What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-03 compared with 2025-02-04 · 158 added, 120 removed, 368 unchanged (43% of the section changed)

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At PayPal, our mission is to revolutionize commerce globally.

Our products are designed to enable digital payments and simplify commerce experiences for consumers and merchants to make selling, shopping, and sending and receiving money simple, personalized, and secure, online or offline, including mobile.

Our two-sided platform serves millions of consumers and merchants worldwide.

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Cybersecurity.”

MACROECONOMIC ENVIRONMENT

A deterioration in macroeconomic conditions resulting from uncertainties and effects from tariffs, inflation, international conflicts, and interest rates could continue to increase the risk of lower consumer spending, merchant and consumer bankruptcy, insolvency, business failure, higher credit losses, foreign exchange fluctuations, or other business interruption, which may adversely impact our business.

We are unable to reasonably estimate the total potential impact on our financial results that may ultimately result from such changes in the macroeconomic environment.

FY 2025 FORM 10-K

OVERVIEW OF RESULTS OF OPERATIONS

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** Not meaningful.

Net revenues increased $2.0 billion, or 7%, in 2024 compared to 2023 driven primarily by growth in total payment volume (“TPV”, as defined below under “Key Metrics”) of 10%.

Total operating expenses increased $1.7 billion, or 7%, in 2024 compared to 2023 due primarily to an increase in transaction expense, and to a lesser extent, restructuring and other, partially offset by a reduction in transaction and credit losses.

Operating income increased $297 million, or 6%, in 2024 compared to 2023 due to net revenues increasing more than operating expenses.

Our operating margin remained consistent at 17% for both 2024 and 2023.

Net income decreased $99 million, or 2%, in 2024 compared to 2023 due to the previously discussed increase in operating income of $297 million and a decrease of $379 million in other income (expense), net, driven primarily by net losses on strategic investments in the current period as compared to net gains on strategic investments in the prior period.

Net revenues increased $1.4 billion, or 4%, in 2025 compared to 2024 driven primarily by growth in total payment volume (“TPV”, as defined below under “Key Metrics”) of 7% and an increase in interest and fee revenue earned on our loans receivable portfolio, partially offset by the unfavorable impact of hedging activities.

Total operating expenses increased $635 million, or 2%, in 2025 compared to 2024 due primarily to an increase in transaction expense, sales and marketing expense, and transaction and credit losses, partially offset by a decline in general and administrative expense, and restructuring and other expenses.

Operating income increased $740 million, or 14%, in 2025 compared to 2024 due to the increase in net revenues, partially offset by the increase in operating expenses.

Our operating margin was 18% and 17% for 2025 and 2024, respectively, reflecting the positive impact of a lower transaction expense growth rate.

Net income increased $1.1 billion, or 26%, in 2025 compared to 2024 due to the previously discussed increase in operating income of $740 million, an increase of $223 million in other income (expense), net, and a decline in income tax expense of $123 million driven primarily by discrete tax adjustments including tax effects of stock-based compensation and a non-recurring internal legal entity restructuring, partially offset by Pillar Two minimum tax expense.

IMPACT OF FOREIGN EXCHANGE RATES

We have significant international operations that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, and Canadian dollar, subjecting us to foreign exchange risk which may adversely impact our financial results.

We have significant international operations that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, Canadian dollar, and Indian rupee, subjecting us to foreign exchange risk which may adversely impact our financial results.

The strengthening or weakening of the United States (“U.S.”) dollar versus foreign currencies in which we conduct our international operations impacts the translation of our net revenues and expenses generated in these foreign currencies into the U.S.

In 2024, 2023, and 2022, we generated approximately 43%, 42%, and 43% of our net revenues from customers domiciled outside of the U.S., respectively.

In 2025 and 2024, we generated approximately 43% of our net revenues from customers domiciled outside of the U.S.

compared to 42% in 2023.

Because we generate substantial net revenues internationally, we are subject to the risks of doing business outside of the U.S., including those discussed under “Item 1A.

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We calculate the year-over-year impact of foreign exchange rate movements on our business using prior period foreign exchange rates applied to current period transactional currency amounts.

While changes in foreign currency exchange rates affect our reported results, we have a foreign currency exposure management program in which we use foreign exchange contracts, designated as cash flow hedges, intended to reduce the impact on earnings from foreign exchange rate movements.

While changes in foreign exchange rates affect our reported results, we have a foreign currency exposure management program in which we use foreign exchange contracts, designated as cash flow hedges, intended to reduce the impact on earnings from foreign exchange rate movements.

Gains and losses from these foreign exchange contracts are recognized as a component of transaction revenues or operating expenses (as applicable) in the same period the forecasted transactions impact earnings.

FY 2025 FORM 10-K

In the years ended December 31, 2025 and 2024, the year-over-year foreign exchange rate movements relative to the U.S.

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(In millions)

(Unfavorable) favorable impact to net revenues (exclusive of hedging impact)

Favorable (unfavorable) impact to net revenues (exclusive of hedging impact)

Hedging impact (166) 48

Favorable impact to net revenues

Favorable (Unfavorable) impact to operating expense

(Unfavorable) favorable impact to operating expense (exclusive of hedging impact) (162) 28

Hedging impact (6) —

(Unfavorable) favorable impact to operating expense

Net favorable impact to operating income $ 5 $ 58

While we enter into foreign exchange contracts to help reduce the impact on earnings from foreign exchange rate movements, it is impossible to eliminate the total effects of this exposure.

We also use foreign exchange contracts, designated as net investment hedges, to reduce the foreign exchange risk related to our investment in certain foreign subsidiaries.

Prior to 2025, we used foreign exchange contracts, designated as net investment hedges, to reduce the foreign exchange risk related to our investment in certain foreign subsidiaries.

Gains and losses associated with these instruments will remain in accumulated other comprehensive income (loss) until the underlying foreign subsidiaries are sold or substantially liquidated.

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These foreign exchange contracts reduce, but do not entirely eliminate, the impact of foreign exchange rate movements on our assets and liabilities.

Additionally, in connection with transactions occurring in multiple currencies on our payments platform, we generally set our foreign exchange rates daily and may face financial exposure if we incorrectly set our foreign exchange rates or as a result of fluctuations in foreign exchange rates between the times that we set our foreign exchange rates and when transactions occur.

While we have processes in place to mitigate these risks, it is impossible to eliminate the total effects of any possible exposure associated with setting foreign exchange rates on our payments platform.

