What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-20 compared with 2025-11-19 · 136 added, 154 removed, 123 unchanged (70% of the section changed)

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All references to “NVIDIA,” “we,” “us,” “our” or the “Company” mean NVIDIA Corporation and its subsidiaries.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

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Fueled by the sustained demand for exceptional 3D graphics and the scale of the gaming market, NVIDIA has leveraged its GPU architecture to create platforms for scientific computing, AI, data science, autonomous vehicles, robotics, and digital twin applications.

Our two operating segments are "Compute & Networking" and "Graphics," as described in Note 13 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

NVIDIA is now a data center-scale AI infrastructure company reshaping all industries.

Our two operating segments are “Compute & Networking” and “Graphics.” Refer to Note 13 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Headquartered in Santa Clara, California, NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998.

Recent Developments, Future Objectives and Challenges

Revenue growth in the third quarter was driven by data center compute and networking platforms for accelerated computing and AI solutions.

Our Blackwell architectures are the majority of our Data Center revenue.

The availability of data centers, energy, and capital to support the buildout of NVIDIA AI infrastructure by our customers is crucial, and any shortage of these resources could impact our future revenue and financial performance.

Revenue growth in the first quarter was driven by data center products for accelerated computing and AI solutions.

Blackwell continued to account for the majority of our system shipments.

The availability of data centers, energy, and capital to support the buildout of NVIDIA AI infrastructure by our customers and partners is crucial, and any shortage of these or other necessary resources could impact our future revenue and financial performance.

Expanding energy capacity to meet demand is a complex, multi-year process that involves significant regulatory, technical, and construction challenges.

In addition, access to capital can be particularly constrained for less-capitalized companies, which may face difficulties securing financing for large-scale infrastructure projects.

These limitations could delay customer deployments or reduce the scale of accelerated computing and AI adoption.

We continue to execute Data Center compute product introductions, bringing new advanced architectures on a one-year product cadence.

We began shipping production units of our new Blackwell Ultra platforms including GB300 in the second quarter of fiscal year 2026 and continue to sell prior generation architecture.

The complexity of our product transitions and sophisticated system configurations may cause delays in production or create challenges in managing supply and demand.

This could result in revenue volatility, quality issues, increased inventory provisions, and/or increased warranty costs.

These limitations could delay customer and partner deployments or reduce the scale of accelerated computing and AI adoption.

We expect our Rubin platform to start shipping in the second half of fiscal year 2027.

The complexity of bringing up our product architecture and sophisticated system configurations has caused and may in the future cause delays in production and create challenges in managing supply and demand.

This could further result in revenue volatility, quality issues, increased inventory provisions, decreases in product yields and higher material costs, and/or increased warranty costs.

Customers may postpone purchasing new architectures or may adopt new technologies more gradually than anticipated, affecting our revenue timing and supply chain expenses.

In April 2025, the U.S.

government, or USG, informed us that a license is required for exports of our H20 product into the China market.

As a result of these new requirements, we incurred a $4.5 billion charge in the first quarter of fiscal year 2026 associated with H20 for excess inventory and purchase obligations, as the demand for H20 diminished.

In August 2025, the USG granted licenses that would allow us to ship certain H20 products to certain China-based customers, but to date, we have generated approximately $50 million in H20 revenue under those licenses.

USG officials have expressed an expectation that the USG will receive 15% or more of the revenue generated from licensed sales of our products, but to date, the USG has not published a regulation codifying such requirement.

In January 2025, the USG published the “AI Diffusion” Interim Final Rule, or IFR, in the Federal Register.

The IFR would have imposed a worldwide licensing requirement on our most recent data center products, such as our H200, GB200 and GB300.

In May 2025, the USG announced that it would rescind the AI Diffusion IFR and implement a replacement rule.

The scope, timing, and requirements of the forthcoming rule remain uncertain.

The replacement rule may impose new restrictions on our products or operations and/or add license requirements that could have a material impact on our business, operating results, and financial condition.

For example, in October 2025, the Senate passed the “GAIN AI Act” in the National Defense Authorization Act, or the NDAA.

The GAIN AI Act would restrict the Trump Administration’s ability to adapt the Biden Administration’s export control rules and could also allow private U.S.

persons to review and overturn licensing and foreign policy decisions made by the Trump Administration.

Beginning in February 2026, the U.S.

government, or USG, granted licenses that allow us to ship small amounts of H200 products to specific China-based customers.

To date, we have not generated any revenue under the H200 licensing program, and do not yet know whether any imports will be allowed into China.

The license requires that the H200s go through an inspection process in the United States prior to any shipment to the customer.

As a result, any H200 shipped under the new licensing program will be subject to a 25% tariff upon importation into the United States.

The recent rise in high-quality, open-source foundation models is making advanced AI capabilities broadly accessible.

Open-source AI is dependent on developer adoption, and if deployed on our competitors’ platforms, it could reduce demand for our products and services.

The rapid evolution of global trade policies, such as export controls and tariffs, has added complexity and increased costs throughout our supply chain, and these challenges are likely to persist.

Ongoing uncertainty regarding the scope and application of such measures may adversely affect investment decisions by us and our partners, disrupt supply chain operations, and impact the timing and volume of customer purchases due to challenges in forecasting future costs and demand.

We are increasing our U.S.-based manufacturing and investing in specialized equipment and processes to support domestic production.

This move is expected to strengthen our supply chain, add resiliency and redundancy, and meet the growing demand for AI infrastructure.

Our ability to increase manufacturing capabilities will depend on the domestic manufacturing ecosystem's capacity to ramp production supply to the required volume and on a timely basis.

Macroeconomic factors, including tariffs, inflation, interest rate changes, capital market volatility, global supply chain constraints, and global economic and geopolitical developments, have direct and indirect impacts on our results of operations, particularly demand for our products.

While difficult to isolate and quantify, these macroeconomic factors impact our supply chain and manufacturing costs, employee wages, costs for capital equipment and value of our investments.

We have made, and expect to continue making, investments in our ecosystem to enhance our growth opportunities, cultivate our ecosystem, and strengthen our competitive position.

In the first quarter of fiscal year 2027, we made the following investments:

• $18.6 billion in private companies and infrastructure funds.

Some of these investments include AI model makers that may indirectly purchase or use our products in the cloud.

• We made investments in publicly-held equity securities where the value may fluctuate significantly and could adversely affect our financial results.

Our global supply chain for our networking products, including our Israel operations of approximately 5,900 employees supporting research and development, operations, and sales and marketing, has not been significantly impacted by the conflict in the Middle East.

If the conflict escalates or extends, it could affect future product development, supply chain, and revenue, and create business uncertainty.

Macroeconomic factors, including tariffs, inflation, interest changes, capital market volatility, global supply chain constraints, and global economic and geopolitical developments and conflicts, have direct and indirect impacts on our results of operations, particularly demand for our products.

While difficult to isolate and quantify, these macroeconomic factors impact our supply chain and manufacturing costs, employee wages, costs for capital equipment, the value of our investments, revenue, and competitive position.

Our product and solution pricing generally does not fluctuate with short-term changes in our costs.

Within our supply chain, we continuously manage product availability and costs with our vendors.

Refer to “Item 1A.

Risk Factors” for a discussion of these factors and other risks.

Third Quarter of Fiscal Year 2026 Summary

Refer to Part II, Item 1A, "Risk Factors" for a discussion of these factors and other risks.

First Quarter of Fiscal Year 2027 Summary

Three Months Ended Quarter-over-Quarter Change Year-over-Year Change

Oct 26, 2025 Jul 27, 2025 Oct 27, 2024

Apr 26, 2026 Jan 25, 2026 Apr 27, 2025

($ in millions, except per share data)

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Net income per diluted share $ 2.39 $ 1.76 $ 0.76 36 % 214 %

We specialize in markets where our computing platforms can provide tremendous acceleration for applications.

These platforms incorporate processors, interconnects, software, algorithms, systems, and services to deliver unique value.

Following the rapid evolution in our businesses, we are transitioning to a new reporting framework that better reflects our current and future growth drivers.

We will have two market platforms – Data Center and Edge Computing.

Within Data Center, we will report two sub-markets, Hyperscale and ACIE which incorporates AI Clouds, Industrial, and Enterprise.

Hyperscale will include revenue from the public clouds and the world’s largest consumer internet companies,

while ACIE addresses our growth opportunity in diverse AI purpose-built data centers and AI factories across industries and countries.

Edge Computing highlights devices for agentic and physical AI including PCs, game consoles, workstations, AI-RAN base stations, robotics and automotive.

Three Months Ended Quarter-over-Quarter Change Year-over-Year Change

Apr 26, 2026 Jan 25, 2026 Apr 27, 2025

($ in millions)

Revenue by Market Platform (1)

Data Center $ 75,246 $ 62,314 $ 39,112 21 % 92 %

Hyperscale 37,869 33,814 17,599 12 % 115 %

AI Clouds, Industrial, & Enterprise 37,377 28,500 21,513 31 % 74 %

Edge Computing 6,369 5,813 4,950 10 % 29 %

Total revenue $ 81,615 $ 68,127 $ 44,062 20 % 85 %

(1) In the first quarter of fiscal year 2027, we changed our presentation of revenue by market platform and the comparable periods have been recast.

Revenue was $81.6 billion, up 85% from a year ago and up 20% sequentially.

Data Center revenue was $51.2 billion, up 66% from a year ago and up 25% sequentially, driven by three platform shifts –accelerated computing, powerful AI models, and agentic applications.

Blackwell Ultra is now our leading architecture across all customer categories while our prior Blackwell architecture saw continued strong demand.

H20 sales were insignificant in the third quarter of fiscal year 2026.

Data Center compute revenue was $43.0 billion, up 56% from a year ago and up 27% sequentially.

Networking revenue was $8.2 billion, up 162% from a year ago from the introduction and continued growth of NVLink compute fabric for

GB200 and GB300 systems.

Networking revenue was up 13% sequentially, driven by the growth of XDR InfiniBand products, NVLink, and Ethernet for AI solutions, while shipment timing and supply availability varied compared to the prior quarter.

Gaming revenue was up 30% from a year ago on the continued demand for Blackwell.

Gaming revenue was down 1% sequentially as channel inventories have reached more normalized levels heading into the holiday season.

Professional Visualization revenue was up 56% from a year ago and up 26% sequentially, driven by the launch of our new DGX Spark as well as the growth of Blackwell sales.

Automotive revenue was up 32% from a year ago and up 1% sequentially, driven by continued adoption of our self-driving platforms.

Gross margin decreased from a year ago as our business model transitioned from offering Hopper HGX systems to Blackwell full-scale datacenter solutions.

Gross margin increased sequentially as Blackwell ramped with an improved mix and cost structure.

Data Center revenue was $75.2 billion, up 92% from a year ago and up 21% sequentially, driven by the ramp of our Blackwell 300 products and demand for our InfiniBand, Spectrum-X Ethernet, and NVLink solutions.

Hyperscaler revenue increased sequentially and remained at approximately 50% of Data Center revenue, while the remaining 50% came from a continued diversification of customers, including AI Clouds, industrial, enterprise, and sovereign customers.

No shipments of Data Center Hopper products to China occurred during the quarter, compared with $4.6 billion in the first quarter of fiscal year 2026.

Edge Computing revenue for the first quarter was $6.4 billion, up 29% from a year ago and up 10% sequentially.

The increases were driven by robust Blackwell workstation demand, partially offset by slower consumer PC demand that was tempered by elevated memory and systems prices.

Gross margin increased from a year ago on lower inventory provisions, primarily due to the prior year's $4.5 billion charge associated with H20 excess inventory and purchase obligations.

Gross margin was approximately flat sequentially as our Blackwell architecture remains the majority of our revenue.

Operating expenses were up 52% from a year ago and up 12% sequentially.

The increases were primarily driven by compute and infrastructure costs, higher compensation and benefits due to compensation increases and employee growth and engineering development costs for new product introductions.

The increases were primarily driven by higher compensation and benefits expense due to employee growth and compensation increases, compute and infrastructure costs, and engineering development materials for new product developments.

Financial Information by Business Segment and Geographic Data

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The following table sets forth, for the periods indicated, certain items in our Condensed Consolidated Statements of Income expressed as a percentage of revenue.

Three Months Ended Nine Months Ended

Oct 26, 2025 Oct 27, 2024 Oct 26, 2025 Oct 27, 2024

Three Months Ended

Apr 26, 2026 Apr 27, 2025

Revenue 100.0 % 100.0 %

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Interest expense (0.1) (0.1)

Other income, net 2.4 0.1 2.3 0.3

Other income (expense), net 19.5 (0.4)

Total other income, net 20.1 0.7

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Net income 71.5 % 42.6 %

Reportable Segments

Revenue by Reportable Segments

Three Months Ended Nine Months Ended

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Change Oct 26, 2025 Oct 27, 2024 $

Three Months Ended

Apr 26, 2026 Apr 27, 2025 $

($ in millions)

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Operating Income by Reportable Segments

Three Months Ended Nine Months Ended

Oct 26, 2025 Oct 27, 2024 $

Change Oct 26, 2025 Oct 27, 2024 $

Three Months Ended

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($ in millions)

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Total $ 56,276 $ 23,694 $ 32,582 138 %

Compute & Networking revenue – The year over year increase in the third quarter and first nine months of fiscal year 2026 was driven by three platform shifts –accelerated computing, powerful AI models, and agentic applications.

Revenue from Data Center computing grew 59% year-on-year compared to the first nine months of fiscal year 2025, driven by demand for our Blackwell computing platform.

Revenue from Data Center networking grew 105% year-on-year compared to the first nine months of fiscal year 2025 driven by the introduction and continued growth of NVLink compute fabric for GB200 and GB300 systems, the growth of XDR InfiniBand products, and adoption of Ethernet for AI solutions.

Graphics revenue – The year over year increase in the third quarter and first nine months of fiscal year 2026 was driven by sales of our Blackwell architecture.

Reportable segment operating income – The year over year increase in Compute & Networking segment operating income in the third quarter of fiscal year 2026 was driven by growth in revenue.

The year over year increase in Compute & Networking segment operating income in the first nine months of fiscal year 2026 was driven by the growth in revenue, partially offset by a $4.5 billion charge associated with H20 excess inventory and purchase obligations in the first quarter of fiscal year 2026.

The year over year increase in Graphics segment operating income in the third quarter and first nine months of fiscal year 2026 was driven by the growth in revenue.

Compute & Networking revenue – The year-over-year increase in the first quarter of fiscal year 2027 was due to growth in Data Center products, driven by the ramp of our Blackwell systems and demand for our InfiniBand, Spectrum-X Ethernet, and NVLink solutions.

Graphics revenue – The year-over-year increase in the first quarter of fiscal year 2027 was driven by sales of our Blackwell architecture.

Reportable segment operating income – The year-over-year increase in Compute & Networking segment operating income in the first quarter of fiscal year 2027 was driven by the growth in revenue and the non-recurrence of a $4.5 billion charge associated with H20 excess inventory and purchase obligations in the first quarter of fiscal year 2026.

The year-over-year increase in Graphics segment operating income in the first quarter of fiscal year 2027 was driven by the growth in revenue.

Concentration of Revenue

We refer to customers who purchase products directly from NVIDIA as direct customers, such as add-in board manufacturers, distributors, ODMs, OEMs, CSPs, hyperscale companies, and system integrators.

We refer to customers who purchase products directly from NVIDIA as direct customers, such as AIBs, distributors, ODMs, OEMs, CSPs, AI model makers, and system integrators.

Certain direct customers may use either internal resources or third-party system integrators to complete their build.

We refer to indirect customers as those who purchase products through our direct customers;

indirect customers include CSPs, Neocloud builders, hyperscale, consumer internet companies, enterprises, and public sector entities.

Direct Customers – For the third quarter of fiscal year 2026, four direct customers with sales greater than 10% of total revenue included:

Customer A at 22%, Customer B at 15%, Customer C at 13%, and Customer D at 11%, which were attributable to the Compute & Networking segment.

For the first nine months of fiscal year 2026, sales to two direct customers represented 21% and 13% of total revenue, respectively, both of which were attributable to the Compute & Networking segment.

The customers referenced above may represent different customers than those reported in a previous period.

For the third quarter of fiscal year 2025, sales to three direct customers each represented 12% of total revenue, which were attributable to the Compute & Networking segment.

For the first nine months of fiscal year 2025, sales to three direct customers represented 12%, 11%, and 11% of total revenue, which were attributable to the Compute & Networking segment.

indirect customers include CSPs, AI Clouds, AI model makers, enterprises, and public sector entities.

Our revenue is concentrated among a limited number of direct and indirect customers and this trend may continue.

Direct Customers – For the first quarter of fiscal year 2027, three direct customers represented 21%, 17%, and 16% of total revenue, all of which was primarily attributable to the Compute & Networking segment.

For the first quarter of fiscal year 2026, sales to two direct customers represented 16% and 14% of total revenue, which were attributable to the Compute & Networking segment.

Indirect Customers – Indirect customer revenue is an estimation based upon multiple factors including customer purchase order information, product specifications, internal sales data, and other sources.

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Certain companies purchase cloud and related services through various direct and indirect customers.

We estimate that one AI research and deployment company contributed to a meaningful amount of our revenue purchasing cloud services from our customers in the third quarter of fiscal year 2026.

Our revenue is concentrated among a limited number of direct, indirect and cloud service purchasers and this trend may continue.

Revenue by geographic region is designated based on the location of the customers' headquarters of direct customers even if the estimated revenue may be attributable to indirect customers in a different location.

Revenue from sales to customers headquartered outside of the United States accounted for 31% and 34% of total revenue for the third quarter and first nine months of fiscal year 2026, respectively, and 44% and 41% of total revenue for the third quarter and first nine months of fiscal year 2025, respectively.

We estimate that one AI research and deployment company contributed to a meaningful amount of our revenue by purchasing cloud services from our customers in the first quarter of fiscal year 2027.

Revenue by geographic region is designated based on the location of the headquarters of direct customers.

The end customer and shipping location may be different from our customers' headquarters location.

Revenue from sales to customers headquartered outside of the United States accounted for 22% of total revenue for the first quarter of fiscal year 2027 and 42% of total revenue for the first quarter of fiscal year 2026.

Gross Profit and Gross Margin

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Cost of revenue consists primarily of the cost of semiconductors, including wafer fabrication, assembly, testing and packaging, board and device costs, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, inventory and warranty provisions, memory and component costs, tariffs, and shipping costs.

Cost of revenue also includes acquisition-related intangible amortization expense, costs for license and development and service arrangements, IP-related costs, and stock-based compensation related to personnel associated with manufacturing operations.

Gross margins decreased to 73.4% for the third quarter of fiscal year 2026 compared to 74.6% for the third quarter of fiscal year 2025, and 69.3% for the first nine months of fiscal year 2026 compared to 75.8% for the first nine months of fiscal year 2025, as our business model transitioned from offering Hopper HGX systems to Blackwell full-scale datacenter solutions.

Gross margin for the first nine months of fiscal year 2026 was also impacted by a $4.5 billion charge associated with H20 excess inventory and purchase obligations.

Provisions for inventory and excess inventory purchase obligations totaled $410 million and $6.7 billion for the third quarter and first nine months of fiscal year 2026, respectively, including $4.5 billion associated with H20 excess inventory and purchase obligations for the first quarter of fiscal year 2026.

Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $366 million and $1.3 billion for the third quarter and first nine months of fiscal year 2026, respectively.

The net effect on our gross margin was an unfavorable impact of 0.1% and 3.7% in the third quarter and first nine months of fiscal year 2026, respectively.

Provisions for inventory and excess inventory purchase obligations totaled $865 million and $2.2 billion for the third quarter and first nine months of fiscal year 2025, respectively.

Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $106 million and $305 million for the third quarter and first nine months of fiscal year 2025, respectively.

The net effect on our gross margin was an unfavorable impact of 2.2% and 2.0% in the third quarter and first nine months of fiscal year 2025, respectively.

Cost of revenue also includes acquisition-related intangible amortization expense, IP-related costs, and stock-based compensation related to personnel associated with manufacturing operations.

Gross margin increased to 74.9% for the first quarter of fiscal year 2027 compared to 60.5% for the first quarter of fiscal year 2026, primarily due to the prior year's $4.5 billion charge associated with H20 excess inventory and purchase obligations.

Provisions for inventory and excess inventory purchase obligations totaled $1.1 billion and $5.3 billion for the first quarter of fiscal years 2027 and 2026, respectively.

The first quarter of fiscal year 2026 includes $4.5 billion associated with H20 excess inventory and purchase obligations.

Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $103 million and $436 million for the first quarter of fiscal years 2027 and 2026, respectively.

The net effect on our gross margin was an unfavorable impact of 1.2% and 11.0% in the first quarter of fiscal years 2027 and 2026, respectively.

Operating Expenses

Three Months Ended Nine Months Ended

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Change Oct 26, 2025 Oct 27, 2024 $

Three Months Ended

Apr 26, 2026 Apr 27, 2025 $

($ in millions)

Research and development expenses $ 4,705 $ 3,390 $ 1,315 39 % $ 12,985 $ 9,200 $ 3,785 41 %

Sales, general and administrative expenses 1,134 897 237 26 % 3,297 2,516 781 31 %

Research and development $ 6,321 $ 3,989 $ 2,332 58 %

Sales, general and administrative 1,300 1,041 259 25 %

Total operating expenses $ 7,621 $ 5,030 $ 2,591 52 %

The increases in research and development expenses for the third quarter and first nine months of fiscal year 2026 were primarily driven by a 27% and 30% increase in compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases, and an 83% and 75% increase in compute and infrastructure, respectively.

The increases in sales, general and administrative expenses for the third quarter and first nine months of fiscal year 2026 were primarily driven by compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases.

The increase in research and development expenses for the first quarter of fiscal year 2027 was primarily driven by a 112% increase in compute and infrastructure, a 31% increase in compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases, and a 204% increase in engineering development materials for new product introductions.

The increase in sales, general and administrative expenses for the first quarter of fiscal year 2027 was primarily driven by compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases.

Total Other Income, Net

Three Months Ended Nine Months Ended

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Change Oct 26, 2025 Oct 27, 2024 $

Three Months Ended

Apr 26, 2026 Apr 27, 2025 $

($ in millions)

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Interest expense (102) (63) (39)

Other income, net

1,363 36 1,327 3,418 301 3,117

Other income (expense), net 15,929 (180) 16,109

Total other income, net $ 16,367 $ 272 $ 16,095

$ 1,926 $ 447 $ 1,479 $ 4,964 $ 1,390 $ 3,574

The increase in interest income for the third quarter and first nine months of fiscal year 2026 was primarily due to growth in cash, cash equivalents, and debt securities.

Interest expense is comprised of coupon interest and debt discount amortization related to our notes.

Other income, net consists of realized or unrealized gains and losses from investments in non-marketable equity securities, publicly-held equity securities, and the impact of changes in foreign currency rates.

The change in Other income, net, compared to the third quarter and first nine months of fiscal year 2025, was primarily driven by unrealized gains in our publicly-held equity securities and non-marketable equity securities.

Refer to Notes 5 and 6 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information regarding our investments in non-marketable equity securities and publicly-held equity securities.

Income tax expense was $6.0 billion and $3.0 billion for the third quarter, and $13.9 billion and $8.0 billion for the first nine months, of fiscal years 2026 and 2025, respectively.

Income tax as a percentage of income before income tax was an expense of 15.9% and 13.5% for the third quarter, and 15.3% and 13.6% for the first nine months, of fiscal years 2026 and 2025, respectively.

The effective tax rate increased primarily due to a lower percentage of tax benefits from stock-based compensation and U.S.

federal research tax credit relative to the increase in income before income tax.

Our effective tax rates for the first nine months of fiscal years 2026 and 2025 were lower than the U.S.

federal statutory rate of 21% primarily due to tax benefits from foreign-derived deduction eligible income, stock-based compensation, income earned in jurisdictions that are subject to taxes at rates lower than the U.S.

federal statutory tax rate, and the U.S.

Total other income, net primarily consists of realized or unrealized gains and losses from investments in non-marketable securities and publicly-held equity securities.

The change in Other income (expense), net compared to the first quarter of fiscal year 2026, was primarily driven by unrealized gains on investments in publicly-held equity securities of $13.4 billion and non-marketable equity securities of $2.6 billion.

Income tax expense was $11.6 billion and $3.1 billion for the first quarter of fiscal years 2027 and 2026, respectively.

Income tax as a percentage of income before income tax was 16.6% and 14.3% for the first quarter of fiscal years 2027 and 2026, respectively.

The effective tax rate increased primarily due to a lower percentage of tax benefits from stock-based compensation relative to the increase in income before income tax.

Our effective tax rates for the first quarter of fiscal years 2027 and 2026 were lower than the U.S.

federal statutory rate of 21% primarily due to tax benefits from foreign-derived deduction eligible income, income earned in jurisdictions that were subject to taxes at rates lower than the U.S.

federal statutory tax rate, stock-based compensation, and the U.S.

federal research tax credit.

In July 2025, the OBBBA was enacted into law and contains several changes to key U.S.

federal income tax laws.

We have recognized the tax effects of currently effective OBBBA provisions, which are not material and are reflected in our results for the first nine months of fiscal year 2026.

We will continue to evaluate the impact of these legislative changes as tax authorities provide additional guidance and interpretation.

Given our current and possible future earnings, we believe that we may release the valuation allowance associated with certain state deferred tax assets in the near term, which would decrease our income tax expense for the period the release is recorded.

The timing and amount of the valuation allowance release could vary based on our assessment of all available information.

Refer to Note 11 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Liquidity and Capital Resources

Oct 26, 2025 Jan 26, 2025

Apr 26, 2026 Jan 25, 2026

(In millions)

Cash and cash equivalents $ 13,237 $ 10,605

Marketable securities 49,122 34,621

Cash, cash equivalents and marketable securities $ 60,608 $ 43,210

Nine Months Ended

Oct 26, 2025 Oct 27, 2024

Marketable debt securities 37,098 39,065

Cash, cash equivalents, and marketable debt securities $ 50,335 $ 49,670

Three Months Ended

Apr 26, 2026 Apr 27, 2025

(In millions)

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Net cash used in financing activities $ (21,283) $ (15,553)

Our investment policy requires the purchase of highly-rated fixed income securities, the diversification of investment types and credit exposures, and certain maturity limits on our portfolio.

Cash provided by operating activities increased in the first nine months of fiscal year 2026 compared to the first nine months of fiscal year 2025 due to higher revenue.

Cash used in investing activities increased in the first nine months of fiscal year 2026 compared to the first nine months of fiscal year 2025, primarily driven by higher purchases of non-marketable equity securities and higher purchases of property and equipment.

Cash used in financing activities increased in the first nine months of fiscal year 2026 compared to the first nine months of fiscal year 2025, mainly due to higher share repurchases.

Our primary sources of liquidity include cash, cash equivalents, marketable securities, and cash generated by our operations.

As of October 26, 2025, we had $60.6 billion in cash, cash equivalents, and marketable securities.

We believe that we have sufficient liquidity to meet our operating requirements for at least the next twelve months and thereafter for the foreseeable future, including our future obligations.

We continuously evaluate our liquidity and capital resources, including our access to external capital, to ensure we can finance future capital requirements.

Our marketable securities consist of publicly-held equity securities, debt securities issued by the USG and its agencies, highly-rated corporations and financial institutions, and foreign government entities, as well as certificates of deposit issued by highly-rated financial institutions.

Our fixed income security investments include highly rated, diversified investment types and credit exposures with shorter maturities.

Cash provided by operating activities increased in the first quarter of fiscal year 2027 compared to the first quarter of fiscal year 2026 due to higher revenue.

Cash used in investing activities increased in the first quarter of fiscal year 2027 compared to the first quarter of fiscal year 2026, primarily driven by higher purchases of equity investment securities.

Cash used in financing activities increased in the first quarter of fiscal year 2027 compared to the first quarter of fiscal year 2026, mainly due to higher share repurchases.

Our primary sources of liquidity include cash, cash equivalents, marketable debt and equity securities, and cash generated by our operations.

As of April 26, 2026, we had $50.3 billion in cash, cash equivalents, and marketable debt securities as well as $30.2 billion of marketable equity securities.

We believe that we have sufficient liquidity to meet our operating requirements for at least the next twelve months and for the foreseeable future, including our future obligations.

We continuously evaluate our liquidity and capital resources, including our access to external capital, to ensure we can finance future capital requirements and commitments.

Our marketable securities consist of publicly-held equity securities, debt securities issued by the U.S.

government and its agencies, highly-rated corporations and financial institutions, and foreign government entities, as well as certificates of deposit issued by highly-rated financial institutions.

These marketable securities are primarily denominated in U.S.

Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Except for approximately $1.7 billion of cash, cash equivalents, and marketable securities held outside the U.S.

for which we have not accrued any related foreign or state taxes if we repatriate these amounts to the U.S., substantially all of our cash, cash equivalents and marketable securities held outside the U.S.

at the end of the first nine months of fiscal year 2026 are available for use in the U.S.

Except for approximately $1.7 billion of cash, cash equivalents, and marketable debt securities held outside of the U.S., for which we have not accrued any related foreign or state taxes if we repatriate these amounts to the U.S., substantially all of our cash, cash equivalents, and marketable debt securities held outside the U.S.

at the end of the first quarter of fiscal year 2027 are available for use in the U.S.

without incurring additional U.S.

federal income taxes.

Our tax payments in fiscal year 2026 will decrease due to currently effective OBBBA provisions.

We made no federal income tax payments in the first quarter of fiscal year 2027, whereas our second quarter of fiscal year 2027 is scheduled to include two payments.

Capital Return to Shareholders

We repurchased 70 million and 262 million shares of our common stock for $12.6 billion and $36.7 billion during the third quarter and first nine months of fiscal year 2026, respectively.

On August 26, 2025, our Board of Directors approved an additional $60.0 billion in share repurchase authorization, without expiration.

As of October 26, 2025, we were authorized, subject to certain specifications, to repurchase up to $62.2 billion of our common stock.

From October 27, 2025 through November 14, 2025, we repurchased 6 million shares for $1.1 billion pursuant to a pre-established trading plan.

In the first quarter of fiscal year 2027, we repurchased 108 million shares of our common stock for $20.2 billion.

As of April 26, 2026, we were authorized, subject to certain specifications, to repurchase up to $38.5 billion of our common stock.

On May 18, 2026, our Board of Directors approved an additional $80.0 billion in share repurchase authorization, without expiration.

We may execute repurchases from time to time, subject to market conditions, operating requirements and other investment opportunities, in the open market, in privately-negotiated transactions, pursuant to a Rule 10b5-1 trading plan or in structured share repurchase agreements in compliance with Rule 10b-18 of the Exchange Act.

Our share repurchase program may be suspended at any time at our discretion.

We paid cash dividends to our shareholders of $243 million and $732 million during the third quarter and first nine months of fiscal year 2026, respectively.

We paid cash dividends to our shareholders of $243 million during the first quarter of fiscal year 2027.

On May 18, 2026, we increased our quarterly cash dividend from $0.01 per share to $0.25 per share to all shareholders of record on June 4, 2026.

Our quarterly cash dividend will be paid on June 26, 2026.

The payment of future cash dividends is subject to our Board of Directors' continuing determination that the declaration of dividends is in the best interests of our shareholders.

Inflation Reduction Act of 2022 requires a 1% excise tax on certain share repurchases in excess of shares issued for employee compensation made after December 31, 2022.

The excise tax is included in our share repurchase cost and was not material for both the third quarter and first nine months of fiscal years 2026 and 2025.

The excise tax is included in our share repurchase cost and was not significant for the first quarter of fiscal year 2027.

Outstanding Indebtedness and Commercial Paper Program

Our aggregate debt maturities as of October 26, 2025, by year payable, are as follows:

Our aggregate debt maturities as of April 26, 2026, by year payable, were as follows:

(In millions)

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Total long-term portion $ 7,470

We have a $575 million commercial paper program to support general corporate purposes.

As of October 26, 2025, we had no commercial paper outstanding.

We have a commercial paper program to support general corporate purposes, pursuant to which we may issue unsecured paper notes, from time to time or all at once, up to $25.0 billion.

As of April 26, 2026, no commercial paper was outstanding.

Refer to Note 9 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

Material Cash Requirements and Other Obligations

Unrecognized tax benefits were $3.2 billion, which includes related interest and penalties, and were recorded in non-current income tax payable as of October 26, 2025.

We are unable to estimate the timing of any potential tax liability, interest payments, or penalties in individual years due to uncertainties in the underlying income tax positions and the timing of the effective settlement of such tax positions.

Refer to Note 4 of the Notes to Condensed Consolidated Financial Statements for further information.

We expect to continue investing in strategic partnerships.

In the third quarter of fiscal year 2026, we committed to invest $5 billion in Intel Corporation, subject to regulatory approval, and we entered into a letter of intent with an opportunity to invest in OpenAI.

In November 2025, we entered into an agreement, subject to certain closing conditions, to invest up to $10 billion in Anthropic.

There is no assurance that any investment will be completed on expected terms, if at all.

Refer to Item 1A.

For descriptions of our facility lease guarantees, long-term debt, purchase commitments, and operating lease obligations, refer to Note 8, Note 9, Note 10, and Note 14 of the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, respectively.

We expect to continue investing in our ecosystem.

Refer to Note 6 and Item 1A.

Risk Factors for additional information regarding our investments.

Other than the contractual obligations described in Note 11, there were no material changes outside the ordinary course of business in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 26, 2025.

Unrecognized tax benefits were $4.5 billion, which includes related interest and penalties of $439 million, and were recorded in non-current income tax payable as of April 26, 2026.

We are currently under examination by the Internal Revenue Service for our fiscal years 2023 and 2024.

Refer to Note 11 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Other than the contractual obligations described in Notes 6 and 10, there were no material changes outside the ordinary course of business in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 25, 2026.

Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in our Annual Report on Form 10-K for the fiscal year ended January 25, 2026 for a description of our contractual obligations.

For a description of our long-term debt, purchase obligations, and operating lease obligations, refer to Notes 10, 11, and 14 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, respectively.

Climate Change

To date, there has been no material impact to our results of operations associated with global sustainability regulations, compliance, costs from sourcing renewable energy or climate-related business trends.

For a description of our facility lease guarantees, long-term debt, purchase obligations, and operating lease obligations, refer to Notes 8, 9, 10, and 14 of the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, respectively.

Adoption of New and Recently Issued Accounting Pronouncements

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Item 2. Management’s Discussion and Analysis