PROCTER & GAMBLE Co 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward-Looking Statements Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including without limitation, in the following sections: “Management's Discussion and Analysis,” “Risk Factors” and "Notes 4, 8 and 13 to the Consolidated Financial Statements." These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result” and similar expressions. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, except to the extent required by law. 14 The Procter & Gamble Company Risks and uncertainties to which our forward-looking statements are subject include, without limitation: (1) the ability to successfully manage global financial risks, including foreign currency fluctuations, changes in global interest rates and rate differentials, currency exchange or pricing controls and tariffs; (2) the ability to successfully manage local, regional or global economic volatility, including reduced market growth rates, and to generate sufficient income and cash flow to allow the Company to effect the expected share repurchases and dividend payments; (3) the ability to successfully manage uncertainties related to changing political and geopolitical conditions and potential implications such as exchange rate fluctuations, market contraction, boycotts, variability and unpredictability in trade relations, sanctions, tariffs or other trade controls; (4) the ability to manage disruptions in credit markets or to our banking partners or changes to our credit rating; (5) the ability to maintain key manufacturing and supply arrangements (including execution of supply chain optimizations and sole supplier and sole manufacturing plant arrangements) and to manage disruption of business due to various factors, including ones outside of our control, such as natural disasters, conflicts or acts of war, terrorism or disease outbreaks; (6) the ability to successfully manage cost fluctuations and pressures, including prices of commodities and raw materials and costs of labor, transportation, energy, pensions and healthcare; (7) the ability to compete with our local and global competitors in new and existing sales channels, including by successfully responding to competitive factors such as prices, promotional incentives and trade terms for products; (8) the ability to manage and maintain key customer relationships; (9) the ability to protect our reputation and brand equity by successfully managing real or perceived issues, including concerns about safety, quality, ingredients, efficacy, packaging content, cyber incidents, supply chain practices, social or environmental practices or similar matters that may arise; (10) the ability to successfully manage the financial, legal, reputational and operational risk associated with third-party relationships, such as our suppliers, contract manufacturers, distributors, contractors and external business partners; (11) the ability to rely on and maintain key company and third-party information and operational technology systems, networks and services and maintain the security and functionality of such systems, networks and services and the data contained therein; (12) the ability to successfully manage demand, supply and operational challenges; (13) the ability to stay on the leading edge of innovation, obtain necessary intellectual property protections and successfully respond to changing consumer habits, evolving and more fragmented digital marketing and selling platform requirements and technological advances attained by, and patents granted to, competitors; (14) the ability to successfully manage our ongoing acquisition, divestiture and joint venture activities, in each case to achieve the Company’s overall business strategy and financial objectives, without impacting the delivery of base business objectives; (15) the ability to successfully achieve productivity improvements and cost savings and manage ongoing organizational changes while successfully identifying, developing and retaining key employees, including in key growth markets where the availability of skilled or experienced employees may be limited; (16) the ability to successfully manage current and expanding regulatory and legal requirements and matters (including, without limitation, those laws, regulations, policies and related interpretations involving product liability, product and packaging composition, manufacturing processes, intellectual property, labor and employment, antitrust, privacy, cybersecurity, data protection and data transfers, artificial intelligence, tax, the environment, due diligence, risk oversight, accounting and financial reporting) and to resolve new and pending matters within current estimates; (17) the ability to manage changes in applicable tax laws and regulations; and (18) the ability to continue delivering progress towards our environmental sustainability ambitions. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from those projected herein is included in the section titled "Economic Conditions and Uncertainties" and the section titled "Risk Factors" (Part I, Item 1A) of this Form 10-K. Purpose, Approach and Non-GAAP Measures The purpose of Management's Discussion and Analysis (MD&A) is to provide an understanding of Procter & Gamble's financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year. The MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and accompanying Notes. The MD&A is organized in the following sections: • Overview • Summary of 2026 Results • Economic Conditions and Uncertainties • Results of Operations • Segment Results • Cash Flow, Financial Condition and Liquidity • Critical Accounting Policies and Estimates • Other Information Throughout the MD&A we refer to measures used by management to evaluate performance, including unit volume growth, net sales, net earnings, diluted net earnings per common share (diluted EPS) and operating cash flow. We also refer to a number of financial measures that are not defined under U.S. GAAP, including organic sales growth, Core earnings per share (Core EPS), adjusted free cash flow and adjusted free cash flow productivity. The explanation at the end of the MD&A provides the definition of these non-GAAP measures, details on the use and the derivation of these measures, as well as reconciliations to the most directly comparable U.S. GAAP measure. The Procter & Gamble Company 15 Management also uses certain market share and market consumption estimates to evaluate performance relative to competition despite some limitations on the availability and comparability of share and consumption information. References to market share and consumption in the MD&A are based on a combination of vendor-purchased traditional brick-and-mortar and online data in key markets as well as internal estimates. All market share references represent the percentage of sales of our products in dollar terms on a constant currency basis relative to all product sales in the category. The Company measures market shares through the most recent period for which market share data is available, which typically reflects a lag time of one or two months as compared to the end of the reporting period. Management also uses unit volume growth to evaluate drivers of changes in net sales. Organic volume growth reflects year-over-year changes in unit volume excluding the impacts of acquisitions and divestitures and certain one-time items, if applicable, and is used to explain changes in organic sales. In our presentation of data in tables or other charts, certain columns and rows may not add due to rounding. OVERVIEW P&G is a global leader in the fast-moving consumer goods industry, focused on providing branded consumer packaged goods of superior quality and value to our consumers around the world. Our products are sold in about 180 countries and territories primarily through mass merchandisers, digital commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. We also sell direct to consumers. We have on-the-ground operations in approximately 65 countries. Our market environment is highly competitive with global, regional and local competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products as well as retailers' private-label brands. Additionally, many of the product segments in which we compete are differentiated by price tiers (referred to as super-premium, premium, mid-tier and value-tier products). We believe we are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. Organizational Structure Our organizational structure is comprised of Sector Business Units (SBUs), Enterprise Markets (EMs), Corporate Functions (CF) and Global Business Services (GBS). Sector Business Units The Company's product categories are organized into five SBUs and five reportable segments (under U.S. GAAP): Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The SBUs are responsible for global brand strategy, product upgrades and innovation, marketing plans and supply chain. They have direct profit responsibility for markets (referred to as Focus Markets) representing the large majority of the Company's sales and earnings and are also responsible for innovation plans, supply plans and operating frameworks to drive growth and value creation in the remaining markets (referred to as Enterprise Markets). Throughout the MD&A, we reference business results by region, which are comprised of North America, Europe, Greater China, Latin America, Asia Pacific and India, Middle East and Africa (IMEA). 