Additionally, in connection with transactions occurring in multiple currencies on our payments platform, we generally set our foreign exchange rates daily and may face financial exposure if we incorrectly set our foreign exchange rates or as a result of fluctuations between setting of foreign exchange rates and timing of transactions.

While we have processes in place to mitigate these risks, it is impossible to eliminate the total effects of possible exposure associated with setting foreign exchange rates on our payments platform.

KEY METRICS AND FINANCIAL RESULTS

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The number of active accounts provides management with additional perspective on the overall scale of our platform, but may not have a direct relationship to our operating results.

FY 2025 FORM 10-K

• Number of payment transactions per active account reflects the total number of payment transactions within the previous 12-month period, divided by active accounts at the end of the period.

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The number of times a consumer account or a merchant account transacts on our platform may vary significantly from the average number of payment transactions per active account.

As our transaction revenue is typically correlated with TPV growth and the number of payment transactions completed on our payments platform, management uses these metrics to gain insights into the scale and strength of our payments platform, the engagement level of our customers, and underlying activity and trends which may be indicators of current and future performance.

As our transaction revenue growth is typically correlated with TPV growth and the number of payment transactions completed on our payments platform, management uses these metrics to gain insights into the scale and strength of our payments platform, the engagement level of our customers, and underlying activity and trends which may be indicators of current and future performance.

We present these key metrics to enhance investors’ evaluation of the performance of our business and operating results.

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We generate additional revenue from merchants and consumers:

on transactions where we perform currency conversion, when we enable cross-border transactions (i.e., transactions where the merchant and consumer are in different countries), to facilitate the instant transfer of funds for our customers from their PayPal or Venmo account to their bank account or debit card, to facilitate the purchase and sale of cryptocurrencies, as contractual compensation from sellers that violate our contractual terms (for example, through fraud or counterfeiting), and other miscellaneous fees.

on transactions where we perform currency conversion, when we enable cross-border transactions (i.e., transactions where the merchant and consumer are in different countries), when we facilitate the instant transfer of funds for our customers from their PayPal or Venmo account to their bank account or debit card, when we facilitate the purchase and sale of cryptocurrencies, as contractual compensation from sellers that violate our contractual terms (for example, through fraud or counterfeiting), and other miscellaneous fees.

• Revenues from other value added services:

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Refer to “Part I, Item 1A, Risk Factors” in this Form 10-K for further discussion on factors that may impact our revenue.

FY 2025 FORM 10-K

Net revenue analysis

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Transaction revenues

Transaction revenues grew $2.0 billion, or 7%, in 2024 compared to 2023 driven primarily by an increase in revenues of approximately $1.3 billion, $0.5 billion, and $0.2 billion from our Braintree, core PayPal, and Venmo products and services, respectively, which resulted from growth in TPV and the number of payment transactions.

As a result of ongoing negotiations with merchants, including our stronger focus on profitable growth, we expect lower volume and transaction revenue growth from our Braintree offerings in 2025.

Transaction revenues grew $956 million, or 3%, in 2025 compared to 2024.

The increase in 2025 was driven primarily by an increase of approximately $740 million and $340 million in revenue from PayPal and Venmo products and services, respectively, which was largely driven by growth in TPV and number of payment transactions, and an increase of approximately $150 million in revenue from Braintree products and services, predominantly attributable to growth in TPV despite a decline in the number of payment transactions over the same period.

The increase in TPV for Braintree products and services despite a decline in the number of payment transactions is due to our strategic shift as we focus on profitable growth.

Transaction revenues in 2025 were also impacted by approximately $210 million of unfavorable impact from hedging activities resulting from losses in 2025 compared to gains in 2024.

As a result of our stronger focus on profitable growth and ongoing negotiations with merchants, we experienced lower volume and transaction revenue from our Braintree offerings in the first half of 2025 followed by revenue and TPV growth in the second half of 2025.

The graphs below present the respective key metrics (in millions) for the years ended December 31, 2025, 2024, and 2023:

*Reflects active accounts at the end of the applicable period.

FY 2025 FORM 10-K

The following table provides a summary of related metrics:

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12 % 12 % 12 % ** **

Percent of TPV generated outside of the U.S.

37 % 37 % 36 % ** **

(1) Cross-border TPV occurs primarily between two PayPal accounts in different countries and includes transactions initiated through our Xoom product.

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We had active accounts of 439 million and 434 million as of December 31, 2025 and 2024, respectively, an increase of 1%.

Number of payment transactions was 26.3 billion and 25.0 billion for the years ended December 31, 2024 and 2023, respectively, an increase of 5%.

Number of payment transactions was 25.4 billion and 26.3 billion for the years ended December 31, 2025 and 2024, respectively, a decrease of 4%.

TPV was $1.79 trillion and $1.68 trillion for the years ended December 31, 2025 and 2024, respectively, an increase of 7%.

Transaction revenues growth was lower than the growth in TPV in 2024 due primarily to changes in mix from core PayPal products and services with a higher volume from large merchants, which have lower pricing.

Transaction revenues growth was lower than the growth in TPV in 2025 due primarily to changes in product mix, merchant mix, and unfavorable impact from foreign exchange hedging activities.

Revenues from other value added services

Revenues from other value added services increased $41 million, or 1%, in 2024 compared to 2023 due primarily to an approximately $380 million increase in interest earned on certain assets underlying customer account balances resulting from higher interest rates and higher customer balances, partially offset by a decline in the revenue of approximately $160 million earned from an independent chartered financial institution (“partner institution”).

Revenue from the partner institution is earned primarily through our revenue share associated with our U.S.

revolving consumer credit product and PayPal and Venmo branded credit cards.

Revenues from other value added services were also impacted by an approximately $180 million decline from:

lower interest and fee revenue on our PayPal Business Loan (“PPBL”) products, lower revenues from Honey, and lower revenues resulting from the sale of Happy Returns in the forth quarter of 2023.

Revenues from other value added services increased $419 million, or 14%, in 2025 compared to 2024 due primarily to an approximately $350 million increase in interest and fee revenue earned from our loans receivable portfolios as well as an increase of approximately $160 million from revenue earned from an independent chartered financial institution (“partner institution”).

Revenue from the partner institution is earned primarily through a revenue share arrangement based on the economic performance of the program related to our U.S.

revolving consumer credit product and PayPal and Venmo branded credit cards, when such performance exceeds a minimum return threshold.

These factors favorably impacting revenues from other value added services were partially offset by a decline of approximately $110 million from lower revenues from Honey and interest earned on certain assets underlying customer account balances resulting from lower interest rates.

