these provisions, the final impact of the OBBBA is expected to be de minimis for fiscal year 2027 and will not materially impact our consolidated financial statements or effective tax rate.
For the three months ended June 30, 2026, we assessed our exposure to the OECD Pillar Two global minimum tax rules and the newly released OECD Administrative Guidance package. While the package's "Side-by-Side" System—designed to align the U.S. tax framework with Pillar Two—does not apply directly to us as a non-U.S. headquartered multinational, the broader guidance introduces a new permanent safe harbor and a one-year extension of the transitional Country-by-Country Reporting ("CbCR") safe harbor. Based on Qualified CbCR data, we expect most jurisdictions in which we operate to continue qualifying for the transitional safe harbor. For the limited jurisdictions that do not qualify, the estimated top-up tax for fiscal year 2027 is expected to be de minimis and will not materially impact our consolidated financial statements or effective tax rate. We continue to monitor ongoing legislative developments but do not anticipate a material change to our Pillar Two liability.
Liquidity and Capital Resources
Cash Balances, Available Borrowings, and Capital Resources
As of June 30, 2026, we had cash and cash equivalents of $1,749.7 million, compared with $1,741.5 million as of March 31, 2026. Our cash and cash equivalents consist of bank demand deposits, short-term time deposits, and U.S. Treasury securities, of which 65% was held in the United States, 17% was held in Switzerland and 9% was held in China (including Hong Kong). We do not expect to incur any material adverse tax impact except for what has already been recognized, or to be significantly inhibited by any country in which we do business, from the repatriation of funds to Switzerland, our country of domicile.
As of June 30, 2026, our working capital was $1,770.8 million, compared to $1,602.3 million as of March 31, 2026. The increase was primarily driven by an increase in accounts receivable and other current assets, partially offset by an increase in accounts payable.
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On January 27, 2025, we entered into an unsecured revolving credit facility with a syndicate of banks (the "Credit Agreement"). The Credit Agreement provides a revolving line of credit of up to $750.0 million including the issuance of letters of credit of up to $100.0 million. The Credit Agreement terminates on January 27, 2030 unless extended in accordance with its terms. The Credit Agreement contains (1) an increase option allowing us to secure up to $250.0 million of additional commitments and (2) an extension option to extend the term by one-year which may be exercised no more than two times, subject to certain requirements. Loans under the Credit Agreement are available in U.S. Dollars, Euro, Sterling, Yen, Swiss Francs, Canadian Dollars, Australian Dollars and any other currency agreed to by each lender. Proceeds of loans made under the Credit Agreement may be used for general corporate purposes.
The Credit Agreement contains a maximum net debt to adjusted EBITDA ratio, compliance with which is a condition to our ability to borrow. Borrowings under the Credit Agreement will bear interest at a rate determined by reference to benchmark rates plus an applicable spread (ranging from 0% to 1.5%) based on our net leverage ratio or credit rating at the time of the borrowing. Undrawn balances available under the Credit Agreement are subject to commitment fees at the applicable rate determined by reference to our net leverage ratio or credit rating. There has been no borrowing outstanding under the Credit Agreement as of June 30, 2026.
In addition, we had several uncommitted, unsecured bank lines of credit and letters of credit aggregating to $151.2 million as of June 30, 2026. There are no financial covenants under these lines of credit with which we must comply. There was no borrowing outstanding under these lines of credit as of June 30, 2026. As of June 30, 2026, we had outstanding bank guarantees of $2.0 million.
Key Working Capital Metrics
The following table presents selected financial information and statistics as of and for the three months ended June 30, 2026 and 2025 (Dollars in thousands):
As of June 30,
2026 2025
Accounts receivable, net $ 668,497 $ 636,523
Accounts payable $ 585,798 $ 549,936
Inventories $ 491,743 $ 499,770
Days sales in accounts receivable (“DSO”) (Days) (1)
49 50
Days accounts payable outstanding (“DPO”) (Days) (2)
85 74
Inventory turnover (“ITO”) (x) (3)
5.0 5.4
(1) DSO is determined using ending accounts receivable, net, as of the most recent quarter-end and sales for the most recent quarter.
(2) DPO is determined using ending accounts payable as of the most recent quarter-end and cost of goods sold for the most recent quarter.
(3) ITO is determined using ending inventories as of the most recent quarter-end and annualized cost of goods sold (based on the most recent quarterly cost of goods sold).