16 The Procter & Gamble Company The following provides additional detail on our reportable segments and the product categories and brand composition within each segment. Reportable Segments % of Net Sales (1) % of Net Earnings (1) Product Categories (Sub-Categories) Major Brands Beauty 19% 17% Hair Care ( Conditioners, Shampoos, Styling Aids, Treatments ) Head & Shoulders, Herbal Essences, Pantene, Rejoice Personal Care (Antiperspirants and Deodorants, Personal Cleansing) Native, Old Spice, Safeguard, Secret Skin Care ( Facial Moisturizers, Cleaners and Treatments ) Olay, SK-II Grooming 8% 9% Grooming ( Appliances, Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Grooming ) Braun, Gillette, Venus Health Care 14% 15% Oral Care ( Toothbrushes, Toothpastes, Other Oral Care ) Crest, Oral-B Personal Health Care ( Gastrointestinal, Pain Relief, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Other Personal Health Care ) Metamucil, Neurobion, Pepto-Bismol, Vicks Fabric & Home Care 35% 35% Fabric Care ( Fabric Enhancers, Laundry Additives, Laundry Detergents ) Ariel, Downy, Gain, Tide Home Care ( Air Care, Dish Care, P&G Professional, Surface Care ) Cascade, Dawn, Fairy, Febreze, Mr. Clean, Swiffer Baby, Feminine & Family Care 24% 24% Baby Care ( Baby Wipes, Taped Diapers and Pants ) Luvs, Pampers Feminine Care ( Adult Incontinence, Menstrual Care ) Always, Always Discreet, Tampax Family Care ( Paper Towels, Tissues, Toilet Paper ) Bounty, Charmin, Puffs (1) Percent of Net sales and Net earnings for the fiscal year ended June 30, 2026 (excluding results held in Corporate). Organization Design: Sector Business Units Beauty: The beauty categories in which we compete are hair care, personal care and skin care. We are a global market leader in the retail hair care market with about 20% global market share primarily behind our Head & Shoulders and Pantene brands. In personal care, we have the number two market share position with about 20% global market share, primarily behind our Old Spice, Native, Secret and Safeguard brands. In skin care, the Olay brand is one of the top facial skin care brands in the world with about 5% global market share. Grooming: We are the global market leader in the grooming market, where we hold more than 50% share. Our global blades and razors market share is more than 60%, primarily behind our Gillette and Venus brands. Our appliances, such as electric shavers and intense pulse light devices, are sold primarily under the Braun brand. We hold nearly 30% of the male electric shavers market. Health Care: We compete in oral care and personal health care. In oral care, we are a leader with a nearly 30% global market share behind our Crest and Oral-B brands. In personal health care, we are a global market leader among the categories in which we compete, including respiratory treatments, digestive wellness, sleep aids, vitamins and analgesics behind our Vicks, Metamucil, Pepto-Bismol and Neurobion brands. Fabric & Home Care: This segment is comprised of a variety of fabric care products, including laundry detergents, additives and fabric enhancers; and home care products, including dishwashing liquids and detergents, surface cleaners and air fresheners. In fabric care, we generally have the number one or number two market share position and are the global market leader with over 35% market share in the markets in which we compete, primarily behind our Tide, Ariel and Downy brands. Our global home care market share is more than 30% across the categories in which we compete, primarily behind our Cascade, Dawn, Febreze and Swiffer brands. Baby, Feminine & Family Care: In baby care, we are a global market leader and compete mainly in taped diapers, pants and baby wipes, with more than 30% global market share. We generally have the number one or number two market share position in the markets in which we compete, primarily behind our Pampers brand. We are the global market leader in the feminine care category with nearly 30% global market share. We compete in the menstrual care sub-category primarily behind our Always and Tampax brands with nearly 35% global market share. We also compete in the adult incontinence sub-category behind Always Discreet, with over 15% market share in the markets in which we compete. Our family care business is predominantly a The Procter & Gamble Company 17 North American business comprised primarily of the Bounty paper towel and Charmin toilet paper brands. North America market shares are nearly 40% for Bounty and over 25% for Charmin. Enterprise Markets Enterprise Markets are responsible for sales and profit delivery in specific countries, supported by SBU-agreed innovation and supply chain plans, along with scaled services like planning, distribution and customer management. Corporate Functions Corporate Functions provides company-level strategy and portfolio analysis, corporate accounting, treasury, tax, external relations, governance, human resources, information technology and legal services. Global Business Services Global Business Services provides scaled services in technology, process and data tools to enable the SBUs, the EMs and CF to better serve consumers and customers. The GBS organization is responsible for providing world-class services and solutions that drive value for P&G. Strategic Focus Procter & Gamble aspires to serve the world’s consumers better than our best competitors in every category and in every country in which we compete and, as a result, deliver total shareholder return in the top one-third of our peer group. Delivering and sustaining leadership levels of shareholder value creation requires balanced top- and bottom-line growth and strong cash generation. Our strategy is to deliver and sustain value creation through five integrated choices: a portfolio of daily-use products where performance drives brand choice; superiority across product, package, brand communication, retail execution and value; productivity; constructive disruption of the entire value chain; and a highly efficient and effective organization structure. The Company competes in daily-use product categories where performance plays a significant role in the consumer's choice of brands, and therefore, plays to P&G's strengths. Our focused portfolio of businesses consists of product categories where P&G has strong brands and consumer-meaningful product technologies with typically leadership market positions. Within these categories, our strategic choices are focused on delighting and winning with consumers. Our consumers are at the center of everything we do. We win with consumers by delivering irresistible superiority across five key vectors - product performance, packaging, brand communication, retail execution and value. Winning with consumers around the world and against our best competitors requires superior innovation. Innovation has always been, and continues to be, P&G’s lifeblood. Superior products delivered with superior execution drive market growth, value creation for retailers and build share growth for P&G. Ongoing productivity improvement is strategic and crucial to delivering our balanced top- and bottom-line growth, cash generation and value creation objectives. Productivity improvement enables investments to strengthen the superiority of our brands via product and packaging innovation, more efficient and effective supply chains, equity and awareness-building brand advertising and other programs and expansion of sales coverage and research and development programs. Productivity improvements also enable us to mitigate and manage through periods of challenging cost environments (including periods of increasing commodity, inflation and negative foreign exchange impacts). Our objective is to drive productivity improvements across all elements of the statement of earnings and balance sheet, including cost of goods sold, marketing and promotional spending, overhead costs and capital spending. We act with agility and are constructively disrupting our highly competitive industry and the way we do business, including how we innovate, communicate and leverage new technologies, to create more value. We are improving operational effectiveness and organizational culture through enhanced clarity of roles and responsibilities, accountability and incentive compensation programs. The Company’s strategic framework has been delivering strong results over an extended period of time. As we observe changes in the markets in which we operate, we will adapt the execution of our core strategy. These market changes include evolving ways in which consumers are engaging with our brands across social media platforms, streaming services or AI based search. We observe changes in retail landscapes around the world, where retailers are selling across multiple platforms (digital and physical outlets) and building their own media platforms. Consumers are changing how they perceive value across their basket of goods as cumulative inflation impacts their shopping behavior. Lastly, technologies, including AI, offer new capabilities to innovate, produce and market our products and brands. We are embracing these changes, and to benefit from them, the Company can and will adjust the execution of its strategy. Beyond the short-term interventions, the Company expects the delivery of the following long-term growth algorithm will result in total shareholder returns in the top third of the competitive, fast-moving consumer goods peer group: • Organic sales growth above market growth rates in the categories and geographies in which we compete; • Core EPS growth of mid-to-high single digits; and • Adjusted free cash flow productivity of 90% or greater. 18 The Procter & Gamble Company While periods of significant macroeconomic pressures may cause short-term results to deviate from the long-term growth algorithm, we intend to maintain a disciplined approach to investing in our business. RECENT DEVELOPMENTS Limited Market Portfolio Restructuring In the fiscal year ended June 30, 2024, the Company started a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. During the period ended September 30, 2024, the Company completed this limited market portfolio restructuring with the substantial liquidation of its operations in Argentina and recorded incremental restructuring charges of $801 million after tax, comprised primarily of non-cash charges for accumulated foreign currency translation losses previously included in Accumulated other comprehensive income/(loss). The total incremental restructuring charges incurred under the program beginning in the three-month period ended December 31, 2023, through the three-month period ended September 30, 2024, were $1.2 billion after tax. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements. Intangible Asset Impairment During the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company’s 2005 acquisition of The Gillette Company. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the non-core restructuring program described above. This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value. For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements. Focused Portfolio, Supply Chain and Productivity Plan In June 2025, the Company announced a portfolio and productivity plan to streamline its portfolio and organization to improve its cost structure and invest in growth. The Company expects to incur approximately $1.5 to $2.0 billion in before-tax restructuring costs over a two-year period, including costs incurred as part of this plan and the ongoing plan. The Company incurred over half of the costs under this plan in fiscal 2026, with the remainder expected in fiscal 2027. The restructuring activities are being executed across the Sector Business Units as well as the Enterprise Markets, Corporate Functions and Global Business Services. These restructuring activities include a plan for a reduction of up to 7,000 non-manufacturing overhead personnel by the end of fiscal 2027. Consistent with our historical policies for ongoing restructuring-type activities, resulting charges are funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs are reported as non-core charges. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements. Glad Joint Venture Agreement In January 2026, the Glad joint venture agreement between the Company and The Clorox Company (Clorox) expired. Under the terms of the agreement, Clorox purchased the Company’s minority interest in the venture at fair market value for $476 million. This transaction was accounted for as a dissolution of the Glad joint venture business and the Company recorded an after-tax gain of $261 million. U.S. Tariffs On February 20, 2026, the U.S. Supreme Court ruled that the tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were invalid. The Company previously paid approximately $200 million in IEEPA tariffs that may be recoverable. During the three-month period ended June 30, 2026, the Company recognized recovery of half of this amount in its Consolidated Financial Statements. Thorne Acquisition On August 4, 2026, the Company entered into an agreement to acquire Thorne, a premium wellness and supplement brand in the vitamins, minerals and supplements category for $3.8 billion. We anticipate the transaction to close in the second quarter of fiscal year 2027, with the timing subject to regulatory approval and customary closing conditions. The Procter & Gamble Company 19 SUMMARY OF 2026 RESULTS Amounts in millions, except per share amounts 2026 2025 Change vs. Prior Year Net sales $ 87,032 $ 84,284 3 % Operating income 19,748 20,451 (3) % Net earnings 16,144 16,065 — % Net earnings attributable to Procter & Gamble 16,046 15,974 — % Diluted net earnings per common share 6.62 6.51 2 % Core earnings per share 6.89 6.83 1 % Cash flow from operating activities 19,556 17,817 10 % • Net sales increased 3% to $87.0 billion versus the prior year. Net sales increased high single digits in Beauty, mid-single digits in Grooming and Health Care and low single digits in Fabric & Home Care and Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 1%. Organic sales increased mid-single digits in Beauty and low single digits in Health Care, Grooming and Fabric & Home Care. Organic sales declined low single digits in Baby, Feminine & Family Care. • Operating income decreased $703 million, or 3%, to $19.7 billion as the net sales increase was more than offset by a decrease in operating margin. • Net earnings increased $79 million to $16.1 billion as the decrease in operating income was offset by higher non-operating restructuring charges in the prior year, primarily driven by the non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina. • Net earnings attributable to Procter & Gamble increased $72 million to $16.0 billion. • Diluted EPS increased 2% to $6.62 due to an increase in net earnings and a reduction in shares outstanding. Core EPS, which excludes the gain from the dissolution of the Glad joint venture business and incremental restructuring charges, increased 1% to $6.89. • Cash flow from operating activities was $19.6 billion. ◦ Adjusted free cash flow, which is defined as operating cash flow less capital expenditures and excluding payments for the transitional tax resulting from the 2017 U.S. Tax Act, was $15.8 billion. ◦ Adjusted free cash flow productivity, which is defined as adjusted free cash flow as a percentage of net earnings excluding the gain from the dissolution of the Glad joint venture business, was 100%. ECONOMIC CONDITIONS AND UNCERTAINTIES Global Economic Conditions. Our products are sold in numerous countries worldwide, with more than half our sales generated outside the United States. Our largest international markets are Greater China, the United Kingdom, Canada, Japan and Germany and collectively comprised approximately 21% of our net sales in fiscal 2026. As a result, we are exposed to global macroeconomic factors, geopolitical tensions and government policies. We are exposed to various risks due to economic, political and social instabilities, market volatility, natural disasters, debt and credit issues, currency controls, new or increased tariffs, foreign exchange, the availability and cost of materials and interest rate changes. These risks can negatively impact our net sales, net earnings and cash flows. For example, we are exposed to risks due to the conflict in the Middle East and the ongoing war between Russia and Ukraine. Our Russia business accounted for 1% of consolidated net sales, net earnings and net assets as of June 30, 2026. Foreign Exchange. We have significant exposure to exchange rate fluctuations, both due to translation and transaction exposures. Translation exposures arise from measuring income statements of foreign subsidiaries with functional currencies other than the U.S. dollar. Transaction exposures involve impacts from 1) input costs that are denominated in currencies other than the local reporting currency and 2) revaluation of working capital balances denominated in currencies other than the functional currency. We have experienced significant foreign exchange impacts in the past due to the weakening of certain foreign currencies versus the U.S. dollar, which have negatively impacted net sales, net earnings and cash flows. In response to the devaluation of foreign currencies (including those deemed highly inflationary), any lags or inability (due to government restrictions) to implement price increases or the negative impacts of such actions on product consumption may lead to a decline in our net sales, net earnings and cash flows. Commodities and Supply Chain. Our costs are subject to fluctuations due to changes in commodity and input material prices, transportation costs, inflationary impacts and productivity efforts. We have significant exposures to certain commodities and input materials, in particular certain oil-derived materials like resins and paper-based materials like pulp. Volatility in the market price of commodities and input materials directly affects our costs. Disruptions in manufacturing, supply and distribution operations can lead to increased costs. Legal or regulatory requirements and sustainability initiatives may result in increased costs. We strive to implement, achieve and sustain cost improvement plans, including supply chain optimization and general overhead and workforce optimization. Increased pricing in response to certain inflationary or cost increases may also 20 The Procter & Gamble Company offset portions of the cost impacts; however, such price increases may negatively impact product consumption. If we are unable to manage cost impacts through pricing actions and consistent productivity improvements, it may negatively impact our net sales, net earnings and cash flows. Government Policies. We are exposed to changes in U.S. and foreign government legislative, regulatory or enforcement policies that can have a negative impact on net sales, net earnings and cash flows. These include tax policy changes (both U.S. and foreign), including those resulting from the current work being led by the OECD/G20 Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy”. Government controls such as currency exchanges, pricing and import authorizations as well as government policies related to environmental and climate change matters and changes to international trade agreements can also impact our financial performance. For additional information on risk factors that could impact our business results, please refer to Risk Factors in Part I, Item 1A of the Company's Form 10-K for the fiscal year ended June 30, 2026. RESULTS OF OPERATIONS The key metrics included in the discussion of our consolidated results of operations include net sales, gross margin, selling, general and administrative expense (SG&A), operating margin, other non-operating items, income taxes and net earnings. The primary factors driving year-over-year changes in net sales include overall market growth in the categories in which we compete, product initiatives, competitive activities (the level of initiatives, pricing and other activities by competitors), marketing spending, retail executions (both in-store and online) and acquisition and divestiture activity, all of which drive changes in our underlying unit volume, as well as our pricing actions (which can also impact volume), changes in product and geographic mix and foreign exchange impacts on sales outside the U.S. Our cost of products sold and SG&A are variable in nature to some extent. Accordingly, our discussion of these operating costs focuses primarily on relative margins rather than the absolute year-over-year changes in total costs. The primary drivers of changes in gross margin are input costs (energy and other commodities), pricing impacts, geographic mix (for example, gross margins in North America are generally higher than the Company average for similar products), product mix (for example, the Beauty segment has higher gross margins than the Company average), foreign exchange rate fluctuations (in situations where certain input costs may be tied to a different functional currency than the underlying sales), the impacts of manufacturing savings projects and reinvestments (for example, product or package improvements) and, to a lesser extent, scale impacts (for costs that are fixed or less variable in nature). The primary components of SG&A are marketing-related costs and non-manufacturing overhead costs. Marketing-related costs are primarily variable in nature, although we may achieve some level of scale benefit over time due to overall growth and other marketing efficiencies. While overhead costs are variable to some extent, we generally experience more scale-related impacts for these costs due to our ability to leverage our organization and systems' infrastructures to support business growth. The main drivers of changes in SG&A as a percentage of net sales are overhead and marketing cost savings, reinvestments (for example, increased advertising), inflation, foreign exchange fluctuations and scale impacts. For a detailed discussion of the fiscal 2025 year-over-year changes, please refer to the MD&A in Part II, Item 7 of the Company's Form 10-K for the fiscal year ended June 30, 2025 . Net Sales Net sales increased 3% to $87.0 billion in fiscal 2026 driven by favorable foreign exchange of 2% and pricing of 1%. Unit volume and mix were unchanged versus the prior year. Net sales increased high single digits in Beauty, mid-single digits in Grooming and Health Care and low single digits in Fabric & Home Care and Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 1%. Organic sales increased mid-single digits in Beauty and low single digits in Health Care, Grooming and Fabric & Home Care. Organic