Consumers that have outstanding loans and interest receivable due to our partner institution may experience hardships that result in losses recognized by the partner institution, which may result in a decrease in our revenue share earned in future periods.

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No individual quarter in 2025, 2024, or 2023 accounted for more than 30% of annual net revenue.

FY 2025 FORM 10-K

OPERATING EXPENSES

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Macroeconomic environment changes may also result in behavioral shifts in consumer spending patterns affecting the type of funding source they use, which could also impact the funding mix.

Transaction expense increased $1.3 billion, or 9%, in 2024 compared to 2023 due to Braintree, which has a higher expense rate than our other products and services, representing a larger portion of TPV.

The decrease in transaction expense rate in 2024 compared to 2023 was attributable to favorable changes in regional mix, product mix, and certain third-party pricing incentives within our core PayPal products and services.

For the years ended December 31, 2024, 2023, and 2022, approximately 37%, 36%, and 35% of TPV, respectively, was generated outside of the U.S.

Transaction expense increased $290 million, or 2%, in 2025 compared to 2024 due to the increase in TPV of 7%, partially offset by favorable changes in merchant mix to lower cost merchants within our Braintree products and services.

The decrease in transaction expense rate in 2025 compared to 2024 was primarily attributable to a lower proportion of TPV from Braintree products and services, which generally have higher expense rates than other products and services, and changes in merchant mix.

FY 2025 FORM 10-K

Transaction and credit losses

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Credit losses include the current expected credit losses associated with our consumer and merchant loans receivable portfolio.

Our transaction and credit losses fluctuate depending on many factors, including TPV, product mix, current and projected macroeconomic conditions such as unemployment rates, retail e-commerce sales and household disposable income, merchant insolvency events, changes to and usage of our customer protection programs, the impact of regulatory changes, and the credit quality of loans receivable arising from transactions funded with our credit products for consumers and loans and advances to merchants.

Our transaction and credit losses fluctuate depending on many factors, including TPV, product mix, current and projected macroeconomic conditions such as unemployment rates, retail e-commerce sales and average weekly earnings, merchant insolvency events, changes to and usage of our customer protection programs, the impact of regulatory changes, and the credit quality of loans receivable arising from transactions funded with our credit products for consumers and loans and advances to merchants.

Estimating our current expected credit loss allowances for our loans receivable portfolios is an inherently uncertain process and the ultimate losses we incur may vary from the current estimates.

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The components of our transaction and credit losses for the years ended December 31, 2025, 2024, and 2023 were as follows (in millions):

Transaction and credit losses decreased $240 million, or 14%, in 2024 compared to 2023.

Transaction losses were approximately $1.1 billion and $1.2 billion for 2024 and 2023, respectively, reflecting a decrease of $78 million, or 7%.

Transaction loss rate (transaction losses divided by TPV) was 0.07%, 0.08%, and 0.09% for the years ended December 31, 2024, 2023, and 2022, respectively.

The decrease in transaction losses and the associated transaction loss rate in 2024 was primarily due to lower losses from our Venmo products and services resulting from enhanced risk mitigation strategies.

Credit losses decreased $162 million in 2024 compared to 2023.

Transaction and credit losses increased $278 million, or 19%, in 2025 compared to 2024.

Transaction losses were approximately $1.3 billion and $1.1 billion for 2025 and 2024, respectively, reflecting an increase of $223 million, or 20%.

Transaction loss rate (transaction losses divided by TPV) was flat at 0.07% for both the years ended December 31, 2025 and 2024, compared to 0.08% in 2023.

The increase in transaction losses in 2025 was primarily due to an increase in losses driven by fraud incidents impacting our PayPal products and services.

Credit losses increased $55 million in 2025 compared to 2024.

The components of credit losses for the years ended December 31, 2025, 2024, and 2023 were as follows (in millions):

Year Ended December 31,

2024 2023 (3)

Net charge-offs (1)

$ 328 $ 372 $ 549

Reserve (release) build (2)

(44) (59) 135

Reserve build (release) (2)

Credit losses $ 383 $ 328 $ 490

(1) Net charge-offs includes principal charge-offs partially offset by recoveries for consumer and merchant receivables.

(2) Reserve (release) build represents change in allowance for principal receivables excluding foreign currency remeasurement.

(3) Includes changes in the allowance due to the reclassification of loans and interest receivable to or from held for sale.

(2) Reserve build (release) represents change in allowance for principal receivables excluding foreign currency remeasurement.

(3) Includes changes in the allowance due to the reclassification of certain loans and interest receivable to or from held for sale.

Credit losses in the year ended December 31, 2025 were primarily attributable to loan originations during the period.

Credit losses in the year ended December 31, 2024 were primarily attributable to loan originations during the period, partially offset by improvement in the credit quality of loans outstanding.

Credit losses in the year ended December 31, 2023 were primarily attributable to loan originations during the period and a deterioration in the credit quality of loans outstanding.

FY 2025 FORM 10-K

Consumer loan portfolio

In June 2023, we entered into a multi-year agreement with a global investment firm to sell United Kingdom (“U.K.”) and other European buy now, pay later loan receivables, consisting of eligible loans and interest receivables, including a forward-flow arrangement for the sale of future originations of eligible loans over a 24-month commitment period (collectively, “eligible consumer installment receivables”).

In December 2024, this agreement was amended and restated to extend the commitment period to December 2026 and to increase the maximum balance of loans that can be sold at a time.

For additional information, see “Note 1—Overview and Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in this Form 10-K.

As of December 31, 2024 and 2023, loans and interest receivable, held for sale was $541 million and $563 million, respectively.

We have entered into forward flow arrangements with third-party investors to sell certain loans receivable portfolios.

As of December 31, 2025 and 2024, loans and interest receivable, held for sale was $1.7 billion and $541 million, respectively.

The consumer loans and interest receivable balance as of December 31, 2025 and 2024 was $5.5 billion and $5.4 billion, respectively, net of participation interest sold, reflecting an increase of 1%.

The increase was driven primarily by growth of approximately $390 million and $250 million in our installment credit products driven by growth in Japan and the U.S., respectively, as well as growth of approximately $170 million in our revolving credit product in the U.K., partially offset by a decline of approximately $180 million in our installment credit products in Germany due to the forward-flow arrangement with the global investment firm.

The increase was driven primarily by growth of our revolving credit product in the United Kingdom (“U.K.”) of approximately $370 million and our installment credit products in the U.S.

and Japan of approximately $190 million and $110 million, respectively, partially offset by the impact of the reclassification of $574 million of U.S.

short-term, non-interest bearing installment loans to held for sale in the third quarter of 2025 and associated forward flow arrangement.

The following table provides information regarding the credit quality of our consumer loans and interest receivable balance:

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(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended December 31, 2025, excluding fraud losses, on consumer loans as a percentage of the average daily amount of consumer loans and interest receivable balance during the same period.

The decline in net charge-off rate for consumer receivables at December 31, 2024 as compared to December 31, 2023 was due primarily to the improvement in credit quality of the U.S.

interest-bearing installment products.

In response to changing portfolio performance and macroeconomic environment, we continue to monitor risk and evaluate and modify our acceptable risk parameters.

Changes to such parameters in 2024 resulted in an increase of U.S.

interest-bearing installment loan originations in 2024.

Modifications to the acceptable risk parameters did not have a material impact on our consumer loans for the year ended December 31, 2025.

Merchant loan portfolio

We offer access to merchant finance products for certain small and medium-sized businesses, which we refer to as our merchant finance offerings.

Total merchant loans, advances, and interest and fees receivable outstanding, net of participation interest sold, as of December 31, 2024 and 2023 was $1.5 billion and $1.2 billion, respectively, reflecting an increase of 23%.

The increase was due primarily to growth of approximately $170 million in our PayPal Working Capital (“PPWC”) product portfolio, primarily from the U.S., Germany and the U.K., as well as growth of approximately $110 million in our PPBL product in the U.S.

The following table provides information regarding the credit quality of our merchant loans, advances, and interest and fees receivable balance:

Percent of merchant loans, advances, and interest and fees receivable current 90.4 % 87.0 %

Percent of merchant loans, advances, and interest and fees receivable > 90 days outstanding (1)

Total merchant loans, advances, and fees receivable outstanding, net of participation interest sold, as of December 31, 2025 and 2024 was $1.8 billion and $1.5 billion, respectively, reflecting an increase of 23%.

The increase was due primarily to growth of approximately $190 million in our PayPal Business Loans (“PPBL”) product in the U.S.

and growth in our PayPal Working Capital (“PPWC”) product portfolio of approximately $150 million, primarily in Germany, and to a lesser extent, in the U.S.

The following table provides information regarding the credit quality of our merchant loans, advances, and fees receivable balance:

Percent of merchant loans, advances, and fees receivable current

89.8 % 90.4 %

Percent of merchant loans, advances, and fees receivable > 90 days outstanding (1)

Net charge-off rate (2)

(1) Represents percentage of balances which are 90 days past the original expected or contractual repayment period, as applicable.

(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended December 31, 2024, excluding fraud losses, on merchant loans and advances as a percentage of the average daily amount of merchant loans, advances, and interest and fees receivable balance during the same period.

The increase in the percent of current merchant receivables and decrease in percent of merchant receivables greater than 90 days outstanding and the net charge-off rate for merchant receivables at December 31, 2024 as compared to December 31, 2023 was due primarily to the improvement in underwriting and credit quality of the PPBL portfolio.

(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended December 31, 2025, excluding fraud losses, on merchant loans and advances as a percentage of the average daily amount of merchant loans, advances, and fees receivable balance during the same period.

In response to changing portfolio performance and macroeconomic environment, we continue to monitor risk and evaluate and modify our acceptable risk parameters.

Changes to such parameters resulted in an increase in PPBL originations in 2024.

Modifications to the acceptable risk parameters did not have a material impact on our merchant loans for the year ended December 31, 2025.

For additional information, see “Note 11—Loans and Interest Receivable” in the notes to the consolidated financial statements, and “Item 1A.

Risk Factors— Our credit products expose us to additional risks ” included in this Form 10-K.

FY 2025 FORM 10-K

Customer support and operations

Customer support and operations includes costs incurred in our global customer operations centers, including costs to provide call support to our customers, costs to support our trust and security programs protecting our consumers and merchants, and other costs incurred related to the delivery of our products, including payment devices, card production, and customer onboarding and compliance costs.

Customer support and operations expenses decreased $151 million, or 8%, in 2024 compared to 2023 due primarily to a decline in employee-related costs of approximately $100 million associated with a headcount reduction.

The decline in customer support and operations expenses year-over-year was also impacted by a reduction in other costs incurred related to delivery of our products, including warehouses, shipping, and payment devices and a decrease in contractors and consulting costs, partially offset by an increase in customer onboarding and compliance costs and card issuance costs.

Customer support and operations expenses decreased $64 million, or 4%, in 2025 compared to 2024 due primarily to a decline in employee-related costs of approximately $110 million and software expenses of approximately $40 million, partially offset by an increase of approximately $80 million in other operating charges and contractors and consulting costs.

Sales and marketing

Sales and marketing includes costs incurred for customer acquisition, business development, advertising, and marketing programs.

Sales and marketing expenses increased $192 million, or 11%, in 2024 compared to 2023 due primarily to higher spend of approximately $260 million on marketing and brand advertising, including the launch of our PayPal Everywhere advertising campaign, partially offset by a decline in employee-related costs.

Sales and marketing includes costs incurred for customer acquisition, business development, advertising, marketing programs, and certain incentives paid to users that are not our customers and revenue share paid to partners that are not our customers.

Sales and marketing expenses increased $282 million, or 14%, in 2025 compared to 2024 due primarily to higher spend of approximately $340 million on marketing and brand advertising, including our PayPal Everywhere and Venmo Everything advertising campaigns, partially offset by lower employee-related costs of approximately $50 million.

FY 2025 FORM 10-K

Technology and development

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It also includes acquired developed technology and our site operations and other infrastructure costs incurred to support our payments platform.

Technology and development expenses remained consistent in 2024 compared to 2023 due primarily to a decline in employee-related costs associated with headcount reduction offset by an increase in costs related to contractors and consultants and software maintenance costs.

Technology and development expenses increased $124 million, or 4%, in 2025 compared to 2024 due primarily to increases in contractor and consultants costs of approximately $80 million, costs from cloud computing services utilized in delivering our products and services of approximately $70 million, and software maintenance costs of approximately $60 million, partially offset by a decline in depreciation and amortization expense of approximately $50 million.

General and administrative

General and administrative includes costs incurred to provide support to our business, including legal, human resources, finance, risk and compliance, executive, and other support operations.

General and administrative expenses increased $88 million, or 4%, in 2024 compared to 2023 due primarily to an increase in professional services expense, a contingency reserve, and indirect tax expense, partially offset by a decline in depreciation expense and facilities costs.

General and administrative expenses decreased $168 million, or 8%, in 2025 compared to 2024 due primarily to a decline in employee-related costs of approximately $120 million as well as a decline of approximately $80 million in indirect tax expense and contingency reserves.

Restructuring and other

Restructuring and other primarily consist of restructuring expenses, asset impairment charges, gain on sale of divested business, and losses on loans and interest receivable, held for sale.

Restructuring and other increased $522 million in 2024 compared to 2023 primarily resulting from restructuring charges and fair value adjustments on loans and interest receivable, held for sale and a gain on sale of a divested business, in which we recorded a pre-tax gain of $339 million in 2023 with no comparable activity in the current period.

During the first quarter of 2024, management initiated a global workforce reduction intended to streamline operations, focus resources on core strategic priorities, and improve our cost structure.

The associated restructuring charges during the year ended December 31, 2024 were $307 million and included employee severance and benefits costs and stock-based compensation expense, which were substantially completed by the fourth quarter of 2024.

The estimated reduction in annualized employee-related costs associated with the impacted workforce is approximately $575 million, including approximately $165 million in stock-based compensation.

We reinvested a portion of the reduction in annual costs associated with the impacted workforce to drive business priorities.

During the first quarter of 2023, management initiated a global workforce reduction intended to focus resources on core strategic priorities, and improve our cost structure and operating efficiency.

The associated restructuring charges during the year ended December 31, 2023 were $122 million.

We primarily incurred employee severance and benefits costs, which were substantially completed in the fourth quarter of 2023.

For information on the associated restructuring liabilities, see “Note 17—Restructuring and Other” in the notes to the consolidated financial statements included in this Form 10-K.

We continue to review our real estate and facility capacity requirements due to our new and evolving work models.

We incurred asset impairment charges of nil and $61 million in the years ended December 31, 2024 and 2023, respectively, due to exiting certain leased properties, which resulted in a reduction of right-of-use lease assets and related leasehold improvements.

In the year ended December 31, 2023, we recognized a gain of $17 million due to the sale of an owned property.

We also incurred a loss of $14 million related to another owned property, which was previously held for sale, in the year ended December 31, 2023.

During the years ended December 31, 2024 and 2023, approximately $129 million and $74 million of losses were recorded in restructuring and other, which included net loss on sale of loans and interest receivable previously held for sale (inclusive of transaction costs) and fair value adjustments to measure loans and interest receivable, held for sale, at the lower of cost or fair value.

FY 2025 FORM 10-K

Restructuring and other decreased $107 million in 2025 compared to 2024 due primarily to a decrease in restructuring charges of approximately $170 million, partially offset by an increase in net loss of approximately $60 million from fair value adjustments to measure loans and interest receivable, held for sale, at the lower of cost or fair value, and loss on sale of loans and interest receivable previously held for sale.

During the second quarter of 2025, management undertook a large-scale initiative (the “2Q 2025 Plan”) to reengineer our existing technology infrastructure to improve scalability, reduce network latency, decrease operational costs, and optimize our workforce.

The 2Q 2025 Plan is a transformative unified program designed to streamline operations and includes exiting certain data centers to migrate to more efficient cloud-based solutions.

The 2Q 2025 Plan is expected to be executed over a period of 18 to 42 months with the workforce component to be substantially completed in 2027 and the technology infrastructure component to be substantially completed in 2028.

The associated restructuring charges during the year ended December 31, 2025 were $102 million, consisting of $96 million in employee severance and benefits costs and $6 million in other restructuring costs.

In connection with this restructuring, we expect to incur employee severance and benefits costs of approximately $90 million to $100 million, asset impairment and accelerated depreciation charges of approximately $40 million to $60 million, and other restructuring costs of approximately $110 million to $140 million over the term of the 2Q 2025 Plan.

Other restructuring costs relate to process re-engineering and one-time migration to cloud solutions and consist of contractor costs, consulting fees, and prepaid software and maintenance costs without future economic benefit.

We expect annualized cost savings of approximately $280 million associated with the impacted workforce and operational costs for our technology infrastructure.

We expect that we will begin to realize these cost savings upon the completion of the components of the 2Q 2025 Plan, and also expect to reinvest a portion of the reduction in annual costs to drive business priorities.

The timing of activities, cost, and savings estimates continue to be developed and are subject to change.

During the first quarter of 2025, management initiated a workforce reduction to ensure compliance with a new regulation impacting operations in an international market.

The associated restructuring charges during the year ended December 31, 2025 were $36 million and included employee severance and benefits costs, which were completed in the third quarter of 2025.

We do not anticipate cost savings in conjunction with this reduction.

For information on restructuring plans completed prior to 2025 as well as the restructuring liabilities associated with the 2Q 2025 Plan, see “Note 17—Restructuring and Other” in the notes to the consolidated financial statements included in this Form 10-K.

Other income (expense), net

Other income (expense), net of $4 million in 2024 decreased $379 million compared to $383 million in 2023.

This decline in other income (expense), net was due primarily to net losses and impairments on strategic investments in the current period compared to net gains in the prior period, which contributed a decline of approximately $490 million year-over-year, partially offset by an increase in interest income of approximately $180 million resulting from an increase in average cash balances and interest rates year-over-year.

Other income (expense), net increased $223 million compared to 2024.

This increase in other income (expense), net was due primarily to net gains on strategic investments in the current period compared to net losses and impairments in the prior period, which contributed an increase of approximately $450 million, partially offset by declines in interest income of approximately $150 million resulting from lower average cash and investment balances, and an increase in interest expense of approximately $60 million due to incremental expense from the March 2025 and May 2024 debt issuances.

Income tax expense

Our effective income tax rate was 22% in both 2024 and 2023.

Our effective income tax rate in 2024 remained consistent compared to 2023 and was impacted primarily by changes in jurisdictional mix of income, U.S.

income taxed at different rates, discrete tax adjustments, and tax expense in prior period associated with sale of a divested business.

Our effective income tax rate was 17% and 22% in 2025 and 2024, respectively.

The decrease in our effective income tax rate in 2025 compared to 2024 was due primarily to discrete tax adjustments including tax effects of stock-based compensation and a non-recurring internal legal entity restructuring, partially offset by Pillar Two minimum tax expense.

See “Note 16—Income Taxes” to the consolidated financial statements included in this Form 10-K for more information on our effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

We require liquidity and access to capital to fund our global operations, including our customer protection programs, credit products, capital expenditures, investments in our business, potential acquisitions and strategic investments, working capital, and other cash needs.

We believe that our existing cash, cash equivalents, and investments, cash expected to be generated from operations, and our expected access to capital markets, together with potential external funding through third-party sources, will be sufficient to meet our cash requirements within the next 12 months and beyond.

FY 2025 FORM 10-K

SOURCES OF LIQUIDITY

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(1) Excludes assets related to funds receivable and customer accounts of $38.2 billion and $37.7 billion as of December 31, 2025 and 2024, respectively.

(2) Excludes total restricted cash of $1 million and $3 million at December 31, 2024 and 2023, respectively, and strategic investments of $1.6 billion and $1.8 billion at December 31, 2024 and 2023, respectively.

(2) Excludes total restricted cash of nil and $1 million at December 31, 2025 and 2024, respectively, and strategic investments of $1.9 billion and $1.6 billion at December 31, 2025 and 2024, respectively.

Cash, cash equivalents, and investments held by our foreign subsidiaries were $7.5 billion at December 31, 2025 and $8.5 billion at December 31, 2024, or 58% and 61%, of our total cash, cash equivalents, and investments as of those respective dates.

At December 31, 2025, all of our cash, cash equivalents, and investments held by foreign subsidiaries were subject to U.S.

taxation under Subpart F, Global Intangible Low Taxed Income (“GILTI”) or the one-time transition tax under the Tax Cuts and Jobs Act of 2017 (“Tax Act”).

taxation under Subpart F, Net Controlled Foreign Corporation Tested Income (“NTCI”) formally known as Global Intangible Low Taxed Income (GILTI), or the one-time transition tax under the Tax Cuts and Jobs Act of 2017.

Subsequent repatriations to the U.S.

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Operating activities

Cash flows from operating activities includes net income adjusted for certain non-cash expenses, timing differences between expenses recognized for provision for transaction and credit losses and actual cash transaction losses incurred, originations and proceeds from repayments and sales of loans and interest receivable held for sale, and changes in other assets and liabilities.

Cash flows from operating activities includes net income adjusted for certain non-cash expenses, timing differences between expenses recognized for provision for transaction and credit losses and actual cash transaction losses incurred, originations and proceeds from repayments and sales of loans and interest receivable originally classified as held for sale, and changes in other assets and liabilities.

Significant non-cash expenses for the period include depreciation and amortization and stock-based compensation.

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Actual charge-offs of receivables related to our consumer and merchant credit products have no impact on cash from operating activities.

Net cash provided by operating activities grew $2.6 billion in 2024 compared to 2023 due primarily to changes in deferred taxes of approximately $900 million, changes in working capital of approximately $760 million, an increase of approximately $530 million in sales and repayments of loans receivable held for sale, net of originations, and an impact of approximately $490 million from losses on strategic investments.

Cash paid for income taxes, net in 2024, 2023, and 2022 was $1.0 billion, $2.1 billion, and $878 million, respectively.

Net cash provided by operating activities declined $1.0 billion in 2025 compared to 2024 due primarily to an increase of approximately $1.2 billion in originations of loans receivable held for sale, net of sales and repayments, an impact of approximately $450 million from net gains on strategic investments, and an impact of approximately $230 million from stock-based compensation, partially offset by an increase of approximately $280 million in transaction and credit losses, and a decrease of $250 million in the accretion of discounts on investments, net of amortization premiums.

Cash paid for income taxes, net in 2025, 2024, and 2023 was $1.1 billion, $1.0 billion, and $2.1 billion, respectively.

FY 2025 FORM 10-K

Investing activities

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and purchases and maturities of reverse repurchase agreements.

Net cash provided by investing activities increased $837 million in 2024 compared to 2023 due primarily to an increase of $5.9 billion from changes related to funds receivable, partially offset by a decrease of $3.0 billion in sales and repayments of loans receivables, net of purchases and originations, and an increase of $1.6 billion in purchases of investments, net of sales and maturities.

Net cash provided by investing activities decreased $892 million in 2025 compared to 2024 due primarily to changes in funds receivable of approximately $3.2 billion, an increase of approximately $220 million in collateral posted related to derivative instruments, and an increase in purchases of property and equipment of approximately $170 million, partially offset by a decrease of approximately $1.8 billion in purchases of investments, net of maturities and sales, and a decrease of approximately $1.0 billion in purchases and originations of loans receivable, net of principal repayments.

Financing activities

Cash flows from financing activities includes proceeds from issuance of common stock, purchases of treasury stock, tax withholdings related to net share settlements of equity awards, borrowings and repayments under financing arrangements, changes in funds payable and amounts due to customers, changes in collateral received related to derivative instruments, net, and borrowings and repayments under repurchase agreements.

Net cash used in financing activities increased $5.3 billion in 2024 compared to 2023 due primarily to a decrease of $3.8 billion from changes related to funds payable and amounts due to customers, an increase of $1.0 billion in share repurchases of our common stock, and an increase of approximately $590 million in repayments, net of borrowings under financing arrangements.

Effect of exchange rates on cash, cash equivalents, and restricted cash

Foreign exchange rates had a negative impact of $207 million and positive impact of $76 million on cash, cash equivalents, and restricted cash during 2024 and 2023, respectively.

Cash flows from financing activities includes proceeds from issuance of common stock, purchases of treasury stock, tax withholdings related to net share settlements of equity awards, borrowings and repayments under financing arrangements, changes in funds payable and amounts due to customers, changes in collateral received related to derivative instruments, net, borrowings and repayments under repurchase agreements, and dividend payments.

Net cash used in financing activities decreased $2.3 billion in 2025 compared to 2024 due primarily to changes related to funds payable and amounts due to customers of approximately $2.1 billion, and an increase of approximately $600 million in borrowings under financing arrangements, net of repayments, partially offset by a decline of approximately $320 million in collateral received related to derivative instruments.

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

Foreign exchange rates had a positive impact of $273 million and negative impact of $207 million on cash, cash equivalents, and restricted cash during 2025 and 2024, respectively.

The positive impact in 2025 was due primarily to favorable fluctuations in the exchange rate of the U.S.

dollar to the British pound and, to a lesser extent, the Australian dollar and Euro.

The negative impact in 2024 was primarily due to unfavorable fluctuations in the exchange rate of the U.S.

dollar to the Australian dollar and, to a lesser extent, the British pound and Euro.

The positive impact in 2023 was primarily due to favorable fluctuations in the exchange rate of the U.S.

dollar to the British pound.