DSO for the three months ended June 30, 2026 decreased by 1 day to 49 days, compared to 50 days for the three months ended June 30, 2025, primarily due to timing of sales and collections within the quarter.
DPO for the three months ended June 30, 2026 increased by 11 days to 85 days, compared to 74 days for the three months ended June 30, 2025, primarily due to the reduction in cost of goods sold resulting from refunds of IEEPA tariffs and higher inventory purchases to align with improved demand.
ITO for the three months ended June 30, 2026 decreased by 0.4 to 5.0, compared to 5.4 for the three months ended June 30, 2025, primarily due to the reduction in cost of goods sold resulting from refunds of IEEPA tariffs.
If we are not successful in launching and phasing in our new products, or market competition increases, or we are not able to sell the new products at the prices planned, it could have a material impact on our sales, gross profit, operating results including operating cash flow, and inventory turnover in the future.
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Cash Flow Activities
The following table summarizes our condensed consolidated statements of cash flows (in thousands):
Three Months Ended
June 30,
2026 2025
Net cash provided by operating activities $ 166,708 $ 125,045
Net cash used in investing activities (17,147) (18,100)
Net cash used in financing activities (140,653) (134,433)
Effect of exchange rate changes on cash and cash equivalents (775) 12,105
Net increase (decrease) in cash and cash equivalents $ 8,133 $ (15,383)
For the three months ended June 30, 2026, net cash provided by operating activities was $166.7 million resulting from net income of $235.7 million, a favorable impact from adding back non-cash expenses totaling $61.9 million, offset by an unfavorable net change in operating assets and liabilities of $130.9 million. Non-cash adjustments were primarily related to share-based compensation expenses, depreciation and amortization, and deferred income taxes. The increase in accounts receivable, net, was primarily driven by higher sales as well as timing of sales and collections within the quarter. The increase in accounts payable was driven by higher inventory purchases to align with demand, as well as the timing of purchases during the quarter.
For the three months ended June 30, 2026, net cash used in investing activities was $17.1 million, primarily resulting from $16.8 million of purchases of property, plant, and equipment.
For the three months ended June 30, 2026, net cash used in financing activities was $140.7 million, primarily resulting from payment for repurchases of our registered shares of $113.6 million.
For the three months ended June 30, 2026, the effect of exchange rate changes on cash and cash equivalents was not material.
Cash Outlook
Our principal sources of liquidity are our cash and cash equivalents, cash flow generated from operations and, to a much lesser extent, capital markets and borrowings. Our future working capital requirements and capital expenditures may increase to support investments in product innovations and growth opportunities or to acquire or invest in complementary businesses, products, services, and technologies. Our principal uses of cash, aside from operational needs and capital expenditures, include outlays for dividends and share repurchases reflecting our commitment to return value to our shareholders.
In May 2026, the Board of Directors recommended that we pay cash dividends for fiscal year 2026 of CHF 1.36 per share (approximately $1.70 per share based on the exchange rate on March 31, 2026). Based on our shares outstanding, net of treasury shares, as of March 31, 2026 (143,502,564 shares), this would result in an aggregate gross dividend of approximately CHF 195.2 million (approximately $243.9 million based on the exchange rate on March 31, 2026). In fiscal year 2026, we paid a cash dividend of CHF 1.26 per share, or CHF 185.1 million (U.S. Dollar amount of $233.1 million based on the exchange rate on the date of payment) out of fiscal year 2025 retained earnings.
In June 2023, our Board of Directors approved a three-year share repurchase program, which allows us to use up to $1.0 billion to repurchase our shares. The 2023 share repurchase program enables us to repurchase shares for cancellation, as well as to support equity incentive plans or potential acquisitions. The Swiss Takeover Board approved the 2023 share repurchase program in July 2023 and the program became effective on July 28, 2023. In March 2025, our Board of Directors approved an increase of $600.0 million to the 2023 share repurchase program, to an aggregate amount of $1.6 billion. The 2023 share repurchase program was completed in May 2026.
In March 2026, our Board of Directors approved a new, three-year share repurchase program to repurchase shares up to an aggregate amount of $1.4 billion, or a maximum of 16,078,446 shares. The 2026 share repurchase program enables us to repurchase shares for cancellation, as well as to support equity incentive plans or potential acquisitions. The program became effective on May 8, 2026, following approval from the Swiss Takeover Board. During the three months ended June 30, 2026, we repurchased 0.9 million shares for an aggregate cost of
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$100.8 million for cancellation under the 2026 share repurchase program, of which $28.0 million of the aggregate cost was not paid yet as of June 30, 2026. As of June 30, 2026 , $1.3 billion was available for repurchase under the 2026 share repurchase program.
Swiss law limits a company’s ability to hold or repurchase its own shares. The aggregate par value of all shares held in treasury by us and our subsidiaries may not exceed 10% of our issued share capital, which corresponds to approximately 16.1 million registered shares as of June 30, 2026. This limitation does not apply to shares repurchased for cancellation, due to the Board of Directors' authority under the capital band set forth in the Company's Articles of Incorporation. As of June 30, 2026, we had a total of 17.2 million shares held in treasury stock, which includes 5.6 million shares that have been repurchased for cancellation and 11.6 million shares that have been purchased to support equity incentive plans or potential acquisitions.
Although we enter into trading plans for systematic repurchases (e.g., 10b5-1 trading plans) from time to time, our share repurchase programs provide us with the opportunity to make opportunistic repurchases during periods of favorable market conditions. To the extent that the shares are repurchased to support equity incentive plans or potential acquisitions, the shares are repurchased on the ordinary trading line of the SIX Swiss Exchange and/or the Nasdaq Global Select Market. Shares repurchased for cancellation purposes are repurchased via a second trading line on the SIX Swiss Exchange. Opportunistic purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.
If we do not generate sufficient operating cash flows to support our operations and future planned cash requirements, our operations could be harmed and our access to credit facilities could be restricted or eliminated. Although we believe that the trend of our historical cash flow generation, our projections of future operations and our available cash balances will provide sufficient liquidity to fund our operations for at least the next 12 months, m arket volatility driven by the current macroeconomic and geopolitical environment may increase our costs of capital and otherwise adversely affect our business, results of operations, financial condition and liquidity.
Operating Lease Obligations
We lease facilities under operating leases, certain of which require us to pay property taxes, insurance and maintenance costs. Operating leases for facilities are generally renewable at our option and usually include escalation clauses linked to inflation . There have been no material changes to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the year ended March 31, 2026. The remaining terms of our non-cancelable operating leases expire in various years through 2036.
Purchase Commitments
As of June 30, 2026, we had non-cancelable purchase commitments of $528.0 million for inventory purchases made in the normal course of business from original design manufacturers, contract manufacturers and other suppliers, the majority of which are expected to be fulfilled within the next 12 months. We recorded a liability for firm, non-cancelable, and unhedged inventory purchase commitments in excess of anticipated demand or net realizable value consistent with our valuation of excess and obsolete inventory. As of June 30, 2026, the liability for these purchase commitments was $15.7 million and is recorded in accrued and other current liabilities in the condensed consolidated balance sheet.
As of June 30, 2026, we have firm purchase commitments of $19.4 million for capital expenditures primarily related to commitments for tooling and equipment for new and existing products. We expect to continue making capital expenditures in the future to support product development activities and ongoing and expanded operations. Although open purchase commitments are considered enforceable and legally binding, the terms generally allow us to reschedule or adjust our requirements based on business needs prior to delivery of goods or performance of services.
Other Contractual Obligations and Commitments
For further detail about our contractual obligations and commitments, refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
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Indemnifications
We indemnify certain suppliers and customers for losses arising from matters such as intellectual property disputes and product safety defects, subject to certain restrictions. The scope of these indemnities varies, but in some instances includes indemnification for damages and expenses, including reasonable attorneys’ fees. As of June 30, 2026, no material amounts have been accrued for indemnification provisions. We do not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under our indemnification arrangements.
We also indemnify our current and former directors and certain current and former officers. Certain costs incurred for providing such indemnification may be recoverable under various insurance policies. We are unable to reasonably estimate the maximum amount that could be payable under these arrangements because these exposures are not capped, the obligations are conditional in nature, and the facts and circumstances involved in any situation that might arise are variable.
Legal Proceedings
From time to time, we are involved in claims and legal proceedings that arise in the ordinary course of our business. For more information about Legal Proceedings, see Part II Item 1 Legal Proceedings of this quarterly report on Form 10-Q for the period ended June 30, 2026.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.