sales declined low single digits in Baby, Feminine & Family Care. Operating Costs Comparisons as a percentage of net sales; fiscal years ended June 30 2026 2025 Basis Point Change Gross margin 50.2 % 51.2 % (100) bps Selling, general and administrative expense 27.5 % 26.9 % 60 bps Operating margin 22.7 % 24.3 % (160) bps Earnings before income taxes 23.4 % 23.9 % (50) bps Net earnings 18.5 % 19.1 % (60) bps Net earnings attributable to Procter & Gamble 18.4 % 19.0 % (60) bps Gross margin decreased 100 basis points to 50.2% of net sales. The decrease in gross margin was due to: • 120 basis points of decline from unfavorable product mix, • 70 basis points of product and packaging investments, • 60 basis points of higher restructuring costs, The Procter & Gamble Company 21 • 30 basis points of net tariff impact from higher costs and recognized recoveries, • 20 basis points of higher commodity costs, • 10 basis points of unfavorable foreign exchange impacts and • 10 basis points of other items and rounding. These decreases were partially offset by: • 180 basis points of manufacturing productivity savings, • 40 basis points of increase due to higher pricing. Total SG&A increased 6% to $23.9 billion and increased 60 basis points to 27.5% as a percentage of net sales due primarily to an increase in marketing spending as a percentage of net sales. • Marketing spending as a percentage of net sales increased 80 basis points due to an increase in marketing spending, partially offset by productivity savings. • Overhead costs as a percentage of net sales were unchanged as wage inflation headwinds and restructuring spending were offset by productivity savings. • Other operating expenses as a percentage of net sales were unchanged. Productivity-driven cost savings delivered 160 basis points of benefit to SG&A as a percentage of net sales. Operating income decreased $703 million, or 3%, to $19.7 billion as the increase in net sales was more than offset by the decrease in gross margin and increase in SG&A spending. The operating margin decreased 160 basis points to 22.7% due primarily to the decrease in gross margin and increase in marketing spending. Non-Operating Items • Interest expense was $877 million, a decrease of $30 million versus the prior year. • Interest income was $430 million, a decrease of $39 million versus the prior year. • Other non-operating income/(expense), net increased $922 million to $1.1 billion primarily driven by the non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina in the prior year and the gain from the dissolution of the Glad joint venture business in the current year period. Income Taxes The effective income tax rate for fiscal year ended June 30, 2026, was 20.8%, compared to 20.3% for the fiscal year ended June 30, 2025. The increase in the effective tax rate was primarily driven by lower excess tax benefits of share-based compensation in the current year and unfavorable geographic mix impacts, partially offset by a decrease from discrete impacts related to uncertain tax positions and the prior year charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina. Net Earnings Earnings before income taxes increased $210 million, or 1%, to $20.4 billion as the increase in other non-operating income/(expense), net, the components of which are described above, were partially offset by the decrease in operating income. Net earnings increased $79 million to $16.1 billion as the increase in earnings before income taxes was partially offset by the effective income tax rate increase discussed above. Foreign exchange impacts increased net earnings by approximately $224 million due to a strengthening of certain currencies against the U.S. dollar. This impact includes both transactional charges and translational impacts from converting earnings from foreign subsidiaries to U.S. dollars. Net earnings attributable to Procter & Gamble increased $72 million to $16.0 billion. Diluted EPS increased $0.11, or 2%, to $6.62 due to an increase in net earnings and a reduction in shares outstanding. SEGMENT RESULTS Segment results reflect information on the same basis we use for internal management reporting and performance evaluation. The results of these reportable segments do not include certain non-business unit specific costs which are reported in Corporate and are included as part of the Corporate discussion. Additionally, we apply blended statutory tax rates in the segments. Eliminations to adjust segment results to arrive at our consolidated effective tax rate are included in Corporate. See Note 2 to the Consolidated Financial Statements for additional information on items included in Corporate. 22 The Procter & Gamble Company The Procter & Gamble Company 23 Net Sales Change Drivers 2026 vs. 2025 (1) Volume with Acquisitions & Divestitures Volume Excluding Acquisitions & Divestitures Foreign Exchange Price Mix Other (2) Net Sales Growth Beauty 4 % 4 % 2 % 1 % — % — % 7 % Grooming (1) % (1) % 3 % 2 % — % — % 4 % Health Care (2) % (2) % 3 % 2 % 1 % — % 4 % Fabric & Home Care — % — % 1 % 1 % — % — % 2 % Baby, Feminine & Family Care (1) % (1) % 2 % — % — % — % 1 % TOTAL COMPANY — % — % 2 % 1 % — % — % 3 % (1) Net sales percentage changes are approximations based on quantitative formulas that are consistently applied. (2) Other includes the sales mix impact from acquisitions and divestitures and rounding impacts necessary to reconcile volume to net sales. BEAUTY ($ millions) 2026 2025 Change vs. 2025 Volume N/A N/A 4% Net sales $16,023 $14,964 7% Net earnings $2,672 $2,715 (2)% % of net sales 16.7% 18.1% (140) bps Beauty net sales increased 7% to $16.0 billion, driven by a unit volume increase of 4%, favorable foreign exchange of 2% and positive impact of higher pricing of 1%. Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 5%. Global market share of the Beauty segment decreased 0.3 points. • Hair Care net sales increased high single digits driven by positive impacts of a unit volume increase, favorable foreign exchange and innovation-based pricing (primarily in North America and Latin America), partially offset by unfavorable geographic mix. The increase in unit volume was driven by growth in Latin America, Europe and Asia Pacific (all due to innovation), partially offset by a decline in North America (due to competitive activity). Organic sales increased mid-single digits driven by double-digit growth in Latin America, high single-digit growth in Europe and Asia Pacific, partially offset by a low single-digit decline in North America. Global market share of the hair care category decreased 0.5 points. • Personal Care net sales increased high single digits driven by positive impacts of a unit volume increase, favorable foreign exchange and higher pricing (primarily in North America), partially offset by unfavorable geographic mix. The volume increase was across all regions, led by growth in Greater China, North America and Europe (all due to innovation). Organic sales also increased high single digits led by high-teens growth in Europe and mid-single-digit growth in Greater China and North America. Global market share of the personal care category increased 0.2 points. • Skin Care net sales increased mid-single digits driven by positive impacts of favorable product mix (due primarily to the increase of the super-premium SK-II brand, which has higher than category-average selling prices) and favorable foreign exchange, partially offset by a unit volume decrease. The volume decrease was driven by Greater China (due to competitive activity). Organic sales increased low single digits due to a double-digit growth in Asia Pacific and a mid-single-digit growth in Greater China, partially offset by a low single-digit decline in North America. Global market share of the skin care category decreased 0.6 points. Net earnings decreased 2% to $2.7 billion due to a 140 basis-point decline in net earnings margin, partially offset by an increase in net sales. Net earnings margin decreased due to a decrease in gross margin and an increase in SG&A as a percentage of net sales. The gross margin decline of 100 basis points was driven by unfavorable product mix and higher commodity costs, partially offset by productivity savings. SG&A as a percentage of net sales increased due to an increase in marketing spending, partially offset by a decrease in overhead spending. GROOMING ($ millions) 2026 2025 Change vs. 2025 Volume N/A N/A (1)% Net sales $6,918 $6,662 4% Net earnings $1,529 $1,577 (3)% % of net sales 22.1% 23.7% (160) bps Grooming net sales increased 4% to $6.9 billion driven by the positive impacts of favorable foreign exchange of 3% and higher pricing (primarily in North America and Europe) of 2%, partially offset by a 1% decrease in unit volume. The unit volume decrease was driven by declines in IMEA (due to distribution loss) and North America (due to market contraction), partially 24 The Procter & Gamble Company offset by a unit volume increase in Latin America (due to increased distribution). Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 1% driven by low single-digit growth in Europe and North America, partially offset by a high single-digit decline in Asia Pacific. Global market share of the Grooming segment decreased 0.4 points. Net earnings decreased 3% to $1.5 billion due to a 160 basis-point decline in net earnings margin, partially offset by an increase in net sales. Net earnings margin decreased due to a decrease in gross margin and an increase in the effective tax rate, partially offset by an decrease in SG&A as a percentage of net sales. The gross margin decrease of 90 basis points was driven by unfavorable product mix, partially offset by higher pricing and productivity savings. SG&A as a percentage of net sales decreased due to a decrease in overhead spending, partially offset by an increase in marketing spending. The higher effective tax rate was driven by unfavorable geographic mix. HEALTH CARE ($ millions) 2026 2025 Change vs. 2025 Volume N/A N/A (2)% Net sales $12,456 $11,998 4% Net earnings $2,404 $2,440 (1)% % of net sales 19.3% 20.3% (100) bps Health Care net sales increased 4% to $12.5 billion driven by favorable foreign exchange of 3%, higher pricing of 2% and favorable product mix of 1%, partially offset by a 2% decrease in unit volume. Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales increased 1%. Global market share of the Health Care segment increased 0.4 points. • Oral Care net sales increased low single digits due to the positive impacts of favorable foreign exchange and favorable product mix (due to growth of premium paste and power brushes, which have higher than category-average selling prices), partially offset by a unit volume decrease. The unit volume decrease was due to a decline in Greater China (due to market contraction and competitive activity) and North America (due to competitive activity), partially offset by an increase in IMEA (due to market growth). Organic sales were unchanged as a low single-digit increase in Europe was offset by a mid-teens decrease in Greater China. Global market share of the oral care category was unchanged. • Personal Health Care net sales increased mid-single digits due to the positive impacts of higher pricing (driven by North America) and favorable foreign exchange, partially offset by a decrease in unit volume. The unit volume decrease was driven by a decline in North America (due to lower average incidence of cough and cold), partially offset by an increase in IMEA (due to innovation). Organic sales increased low single digits due to high single-digit growth in IMEA and Latin America, partially offset by low single-digit growth in North America and Europe. Global market share of the personal health care category increased 0.5 points. Net earnings decreased 1% to $2.4 billion due to a 100 basis-point decline in net earnings margin, partially offset by an increase in net sales. Net earnings margin decreased due to a decrease in gross margin and an increase in SG&A as a percentage of net sales. The gross margin decrease of 30 basis points was driven by unfavorable product mix, partially offset by productivity savings and higher pricing. SG&A as a percentage of net sales increased due to increased marketing spending, partially offset by decreased overhead spending. FABRIC & HOME CARE ($ millions) 2026 2025 Change vs. 2025 Volume N/A N/A —% Net sales $30,314 $29,617 2% Net earnings $5,632 $5,848 (4)% % of net sales 18.6% 19.7% (110) bps Fabric & Home Care net sales increased 2% to $30.3 billion driven by favorable foreign exchange of 1% and higher pricing of 1%. Unit volume was unchanged. Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales increased 1%. Global market share of the Fabric & Home Care segment was unchanged. • Fabric Care net sales increased low single digits driven by favorable foreign exchange and favorable product mix. Unit volume was unchanged as the volume increase in North America (due to innovation) and Latin America (due to market growth) was offset by the volume decrease in Europe (due to competitive activity). Organic sales were unchanged as a mid-single-digit increase in Latin America and a low single-digit increase in North America were offset by a low single-digit decrease in Europe. Global market share of the fabric care category decreased 0.4 points. • Home Care net sales increased low single digits driven by higher pricing (primarily in North America) and favorable foreign exchange. Unit volume was unchanged as increases in Latin America and Asia Pacific (both due to innovation) were offset by a decline in North America (due to competitive activity). Organic sales also increased low single digits as a The Procter & Gamble Company 25 high single-digit growth in Latin America was partially offset by low single-digit growth in Europe and North America. Global market share of the home care category increased 0.3 points. Net earnings decreased 4% to $5.6 billion due to a 110 basis-point decline in net earnings margin, partially offset by an increase in net sales. Net earnings margin decreased due to a decrease in gross margin, partially offset by a decrease in SG&A as a percentage of net sales. The gross margin decrease of 140 basis points was driven by unfavorable product mix and higher commodity costs, partially offset by productivity savings. SG&A as a percentage of net sales decreased due primarily to a decrease in overhead spending as a percentage of net sales and lower foreign exchange transactional charges, partially offset by an increase in marketing spending. BABY, FEMININE & FAMILY CARE ($ millions) 2026 2025 Change vs. 2025 Volume N/A N/A (1)% Net sales $20,401 $20,248 1% Net earnings $3,930 $4,013 (2)% % of net sales 19.3% 19.8% (50) bps Baby, Feminine & Family Care net sales increased 1% to $20.4 billion driven by favorable foreign exchange of 2%, partially offset by a unit volume decrease of 1%. Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales decreased 1%. Global market share of the Baby, Feminine & Family Care segment decreased 0.2 points. • Baby Care net sales increased low single digits driven by favorable foreign exchange and a unit volume increase. The unit volume increase was driven by increases in Greater China (due to innovation) and IMEA (due to market growth), partially offset by a decrease in North America (due to competitive activity). Organic sales also increased low single digits as a 20% increase in Greater China and a mid-single-digit increase in IMEA were partially offset by a low single-digit decrease in North America. Global market share of the baby care category increased 0.3 points. • Feminine Care net sales increased low single digits driven by positive impacts of favorable foreign exchange, favorable geographic mix and higher pricing (primarily in North America), partially offset by a decrease in unit volume. The unit volume decrease was driven by IMEA and Europe (both due to competitive activity) and Greater China (due to market contraction). Organic sales were unchanged as low single-digit growth in North America was offset by a high single-digit decline in IMEA and a low single-digit decline in Europe. Market share of the feminine care category decreased 0.2 points. • Net sales in Family Care, which is predominantly a North American business, decreased low single digits driven by lower pricing (due to merchandising investments) and a unit volume decrease (due to competitive activity). Organic sales also decreased low single digits. North America's share of the family care category decreased 0.7 points. Net earnings decreased 2% to $3.9 billion due to a 50 basis-point decline in net earnings margin, partially offset by an increase in net sales. Net earnings margin decreased due to a decrease in gross margin and an increase in SG&A as a percentage of net sales. Gross margin decreased 40 basis points due to unfavorable category mix, partially offset by lower commodity costs and productivity savings. SG&A as a percentage of net sales increased due to an increase in marketing spending, partially offset by a reduction in overhead spending. CORPORATE ($ millions) 2026 2025 Change vs. 2025 Net sales $919 $794 16% Net earnings/(loss) $(23) $(527) N/A Corporate includes certain operating and non-operating activities not allocated to specific business segments. These include but are not limited to incidental businesses managed at the corporate level, gains and losses related to certain divested brands or businesses, impacts from various financing and investing activities, certain impacts related to employee benefits, asset impairments and restructuring activities including manufacturing and workforce optimization. Corporate also includes reconciling items to adjust the accounting policies used within the reportable segments to U.S. GAAP. The most notable ongoing reconciling item is income taxes, which adjusts the blended statutory rates that are reflected in the reportable segments to the overall Company effective tax rate. Corporate net sales increased 16% to $919 million due to an increase in net sales of incidental businesses managed at the corporate level. Corporate net earnings increased $504 million to a loss of $23 million due to restructuring charges related to the substantial liquidation of operations in certain Enterprise Markets, including Argentina, in the prior year period and the dissolution of the Glad joint venture business in the current year period, partially offset by current year restructuring charges. Restructuring Program to Deliver Productivity and Cost Savings The Company has historically had an ongoing restructuring program with annual spending in the range of $250 to $500 million before tax. In fiscal 2024, the Company announced an incremental limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, and during the period ended September 26 The Procter & Gamble Company 30, 2024, the Company completed the limited market portfolio restructuring. The total incremental restructuring charges incurred under the program were $1.2 billion after tax. In June 2025, the Company announced a two-year portfolio and productivity plan to streamline its portfolio and organization to improve its cost structure and competitiveness. In fiscal 2026, the Company incurred incremental restructuring charges of $903 million after tax under the program. Restructuring accruals of $336 million as of June 30, 2026, are classified as current liabilities. Approximately 67% of the before tax restructuring charges incurred in fiscal 2026 either have been or will be settled with cash. Consistent with our policies for restructuring-type activities, the resulting charges are funded by and included within Corporate for segment reporting. Savings generated from the Company's restructuring program are difficult to estimate, given the nature of the activities, the timing of the execution and the degree of reinvestment. In addition to our restructuring programs, we have additional ongoing savings efforts in our supply chain, marketing and overhead areas that yield additional benefits to our operating margins. Refer to Note 3 to the Consolidated Financial Statements for more details on the restructuring program. CASH FLOW, FINANCIAL CONDITION AND LIQUIDITY We believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and to readily access capital markets at competitive rates. Operating cash flow provides the primary source of cash to fund operating needs and capital expenditures. Excess operating cash is used first to fund shareholder dividends. Other discretionary uses include share repurchases and acquisitions to complement our portfolio of businesses, brands and geographies. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations. Cash Flow Analysis ($ millions) 2026 2025 Net cash provided by operating activities $ 19,556 $ 17,817 Net cash used in investing activities (4,624) (3,818) Net cash used in financing activities (14,460) (14,036) Adjusted Free Cash Flow 15,835 14,606 Adjusted Free Cash Flow Productivity 100 % 87 % Operating Cash Flow Operating cash flow was $19.6 billion in 2026, a 10% increase versus the prior year. Net earnings, adjusted for certain non-cash items (depreciation and amortization, share-based compensation expense, deferred income taxes and (gain)/loss on sale of assets) generated approximately $19.5 billion of operating cash flow. Working capital and other impacts generated $29 million of cash in the period. Accounts receivable decreased, resulting in $84 million of cash flow help. Days sales outstanding decreased by one day. Total inventories increased, consuming $641 million of cash, driven primarily by increased safety stock levels and new product initiatives. Days inventory on hand increased by two days . Accounts payable increased, generating $919 million of cash, driven primarily by increased supply chain activity in line with the increase in inventory and increased marketing support activity. Other impacts reduced cash by $333 million primarily driven by the final payment of the transitional tax related to the 2017 U.S. Tax Act and a reduction in postretirement benefit accruals, partially offset by tax accruals in excess of estimated payments and accrued marketing expense. Adjusted Free Cash Flow. We view adjusted free cash flow as an important non-GAAP measure because it is a factor impacting the amount of cash available for dividends, share repurchases, acquisitions and other discretionary investments. It is defined as operating cash flow less capital expenditures and excluding payments for the transitional tax resulting from the 2017 U.S. Tax Act. Adjusted free cash flow is one of the measures used to evaluate senior management and determine their at-risk compensation. Adjusted free cash flow was $15.8 billion in 2026, an increase of 8% versus the prior year. The increase was primarily driven by the increase in operating cash flows as discussed above. Adjusted free cash flow productivity, defined as the ratio of adjusted free cash flow to net earnings excluding the gain from the dissolution of the Glad joint venture business, was 100% in 2026. Investing Cash Flow Net investing activities used $4.6 billion of cash in 2026, primarily due to capital expenditures and the settlement of net investment hedges, partially offset by proceeds from the dissolution of the Glad joint venture business. Financing Cash Flow Net financing activities used $14.5 billion of cash in 2026, mainly due to dividends to shareholders and treasury stock purchases, partially offset by the impact of stock options and other. The Procter & Gamble Company 27 Liquidity At June 30, 2026, our current liabilities exceeded current assets by $12.5 billion, l argely due to accounts payable, short-term borrowings and debt due within one year. We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations. The Company regularly assesses its cash needs and the available sources to fund these needs. As of June 30, 2026, the Company had $8.9 billion of cash and cash equivalents related to foreign subsidiaries, primarily in various European and Asian countries. We did not have material cash and cash equivalents related to any country subject to exchange controls that significantly restrict our ability to access or repatriate the funds. Under current law, we do not expect restrictions or taxes on repatriation of cash held outside of the U.S. to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future. We utilize short- and long-term debt to fund discretionary items, such as acquisitions and share repurchases. We have strong short- and long-term debt ratings, that have enabled and should continue to enable us to refinance our debt as it becomes due in commercial paper and bond markets. In addition, we have agreements with a diverse group of financial institutions that, if needed, should provide sufficient funding to meet short-term financing requirements. On June 30, 2026, our short-term credit ratings were P-1 (Moody's) and A-1+ (Standard & Poor's), while our long-term credit ratings were Aa3 (Moody's) and AA- (Standard & Poor's), all with a stable outlook. We maintain bank credit facilities to support our ongoing commercial paper program. The current facility is an $8.0 billion facility split between a $3.2 billion five-year facility and a $4.8 billion 364-day facility, which expire in October 2030 and October 2026, respectively. Both facilities can be extended for certain periods of time as specified in the terms of the credit agreement. These facilities are currently undrawn and we anticipate that they will remain undrawn. These credit facilities do not have cross-default or ratings triggers, nor do they have material adverse events clauses, except at the time of signing. In addition to these credit facilities, we have an automatically effective registration statement on Form S-3 filed with the SEC that is available for registered offerings of short- or long-term debt securities. For additional details on debt, see Note 10 to the Consolidated Financial Statements. Guarantees and Other Off-Balance Sheet Arrangements We do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity. Contractual Commitments The following table provides information on the amount and payable date of our contractual commitments as of June 30, 2026. ($ millions) Total Less Than 1 Year 1-3 Years 3-5 Years After 5 Years RECORDED LIABILITIES Total debt $ 34,490 $ 11,357 $ 4,173 $ 6,306 $ 12,654 Leases 1,028 246 376 208 198 OTHER Interest payments relating to long-term debt 6,102 884 1,365 1,075 2,777 Minimum pension funding (1) 573 186 387 — — Purchase obligations (2) 3,651 1,155 1,366 636 494 TOTAL CONTRACTUAL COMMITMENTS $ 45,843 $ 13,828 $ 7,667 $ 8,225 $ 16,123 (1) Represents future pension payments to comply with local funding requirements. These future pension payments assume the Company continues to meet its future statutory funding requirements. Considering the current economic environment in which the Company operates, the Company believes its cash flows are adequate to meet the future statutory funding requirements. The projected payments beyond fiscal year 2029 are not currently determinable. (2) Primarily reflects future contractual payments under various take-or-pay arrangements entered into as part of the normal course of business. Commitments made under take-or-pay obligations represent minimum commitments with suppliers and are in line with expected usage. This includes service contracts for information technology, human resources management and facilities management activities that have been outsourced. While the amounts listed represent contractual obligations, we do not believe it is likely that the full contractual amount would be paid if the underlying contracts were canceled prior to maturity. In such cases, we generally are able to negotiate new contracts or cancellation penalties, resulting in a reduced payment. The amounts do not include other contractual purchase obligations that are not take-or-pay arrangements. Such contractual purchase obligations are primarily purchase orders at fair value that are part of normal operations and are reflected in historical operating cash flow trends. We do not believe such purchase obligations will adversely affect our liquidity position. CRITICAL ACCOUNTING POLICIES AND ESTIMATES In preparing our financial statements in accordance with U.S. GAAP, there are certain accounting policies that may require a choice between acceptable accounting methods or may require substantial judgment or estimation in their application. These include revenue recognition, income taxes, certain employee benefits and goodwill and intangible assets. We believe these 28 The Procter & Gamble Company accounting policies, and others set forth in Note 1 to the Consolidated Financial Statements, should be reviewed as they are integral to understanding the results of operations and financial condition of the Company. The Company has discussed the selection of critical accounting policies and the effect of estimates with the Audit Committee of the Company's Board of Directors. Revenue Recognition Our revenue is primarily generated from the sale of finished product to customers. Those sales predominantly contain a single performance obligation and revenue is recognized at a single point in time when ownership, risks and rewards transfer, which can be on the date of shipment or the date of receipt by the customer. Trade promotions, consisting primarily of customer pricing allowances, in-store merchandising funds, advertising and other promotional activities and consumer coupons, are offered through various programs to customers and consumers. Sales are recorded net of trade promotion spending, which is recognized as incurred at the time of the sale. Amounts accrued for trade promotions at the end of a period require estimation, based on contractual terms, sales volumes and historical utilization and redemption rates. The actual amounts paid may be different from such estimates. These differences, which have historically not been significant, are recognized as a change in management estimate in a subsequent period. Income Taxes Our annual tax rate is determined based on our income, statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Also inherent in determining our annual tax rate are judgments and assumptions regarding the recoverability of certain deferred tax balances, primarily net operating loss and other carryforwards, and our ability to uphold certain tax positions. Realization of net operating losses and other carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods, which involves business plans, planning opportunities and expectations about future outcomes. Although realization is not assured, management believes it is more likely than not that our deferred tax assets, net of valuation allowances, will be realized. We operate in multiple jurisdictions with complex tax policy and regulatory environments. In certain of these jurisdictions, we may take tax positions that management believes are supportable but are potentially subject to successful challenge by the applicable taxing authority. These interpretational differences with the respective governmental taxing authorities can be impacted by the local economic and fiscal environment. A core operating principle is that our tax structure is based on our business operating model, such that profits are earned in line with the business substance and functions of the various legal entities in the jurisdictions where those functions are performed. However, because of the complexity of transfer pricing concepts, we may have income tax uncertainty related to the determination of intercompany transfer prices for our various cross-border transactions. We have obtained and continue to prioritize the strategy of seeking advance rulings with tax authorities to reduce this uncertainty. We estimate that our current portfolio of advance rulings reduces this uncertainty with respect to over 70% of our global earnings. We evaluate our tax positions and establish liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes. We review these tax uncertainties considering changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We have several audits in process in various jurisdictions. Although the resolution of these tax positions is uncertain, based on currently available information, we believe that the ultimate outcomes will not have a material adverse effect on our financial position, results of operations or cash flows. Because there are several estimates and assumptions inherent in calculating the various components of our tax provision, certain future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effective tax rate. See Note 5 to the Consolidated Financial Statements for additional details on the Company's income taxes. Employee Benefits We sponsor various postretirement benefits throughout the world. These include pension plans, both defined contribution plans and defined benefit plans, and other postretirement benefit (OPRB) plans consisting primarily of health care and life insurance for retirees. For accounting purposes, the defined benefit pension and OPRB plans require assumptions to estimate the net projected and accumulated benefit obligations, including the following variables: discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality; expected return on assets; and health care cost trend rates. These and other assumptions affect the annual expense and net obligations recognized for the underlying plans. Our assumptions reflect our historical experiences and management's best judgment regarding future expectations. As permitted by U.S. GAAP, the net amount by which actual results differ from our assumptions is deferred. If this net deferred amount exceeds 10% of the greater of plan assets or liabilities, a portion of the deferred amount is included in expense for the following year. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits. The expected return on plan assets assumption impacts our defined benefit expense since many of our defined benefit pension plans and our primary OPRB plan are partially funded. The process for setting the expected rates of return is described in Note The Procter & Gamble Company 29 8 to the Consolidated Financial Statements. For 2026, the average return on assets assumptions for pension plan assets and OPRB assets was 6.0% and 8.5%, respectively. A change in the rate of return of 100 basis points for both pension and OPRB assets would impact annual after-tax benefit/expense by approximately $160 million. Since pension and OPRB liabilities are measured on a discounted basis, the discount rate impacts our plan obligations and expenses. Discount rates used for our U.S. defined benefit pension and OPRB plans are based on a yield curve constructed from a portfolio of high-quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better. The average discount rate on the defined benefit pension plans of 4.6% represents a weighted average of local rates in countries where such plans exist. A 100 basis-point change in the discount rate would impact annual after-tax benefit expense by approximately $35 million. The average discount rate on the OPRB plan of 6.0% reflects the higher interest rates generally applicable in the U.S., which is where most of the plan participants receive benefits. A 100 basis-point change in the discount rate would impact annual after-tax OPRB expense by approximately $20 million. See Note 8 to the Consolidated Financial Statements for additional details on our defined benefit pension and OPRB plans. Goodwill and Intangible Assets Significant judgment is required to estimate the fair value of our goodwill reporting units and intangible assets. Accordingly, we typically obtain the assistance of third-party valuation specialists for those goodwill reporting units and intangible assets that do not have fair values that significantly exceed their underlying carrying values. Determining the useful life of an intangible asset also requires judgment. Certain brand intangible assets are expected to have indefinite lives based on their history and our plans to continue to support and build the acquired brands. Other acquired intangible assets (e.g., certain brands, customer relationships, patents and technologies) are expected to have determinable useful lives. Our assessment as to brands that have an indefinite life and those that have a determinable life is based on a number of factors including competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. Determinable-lived intangible assets are amortized to expense over their estimated lives. An impairment assessment for determinable-lived intangibles is only required when an event or change in circumstances indicates that the carrying amount of the asset may not be recoverable. Goodwill and indefinite-lived intangible assets are not amortized but are tested at least annually for impairment. Our annual impairment testing for goodwill and indefinite-lived intangible assets occurs during the three months ended December 31. Other than our Gillette indefinite-lived intangible asset, our goodwill reporting units and our indefinite-lived intangible assets have fair values that significantly exceed their underlying carrying values. As previously disclosed, we recorded a non-cash impairment charge related to the Gillette indefinite-lived intangible asset during the fiscal year ended June 30, 2024. For additional information regarding the impairment charge and related accounting, see Note 4 to the Consolidated Financial Statements. Based on our impairment testing performed during the three months ended December 31, 2025, the Gillette indefinite-lived intangible asset's fair value exceeds its carrying value by greater than 10%. As of June 30, 2026, the carrying value of the Gillette indefinite-lived intangible asset was $12.8 billion. While we have concluded that no triggering event has occurred since our annual impairment test, the Gillette indefinite-lived intangible asset is susceptible to impairment risk. Adverse changes in the business or in the macroeconomic environment including foreign currency devaluation, increasing global inflation or market contraction from an economic recession or geopolitical conflicts, could reduce the underlying cash flows used to estimate the fair value of the Gillette indefinite-lived intangible asset and result in a future impairment charge. The most significant assumptions utilized in the determination of the estimated fair value of the Gillette indefinite-lived intangible asset are the net sales growth rates (including residual growth rate), discount rate and royalty rate. Net sales growth rates could be negatively impacted by reductions or changes in demand for our Gillette products, which may be caused by, among other things: changes in the use and frequency of grooming products, shifts in demand away from one or more of our higher priced products to lower priced products or potential supply chain constraints. In addition, relative global and country/regional macroeconomic factors could result in additional and prolonged devaluation of other countries’ currencies relative to the U.S. dollar. The residual growth rate represents the expected rate at which the Gillette brand is expected to grow beyond the shorter-term business planning period. The residual growth rate utilized in our fair value estimates is consistent with the brand operating plans and approximates expected long-term category market growth rates. The residual growth rate depends on overall market growth rates, the competitive environment, inflation, relative currency exchange rates and business activities that impact market share. As a result, the residual growth rate could be adversely impacted by a sustained deceleration in category growth, grooming habit changes, devaluation of currencies against the U.S. dollar or an increased competitive environment. The discount rate is based on a weighted average cost of capital that is likely to be expected by a market participant, including consideration of both debt and equity components of the capital structure. Our discount rate may be impacted by adverse changes in the macroeconomic environment, volatility in the equity and debt markets or other country specific factors, such as further devaluation of currencies against the U.S. dollar. Spot rates as of the fair value measurement date are utilized in our fair value estimates for cash flows outside the U.S. 30 The Procter & Gamble Company The royalty rate used to determine the estimated fair value for the Gillette indefinite-lived intangible asset is driven by historical and estimated future profitability of the underlying Gillette business. The royalty rate may be impacted by significant adverse changes in long-term operating margins. We performed a sensitivity analysis for the Gillette indefinite-lived intangible asset as part of our annual impairment testing during the three months ended December 31, 2025, utilizing reasonably possible changes in the assumptions for the discount rate, the short-term and residual growth rates and the royalty rate to demonstrate the potential impacts to estimated fair values. The table below provides, in isolation, the estimated fair value impacts related to a 25 basis-point increase in the discount rate, a 25 basis-point decrease in our short-term and residual growth rates or a 50 basis-point decrease in our royalty rate. Approximate Percent Change in Estimated Fair Value +25 bps Discount Rate -25 bps Growth Rate -50 bps Royalty Rate Gillette indefinite-lived intangible asset (5)% (5)% (4)% See Note 4 to the Consolidated Financial Statements for additional information on goodwill and intangible assets, including the recorded impairment charge discussed above. New Accounting Pronouncements Refer to Note 1 to the Consolidated Financial Statements for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of June 30, 2026. OTHER INFORMATION Hedging and Derivative Financial Instruments As a multinational company with diverse product offerings, we are exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. We evaluate exposures on a centralized basis to take advantage of natural exposure correlation and netting. We leverage the Company's diversified portfolio of exposures as a natural hedge and prioritize these operational hedging activities over financial market instruments. To the extent we choose to further manage volatility within our financing operations, as discussed below, we enter into various financial transactions which we account for using the applicable accounting guidance for derivative instruments and hedging activities. These financial transactions are governed by our policies covering acceptable counterparty exposure, instrument types and other hedging practices. See Note 9 to the Consolidated Financial Statements for a discussion of our accounting policies for derivative instruments. Derivative positions are monitored using techniques including market valuation, sensitivity analysis and value-at-risk modeling. The tests for interest rate, currency rate and commodity derivative positions discussed below are based on the RiskManager™ value-at-risk model using a one-year horizon and a 95% confidence level. The model incorporates the impact of correlation (the degree to which exposures move together over time) and diversification (from holding multiple currency, commodity and interest rate instruments) and assumes that financial returns are normally distributed. Estimates of volatility and correlations of market factors are drawn from the RiskMetrics™ dataset as of June 30, 2026. In cases where data is unavailable in RiskMetrics™, a reasonable proxy is included. Our market risk exposures relative to interest rates, currency rates and commodity prices, as discussed below, have not changed materially versus the previous reporting period. In addition, we are not aware of any facts or circumstances that would significantly impact such exposures in the near term. Interest Rate Exposure. We are exposed to interest rate movements due to our long and short-term borrowing program. Interest rate swaps are used to manage exposures to interest rates on underlying debt obligations. Certain interest rate swaps denominated in foreign currencies are designated to hedge exposures to currency exchange rate movements on our investments in foreign operations. These currency interest rate swaps are designated as hedges of the Company's foreign net investments. Based on our interest rate exposure as of and during the fiscal year ended June 30, 2026, including derivative and other instruments sensitive to interest rates, we believe a near-term change in interest rates, at a 95% confidence level based on historical interest rate movements, would not materially affect our financial statements. Currency Rate Exposure. Because we manufacture and sell products and finance operations in a number of countries throughout the world, we are exposed to movements in currency exchange rates. We leverage the Company’s diversified portfolio of exposures as a natural hedge. Corporate policy prescribes the range of allowable hedging activity. To manage the exchange rate risk associated with the financing of our operations, we primarily use forward contracts and currency swaps with maturities of less than 18 months. Based on our currency rate exposure on derivative and other instruments as of and during the fiscal year ended June 30, 2026, we believe, at a 95% confidence level based on historical currency rate movements, the impact on such instruments of a near-term change in currency rates would not materially affect our financial statements. Commodity Price Exposure. We use raw materials that are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. We may use futures, options and swap contracts to manage the volatility related to the above exposures. During the fiscal years ended June 30, 2026 and 2025, we did not have any financial commodity hedging activity. The Procter & Gamble Company 31 Measures Not Defined By U.S. GAAP In accordance with the SEC's Regulation S-K Item 10(e), the following provides definitions of non-GAAP measures and a reconciliation to the most closely related GAAP measure. We believe that these measures provide useful perspective on underlying business trends (i.e., trends excluding non-recurring or unusual items) and results and provide a supplemental measure of year-on-year results. The non-GAAP measures described below are used by management in making operating decisions, allocating financial resources and for business strategy purposes. These measures may be useful to investors, as they provide supplemental information about business performance and provide investors with a view of our business results through the eyes of management. These measures are also used to evaluate senior management and are a factor in determining their at-risk compensation. These non-GAAP measures are not intended to be considered by the user in place of the related GAAP measures but rather as supplemental information to our business results. These non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in method and in the items or events being adjusted. Organic Sales Growth. Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. This measure is used in assessing the achievement of management goals for at-risk compensation. The following tables provide a numerical reconciliation of net sales growth to organic sales growth: Fiscal year ended June 30, 2026 Net Sales Growth Foreign Exchange Impact Acquisition & Divestiture Impact/Other (1) Organic Sales Growth Beauty 7 % (2) % — % 5 % Grooming 4 % (3) % — % 1 % Health Care 4 % (3) % — % 1 % Fabric & Home Care 2 % (1) % — % 1 % Baby, Feminine & Family Care 1 % (2) % — % (1) % TOTAL COMPANY 3 % (2) % — % 1 % (1) Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales. Adjusted Free Cash Flow. Adjusted free cash flow is defined as operating cash flow less capital spending and excluding payments for the transitional tax resulting from the 2017 U.S. Tax Act. Adjusted free cash flow represents the cash that the Company is able to generate after taking into account planned maintenance and asset expansion. We view adjusted free cash flow as an important measure because it is one factor used in determining the amount of cash available for dividends, share repurchases, acquisitions and other discretionary investments. The following table provides a numerical reconciliation of adjusted free cash flow ($ millions): Operating Cash Flow Capital Spending 2017 U.S. Tax Act Payments Adjusted Free Cash Flow 2026 $ 19,556 $ (4,409) $ 688 $ 15,835 2025 $ 17,817 $ (3,773) $ 562 $ 14,606 Adjusted Free Cash Flow Productivity. Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings excluding the gain from the dissolution of the Glad joint venture business in fiscal 2026 and the non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina in fiscal 2025. We view adjusted free cash flow productivity as a useful measure to help investors understand P&G’s ability to generate cash. Adjusted free cash flow productivity is used by management in making operating decisions, in allocating financial resources and for budget planning purposes. This measure is used in assessing the achievement of management goals for at-risk compensation. The following table provides a numerical reconciliation of adjusted free cash flow productivity ($ millions): Adjusted Free Cash Flow Net Earnings Adjustments to Net Earnings (1) Net Earnings as Adjusted Adjusted Free Cash Flow Productivity 2026 $ 15,835 $ 16,144 $ (261) $ 15,883 100 % 2025 $ 14,606 $ 16,065 $ 752 $ 16,817 87 % (1) Adjustments to Net Earnings relate to the gain from the dissolution of the Glad joint venture business in fiscal 2026 and the non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina in fiscal 2025. Core EPS. Core EPS is a measure of the Company's diluted EPS excluding items that are not judged by management to be part of the Company's sustainable results or trends. Management views this non-GAAP measure as a useful supplemental measure 32 The Procter & Gamble Company of Company performance over time. This measure is also used in assessing the achievement of management goals for at-risk compensation. The Core earnings measures included in the following reconciliation tables refer to the equivalent GAAP measures adjusted as applicable for the following items: • Incremental restructuring: The Company has historically had an ongoing level of restructuring activities of approximately $250 - $500 million before tax. As discussed in Note 3 to the Consolidated Financial Statements, during the period ended September 30, 2024, the Company completed its limited market portfolio restructuring with the substantial liquidation of its operations in Argentina. In June 2025, the Company announced a portfolio and productivity plan to streamline its portfolio and organization to improve its cost structure and competitiveness. The Company incurred over half of the costs under this plan in fiscal 2026, with the remainder expected to be incurred in fiscal 2027. The adjustments to Core earnings include the restructuring charges that exceed the normal, recurring level of restructuring charges. • Glad joint venture agreement: In January 2026, the Glad joint venture agreement between the Company and Clorox expired. Under the terms of the agreement, Clorox purchased the Company’s minority interest in the venture at fair market value for $476 million. This transaction was accounted for as a dissolution of the Glad joint venture business and the Company recorded an after-tax gain of $261 million. We do not view the above items to be part of our sustainable results, and their exclusion from Core earnings measures provides a more comparable measure of year-on-year results. These items are also excluded when evaluating senior management in determining their at-risk compensation. THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES Reconciliation of Non-GAAP Measures Fiscal Year Ended June 30, 2026 Amounts in millions except per share amounts As Reported (GAAP) Incremental Restructuring Glad Joint Venture Agreement Core (Non-GAAP) Cost of products sold $ 43,362 $ (436) $ — $ 42,927 Selling, general and administrative expense 23,922 (313) — 23,608 Operating income 19,748 749 — 20,497 Other non-operating income/(expense), net 1,076 161 (343) 894 Income taxes 4,233 6 (81) 4,158 Net earnings 16,144 904 (261) 16,786 Less: Net earnings attributable to noncontrolling interests 98 1 — 98 Net earnings attributable to P&G 16,046 903 (261) 16,688 Core EPS Diluted net earnings per common share (1) $ 6.62 $ 0.37 $ (0.11) $ 6.89 (1) Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble. CHANGE VERSUS YEAR AGO Diluted net earnings per common share 2 % Core EPS 1 % The Procter & Gamble Company 33 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES Reconciliation of Non-GAAP Measures Fiscal Year Ended June 30, 2025 Amounts in millions except per share amounts As Reported (GAAP) Incremental Restructuring Core (Non-GAAP) Cost of products sold $ 41,164 $ 20 $ 41,184 Selling, general and administrative expense 22,669 (25) 22,643 Operating income 20,451 5 20,456 Other non-operating income/(expense), net 154 789 943 Income taxes 4,102 (7) 4,094 Net earnings attributable to P&G 15,974 801 16,775 Core EPS Diluted net earnings per common share (1) $ 6.51 $ 0.33 $ 6.83 (1) Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The information required by this item is incorporated by reference to the section entitled Other Information in the MD&A and Note 9 to the Consolidated Financial Statements. 34 The Procter & Gamble Company