Available credit and debt

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In February 2022, we entered into a credit agreement (the “Paidy Credit Agreement”) with Paidy as co-borrower, which provided for an unsecured revolving credit facility of ¥60.0 billion, which was modified in September 2022 to increase the borrowing capacity by ¥30.0 billion for a total borrowing capacity of ¥90.0 billion (approximately $575 million as of December 31, 2025).

In the year ended December 31, 2024, ¥90.0 billion (approximately $574 million) was drawn down under the Paidy Credit Agreement.

As of December 31, 2025, ¥90.0 billion (approximately $575 million) was drawn down under the Paidy Credit Agreement.

Accordingly, at December 31, 2025, no borrowing capacity was available under the Paidy Credit Agreement.

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As of December 31, 2025, substantially all of the borrowing capacity under these credit facilities was available, subject to customary conditions to borrowing.

In May 2024, June 2023, May 2022, May 2020 and September 2019, we issued fixed rate notes with varying maturity dates (collectively referred to as the “Notes”).

FY 2025 FORM 10-K

In November 2025, we established a commercial paper program that allows us to issue up to $5.0 billion of unsecured commercial paper notes (“Commercial Paper Notes”) through private placement using third-party broker-dealers (the “Commercial Paper Program”).

Borrowings under the Commercial Paper Program are supported by the Credit Agreement.

The Company intends to maintain availability under the Credit Agreement in an amount at least equal to the aggregate outstanding borrowings under the Commercial Paper Program.

Net proceeds from the issuance of the Commercial Paper Notes may be used for general corporate purposes.

The maturities of the Commercial Paper Notes may vary but may not exceed 397 days from the date of issuance.

There were $200 million in Commercial Paper Notes outstanding as of December 31, 2025.

In March 2025, May 2024, June 2023, May 2022, May 2020 and September 2019, we issued fixed and floating rate notes with varying maturity dates (collectively referred to as the “Notes”).

Proceeds from the issuance of these Notes may be used for general corporate purposes, which may include funding the repayment or redemption of outstanding debt, share repurchases, ongoing operations, capital expenditures, and possible acquisitions of businesses, assets, or strategic investments.

As of December 31, 2024, we had an aggregate principal amount of $10.6 billion in fixed rate debt outstanding with varying maturity dates.

As of December 31, 2025, we had an aggregate principal amount of $10.9 billion in debt outstanding with varying maturity dates.

For additional information, see “Note 12—Debt” to our consolidated financial statements included in this Form 10-K.

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We expect that these credit rating agencies will continue to monitor our performance, including our capital structure and results of operations.

Our goal is to be rated investment grade, but as circumstances change, there are factors that could result in our credit ratings being downgraded or put on a watch list for possible downgrading.

Our goal is to be rated investment grade, but as circumstances change, various factors could result in our credit ratings being downgraded or put on a watch list for possible downgrading.

If that were to occur, it could increase our borrowing rates, including the interest rate on borrowings under our credit agreements.

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Our material cash requirements include funds to support current and potential:

operating activities, credit products, customer protection programs, stock repurchases, strategic investments, acquisitions, other commitments, capital expenditures, and other future obligations.

operating activities, credit products, customer protection programs, stock repurchases, dividend payments, strategic investments, acquisitions, other commitments, capital expenditures, and other future obligations.

Credit products

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We continue to evaluate partnerships and third-party sources of funding for our credit products.

The Luxembourg Commission de Surveillance du Secteur Financier (the “CSSF”) has agreed that PayPal’s management may designate up to 50% of European customer balances held in our Luxembourg banking subsidiary to fund European, U.K., and U.S.

credit activities.

As of December 31, 2024 and 2023, the cumulative amount approved by PayPal to be designated to fund credit activities was $2.0 billion and $3.0 billion, respectively, and represented approximately 26% and 39% of European customer balances made available for our corporate use as of those respective dates, as determined by applying financial regulations maintained by the CSSF.

As of December 31, 2025 and 2024, the cumulative amount approved by PayPal to be designated to fund credit activities was $2.0 billion as of those respective dates and represented approximately 26% of European customer balances made available for our corporate use as of those respective dates, as determined by applying financial regulations maintained by the CSSF.

We may periodically seek to change the designation of amounts of European customer balances for our credit activities, as we deem necessary, based on utilization of the approved funds and anticipated credit funding requirements.

Under certain exceptional circumstances, corporate liquidity could be called upon to meet our obligations related to our European customer balances.

In June 2023, we entered into a multi-year agreement with a global investment firm to sell our eligible consumer installment receivables portfolio.

In December 2024, this agreement was amended and restated to extend the commitment period to December 2026 and to increase the maximum balance of loans that can be sold at a time.

During the years ended December 31, 2024 and 2023, we sold $20.8 billion and $5.5 billion, respectively, of loans and interest receivable in connection with this agreement.

We have entered into forward flow arrangements with third-party investors to sell certain loans receivable portfolios.

In 2023, we entered into a multi-year agreement with a third-party investment firm to sell loans receivable, which was amended and restated in 2024 and 2025.

In 2025, we entered into an updated multi-year agreement with this third-party investment firm to extend the commitment period through March 2028 and increase the maximum loans to be sold to €65 billion.

Also in 2025, we entered into an arrangement with a separate third-party investment firm which has a duration of two years and up to $7.0 billion of loans receivable sales over the term.

During the years ended December 31, 2025 and 2024, we had net proceeds of $26.7 billion and $20.8 billion, respectively, of loans and interest receivable sold under these arrangements.

For additional information, see “Note 1—Overview and Summary of Significant Accounting Policies” to our consolidated financial statements included in this Form 10-K.

FY 2025 FORM 10-K

While our objective is to expand the availability of our credit products with capital from external sources, there can be no assurance that we will be successful in achieving that goal.

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Historical loss rates may not be indicative of future results.

Capital return program

Stock repurchases

During the year ended December 31, 2024, we repurchased approximately $6.0 billion of our common stock in the open market under our stock repurchase program authorized in June 2022.

As of December 31, 2024, a total of approximately $4.9 billion remained available for future repurchases of our common stock under our June 2022 stock repurchase program.

For additional information, see “Note 14—Stock Repurchase Programs” to our consolidated financial statements included in this Form 10-K.

During the year ended December 31, 2025, we repurchased approximately $6.0 billion of our common stock in the open market under our stock repurchase programs authorized in June 2022 and February 2025.

As of December 31, 2025, a total of approximately $13.9 billion remained available for future repurchases of our common stock under our February 2025 stock repurchase program.

For additional information, see “Note 14—Stockholders’ Equity” to our consolidated financial statements included in this Form 10-K.

Implementation of dividend program

In October 2025, we announced that our Board of Directors approved the initiation of a quarterly cash dividend program and declared a cash dividend of $0.14 per share on our common stock, totaling approximately $130 million.

The dividend was payable on December 10, 2025, to stockholders of record of our common stock as of the close of business on November 19, 2025.

Dividend payments in future quarters will be subject to and contingent upon market conditions and approval by our Board of Directors at its sole discretion.

Future obligations

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We believe we will be able to fund these obligations through our existing cash and investment portfolio and cash expected to be generated from operations.

Obligations Leases

Transition Tax Long-term Debt Total

Obligations Leases Long-term Debt Total

Payments Due During the Year Ending December 31, (In millions)

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• Purchase obligation amounts include minimum purchase commitments for cloud computing services, advertising, and other goods and services entered into in the ordinary course of business.

• Lease amounts include primarily minimum rental payments under our non-cancelable operating leases primarily for office and data center facilities.

• Lease amounts include primarily minimum rental payments under our non-cancelable operating leases predominantly for office and data center facilities.

The amounts presented are consistent with contractual terms and are not expected to differ significantly from actual results under our existing leases, unless a substantial change in our headcount needs requires us to expand our occupied space or exit an office facility early.

• Transition tax represents the one-time mandatory tax on previously deferred foreign earnings under the Tax Act.

• Long-term debt amounts represent the future principal and interest payments (based on contractual interest rates) on our fixed-rate debt.

FY 2025 FORM 10-K

• Long-term debt amounts represent the future principal and interest payments (based on contractual interest rates) on our fixed and floating-rate debt and amounts outstanding under our credit facilities.

For more information, see “Note 12—Debt” to our consolidated financial statements included in this Form 10-K.

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An accounting estimate or assumption is considered critical if both (a) the nature of the estimate or assumption is material due to the levels of subjectivity and judgment involved, and (b) the impact within a reasonable range of outcomes of the estimate and assumption is material to our financial condition.

Management has discussed the development, selection, and disclosure of these estimates with the Audit, Risk, and Compliance Committee of our Board of Directors.

Management has discussed the development, selection, and disclosure of these estimates with the Audit and Finance Committee of our Board of Directors.

Our significant accounting policies, including recent accounting pronouncements, are described in “Note 1 — Overview and Summary of Significant Accounting Policies” to the consolidated financial statements included in this Form 10 ‑ K.

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total TPV, product mix, current and projected macroeconomic conditions, merchant insolvency events, changes to and usage of our customer protection programs, the impact of regulatory changes, and the credit quality of loans receivable arising from transactions funded with our credit products, which include revolving and installment credit products offered to consumers at checkout, as well as merchant loans and advances arising from the PPWC and PPBL products.

We establish allowances for negative customer balances and estimated transaction losses arising from processing customer transactions, such as chargebacks for unauthorized credit card use and merchant-related chargebacks due to non-delivery or unsatisfactory delivery of purchased items, purchase protection program claims, account takeovers, and bank returns and reversals.

We establish allowances for negative customer balances and estimated transaction losses arising from processing customer transactions, such as chargebacks for unauthorized credit card use and merchant-related chargebacks due to non-delivery or unsatisfactory delivery of eligible purchased items, purchase protection program claims, account takeovers, and bank returns and reversals.

Additions to the allowance, in the form of provisions, are reflected in transaction and credit losses on our consolidated statements of income (loss).

The allowances are based on known facts and circumstances, internal factors including experience with similar cases, historical trends involving collection and write-off patterns, and the mix of transaction and loss types, as well as current and projected macroeconomic factors, as appropriate.

Actual losses may vary from amounts recorded given the estimates used in determining allowances for negative customer balances and transaction losses involve judgment and uncertainties and historical loss patterns may not be predictive of future losses.

Changes in loss rate assumptions could have a material impact on the allowance for transaction losses.

We evaluate these assumptions and estimates on an ongoing basis and periodically update our allowance as new facts become known and events occur that may impact the ultimate settlement or recovery of losses.

FY 2025 FORM 10-K

We also establish an allowance for loans and interest receivable, which represents our estimate of current expected credit losses inherent in our portfolio of loans and interest receivable and includes expected credit losses from modifications of receivables to borrowers experiencing financial difficulty.

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The allowances are maintained at a level we deem appropriate to adequately provide for current expected credit losses at the balance sheet date after incorporating the impact of externally sourced macroeconomic forecasts.

As of December 31, 2024 and 2023, we utilized externally published projections of forecasted U.S.

As of December 31, 2025, we utilized externally published projections of forecasted U.S.

unemployment rates and retail e-commerce sales and forecasted U.K.

average weekly earnings, among others, over the reasonable and supportable forecast period.

As of December 31, 2024, we utilized externally published projections of forecasted U.S.

unemployment rates, forecasted U.S.

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household disposable income, among others, over the reasonable and supportable forecast period.

The overall principal and interest coverage ratio as of December 31, 2024 and 2023 was approximately 7% and 9%, respectively.

The overall principal and interest coverage ratio as of both December 31, 2025 and 2024 was approximately 7%.

A significant change in the forecasted macroeconomic factors could result in a material change in our allowances.

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In addition to local country tax laws and regulations, our income tax rate depends on the extent that our foreign earnings are taxed by the U.S.

through provisions such as the GILTI tax and base erosion anti-abuse tax.

through provisions such as the NCTI tax and base erosion anti-abuse tax.

Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years.

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Based on our results for the year ended December 31, 2025, an increase in our income tax expense of $63 million would have resulted in a one-percentage point increase in our effective tax rate.

FY 2025 FORM 10-K

LOSS CONTINGENCIES

We are regularly involved in various claims, regulatory and legal proceedings, and investigations of potential violations by regulatory oversight authorities.

We are regularly involved in various claims, regulatory and legal proceedings, and investigations of potential violations by regulatory authorities.

On a regular basis, we review the status of each significant matter and assess our potential financial exposure.

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Because of uncertainties related to these matters, accruals are based on the best information available at the time.

As additional information becomes available, we reassess the potential liability related to pending claims, litigation, or other violations and may revise our estimates.

As additional information becomes available, we reassess the potential liability related to pending claims, litigation, or other potential violations and may revise our estimates.

Due to the inherent uncertainties of legal and regulatory processes in the multiple jurisdictions in which we operate, our judgments may differ materially from the actual outcomes.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis