What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-29 compared with 2025-05-30 · 122 added, 66 removed, 161 unchanged (54% of the section changed)

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Leveraging leading intellectual property and deep system-level expertise, as well as highly innovative security firmware, our solutions are empowering the data economy and enabling the data center, enterprise networking, carrier infrastructure, consumer, and automotive/industrial end markets.

Net revenue in the first quarter of fiscal 2026 was $1.9 billion and was 63% higher than net revenue in the first quarter of fiscal 2025.

This was due to increases in sales from the data center end market by 76%, from the carrier infrastructure end market by 93%, from the enterprise networking end market by 16%, and from the consumer end market of 50%.

The increase was partially offset by a decrease in sales from the automotive/industrial end market by 2%.

We have seen strong revenue growth from our data center end market, driven by robust demand for our interconnect and custom compute products from AI applications.

In addition, following a period of inventory correction, we have continued to see revenue recovery in our carrier infrastructure and enterprise networking end markets.

The Company continues to monitor the environment for potential long-term impact on supply and demand from tariffs.

Net revenue in the second quarter of fiscal 2026 was $2.0 billion and was 58% higher than net revenue in the second quarter of fiscal 2025.

This was due to increases in sales from the data center end market by 69%, from the carrier infrastructure end market by 71%, from the enterprise networking end market by 28%, and from the consumer end market by 30%.

Sales from the automotive/industrial end market were relatively flat for the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025.

Strong revenue growth from our data center market was led by our custom products, as well as our electro-optics portfolio.

Additionally, following a period of inventory correction, we have continued to see revenue recovery in our carrier infrastructure and enterprise networking end markets, with both end markets growing significantly compared to the second quarter of fiscal 2025.

We continue to monitor the environment for potential long-term impact on supply and demand from tariffs.

On April 7, 2025, we entered into a definitive agreement to sell our automotive ethernet business to Infineon Technologies AG (the “Buyer”) for $2.5 billion in cash.

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In addition, we will license certain intellectual property to the Buyer in connection with the transferred business and provide certain temporary transition services following completion of the sale.

As of May 3, 2025, we classified assets held for sale of $588.2 million, which consisted of $29.0 million of inventories, $17.4 million of property and equipment, $524.7 million of goodwill, $14.0 million of acquired intangible assets, and other related assets.

The transaction is expected to close within calendar year 2025, subject to customary closing conditions and regulatory approvals.

As of August 2, 2025, we classified assets held for sale of $595.5 million, which consisted of $33.0 million of inventories, $20.3 million of property and equipment, $524.7 million of goodwill, $14.0 million of acquired intangible assets, and other related assets.

Subsequent to quarter end, on August 14, 2025, we completed the sale of our automotive ethernet business to the Buyer for $2.5 billion.

We expect to record a gain on sale in the third quarter of fiscal 2026.

See “Note 1 – Basis of Presentation” in the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

Government Incentives and Grants.

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In addition, certain jurisdictions in which we operate are pursuing alternative incentive programs, which operate within the Pillar Two tax framework.

On May 1, 2025, we received notification that our application for government incentives in a foreign jurisdiction in which we operate has been approved by the necessary government agencies.

On May 1, 2025, we received notification that our application for government incentives in a foreign jurisdiction in which we operate had been approved by the necessary government agencies.

For the duration of the incentive period from February 2, 2025, through February 1, 2030, qualifying expenditures and certain qualifying purchases will result in the generation of credits that will reduce qualifying cost of sales and operating expenses by the incentives earned, and the credits may be used to offset income taxes payable or be refunded in cash.

We believe there is reasonable assurance that we will meet the conditions of the incentive agreement and that the credits will ultimately be received and thus have recognized benefits associated with qualifying expenditures incurred in the current period.

Ultimate realization of the incentives is subject to satisfying certain minimum investment levels over the course of the incentive period and government agency reviews and audits of qualifying expenditures.

We cannot guarantee that we will achieve the agreed upon investment levels over the incentive period and any failure to meet these investment levels may result in a clawback of some or all of the incentives and a corresponding reversal of any benefit recognized.

We cannot guarantee that we will achieve the agreed upon investment levels over the incentive period and any failure to meet these investment levels or any change in the current law or government regulations may result in a clawback of some or all of the incentives and a corresponding reversal of any benefit recognized.

Capital Return Program.

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The extent to which we repurchase our stock and the timing of such repurchases will depend upon market conditions, legal rules and regulations, and other corporate considerations, as determined by our management team.

During the three months ended May 3, 2025, we repurchased 5.6 million shares of our common stock for $340.0 million.

As of May 3, 2025, $2.2 billion remained available for future stock repurchases.

We returned $391.8 million to stockholders in the three months ended May 3, 2025 through $340.0 million in repurchases of shares of our common stock and $51.8 million in cash dividends.

During the six months ended August 2, 2025, we repurchased 8.3 million shares of our common stock for $540.0 million.

As of August 2, 2025, $2.0 billion remained available for future stock repurchases.

We returned $643.5 million to stockholders in the six months ended August 2, 2025 through $540.0 million in repurchases of shares of our common stock and $103.5 million in cash dividends.

Cash and Short-Term Investments.

Our cash and cash equivalents were $885.9 million at May 3, 2025, which were $62.4 million lower than our balance at February 1, 2025 of $948.3 million.

Our cash and cash equivalents were $1.2 billion at August 2, 2025, which were $276.1 million higher than our balance at February 1, 2025 of $948.3 million.

Sales and Customer Composition.

Our accounts receivable was concentrated with five customers at May 3, 2025, who represented a total of 72% of gross accounts receivable, compared with two customers at May 4, 2024, who represented a total of 70% of gross accounts receivable.

Our accounts receivable was concentrated with five customers at August 2, 2025, who represented a total of 73% of gross accounts receivable, compared with four customers at August 3, 2024, who represented a total of 70% of gross accounts receivable.

Net revenue attributable to significant customers including both distributor and direct customers whose revenues represented 10% or more of total net revenue is presented in the following table:

Three Months Ended

Three Months Ended Six Months Ended

2025 August 3,

2024 August 2,

2025 August 3,

Direct Customer:

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Most of our sales are made to customers with operations located outside of the United States, primarily in Asia, and a majority of our products are manufactured outside the United States.

Sales shipped to customers with operations in Asia represented approximately 74% of our net revenue in the three months ended May 3, 2025, and approximately 73% of our net revenue in the three months ended May 4, 2024.

Sales shipped to customers with operations in Asia represented approximately 76% and 75% of our net revenue in the three and six months ended August 2, 2025, respectively, and approximately 77% and 75% of our net revenue in the three and six months ended August 3, 2024, respectively.

Because many manufacturers and manufacturing subcontractors of our customers are located in Asia, we expect that most of our net revenue will continue to be represented by sales to our customers in that region.

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Critical Accounting Policies and Estimates

There have been no material changes during the three months ended May 3, 2025 to our critical accounting policies and estimates from the information provided in the “Critical Accounting Policies and Estimates” section of Part II, Item 7, “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 February 1, 2025.

There have been no material changes during the three months ended August 2, 2025 to our critical accounting policies and estimates from the information provided in the “Critical Accounting Policies and Estimates” section of Part II, Item 7, “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 February 1, 2025.

In the current macroeconomic environment, our estimates could require increased judgment and carry a higher degree of variability and volatility.

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The following table sets forth information derived from our Unaudited Condensed Consolidated Statements of Operations expressed as a percentage of net revenue:

Three Months Ended

Three Months Ended Six Months Ended

2025 August 3,

2024 August 2,

2025 August 3,

Net revenue 100.0 % 100.0 % 100.0 % 100.0 %

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Net income (loss) 9.7 % (15.2) % 9.6 % (16.8) %

Three months ended May 3, 2025 and May 4, 2024

Three Months Ended

Three and six months ended August 2, 2025 and August 3, 2024

Three Months Ended Six Months Ended

2025 August 3,

Change August 2,

2025 August 3,

(in millions, except percentage)

Net revenue $ 2,006.1 $ 1,272.9 57.6% $ 3,901.4 $ 2,433.8 60.3%

Our net revenue for the three months ended May 3, 2025 increased by $734.4 million, or 63%, compared to net revenue for the three months ended May 4, 2024.

Our net revenue for the three months ended August 2, 2025 increased by $733.2 million, or 58%, compared to net revenue for the three months ended August 3, 2024.

This was primarily due to a 69% increase in sales from the data center end market which benefited from strong AI demand.

The increase was also driven by increases in sales from the carrier infrastructure end market by 93%, from the enterprise networking end market by 16%, and from the consumer end market of 50%, which have been experiencing increases in demand.

The increase was partially offset by a decrease in sales from the automotive/industrial end market by 2%.

The increase was also driven by increases in sales from the carrier infrastructure end market by 71%, from the enterprise networking end market by 28%, and from the consumer end market by 30%, which have been experiencing increases in demand.

Sales from the automotive/industrial end market were relatively flat for three months ended August 2, 2025 compared to the three months ended August 3, 2024.

Our net revenue for the six months ended August 2, 2025 increased by $1.5 billion, or 60%, compared to net revenue for the six months ended August 3, 2024.

This was primarily due to a 73% increase in sales from the data center end market which benefited from strong AI demand.

The increase was also driven by increases in sales from the carrier infrastructure end market by 82%, from the enterprise networking end market by 22%, and from the consumer end market by 37%, which have been experiencing increases in demand.

Sales from the automotive/industrial end market were relatively flat for six months ended August 2, 2025 compared to the six months ended August 3, 2024.

Cost of Goods Sold and Gross Profit

Three Months Ended

Three Months Ended Six Months Ended

2025 August 3,

Change August 2,

2025 August 3,

(in millions, except percentage)

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% of net revenue 50.4 % 46.2 % 50.3 % 45.8 %

Cost of goods sold as a percentage of net revenue decreased for the three months ended May 3, 2025 compared to the three months ended May 4, 2024, which was primarily due to better cost absorption driven by higher revenues, partially offset by a shift in product mix.

As a result, gross margin for the three months ended May 3, 2025 increased by 4.8 percentage points compared to the three months ended May 4, 2024.

Cost of goods sold as a percentage of net revenue decreased for the three and six months ended August 2, 2025 compared to the three and six months ended August 3, 2024, which was primarily due to better cost absorption driven by higher revenues, partially offset by a shift in product mix.

As a result, gross margin for the three and six months ended August 2, 2025 increased by 4.2 and 4.5 percentage points, respectively, compared to the three and six months ended August 3, 2024.

Research and Development

Three Months Ended

Three Months Ended Six Months Ended

2025 August 3,

Change August 2,

2025 August 3,

(in millions, except percentage)

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% of net revenue 25.9 % 38.2 % 26.3 % 39.6 %

Research and development expense increased by $31.6 million in the three months ended May 3, 2025 compared to the three months ended May 4, 2024.

The increase was primarily due to $18.7 million of higher employee compensation and related costs, as well as an increase in stock-based compensation expense.

The increase was also due to higher overall spending to support our R&D initiatives.

Research and development expense increased by $32.3 million in the three months ended August 2, 2025 compared to the three months ended August 3, 2024.

The increase was primarily due to higher overall spending to support our R&D initiatives, including $15.9 million of higher engineering design related costs.

Research and development expense increased by $63.9 million in the six months ended August 2, 2025 compared to the six months ended August 3, 2024.

The increase was primarily due to $21.6 million of higher employee compensation and related costs, as well as higher overall spending to support our R&D initiatives, including $11.0 million of higher engineering design related costs.

Selling, General and Administrative

Three Months Ended

Three Months Ended Six Months Ended

2025 August 3,

Change August 2,

2025 August 3,

(in millions, except percentage)

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% of net revenue 9.6 % 15.5 % 9.7 % 16.3 %

Selling, general and administrative expense decreased by $13.5 million in the three months ended May 3, 2025 compared to the three months ended May 4, 2024.

The decrease was primarily due to lower amortization expense for acquired intangible assets, as well as lower acquisition related costs.

The decrease was partially offset by higher employee compensation and related costs.

Selling, general and administrative expense decreased by $4.5 million and $18.0 million, respectively, in the three and six months ended August 2, 2025 compared to the three and six months ended August 3, 2024.

The decreases were primarily due to lower amortization expense for acquired intangible assets.

Restructuring Related Charges (Gains), Net

Three Months Ended

Three Months Ended Six Months Ended

2025 August 3,

Change August 2,

2025 August 3,

(in millions, except percentage)

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% of net revenue 0.4 % 0.4 % (0.1) % 0.3 %

We recognized a net restructuring gain of $12.3 million in the three months ended May 3, 2025 as we continued to evaluate our existing operations to increase operational efficiency, decrease costs and increase profitability.

We recognized restructuring related charges of $8.7 million in the three months ended August 2, 2025, and a net restructuring gain of $3.6 million in the six months ended August 2, 2025 as we continued to evaluate our existing operations to increase operational efficiency, decrease costs and increase profitability.

See “Note 7 – Restructuring” in the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

Interest and Other Loss, Net

Three Months Ended

Three Months Ended Six Months Ended

2025 August 3,

Change August 2,

2025 August 3,

(in millions, except percentage)

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% of net revenue (2.9) % (3.6) % (2.9) % (3.7) %

Interest and other loss, net increased by $9.2 million in the three months ended May 3, 2025 compared to the three months ended May 4, 2024.

The increase was primarily due to higher net losses recognized from equity investments.

Interest and other loss, net increased by $10.6 million in the three months ended August 2, 2025 compared to the three months ended August 3, 2024.

The increase was primarily due costs related to the sale of our automotive ethernet business, as well as higher interest expense.

Interest and other loss, net increased by $19.8 million in the six months ended August 2, 2025 compared to the six months ended August 3, 2024.

The increase was primarily due to higher net losses recognized from equity investments, costs related to the sale of our automotive ethernet business, as well as higher interest expense.

Provision for income taxes

Three Months Ended

Three Months Ended Six Months Ended

2025 August 3,

Change August 2,

2025 August 3,

(in millions, except percentage)

Provision for income taxes $ 38.9 $ 47.1 (17.4)% $ 76.9 $ 64.9 18.5%

Our income tax expense for the three months ended May 3, 2025 was $38.0 million compared to a tax expense of $17.8 million for the three months ended May 4, 2024.

Our income tax expense for the three months ended August 2, 2025 was $38.9 million compared to a tax expense of $47.1 million for the three months ended August 3, 2024.

These amounts differed from the U.S.

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The recorded tax expense is based on year-to-date pretax results, forecasted pretax results, forecasted annual tax expense and discrete adjustments for the respective periods.

Our income tax expense for the six months ended August 2, 2025 was $76.9 million compared to a tax expense of $64.9 million for the six months ended August 3, 2024.

These amounts differed from the U.S.

federal statutory tax rate of 21%, primarily due to a substantial portion of earnings or losses being taxed or benefited at rates lower than the U.S.

statutory rate, net of the impact of U.S.

taxation of foreign operations, benefits from tax credits, valuation allowance releases, and discrete tax benefits and expenses for excess deductions and deficiencies on stock-based compensation.

The recorded tax expense is based on year-to-date pretax results, forecasted pretax results, forecasted annual tax expense and discrete adjustments for the respective periods.

The One Big Beautiful Bill Act of 2025 (the “2025 Tax Act”) was signed into law on July 4, 2025.

The 2025 Tax Act makes permanent key elements of the 2017 Tax Cuts and Jobs Act, including domestic research cost expensing, 100% bonus depreciation and makes modifications to the U.S.

International tax framework.

Our tax provision for the August 2, 2025 period includes the estimated impact of the 2025 Tax Act.

We will continue to evaluate the impact of the 2025 Tax Act on our income taxes.

Subsequent to quarter end, on August 14, 2025, we completed the sale of our automotive ethernet business to the Buyer for $2.5 billion.

We expect to record the tax impact related to the gain on sale in the third quarter of fiscal 2026.

Our provision for incomes taxes may be affected by changes in the geographic mix of earnings with different applicable tax rates, acquisitions, changes in the realizability of deferred tax assets, accruals related to contingent tax liabilities and period-to-period changes in such accruals, the results of income tax audits, the expiration of statutes of limitations, the implementation of tax planning strategies, tax rulings, court decisions, settlements with tax authorities and changes in tax laws and regulations.

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We are subject to legislation based on the Organization for Economic Cooperation and Development’s 15% global minimum tax regime which applies to the majority of countries in which we operate.

The enacted legislation did not have a significant effect on our provision for income taxes during the three months ended May 3, 2025.

The enacted legislation did not have a significant effect on our provision for income taxes during the six months ended August 2, 2025.

The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which those assets become deductible or creditable.

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Liquidity and Capital Resources

Our principal source of liquidity as of May 3, 2025 consisted of approximately $885.9 million of cash and cash equivalents, of which approximately $649.7 million was held by subsidiaries outside of the United States, a portion of which are deemed to be indefinitely reinvested.

Our principal source of liquidity as of August 2, 2025 consisted of approximately $1.2 billion of cash and cash equivalents, of which approximately $973.8 million was held by subsidiaries outside of the United States, a portion of which are deemed to be indefinitely reinvested.

We manage our worldwide cash requirements by, among other things, reviewing available funds held by our foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States.

As of May 3, 2025, we had total borrowings outstanding of $4.3 billion, of which $1.3 billion is due within twelve months, consisting of $3.5 billion of senior notes outstanding, $557.8 million outstanding under our 5-Year Tranche Loan (“2026 Term Loan”), and $200.0 million under our revolving credit facility.

We intend to repay the current amounts due with operating cash flows or opportunistically refinance such debt.

For the three months ended May 3, 2025, we rep aid $32.8 million of the principal outstanding of the 2026 Term Loan.

We have a revolving credit facility with a borrowing capacity of $1.0 billion and a 5-year term (“2023 Revolving Credit Facility”).

During the first quarter of fiscal 2026, we drew down $200.0 million on the 2023 Revolving Credit Facility that remains outstanding as of May 3, 2025, and which we intend to repay during fiscal 2026.

As of May 3, 2025, $800.0 million of the $1.0 billion total borrowing capacity under the 2023 Revolving Credit Facility was undrawn and is available for draw down through April 14, 2028.

As of August 2, 2025, we had total borrowings outstanding of $4.5 billion, consisting of senior notes outstanding, of which $499.3 million is due within twelve months.

During the first quarter of fiscal 2026, we repaid $32.8 million of the principal outstanding of the 5-Year Tranche Loan.

During the second quarter of fiscal 2026, the 5-Year Tranche Loan, due on April 20, 2026, which had a remaining principal of $557.8 million, was repaid in full.

On June 30, 2025, we entered into an agreement to amend and restate the credit facility to increase the borrowing capacity to $1.5 billion (as so amended and restated, the “2025 Revolving Credit Facility”).

The 2025 Revolving Credit Facility has a 5-year term and a stated floating interest rate which equates to an adjusted term SOFR plus an applicable margin.

During the second quarter of fiscal 2026, we repaid $200.0 million on the 2025 Revolving Credit Facility that was outstanding from the first quarter of fiscal 2026.

As of August 2, 2025, the 2025 Revolving Credit Facility was undrawn and is available for draw down through June 30, 2030.

On June 30, 2025, we completed a debt offering and issued (i) $500.0 million of Senior Notes with a 5-year term due in 2030 (“2030 Senior Notes”) and (ii) $500.0 million of Senior Notes with a 10-year term due in 2035 (“2035 Senior Notes”).

For a description of our contractual obligations including debt and purchase commitments, see “Note 6 – Debt,” and “Note 8 – Commitments and Contingencies” in the Notes to Unaudited Condensed Consolidated Financial Statements.

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We may elect to factor trade accounts receivable from time to time as part of our overall liquidity and working capital management strategy.

During the three months ended May 3, 2025, we generated cash from operations from the sale of certain trade accounts receivable on a non-recourse basis to a third-party financial institution pursuant to a factoring arrangement.

During the three and six months ended August 2, 2025, we generated cash from operations from the sale of certain trade accounts receivable on a non-recourse basis to a third-party financial institution pursuant to a factoring arrangement.

See “Note 12 – Supplemental Financial Information” in the Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

Subsequent to quarter end, on August 14, 2025, we completed the sale of our automotive ethernet business to the Buyer for $2.5 billion.

We expect to record a gain on sale in the third quarter of fiscal 2026.

See “Note 1 – Basis of Presentation” in the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

We believe that our existing cash and cash equivalents, together with cash generated from operations, and funds from our 2025 Revolving Credit Facility will be sufficient to cover our working capital needs, capital expenditures, investment requirements, any declared dividends, repurchases of our common stock and commitments (including those discussed in “Note 8 – Commitments and Contingencies” in the Notes to Unaudited Condensed Consolidated Financial Statements) for at least the next twelve months.

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Cash Flows from Operating Activities

Net cash provided by operating activities for the three months ended May 3, 2025 was $332.9 million.

Net cash provided by operating activities for the six months ended August 2, 2025 was $794.5 million.

We had a net income of $372.7 million adjusted for the following non-cash items:

amortization of acquired intangible assets of $489.4 million, stock-based compensation expense of $295.7 million, depreciation and amortization of $168.3 million, restructuring related gains of $14.0 million, deferred income tax benefit of $9.2 million, and $80.8 million of net loss from other non-cash items.

Cash outflow from working capital of $342.8 million for the three months ended May 3, 2025 was primarily driven by a decrease in accrued employee compensation, and increases in accounts receivable and inventories.

Cash outflow from working capital of $589.2 million for the six months ended August 2, 2025 was primarily driven by increases in accounts receivable, prepaid expenses and other assets, and inventories, and decreases in accrued employee compensation and accounts payable, partially offset by an increase in accrued liabilities and other non-current liabilities.

The increase in accounts receivable was primarily due to higher sales and the impact of factoring of receivables.

The increase in prepaid expenses and other assets was primarily due to receivables for government incentives earned.

Inventories increased in support of expected revenue growth.

The decrease in accrued employee compensation was due to bonus payout of our annual employee bonus plan.

The increase in accounts receivable was primarily due to higher sales and lower distribution sales reserves, partially offset by higher factored receivables.

Inventories grew sequentially in support of expected revenue growth.

Net cash provided by operating activities for the three months ended May 4, 2024 was $324.5 million.

The decrease in accounts payable is due to the timing of payments.

The increase in accrued liabilities and other non-current liabilities was primarily driven by higher ship and debit claims accrual.

Net cash provided by operating activities for the six months ended August 3, 2024 was $630.9 million.

We had a net loss of $408.9 million adjusted for the following non-cash items:

amortization of acquired intangible assets of $540.6 million, stock-based compensation expense of $291.4 million, depreciation and amortization of $148.9 million, deferred income tax benefit of $58.3 million, and $33.1 million of net loss from other non-cash items.

Cash inflow from working capital of $65.8 million for the three months ended May 4, 2024 was primarily driven by decreases in accounts receivable, prepaid expenses and other assets, and inventory, partially offset by decreases in accrued liabilities and other non-current liabilities, accrued employee compensation, and accounts payable.

Cash inflow from working capital of $81.8 million for the six months ended August 3, 2024 was primarily driven by decreases in accounts receivable, prepaid expenses and other assets, and inventories, and an increase in accounts payable, partially offset by decreases in accrued liabilities and other non-current liabilities, and accrued employee compensation.

The decrease in accounts receivable was primarily due to decreased sales.

The decrease in prepaid expenses and other assets was primarily driven by a decrease in prepaid ship and debits due to lower inventory balances at distributors, a decrease in prepaid corporate income tax, partially offset by payments on supply capacity reservation agreements, net of refunds.

The decrease in inventory was primarily a result of managing the supply chain in a slower demand environment.

The decrease in accrued liabilities and other non-current liabilities was primarily driven by lower ship and debit claims accrual due to lower inventory balances at distributors, interest payments net of accruals, and a decrease in stock rotation accruals.

The decrease in prepaid expenses and other assets was primarily driven by a decrease in prepaid ship and debits due to lower inventory balances at distributors, and a decrease in prepaid corporate income tax, partially offset by payments on supply capacity reservation agreements, net of refunds.

The decrease in inventories was primarily due to an increase in demand and focused effort on supply chain efficiency as demand improves.

The increase in accounts payable was primarily due to the timing of payments.

The decrease in accrued liabilities and other non-current liabilities was primarily driven by lower ship and debit claims accrual due to lower inventory balances at distributors, partially offset by increases in income tax payable, interest accruals, and stock rotation accruals.

The decrease in accrued employee compensation was due to bonus payout of our annual employee bonus plan.

The decrease in accounts payable was primarily due to the timing of payments.

Cash Flows from Investing Activities

For the three months ended May 3, 2025, net cash used in investing activities of $94.1 million was primarily driven by purchases of property and equipment of $118.8 million, partially offset by proceeds from sales of property and equipment of $25.9 million.

For the three months ended May 4, 2024, net cash used in investing activities of $101.9 million was primarily driven by purchases of property and equipment of $91.5 million.

For the six months ended August 2, 2025, net cash used in investing activities of $171.3 million was primarily driven by purchases of property and equipment of $166.3 million, partially offset by proceeds from sales of property and equipment of $27.3 million.

For the six months ended August 3, 2024, net cash used in investing activities of $154.9 million was primarily driven by purchases of property and equipment of $139.7 million.

Cash Flows from Financing Activities

For the three months ended May 3, 2025, net cash used in financing activities of $301.2 million was primarily attributable to $340.0 million repurchases of common stock, $51.8 million for payment of our quarterly dividends, $50.2 million for tax withholding payments on behalf of employees for net share settlements, $32.8 million repayment of debt principal, and $26.8 million payments on technology license obligations, partially offset by $200.0 million proceeds from borrowings.

For the three months ended May 4, 2024, net cash used in financing activities of $325.7 million was primarily attributable to $150.0 million repurchases of common stock, $74.1 million for tax withholding payments on behalf of employees for net share settlements, $51.8 million for payment of our quarterly dividends, $30.2 million payments on technology license obligations, and $21.9 million repayment of debt principal, partially offset by $2.3 million in proceeds from the issuance of common stock under our employee stock plans.

For the six months ended August 2, 2025, net cash used in financing activities of $347.1 million was primarily attributable to $790.6 million repayment of debt principal, $540.0 million repurchases of common stock, $103.5 million for payment of our quarterly dividends, $100.9 million for tax withholding payments on behalf of employees for net share settlements, and $54.3 million payments on technology license obligations, partially offset by $1.2 billion proceeds from borrowings, and $51.1 million in proceeds from the issuance of common stock under our employee stock plans.

For the six months ended August 3, 2024, net cash used in financing activities of $618.1 million was primarily attributable to $325.0 million repurchases of common stock, $131.7 million for tax withholding payments on behalf of employees for net share settlements, $103.7 million for payment of our quarterly dividends, $65.5 million payments on technology license obligations, and $43.8 million repayment of debt principal, partially offset by $51.6 million in proceeds from the issuance of common stock under our employee stock plans.

Indemnification Obligations

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis