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Item 7. Management’s Discussion and Analysis

2026-03-11 compared with 2025-03-12 · 124 added, 100 removed, 249 unchanged (47% of the section changed)

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We are a fabless supplier of high-performance semiconductor products with core strengths in developing and scaling complex System-on-a-Chip architectures, integrating analog, mixed-signal and digital signal processing functionality.

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.

Our fiscal year is the 52- or 53-week period ending on the Saturday closest to January 31.

Accordingly, every fifth or sixth fiscal year will have a 53-week period.

The additional week in a 53-week year is added to the fourth quarter, making such quarter consist of 14 weeks.

Fiscal 2024 had a 53-week period.

The additional week in a 53-week period is added to the fourth quarter, making such quarter consist of 14 weeks.

Fiscal 2026 and fiscal 2025 each had a 52-week period.

Net revenue in fiscal 2025 was $5.8 billion and was 5% higher than net revenue of $5.5 billion in fiscal 2024.

This was due to an 88% increase in sales from the data center end market compared to fiscal 2024.

The increase was partially offset by decreases in sales from the carrier infrastructure end market by 68%, from the enterprise networking end market by 49%, from the consumer end market by 49% and from the automotive/industrial end market by 17%.

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 started to see demand stabilize in our enterprise networking and carrier infrastructure end markets.

To secure capacity over the long term, we have entered into capacity reservation arrangements with certain foundries and partners.

See “Note 8 – Commitments and Contingencies” in the Notes to Consolidated Financial Statements for additional information.

Fiscal 2024 had a 53-week period.

Net revenue in fiscal 2026 was $8.2 billion, 42% higher than net revenue of $5.8 billion in fiscal 2025.

This was due to increases in sales from the data center end market by 46% and from the communications and other end market by 31%.

The increase was partially offset by a decrease in sales from our automotive ethernet product portfolio due to the divestiture of our automotive ethernet business at the beginning of the third quarter of fiscal 2026.

Strong revenue growth from our data center market was driven by AI-related demand for our custom products and electro-optics portfolio.

Additionally, following a period of inventory correction, we have continued to see revenue recovery in our communication and other end market growing significantly compared to fiscal 2025.

On August 14, 2025, we completed the sale of our automotive ethernet business to Infineon Technologies AG for $2.5 billion in cash.

During the third quarter of fiscal 2026, we recorded a pre-tax gain on sale of $1.8 billion, which is included in interest income and other, net in the Consolidated Statements of Operations.

Subsequent to our fiscal 2026 year end, on February 2, 2026, we completed the previously announced acquisition of Celestial AI, Inc.

(“Celestial”), a provider of a Photonic Fabric TM technology platform purpose-built for next-generation scale-up interconnect.

The acquisition of Celestial is expected to accelerate our connectivity strategy for next-generation AI and cloud data centers.

At acquisition close, we paid approximately $1.3 billion in cash (or $1.0 billion, net of cash acquired of approximately $300.0 million) and issued approximately 24.5 million shares of our common stock.

Contingent on the achievement of specified revenue milestones, we may be required to pay additional cash and issue additional shares of our common stock through fiscal 2029.

Subsequent to our fiscal 2026 year end, on February 10, 2026, we completed the previously announced acquisition of XConn Technologies Holdings, Ltd.

(“XConn”), a provider of advanced PCIe and CXL switching silicon, which expands our switching portfolio and augments our Ultra Accelerator Link (“UALink TM ”) scale-up switch team.

At acquisition close, we paid approximately $280.0 million in cash and issued approximately 2.1 million shares of our common stock.

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

We expect that the U.S.

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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.

If we enter into such an incentive, it could have a significant effect on our future operating results and cash flows.

We are currently in negotiation for such incentives with a governmental agency, and if agreement is reached, the incentive could have a significant effect on our operating results beginning in fiscal 2026 and continuing for the duration of the agreed-upon incentive period.

Restructuring .

We continuously evaluate our existing operations to increase operational efficiency, decrease costs and increase profitability.

A restructuring plan was initiated during the third quarter of fiscal 2025 to increase research and development investment in the data center end market and reduce investment in new product development in other end markets including the cancellation of certain future product releases.

We recognized $711.8 million of restructuring related charges for the year ended February 1, 2025, mainly comprised of impairment and write-off of acquired intangible assets, purchased technology licenses, inventories, property and equipment, and other non-current assets, as well as recognition of future contractual obligations, severance, other one-time termination benefits, and other costs.

See “Note 4 – Restructuring” in the Notes to Consolidated Financial Statements for further information.

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 fiscal year.

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 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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Under the program authorized by our Board of Directors, we may repurchase shares of our common stock in the open-market or through privately negotiated transactions.

On September 24, 2025, we executed an accelerated share repurchase agreement (“ASR Agreement”) with a counterparty financial institution to repurchase shares of our common stock in exchange for an upfront payment of $1.0 billion.

See “Note 10 – Stockholders’ Equity” in the Notes to Consolidated Financial Statements for additional information.

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.

On March 7, 2024, we announced that our Board of Directors authorized a $3.0 billion addition to the balance of our existing stock repurchase program.

During the year ended February 1, 2025, we repurchased 9.0 million shares of our common stock for $725.0 million.

As of February 1, 2025, $2.6 billion remained available for future stock repurchases.

Subsequent to fiscal 2025 year end through March 11, 2025, we repurchased 0.7 million shares of our common stock for $45.0 million.

See “Note 10 – Stockholders’ Equity” in the Notes to Consolidated Financial Statements for further information.

We returned $932.5 million to stockholders in fiscal 2025 through $725.0 million in repurchases of shares of our common stock and $207.5 million in cash dividends.

During fiscal 2026, we repurchased 26.6 million shares of our common stock for $2.0 billion.

As of January 31, 2026, $5.5 billion remained available for future stock repurchases.

We returned $2.2 billion to stockholders in fiscal 2026 through $2.0 billion in repurchases of our common stock and $205.1 million in cash dividends.

Cash and Short-Term Investments.

Our cash and cash equivalents were $948.3 million at February 1, 2025, which were $2.5 million lower than our balance at February 3, 2024 of $950.8 million.

Our cash and cash equivalents were $2.6 billion at January 31, 2026, which were $1.7 billion higher than our balance at February 1, 2025 of $948.3 million.

Sales and Customer Composition.

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Conversely, we may have insufficient inventory or be unable to obtain the supplies or contract manufacturing capacity to meet demand, which would result in lost revenue opportunities and potential loss of market share as well as damaged customer relationships.

To secure capacity over the long term, we have entered into capacity reservation arrangements with certain foundries and partners.

See “Note 8 – Commitments and Contingencies” in the Notes to Consolidated Financial Statements for additional information.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, provisions for sales returns and allowances, inventory excess and obsolescence, goodwill and other intangible assets, restructuring, income taxes, litigation, and other contingencies.

On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, provisions for sales returns and allowances, inventory excess and obsolescence, goodwill and other intangible assets, business combinations, restructuring, government incentives, income taxes, litigation, and other contingencies.

We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that are believed to be reasonable under the circumstances when these carrying values are not readily available from other sources.

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In addition, our industry is characterized by rapid technological change, frequent new product development and rapid product obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand.

Additionally, our estimates of future product demand and judgement to determine excess inventory may prove to be inaccurate, in which case we may have understated or overstated the reduction to the total carrying value of our inventory for excess and obsolete inventory.

Additionally, our estimates of future product demand and judgment to determine excess inventory may prove to be inaccurate, in which case we may have understated or overstated the reduction to the total carrying value of our inventory for excess and obsolete inventory.

In the future, if our inventory is determined to be overvalued, we would be required to recognize such costs in our cost of goods sold at the time of such determination.

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Accounting for Income Taxes.

We estimate our income taxes in each of the jurisdictions in which we operate.

We estimate our income taxes in the jurisdictions in which we operate.

This process involves estimating our actual tax expense together with assessing temporary differences resulting from the differing treatment of certain items for tax return and financial statement purposes.

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Business Combinations.

We allocate the fair value of the purchase consideration of a business acquisition to the tangible assets, liabilities, and intangible assets acquired, including in-process research and development (“IPR&D”), based on their estimated fair values.

We allocate the fair value of the purchase consideration, including any contingent consideration, of a business acquisition to the tangible assets, liabilities, and intangible assets acquired, including in-process research and development (“IPR&D”), based on their estimated fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

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When an IPR&D project is completed, the IPR&D is reclassified as an amortizable purchased intangible asset and amortized over the asset’s estimated useful life.

Our valuation of acquired assets and assumed liabilities requires significant estimates, especially with respect to intangible assets.

The valuation of intangible assets, in particular, requires that we use valuation techniques such as the income approach.

The income approach includes the use of a discounted cash flow model, which includes discounted cash flow scenarios and requires the following significant estimates:

future expected revenue, expenses, capital expenditures and other costs, and discount rates.

The accounting for business combinations requires management to make significant estimates and assumptions, especially with respect to the fair value of intangible assets and contingent consideration, in which we typically use the income approach methodology.

Critical estimates used for the valuation of acquired intangible assets can include, but are not limited to, forecasted revenue, expenses, capital expenditures and other costs, and discount rates.

Critical estimates used for the valuation of contingent consideration can include, but are not limited to, probability of achievement, stock price, performance period, volatility and other relevant assumptions.

We estimate the fair value based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.

Acquisition-related expenses and related restructuring costs are recognized separately from the business combination and are expensed as incurred.

Results of Operations

Years Ended February 1, 2025 and February 3, 2024

Years Ended January 31, 2026 and February 1, 2025

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

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Selling, general and administrative 9.4 13.8

Restructuring related charges 6.1 2.4

Restructuring related charges, net 0.2 6.1

Total operating expenses 34.9 53.8

Operating loss (12.5) (10.3)

Interest and other loss, net (3.0) (3.4)

Loss before income taxes (15.5) (13.7)

Operating income (loss) 16.1 (12.5)

Interest and other income (loss), net 21.1 (3.0)

Income (loss) before income taxes 37.2 (15.5)

Provision (benefit) for income taxes 4.6 (0.2)

Net loss (15.3) % (16.9) %

Net income (loss) 32.6 % (15.3) %

2026 February 1,

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Net revenue $ 8,194.6 $ 5,767.3 42.1%

Our net revenue for fiscal 2025 increased by $259.6 million compared to net revenue for fiscal 2024.

This was primarily due to an 88% increase in sales from the data center end market which benefited from strong AI demand.

The increase was partially offset by a decrease in sales from the carrier infrastructure end market by 68%, from the enterprise networking end market by 49%, from the consumer end market by 49%, and from the automotive/industrial end market by 17%, which have been navigating inventory corrections and soft industry demand.

Our net revenue for fiscal 2026 increased by $2.4 billion compared to net revenue for fiscal 2025.

This was primarily due to a 46% increase in sales from the data center end market which benefited from strong AI-related demand.

Sales from the communications and other end market also increased by 31%, which has continued to recover due to normalizing customer inventory levels and strong adoption of our products, partially offset by a decrease in sales from our automotive ethernet product portfolio due to the divestiture of our automotive ethernet business at the beginning of the third quarter of fiscal 2026.

Cost of Goods Sold and Gross Profit

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% of net revenue 51.0 % 41.3 %

Cost of goods sold as a percentage of net revenue was relatively flat for fiscal 2025 compared to fiscal 2024.

Cost of goods sold in fiscal 2025 was impacted by impairment charges of $357.9 million for acquired intangible assets, inventories, property and equipment, and other non-current assets associated with restructuring actions during fiscal 2025.

Cost of goods sold as a percentage of net revenue decreased for fiscal 2026 compared to fiscal 2025, which was primarily due to impairment charges of $357.9 million for acquired intangible assets, inventories, property and equipment, and other non-current assets associated with restructuring actions during fiscal 2025.

See “Note 4 – Restructuring” in the Notes to Consolidated Financial Statements for further information.

Cost of goods sold in fiscal 2024 was impacted by charges for product related claim matters, that were fully resolved in the fourth quarter of fiscal 2024.

As a result, gross margin for fiscal 2025 decreased 0.3 percentage points compared to fiscal 2024.

The decrease in cost of goods sold as a percentage of net revenue was also due to better cost absorption driven by higher revenues, partially offset by a shift in product mix.

As a result, gross margin for fiscal 2026 increased by 9.7 percentage points compared to fiscal 2025.

Research and Development

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Research and development expense increased by $124.8 million in fiscal 2026 compared to fiscal 2025.

The increase was primarily due to $34.0 million of higher employee compensation and related costs and $33.1 million of higher engineering design related costs.

The increases were partially offset by a decrease in stock-based compensation of $15.5 million.

The increase was primarily due to higher overall spending to support our R&D initiatives, including advanced IP development and customer design win activity.

Selling, General and Administrative

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Selling, general and administrative expense decreased by $31.1 million in fiscal 2026 compared to fiscal 2025.

The decrease was primarily due to charges for an intellectual property matter during fiscal 2024, as well as $22.7 million of lower depreciation and amortization expense.

The decreases were partially offset by higher employee compensation and related costs of $9.8 million.

The decrease was primarily due to lower amortization expense for acquired intangible assets.

Stock-Based Compensation Expense

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Total stock-based compensation $ 590.8 $ 597.4

Stock-based compensation expense decreased by $12.4 million in fiscal 2025 compared to fiscal 2024.

Stock-based compensation under research and development and cost of goods sold decreased by $15.5 million and $1.8 million, respectively, and stock-based compensation under selling, general and administrative increased by $4.9 million.

The overall decrease was primarily due to a decrease in expense associated with our employee stock purchase plan.

Restructuring Related Charges

Stock-based compensation expense declined slightly in fiscal 2026 compared to fiscal 2025.

Stock-based compensation under selling, general and administrative decreased by $21.9 million, and research and development and cost of goods sold increased by $13.4 million and $1.9 million, respectively.

Restructuring Related Charges, Net

2026 February 1,

(in millions)

Restructuring related charges $ 353.9 $ 131.1

(in millions, except percentages)

Restructuring related charges, net

$ 15.5 $ 353.9

% of net revenue 0.2 % 6.1 %

We recognized $353.9 million of restructuring related charges in fiscal 2025 as we continued to evaluate our existing operations to increase operational efficiency, decrease costs and increase profitability.

Restructuring charges for fiscal 2025 were mainly comprised of impairment and write-off of purchased technology licenses and property and equipment, as well as recognition of future contractual obligations, severance, other one-time termination benefits, and other costs.

We recognized net restructuring related charges of $15.5 million in fiscal 2026 as we continued to evaluate our existing operations to increase operational efficiency, decrease costs and increase profitability.

See “Note 4 – Restructuring” in the Notes to Consolidated Financial Statements for further information.

Interest and Other Loss, Net

Interest and Other Income (Loss), Net

2026 February 1,

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Interest income and other, net 1,926.3 15.0 *

Interest and other loss, net $ (174.4) $ (191.0) (8.7) %

Interest and other income (loss), net $ 1,723.7 $ (174.4) *

% of net revenue 21.1 % (3.0) %

Interest and other loss, net decreased by $16.6 million in fiscal 2025 compared to fiscal 2024.

The net decrease was primarily due to a decrease in interest expense and an increase in interest income.

The decrease was partially offset by higher factoring fees for the sales of receivables in fiscal 2025 as compared to fiscal 2024, as well as lower net gains recognized from equity investments.

*Not meaningful.

We recognized interest and other income, net of $1.7 billion in fiscal 2026 as compared to interest and other loss, net of $174.4 million in fiscal 2025.

The change was primarily due to the $1.8 billion gain on sale of our automotive ethernet business in the third quarter of fiscal 2026.

Provision (Benefit) for Income Taxes

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in fiscal 2026

(in millions, except percentage)

(in millions)

Provision (benefit) for income taxes

$ 376.5 $ (9.7) *

*Not meaningful.

The increase in our income tax expense for fiscal 2026 as compared to our income tax benefit for fiscal 2025 was driven by an increase in earnings, which includes the gain on the sale of our automotive ethernet business in fiscal 2026, against losses in fiscal 2025.

The income tax expense for fiscal 2026 differs from the U.S.

federal statutory tax rate of 21% as a result of foreign income inclusions in the U.S., a portion of our earnings or losses being taxed or benefited at rates lower than the U.S.

statutory rate, research and development credit generation, and changes in valuation allowance.

The income tax benefit for fiscal 2025 differs from the U.S.

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statutory rate, research and development credit generation, and deductions related to stock compensation.

The income tax expense for fiscal 2024 differs from the U.S.

federal statutory tax rate of 21% as a result of foreign income inclusions in the U.S., a portion of our earnings or losses being taxed or benefited at rates lower than the U.S.

statutory rate, research and development credit generation, and disallowed deductions related to non-deductible compensation.

Further, during fiscal 2024, guidance was issued by the U.S.

Internal Revenue Service in connection with the capitalization of research and development expenditures.

As a result of this guidance, certain costs are currently deductible rather than capitalizable, which resulted in a reduction to our income tax payable and an increase in our deferred tax assets for which we maintain a full valuation allowance.

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.

It is also possible that significant neg ative evidence may become available that causes us to conclude that a valuation allowance is needed on certain of our deferred tax assets, which would adversely affect our income tax provision in the period of such change in judgment.

Several countries in which we operate have enacted, or have committed to enact, legislation based on the Organization for Economic Cooperation and Development’s 15% global minimum tax regime.

The enacted legislation did not have a significant effect on our provision for income taxes for fiscal 2025.

However, Singapore has enacted legislation based on the Pillar Two tax framework, including a 15% minimum top up tax, for years beginning on or after January 1, 2025.

This legislation is effective for us in fiscal 2026 and could significantly affect our provision for income taxes beginning in fiscal 2026.

Additionally, please see the information in Part I, Item 1A, “Risk Factors” under the caption “ Changes in existing taxation benefits, tax rules or tax practices may adversely affect our financial results .”

Our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 includes a discussion and analysis of our financial condition and results of operations for the year ended January 28, 2023 and year-to-year comparisons between the years ended February 3, 2024 and January 28, 2023 in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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 January 31, 2026 period includes the impact of the 2025 Tax Act.

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

Our provision for incomes taxes may be affected by changes in the geographic mix of earnings with different applicable tax rates, acquisitions or divestitures, 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.

It is also possible that significant negative evidence may become available that causes us to conclude that a valuation allowance is needed on certain of our deferred tax assets, which would adversely affect our income tax provision in the period of such change in judgment.

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.

As a result of this legislation, our foreign earnings are generally subject to a minimum tax rate of 15%.

On January 5, 2026, the OECD released a comprehensive package of administrative guidance, including the “side-by-side system” that exempts U.S.

parented multinational businesses from certain provisions of Pillar Two, specifically the Income Inclusion Rule and the Undertaxed Profits Rule.

The OECD guidance provides that the side-by-side system will be effective for fiscal years beginning on or after January 1, 2026.

The effects of any future legislation in this area are not yet reasonably estimable, but if such legislation is enacted in the future could have a significant effect on our provision for income taxes, our financial results, and our earnings and cash flows.

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.

We evaluate the recoverability of these assets, weighing all positive and negative evidence, and provide or maintain a valuation allowance for these assets if it is more likely than not that some, or all, of the deferred tax assets will not be realized.

If negative evidence exists, sufficient positive evidence is necessary to support a conclusion that a valuation allowance is not needed.

We consider all available evidence such as our earnings history including the existence of cumulative income or losses, reversals of taxable temporary differences, projected future taxable income, and tax planning strategies.

In future periods, it is possible that significant positive or negative evidence could arise that results in a change in our judgment with respect to the need for a valuation allowance, which could result in a tax benefit, or adversely affect our income tax provision, in the period of such change in judgment.

We also continue to evaluate potential changes to our legal structure in response to guidelines and requirements in various international tax jurisdictions where we conduct business.

Additionally, see the information in Part I, Item 1A, “Risk Factors” under the caption “ Changes in existing taxation benefits, tax rules or tax practices may adversely affect our financial results .”

Our Annual Report on Form 10-K for the fiscal year ended February 1, 2025 includes a discussion and analysis of our financial condition and results of operations for the year ended February 3, 2024 and year-to-year comparisons between the years ended February 1, 2025 and February 3, 2024 in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Liquidity and Capital Resources

Our principal source of liquidity as of February 1, 2025 consisted of approximately $948.3 million of cash and cash equivalents, of which approximately $716.9 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 January 31, 2026 consisted of approximately $2.6 billion of cash and cash equivalents, of which approximately $642.0 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.

See “Note 12 – Income Taxes” in the Notes to Consolidated Financial Statements for further information.

As of February 1, 2025, we had total borrowings outstanding of $4.1 billion, consisting of $3.5 billion of senior notes outstanding and $590.6 million outstanding under the 2026 Term Loan.

For the year ended February 1, 2025, we repaid $109.4 million of the principal outstanding of the 5-Year Tranche Loan (“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”).

As of February 1, 2025, the 2023 Revolving Credit Facility is undrawn and is available for draw down through April 14, 2028.

As of January 31, 2026, we had total borrowings outstanding of $4.5 billion, consisting of senior notes outstanding, of which $499.8 million are due within twelve months.

During fiscal 2026, we repaid $590.6 million of the principal outstanding of the 5-Year Tranche Loan (“2026 Term Loan”).

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 January 31, 2026, 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, purchase commitments, and leases, see “Note 7 – Debt,” “Note 8 – Commitments and Contingencies” and “Note 9 – Leases” in the Notes to Consolidated Financial Statements.

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We generally expect to satisfy these commitments with cash on hand and cash provided by operating activities.

On August 14, 2025, we completed the sale of our automotive ethernet business to Infineon Technologies AG for $2.5 billion in cash.

In the third quarter of fiscal 2026, we recorded a pre-tax gain on sale of $1.8 billion, which is included in interest income and other, net in the Consolidated Statements of Operations.

Subsequent to our fiscal 2026 year end, in February 2026, we completed the previously announced acquisitions of Celestial and XConn in which we paid $1.3 billion (or $1.0 billion, net of cash acquired of approximately $300.0 million) and $280.0 million in cash, respectively.

We also issued shares of our common stock of approximately 24.5 million shares for Celestial, and approximately 2.1 million shares for XConn.

For the Celestial acquisition, contingent on the achievement of specified revenue milestones, we may be required to pay additional cash and issue additional shares of our common stock through fiscal 2029.

See “Note 16 – Subsequent Events” in the Notes to Consolidated Financial Statements for discussions of the acquisitions.

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 year ended February 1, 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 year ended January 31, 2026, 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 15 – Supplemental Financial Information” in the Notes to Consolidated Financial Statements for additional information.

We believe that our existing cash, cash equivalents, together with cash generated from operations, and funds from our 2023 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 Consolidated Financial Statements) for at least the next twelve months.

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, commitments (including those discussed in “Note 8 – Commitments and Contingencies” in the Notes to Consolidated Financial Statements) for at least the next twelve months.

Our capital requirements will depend on many factors, including our rate of sales growth, market acceptance of our products, costs of securing access to adequate manufacturing capacity, the timing and extent of research and development projects and increases in operating expenses, all of which are subject to uncertainty.

To the extent that our existing cash and cash equivalents, together with cash generated by operations, and funds available under our 2023 Revolving Credit Facility are insufficient to fund our future activities, we may need to raise additional funds through public or private debt or equity financing.

To the extent that our existing cash and cash equivalents, together with cash generated from operations, and funds available under our 2025 Revolving Credit Facility are insufficient to fund our future activities, we may need to raise additional funds through public or private debt or equity financing.

We may also acquire additional businesses, purchase assets or enter into other strategic arrangements in the future, which could also require us to seek debt or equity financing.

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Net cash provided by operating activities was $1.8 billion for fiscal 2026 compared to net cash provided by operating activities of $1.7 billion for fiscal 2025.

We had a net income of $2.7 billion adjusted for the following non-cash items:

gain on sale of our automotive ethernet business of $1.8 billion, amortization of acquired intangible assets of $942.0 million, stock-based compensation expense of $590.8 million, depreciation and amortization of $348.6 million, deferred income tax of $42.2 million, restructuring related gains of $14.0 million, and $109.5 million net loss from other non-cash items.

Cash outflow from working capital of $1.1 billion for fiscal 2026 was primarily driven by increases in accounts receivable, inventories, and prepaid expenses and other assets, partially offset by increases in accrued liabilities and other non-current liabilities, and accounts payable.

The increase in accounts receivable was primarily due to higher sales in the last two months of fiscal 2026.

The increase in inventories is aligned with expected revenue growth.

The increase in prepaid expenses and other assets was primarily driven by higher prepaid ship and debits due to higher inventory balances at distributors, and from receivables for government incentives earned.

The increase in accrued liabilities and other non-current liabilities was primarily driven by an increase in income taxes payable mainly from taxes on gain from sale of business, and higher ship and debit claims accrual.

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

Net cash provided by operating activities was $1.7 billion for fiscal 2025 compared to net cash provided by operating activities of $1.4 billion for fiscal 2024.

We had a net loss of $885.0 million adjusted for the following non-cash items:

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The increase in inventories was primarily to support improving demand environment.

Net cash provided by operating activities was $1.4 billion for fiscal 2024 compared to net cash provided by operating activities of $1.3 billion for fiscal 2023.

We had a net loss of $933.4 million adjusted for the following non-cash items:

amortization of acquired intangible assets of $1.1 billion, stock-based compensation expense of $609.8 million, depreciation and amortization of $299.8 million, deferred income tax expense of $150.8 million, restructuring related impairment charges of $32.9 million, and $54.9 million net loss from other non-cash items.

Cash inflow from working capital of $57.8 million for fiscal 2024 was primarily driven by a decrease in accounts receivable, and a decrease in inventories, partially offset by cash outflows due to an increase in prepaid expenses and other assets, and a decrease in accounts payable.

The decrease in accounts receivable was primarily due to timing of billing and collections and the impact of factoring of receivables.

The decrease in inventory was a result of utilizing previously built buffers.

The increase in prepaid expenses and other assets was primarily due to prepayments on supply capacity reservation agreements net of refunds, and an increase in ship and debit reserve.

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

Cash Flows from Investing Activities

Net cash used in investing activities of $300.7 million in fiscal 2025 was primarily driven by the purchases of property and equipment of $284.6 million.

Net cash provided by investing activities of $2.1 billion in fiscal 2026 was primarily driven by net proceeds from sale of our automotive ethernet business of $2.5 billion, and proceeds from sales of property and equipment of $27.4 million, partially offset by purchases of property and equipment of $354.1 million.

Net cash used in investing activities of $300.7 million in fiscal 2025 was primarily driven by the purchases of property and equipment of $284.6 million.

Cash Flows from Financing Activities

Net cash used in financing activities of $1.4 billion in fiscal 2025 was primarily attributable to $725.0 million repurchases of common stock, $274.9 million for withholding tax paid on behalf of employees for net share settlement, $207.5 million payment for our quarterly dividends, $153.6 million payments for technology license obligations, and $109.4 million repayment of debt principal.

These outflows were partially offset by $87.6 million proceeds from the issuance of our common stock under our equity incentive plans.

Net cash used in financing activities of $980.2 million in fiscal 2024 was primarily attributable to $1.6 billion repayment of debt principal, $223.7 million for withholding tax paid on behalf of employees for net share settlement, $206.8 million payment for our quarterly dividends, $150.3 million payments for technology license obligations, and $150.0 million repurchases of common stock.

These outflows were partially offset by $1.3 billion proceeds from issuance of debt, and $99.2 million proceeds from the issuance of our common stock under our equity incentive plans.

Net cash used in financing activities of $2.2 billion in fiscal 2026 was primarily attributable to $2.0 billion repurchases of common stock, $790.6 million repayment of debt principal, $240.7 million for tax withholding payments on behalf of employees for net share settlements, $205.1 million for payment for our quarterly dividends, and $128.3 million payments on technology license obligations.

These outflows were partially offset by $1.2 billion in proceeds from borrowings and $78.7 million in proceeds from the issuance of our common stock under our equity incentive plans.

Net cash used in financing activities of $1.4 billion in fiscal 2025 was primarily attributable to $725.0 million repurchases of common stock, $274.9 million for tax withholding payments on behalf of employees for net share settlements, $207.5 million for payment for our quarterly dividends, $153.6 million payments on technology license obligations, and $109.4 million repayment of debt principal.

These outflows were partially offset by $87.6 million in proceeds from the issuance of our common stock under our equity incentive plans.

Recent Accounting Pronouncements

Please see “Note 2 – Significant Accounting Policies - Recent Accounting Pronouncements” in our Notes to Consolidated Financial Statements set forth in Part II, Item 8 of this Annual Report on Form 10-K.

See “Note 2 – Significant Accounting Policies - Recent Accounting Pronouncements” in our Notes to Consolidated Financial Statements.

Related Party Transactions

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

What changed 10-K

Item 7. Management’s Discussion and Analysis