What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-08-17 compared with 2025-08-21 · 157 added, 160 removed, 183 unchanged (63% of the section changed)

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See also “Forward-Looking Statements” immediately prior to Part I, Item 1., of this Annual Report on Form 10-K.

For management’s discussion of our combined results for the year ended June 28, 2024 in comparison with the year ended June 30, 2023 , and other financial information related to fiscal year 2024 , refer to Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Form 10, initially filed with the U.S.

Securities and Exchange Commission (“SEC”) on November 25, 2024, and as further amended thereafter and declared effective on January 31, 2025 (as amended, the “Form 10”).

Unless otherwise indicated, references herein to specific years and quarters are to our fiscal years and fiscal quarters.

For management’s discussion of our consolidated results for the year ended June 27, 2025 in comparison with the combined results for the year ended June 28, 2024, and other financial information related to fiscal year 2025, refer to Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2025 Annual Report on Form 10-K, filed with the U.S.

Securities and Exchange Commission (“SEC”) on August 21, 2025.

Unless otherwise indicated or the context requires, references herein to specific years and quarters are to our fiscal years and fiscal quarters.

As used herein, the terms “we,” “us,” “our,” and the “Company” refer to Sandisk Corporation and its subsidiaries.

Sandisk is a leading global semiconductor memory company with more than 30 years of innovation in NAND flash technology.

We are a vertically integrated solutions provider with ownership of chip-level design and IP, front and back-end manufacturing, as well as systems engineering and design.

With a differentiated innovation engine driving advancements in storage and semiconductor technologies, our broad and ever-expanding portfolio delivers powerful flash storage solutions for artificial intelligence (“AI”) workloads in datacenters, edge devices, and consumer applications.

Our technologies enable everyone from students, gamers, and home offices to the largest enterprises and public clouds to produce, analyze, and store data.

Our solutions include a broad range of solid-state drives (“SSDs”), embedded products, removable cards, universal serial bus drives and wafers and components.

Our broad portfolio of technology and products addresses multiple end markets of “Datacenter” (formerly referred to as “Cloud”), “Edge” (formerly referred to as “Client”), and “Consumer.”

The Datacenter end market is comprised primarily of products for datacenters, cloud service providers, and private cloud customers.

Through the Edge end market, we provide our original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance flash solutions across personal computer, mobile, gaming, automotive, physical AI, at-home entertainment, and industrial spaces.

The Consumer end market is highlighted by our broad range of retail and other end-user products, which capitalize on the strength of our product brand recognition and vast presence around the world.

The Company’s fiscal year ends on the Friday nearest to June 30 and typically consists of 52 weeks.

Approximately every five to six years, we report a 53-week fiscal year to align the fiscal year with the foregoing policy.

Fiscal years 2025 and 2024, which ended on June 27, 2025 and June 28, 2024, respectively, were each comprised of 52 weeks, with each fiscal quarter consisting of 13 weeks.

Fiscal year 2026 was comprised of 53 weeks and ended on July 3, 2026, with the first fiscal quarter consisting of 14 weeks.

Unless otherwise indicated or the context requires, references herein to specific years and quarters are to fiscal years and fiscal quarters, and references to financial information are on a consolidated basis.

The Separation

On October 30, 2023, Western Digital Corporation (“WDC”) announced that its board of directors (the “WDC Board of Directors”) authorized management to pursue a plan to separate the Company into an independent public company.

On October 30, 2023, Western Digital Corporation (“WDC”) announced that its board of directors (the “WDC Board of Directors”) authorized WDC management to pursue a plan to separate the Company into an independent public company (the “separation” or “the spin-off”).

The separation received final approval by the WDC Board of Directors and was completed on February 21, 2025.

Prior to February 21, 2025, we were wholly owned by WDC.

On February 21, 2025, WDC executed the spin-off of the Company through WDC’s pro rata distribution of 116,035,464 or 80.1% of the outstanding shares of common stock of the Company to holders of WDC’s common stock.

On February 21, 2025, WDC executed the spin-off of the Company through WDC’s pro rata distribution of 116,035,464, or 80.1%, of the Company’s outstanding shares of common stock to holders of WDC’s common stock.

Each WDC stockholder received one-third (1/3) of one share of the Company’s common stock for each share of WDC’s common stock held by such WDC stockholder as of February 12, 2025, the record date of the distribution.

Upon completion of the separation, WDC owned 28,827,787 or 19.9% of the outstanding shares of the Company’s common stock, which WDC was expected to retain for a period of up to twelve months following the distribution.

Upon completion of the separation, WDC owned 28,827,787, or 19.9%, of the outstanding shares of the Company’s common stock.

Following the distribution, the Company became an independent publicly listed company, and on February 24, 2025, the Company began trading as an independent publicly traded company under the stock symbol “SNDK” on Nasdaq.

On June 6, 2025, WDC disposed of 21,314,768 or 14.6% of our common stock through an exchange of our common stock for WDC debt held by WDC creditors.

Sandisk is a leading developer, manufacturer and provider of data storage devices and solutions based on NAND flash technology.

Our technologies enable everyone from students, gamers and home offices to the largest enterprises and public clouds to produce, analyze, and store data.

Our solutions include a broad range of solid-state drives (“SSDs”), embedded products, removable cards, universal serial bus drives and wafers and components.

Our broad portfolio of technology and products addresses multiple end markets of “Cloud,” “Client,” and “Consumer.”

Through the Client end market, we provide our original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance flash solutions across personal computer, mobile, gaming, automotive, virtual reality headsets, at-home entertainment and industrial spaces.

The Consumer end market is highlighted by our broad range of retail and other end-user products, which capitalizes on the strength of our product brand recognition and vast presence around the world.

Cloud is comprised primarily of products for datacenters, cloud service providers, and private cloud customers.

Our fiscal year ends on the Friday nearest to June 30 and typically consists of 52 weeks.

Approximately every five to six years, we report a 53-week fiscal year to align the fiscal year with the foregoing policy.

Fiscal years 2025, 2024, and 2023, which ended on June 27, 2025, June 28, 2024, and June 30, 2023 are each comprised of 52 weeks, with each fiscal quarter consisting of 13 weeks.

Fiscal year 2026 will be comprised of 52 weeks and end on July 3, 2026.

Sale-Leaseback

In September 2023, WDC completed a sale and leaseback of its facility in Milpitas, California, and received net proceeds of $191 million in cash.

A substantial majority of these assets are associated with the Company, and as a result, $134 million of the net proceeds from the sale-leaseback transaction were allocated to us on a relative square footage basis.

The property is being leased back to us at a total annual rate of $16 million for the first year and increasing by 3% per year thereafter through January 1, 2039.

The lease includes three five-year renewal options and one four-year renewal option that provide the ability to extend through December 2057.

The associated operating lease liability and right-of-use asset for this facility have been included in the Consolidated Balance Sheets as of June 27, 2025 and June 28, 2024.

SanDisk Semiconductor (Shanghai) Co.

As discussed in Part II, Item 8., Note 10, Related Parties and Related Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K, on September 28, 2024, prior to the separation, WDC’s wholly-owned subsidiary, SanDisk China Limited (“SanDisk China”) completed the sale of 80% of its equity interest in SDSS (the “Transaction”) to JCET Management Co., Ltd.

(“JCET”), a wholly-owned subsidiary of JCET Group Co., Ltd., a Chinese publicly listed company, thereby forming a venture between SanDisk China and JCET (the “SDSS Venture”).

The Transaction resulted in a pre-tax gain of $34 million.

Subsequent to and in connection with the Transaction, Western Digital Technologies, Inc.

(“WDT”) entered into a five-year supply agreement with SDSS (the “Supply Agreement”) to purchase certain flash-based products with a minimum annual commitment of $550 million.

On January 10, 2025, the Company and WDT entered into an assignment agreement, pursuant to which, WDT assigned all of its rights and obligations under the Supply Agreement to the Company.

The Supply Agreement contains specific penalties the Company must pay if SDSS fails to meet its minimum annual commitment.

The Supply Agreement also provides that if SDSS purchases exceed the minimum annual commitment in any of the two years immediately succeeding any annual period where a shortfall penalty has been paid, SDSS shall reimburse the Company an amount not exceeding the previously paid penalty amount.

The Supply Agreement expires on September 28, 2029, and automatically renews for additional one-year terms unless earlier terminated by either of the parties.

The Company also entered into an agreement to grant SDSS certain intellectual property rights on a royalty-free basis for use in manufacturing products on the Company’s behalf for the term of and under the Supply Agreement.

As a result of the Transaction, we expect to incur a modest reduction in annual operating expenses and a reduction in annual capital expenditure related to the assembly and testing of flash-based products.

We also anticipate that the transition to a contract manufacturing model through the SDSS Venture will result in a small increase in our annual cost of revenue for flash-based products.

On June 9, 2025, WDC disposed of 21,314,768, or 14.6%, of our common stock through an exchange of our common stock for WDC debt held by WDC creditors, which shares were sold by affiliates of the WDC creditors in a registered public offering by the Company.

On February 18, 2026, WDC disposed of an additional 5,821,135 outstanding shares of the Company through an exchange of Sandisk’s common stock for WDC debt held by WDC creditors, which shares were sold by affiliates of the WDC creditors in a registered public offering by us.

All expenses for these offerings were paid for by us.

Following this transaction, WDC continued to retain 1,691,884 of the outstanding shares of the Company’s common stock and, as of March 19, 2026, the sale of such shares was no longer subject to restriction, and we were no longer required to pay any expenses associated with WDC’s eventual exchange or distribution of our shares.

Subsequent to this date, WDC has disposed of additional outstanding shares of our common stock in exchange for shares of its outstanding common stock and has announced that it expects to monetize all remaining shares of Sandisk common stock held by it by the end of 2026 in one or more subsequent exchanges for its outstanding common stock.

Goodwill Impairment

As discussed in Part II, Item 8.

, Note 5 , Supplemental Financial Statement Data of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K , subsequent to the separation, we conducted a quantitative analysis of potential goodwill and long-lived assets impairments, in accordance with Accounting Standards Codification (“ASC”) No.

, Note 5, Supplemental Financial Statement Data of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K , subsequent to the separation, we conducted a quantitative analysis of potential goodwill and long-lived assets impairments, in accordance with Accounting Standards Codification (“ASC”) No.

350, Intangibles - Goodwill and Other.

This analysis indicated that the estimated carrying value of our reporting unit exceeded its fair value.

Consequently, we recorded a goodwill impairment charge of $1.8 billion during the third quarter of the fiscal year ended June 27, 2025 .

Our policy is to perform an annual impairment test on the first day of the fourth fiscal quarter.

For the year ended June 27, 2025, we performed a qualitative analysis which did not indicate that goodwill was more-likely-than-not impaired.

As a result, no additional quantitative analysis was required and no additional impairment charge was recorded during the fiscal year ended June 27, 2025.

Consequently, we recorded a goodwill impairment charge of $1.8 billion during the fiscal year ended June 27, 2025 .

For the year ended July 3, 2026, there were no goodwill impairment charges recorded.

Financing Activities

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Additional information regarding our outstanding notes due to (from) Western Digital Corporation is included in Part II, Item 8., Note 10, Related Parties and Related Commitments and Contingencies of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

As discussed in Part II, Item 8., Note 8, Debt of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K, on February 21, 2025 , we entered into a loan agreement comprised of a seven-year Term Loan B facility in an aggregate principal amount of $2.0 billion (the “Term Loan Facility”) and a five-year revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $1.5 billion with $150 million available for letters of credit.

As discussed in Part II, Item 8., Note 8, Debt of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, on February 21, 2025 , we entered into a loan agreement (the “Loan Agreement”) comprised of a seven-year Term Loan B facility in an aggregate principal amount of $2.0 billion (the “Term Loan Facility”) and a five-year revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $1.5 billion, including up to $150 million for letters of credit.

On February 21, 2025, we borrowed $2.0 billion under the Term Loan Facility.

We used a portion of the proceeds of the borrowing to make a net distribution payment of approximately $1.5 billion to WDC , with the remainder to be used for general corporate purposes.

The proceeds of the Revolving Credit Facility may be used for working capital and general corpor ate purposes.

As of June 27, 2025 , we have drawn no amounts under the Revolving Credit Facility.

We used a portion of the proceeds of the borrowing to make a net distribution payment of $1.5 billion to WDC, with the remainder used for general corporate purposes of the Company.

The proceeds of the Revolving Credit Facility may be used by us for working capital and general corporate purposes.

On March 4, 2026, the Company settled in full the remaining outstanding principal amounts of the Term Loan Facility, plus accrued interest, using cash on hand.

In connection with the early settlement of the Term Loan Facility, the Company recognized a loss on debt extinguishment of $46 million resulting from the write-off of the remaining unamortized issuance costs.

As of July 3, 2026 , we have drawn no amounts under the Revolving Credit Facility.

Operational Update

In 2025, we generally saw an improvement in the supply and demand dynamics, leading to improved revenues and gross margin in fiscal 2025 compared to 2024.

As part of our actions to align supply with market demand in the later half of fiscal 2025, we incurred charges for unabsorbed manufacturing overhead costs due to reduced utilization of our manufacturing capacity totaling $75 million , and we anticipate incurring some underutilization charges as we moderate production levels to align with demand for our products in the first quarter of 2026.

Additionally, in 2025, the U.S.

announced changes to U.S.

trade policy, including increased tariffs on imported goods.

In 2026, we continued to observe that the rapid growth of AI infrastructure is driving demand for high-performance storage products, and AI adoption is driving the need for NAND storage to support these workloads, leading to increased revenues when compared to prior periods.

The current demand environment has led to pricing shifts that have positively impacted our business, and we expect these favorable pricing trends to have a positive impact on our revenue and cash flows from operations.

We expect AI-driven demand to persist through calendar year 2027 and beyond.

Accordingly, we expect to invest in, and allocate resources to, high-value opportunities for both the short-term and long-term benefit of our customers and us.

There are pending and ongoing investigations initiated by the United States under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974 that may impact tariff rates for our products.

Currently, the majority of our products sold in the U.S.

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and other countries, the scope, amount, or duration of tariffs that may be imposed by any country, and the impact of these factors on our business are uncertain and may contribute to increased costs and reduced demand for our products, each of which could harm our financial performance.

With regard to technological advances, we anticipate that digital transformation, including the AI data-cycle, will drive improved market conditions in the long term for our data storage products.

Commencing in fiscal 2026, we entered into long-term agreements, which we also refer to as New Business Models, or “NBMs,” with several Datacenter and Edge customers.

These agreements generally commit us to deliver, and our customers to purchase, a stated volume of products, mostly over multi-year periods.

The agreements include pricing mechanisms consisting of fixed and variable components and are supported by financial guarantees that are intended to provide additional protection in the event a customer does not satisfy their contractual purchase obligations.

As NBMs are expected to become our predominant way of doing business, we believe that this business model will contribute to greater predictability of revenue, support production planning, and enhance supply assurance for our customers.

While these agreements do not eliminate the risks associated with customer demand, market conditions, or operational execution, we believe they reduce certain elements of industry cyclicality and support our long-term strategic and financial objectives.

We will continue to actively monitor developments impacting our business and may take additional responsive actions that we determine to be in the best interest of our business and stakeholders.

Basis of Presentation

On February 21, 2025, we became a standalone publicly traded company, and our financial statements are now presented on a consolidated basis.

Prior to the separation, our historical financial statements were derived from WDC’s consolidated financial statements and accounting records and prepared as if we existed on a standalone basis.

The financial statements for all periods presented, including our historical results prior to February 21, 2025, are now referred to as “Consolidated Financial Statements” and have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

On February 21, 2025, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis.

Prior to the separation, the Company’s historical consolidated financial information was derived from WDC’s consolidated financial statements and accounting records and prepared as if the Company existed on a standalone basis.

The financial statements for all periods presented, including the historical results of the Company prior to February 21, 2025, are now referred to as “Consolidated Financial Statements” and have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) and the policies and practices that are generally accepted in the industry in which it operates, consistent with prior statements.

The following discussion reflects our financial condition and results of operations as set forth in the Consolidated Financial Statements included in this Annual Report on Form 10-K.

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Results of Operations

The following table sets forth, for the periods presented, selected summary information from our Consolidated Statements of Operations by dollars and percentage of net revenue (1) :

The following table sets forth, for the periods presented, selected summary information from our Consolidated Statements of Operations by U.S.

dollars and percentage of net revenue (1) :

2026 2025 2024

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Goodwill impairment — — 1,830 24.9 — —

Loss on debt extinguishment 46 0.2 — — — —

Business separation costs 25 0.1 67 0.9 64 1.0

Employee termination and other (2) — 21 0.3 (40) (0.6)

Gain on business divestiture (34) (0.5) — — — —

(Gain) loss on business divestiture 10 — (34) (0.5) — —

Total operating expenses 2,083 10.2 3,589 48.8 1,540 23.1

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Interest and other income (expense), net:

Gain (loss) on equity securities, net 808 4.0 (2) — 1 —

Interest income 70 0.3 22 0.3 12 0.2

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Revenue by end market:

Cloud $ 960 $ 325 $ 500

Client 4,127 4,069 3,637

Datacenter $ 5,153 $ 960 $ 325

Edge 12,160 4,127 4,069

Consumer 2,935 2,268 2,269

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Our broad portfolio of technology and products addresses multiple end markets.

Cloud represents a large and growing end market comprised primarily of products for public or private cloud environments and enterprise customers.

Through the Client end market, we provide our OEM and channel customers a broad array of high-performance flash solutions across personal computer, mobile, gaming, automotive, virtual reality headsets, at-home entertainment, and industrial spaces.

The Consumer end market is highlighted by our broad range of retail and other end-user products, which capitalize on the strength of our product brand recognition and vast points of presence around the world.

Net revenue increased 10%, or $692 million, in 2025 compared to 2024, primarily due to a 6% increase in exabytes sold due to stronger demand in our Cloud end market and a 4% increase in average selling prices (“ASP”) per gigabyte due to enhanced pricing as the supply-demand balance improved.

Cloud revenue increased 195%, or $635 million, in 2025 compared to 2024, primarily due to a 153% increase in exabytes sold due to increased enterprise SSD shipments to data center customers and a 17% increase in ASP per gigabyte due to improved pricing.

Client revenue increased 1%, or $58 million, in 2025 compared to 2024, primarily due to an 8% increase in ASP per gigabyte, partially offset by a 7% decrease in exabytes sold.

Consumer revenue decreased $1 million in 2025 compared to 2024, primarily due to a 6% increase in exabytes sold, offset by a 7% decrease in ASP per gigabyte due to pricing pressure.

The changes in net revenue by geography in 2025 compared to 2024 primarily reflected higher revenue in the Americas region from Cloud customers.

Consistent with standard industry practice, we offer sales incentives and marketing programs that provide customers with price protection and other incentives or reimbursements that are recorded as reductions of gross revenue.

Datacenter represents a large and growing end market comprised primarily of products for public or private cloud environments and enterprise customers.

Through the Edge end market, we provide our OEM and channel customers a broad array of high-performance flash solutions across personal computer, mobile, gaming, automotive, physical AI, at-home entertainment, and industrial spaces.

The Consumer end market is highlighted by our broad range of retail and other end-user products, which capitalize on the strength of our product brand recognition and vast presence around the world.

Net revenue increased 175%, or $12,893 million, in 2026 compared to 2025, due to a 437% increase in Datacenter revenue, a 195% increase in Edge revenue, and a 29% increase in Consumer revenue.

Total products sold increased by mid-teens percent on an exabyte basis.

Datacenter revenue increased 437% , or $4,193 million , in 2026 compared to 2025 , primarily due to higher sales and higher pricing.

Total products sold increased by almost 120% on an exabyte basis.

Revenue per gigabyte increased by almost 150%.

Edge revenue increased 195% , or $8,033 million , in 2026 compared to 2025 , primarily due to higher sales and higher pricing.

Total products sold increased by high single-digits percent on an exabyte basis.

Revenue per gigabyte increased by almost 180%.

Consumer revenue increased 29%, or $667 million in 2026 compared to 2025 , primarily due to higher pricing partially offset by lower sales.

Total products sold decreased by mid-teens percent on an exabyte basis.

Revenue per gigabyte increased by low-fifties percent.

The changes in net revenue by geography in 2026 compared to 2025 primarily reflected higher revenue in the Asia and Americas regions from Edge and Datacenter customers, respectively.

For 2026, 2025 and 2024, these programs represented 11%, 19%, and 19%, respectively, of gross revenues.

The amounts attributed to our sales incentive and marketing programs generally vary according to several factors, including industry conditions, list pricing strategies, seasonal demand, competitor actions, channel mix and overall availability of products.

The amounts attributed to our sales incentive and marketing programs generally vary according to several factors, including industry conditio ns, list pricing strategies, seasonal demand, competitor actions, channel mix, and overall availability of products.

Changes in future customer demand and market conditions may require us to adjust our incentive programs as a percentage of gross revenue.

Gross Profit and Gross Margin

Gross profit increased $1,140 million in 2025 compared to 2024, primarily due to improved pricing, a favorable product mix, a decrease in manufacturing underutilization charges incurred in 2025 compared to the comparable prior year period, and a $54 million write-down of Flash inventory in 2024 as a result of decreases in market pricing, for which a similar charge was not incurred in 2025, partially offset by $36 million of insurance recoveries received during 2024 for losses incurred due to a contamination incident in 2022.

In 2024, we recognized a $252 million charge due to reduced manufacturing capacity utilization, compared to an underutilization charge of $75 million incurred in 2025.

Gross profit margin increased 14% in 2025 compared to 2024, with approximately 10% driven by higher revenue due to improved pricing, higher demand for our offerings, and favorable product mix and the remaining 4% due to the decrease in manufacturing underutilization charges incurred in 2025 and a write-down of Flash inventory in 2024 for which a similar charge was not incurred in the current period.

Gross profit increased $12,260 million in 2026 compared to 2025 , primarily due to higher sales and higher pricing in 2026 compared to 2025 as described above.

Gross profit margin increased 4,100 basis points in 2026 compared to 2025 primarily due to higher sales and higher pricing.

Operating Expenses

Research and development (“R&D”) expenses increased $71 million in 2025 compared to 2024, primarily due to a $32 million increase in compensation and benefits mainly due to higher variable compensation which includes short-term incentives, an $18 million increase in spending for R&D projects, a $15 million increase in material purchases, and a $5 million increase in legal and outside service fees.

Selling, general and administrative expenses increased $118 million in 2025 compared to 2024, primarily due to an $84 million increase in compensation and benefits due to higher variable compensation which includes short-term incentives , a $24 million increase in materials, a $16 million increase in legal service fees, and a $14 million increase in sales and marketing expenses, partially offset by a $20 million decrease in strategic review costs incurred in 2024 for which there are no comparable costs in the current year.

Employee termination and other charges decreased $61 million in 2025 compared to 2024, primarily due to a $60 million gain on the sale-leaseback of a facility in the prior period, for which there is no comparable transaction in 2025.

For additional information regarding employee termination and other charges, see Part II, Item 8., Note 15, Employee Termination and Other Charges of the Notes to Consolidated Financial Statements included in this Annual Report.

Research and development

Research and development (“R&D”) expenses increased $196 million in 2026 compared to 2025 , primarily due to a $136 million increase in compensation and benefits due to variable compensation associated with company performance and increased headcount, a $28 million increase in spending for R&D projects as we continue to invest in innovation, and a $24 million increase in stock based compensation.

Selling, general and administrative

Selling, general and administrative expenses increased $103 million in 2026 compared to 2025, primarily due to a $68 million increase in compensation and benefits due to variable compensation associated with company performance and increased headcount, partially offset by a $51 million decrease in materials due to a change in business practice for the launch of new products whereby the Company is distributing fewer free samples and has started entering into contracts to sell certain qualification units to customers.

The costs of qualification units are recorded in inventory until sold to customers and recognized as cost of revenue.

The change contributed to a decrease in materials and production costs classified as selling expenses when compared to the prior year period, partially offset by a $32 million increase in sales and marketing expenses, and a $15 million increase in outside services.

Goodwill impairment

Goodwill impairment increased $1.8 billion in 2025 compared to 2024 due to an impairment charge resulting from the difference between the carrying value of our reporting unit and its fair value.

Goodwill impairment decreased $1.8 billion in 2026 compared to 2025 due to an impairment charge resulting from the difference between the carrying value of our reporting unit and its fair value that was recognized in the previous fiscal year.

No such impairment charge was incurred during the current fiscal year.

Loss on debt extinguishment

Loss on debt extinguishment increased $46 million in 2026 compared to 2025 due to the write-off of the remaining unamortized issuance costs in connection with the early settlement of the Company’s Term Loan Facility.

Business separation costs

Business separation costs increased $3 million in 2025 compared to 2024, primarily due to the completion of the separation from WDC.

Business separation costs decreased $42 million in 2026 compared to 2025, primarily due to the completion of the separation from WDC.

Employee termination and other

Employee termination and other charges decreased $23 million in 2026 compared to 2025 as there were no restructuring actions taken in the current period.

Gain on business divestiture

Gain on business divestiture increased $34 million in 2025 compared to 2024 due to the pre-tax gain on the sale of SDSS.

Interest and Other Expense, net

Interest and other expense, net increased $67 million in 2025 compared to 2024, primarily due to a $56 million increase in interest expense from our Loan Agreement, a $37 million increase in losses on our equity method investments, and a $24 million increase in foreign exchange losses, partially offset by a $28 million decrease in interest expense on borrowings due to WDC, a $15 million increase in interest income due to an increase in available cash, and a $7 million increase in interest income arising from the accretion of the present value discount on the outstanding SDSS sale consideration receivable.

Gain on business divestiture decreased $44 million in 2026 compared to 2025 primarily due to the pre-tax gain on the sale of 80% of the Company’s interest in SanDisk Semiconductor (Shanghai) Co.

(“SDSS”) recognized in the prior fiscal year and no comparable transaction in the current fiscal year.

Interest and Other Income (Expense), net

Interest and other income (expense), net increased $730 million in 2026 compared to 2025 , primarily due to a gain on equity securities, due to the Company’s investment in Nanya Technology Corporation (“Nanya”), for which there was no activity in the comparable year.

This $807 million gain was offse t by a $118 million increase in other expenses which was primarily due to the settlement of certain non-operating legal matters, partially offset by a $48 million increase in interest income related to cash and investment accounts.

Income Tax Expense

H.R.1, more widely known as the Big Beautiful Bill Act, was recently signed into law on July 4, 2025.

1, more widely known as the One Big Beautiful Bill Act (“OBBBA”) , was signed into law on July 4, 2025.

It reversed the requirement for capitalization of U.S.

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The tax rates for income earned by our foreign subsidiaries will also be changed under H.R.

1, which applies to our fiscal years 2027 and onward.

Depending on our operating results, these changes can materially impact our effective tax rate and reduce our operating cash flows.

As H.R.1 was enacted after our fiscal year 2025, its impact on the tax provision will be reflected in fiscal year 2026.

During the fiscal year ended July 3, 2026 , w e recorded a $10 million tax benefit in relation to the OBBBA’s impact on the Company’s 2025 tax provision.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, which contained significant changes to laws related to tax, climate, energy, and health care.

The tax measures include, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.0 billion.

We do not expect to be subject to the CAMT of 15% for 2025 as our average annual AFSI did not exceed $1.0 billion for the preceding three-year period.

On December 20, 2021, the Organization for Economic Co-operation and Development G20 Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two (“Pillar Two”).

Several non-U.S.

jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of Pillar Two, some of which are effective for us in 2025.

For 2025, we currently expect to be able to meet certain transitional safe harbors and do not expect any material Pillar Two taxes.

As more jurisdictions adopt this legislation in 2026, there may be material increases in our future tax obligations in certain jurisdictions.

We do not expect to be subject to the CAMT of 15% for fiscal year 2026 as our average annual AFSI did not exceed $1.0 billion for the preceding three-year period.

We expect to be subject to CAMT in fiscal year 2027.

On December 20, 2021, the Organisation for Economic Co-operation and Development G20 Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two (“Pillar Two”).

Pillar Two is currently effective in most of the jurisdictions in which we operate.

Accordingly, these taxes are included in the Company’s Income tax expense for the year ended July 3, 2026.

The following table presents our Income tax expense and the effective tax rate:

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Effective tax rate 12 % (11) % (34) %

The relative mix of earnings and losses by jurisdiction, the goodwill impairment, the foreign income inclusion, credits, and tax holidays in Malaysia that will expire at various dates during years 2028 through 2031 resulted in decreases to the effective tax rate below the U.S.

statutory rate for the years ended June 27, 2025.

For additional information regarding income tax expense, see Part II, Item 8., Note 14, Income Tax Expense of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

The relative mix of earnings and losses by jurisdiction, foreign-derived deduction-eligible income, credits, and tax holidays in Malaysia that will expire at various dates during years 2028 through 2031 resulted in decreases to the effective tax rate below the U.S.

statutory rate for the year ended July 3, 2026.

The primary drivers of the difference between the effective tax rate for the year ended June 27, 2025 and the U.S.

federal statutory rate of 21% are the relative mix of earnings and losses by jurisdiction, the goodwill impairment, the foreign income inclusion, credits, and tax holidays in Malaysia.

For additional information regarding income tax expense, see Part II, Item 8., Note 14, Income Tax Expense of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Financial condition, liquidity and capital resources

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Effect of exchange rate changes on cash (3) (5) (1)

Net increase (decrease) in cash and cash equivalents $ 1,153 $ 36 $ (43)

In alignment with market conditions, we have maintained a conservative capital expenditure strategy for 2025 and 2024.

Net increase in cash and cash equivalents $ 3,281 $ 1,153 $ 36

In alignment with market conditions, we maintained what we believe to be a conservative capital expenditure strategy for fiscal years 2026 and 2025.

For fiscal year 2027, we anticipate increased capital investments as we transition to newer nodes to meet the demand and technology needs of our product portfolio.

We believe our cash and cash equivalents will be sufficient to meet our working capital needs for at least the next twelve months and for the foreseeable future thereafter.

We believe our cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs, as well as to fund any repurchases of our shares under the Repurchase Program (as defined under Share Repurchase Authorization below).

We believe we can also access the various capital markets to further supplement our liquidity position if necessary.

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A total of $2,879 million and $692 million of our cash and cash equivalents were held outside of the U.S.

as of June 27, 2025 and June 28, 2024 respectively.

as of July 3, 2026 and June 27, 2025, respectively.

There are no material tax consequences that were not previously accrued for the repatriation of this cash.

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Operating Activities

Net cash provided by (used in) operating activities primarily consists of net income or loss, adjusted for non-cash charges, plus or minus changes in operating assets and liabilities.

Net cash used as a result of changes in operating assets and liabilities was $380 million for 2025, compared to $86 million net cash provided for 2024, reflecting an increase in the volume of our business, as discussed above.

Net cash provided by operating activities primarily consists of net income or loss, adjusted for non-cash charges, plus or minus changes in operating assets and liabilities.

Net cash used as a result of changes in operating assets and liabilities was $212 million for 2026, compared to $380 million net cash provided for 2025 and to $86 million net cash provided for 2024, reflecting an increase in the volume of our business, as discussed above.

Changes in our operating assets and liabilities are largely affected by our working capital requirements, which are dependent on the volume of our business and the effective management of our cash conversion cycle as well as timing of payments for taxes.

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Generally, we make payment term modifications through negotiations with our vendors or by granting to, or receiving from, our vendors’ payment term accommodations.

In 2025, DSO increased 3 days when compared to the prior year, reflecting lower accounts receivable factoring and the timing of shipments and customer collections.

DIO decreased 23 days over the prior year, primarily reflecting greater consumption of inventory.

DPO decreased 4 days over the prior year, primarily due to routine variations in the timing of purchases and payments.

In 2026, DSO decreased 3 days when compared to the prior year, primarily due to the timing of shipments and continued strong receivables collections.

DIO increased 43 days over the prior year, primarily due to inventory builds to meet demand.

DPO increased 14 days over the prior year, primarily due to routine variations in the timing of purchases and payments.

Investing Activities

Net cash used in investing activities in 2026 primarily consisted of $970 million in purchases of marketable equity securities, $275 million in net issuances from activity related to Flash Ventures and $177 million in capital expenditures , partially offset by $25 million in net proceeds from our sale of a majority interest in one of our subsidiaries.

Net cash provided by investing activities in 2025 primarily consisted of $401 million in net proceeds from our sale of a majority interest in one of our subsidiaries and $358 million in net proceeds from activity related to Flash Ventures, partially offset by $204 million in capital expenditures.

Net cash provided by investing activities in 2024 primarily consisted of $239 million in net proceeds from activity related to Flash Ventures and $137 million of proceeds from the sale-leaseback of our Milpitas, California facility, partially offset by $166 million in capital expenditures.

Financing Activities

Net cash provided by financing activities in 2025 primarily consisted of $1,970 million in proceeds from borrowings from the Term Loan Facility, $550 million in proceeds from borrowings on notes due to WDC, and $101 million in proceeds from principal repayments on notes due from WDC, partially offset by $1,887 million transferred to WDC, $100 million in repayment on the Term Loan Facility, and $76 million in net repayments on notes due to WDC.

Net cash provided by financing activities in 2024 primarily consisted of $394 million in net transfers from WDC, partially offset by $170 million in origination of notes due from WDC and $102 million in net repayments on notes due to WDC.

A discussion of our cash flows for 2024, including a comparison of such cash flows to 2023, is included in Item 2., Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10.

Net cash used in financing activities in 2026 primarily consisted of $4.5 billion in repurchases of the Company’s common stock pursuant to the Initial Repurchase Program (as defined under Share Repurchase Authorization below), $1.9 billion for repayments and eventual settlement of the Term Loan Facility, and $630 million in payments of taxes on vested stock awards.

Net cash provided by financing activities in 2025 primarily consisted of $2.0 billion in proceeds from borrowings from the Term Loan Facility, $550 million in proceeds from borrowings on notes due to WDC, and $101 million in proceeds from principal repayments on notes due from WDC, partially offset by $1.9 billion transferred to WDC, $100 million in repayment on the Term Loan Facility, and $76 million in net repayments on notes due to WDC.

A discussion of our cash flows for 2024, including a comparison of such cash flows to 2023, is included in Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2025 Annual Report on Form 10-K, filed with the U.S.

Securities and Exchange Commission (“SEC”) on August 21, 2025.

Off-Balance Sheet Arrangements

Other than the Flash Ventures and SDSS-related commitments incurred in the normal course of business and certain indemnification provisions (see “Short-and-Long-term Liquidity - Purchase Obligations and Other Commitments” below), we do not have any other material off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any other obligations arising out of a material variable interest in an unconsolidated entity.

Other than the Flash Ventures, SDSS and Nanya-related commitments incurred in the normal course of business and certain indemnification provisions (see “Short-and-Long-term Liquidity — Purchase Obligations and Other Commitments” below), we do not have any other material off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any other obligations arising out of a material variable interest in an unconsolidated entity.

We do not have any majority-owned subsidiaries that are not included in the Consolidated Financial Statements.

Additionally, with the exception of Flash Ventures, the SDSS Venture and the Unis Venture, we do not have an interest in, or relationships with, any variable interest entities.

For additional information regarding our off-balance sheet arrangements, see Part II, Item 8., Note 10, Related Parties and Related Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

For additional information regarding our off-balance sheet arrangements, see Part II, Item 8., Note 10, Related Parties and Related Commitments and Contingencies of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Short-and-Long-term Liquidity

Material Cash Requirements

The following is a summary of our known material cash requirements, including those for capital expenditures, as of June 27, 2025.

In addition, see the discussions further below related to unrecognized tax benefits, foreign exchange contracts and indemnifications.

The following is a summary of our known material cash requirements, including those for capital expenditures, as of July 3, 2026.

In addition, see the discussions further below related to unrecognized tax benefits, foreign exchange contracts, indemnifications, long term agreements and share repurchase authorization.

Total 1 year (2027) 2-3 Years (2028 - 2029) 4-5 Years (2030 - 2031) More than 5 Years (Beyond 2031)

(in millions)

Long-term debt, including current portion (1)

$ 1,900 $ 20 $ 40 $ 40 $ 1,800

Interest on debt 905 143 276 267 219

Flash Ventures related commitments (1)

$ 6,559 $ 2,627 $ 2,577 $ 1,318 $ 37

Operating leases 331 41 63 44 183

Purchase obligations and other commitments 4,902 726 2,993 1,111 72

Operating leases 299 38 55 44 162

Total $ 11,760 $ 3,391 $ 5,625 $ 2,473 $ 271

(1) Principal portion of debt, excluding issuance costs.

(2) Includes reimbursement for depreciation and lease payments on owned and committed equipment, funding commitments for loans and equity investments and payments for other committed expenses, including R&D and building depreciation.

(1) Includes Flash Ventures depreciation reimbursement and lease payments on owned and committed equipment, funding commitments for loans and equity investments and payments for other committed expenses, including research and development and building depreciation and payments made directly to Kioxia in consideration for the manufacturing services and continued availability of supply.

Funding commitments assume no additional operating lease guarantees.

Additional operating lease guarantees can reduce funding commitments.

In connection with the separation, on February 21, 2025, we entered into a loan agreement (the “Loan Agreement”) comprised of a $1.5 billion revolving credit facility, on which no amounts have been drawn, and a $2.0 billion term loan facility due in 2032.

In connection with the separation, on February 21, 2025, we entered into the Loan Agreement, comprised of the $1.5 billion Revolving Credit Facility, on which no amounts have been drawn, and the $2.0 billion Term Loan Facility which was due in 2032.

The Company used a portion of the proceeds received from the Term Loan Facility, as well as cash on hand, to make a net distribution payment of $1.5 billion t o WDC in exchange for assets, liabilities and certain legal entities of WDC associated with the Company.

As of June 27, 2025 , we were in compliance with the Loan Agreement financial covenant that requires us to maintain a maximum Leverage Ratio.

On March 4, 2026, the Company settled in full the remaining outstanding principal amounts of the Term Loan Facility, plus accrued interest, using cash on hand.

As of July 3, 2026 , we were in compliance with the Loan Agreement financial covenant that prohibits us from exceeding a maximum Leverage Ratio.

Additi onal information regarding our indebtedness, including information about availability under our revolving credit facility and the principal repayment terms, interest rates, covenants, collateral and other key terms of our outstanding indebtedness, is included in Part II, Item 8., Note 8, Debt of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

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The occurrence of a cancellation event could result in an acceleration of the lease obligations and a call on our guarantees.

As of June 27, 2025, and as of June 28, 2024, we were in compliance with all covenants under these Japanese lease facilities.

See Part II, Item 8., Note 10, Related Parties and Related Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding Flash Ventures.

As of July 3, 2026, and as of June 27, 2025, we were in compliance with all covenants under these Japanese lease facilities.

See Part II, Item 8., Note 10, Related Parties and Related Commitments and Contingencies of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding Flash Ventures.

Purchase Obligations and Other Commitments

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Unrecognized Tax Benefits

As of June 27, 2025, our liability for unrecognized tax benefits (excluding accrued interest and penalties) was approximately $140 million.

Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of June 27, 2025 and June 28, 2024 was $11 million and $9 million, respectively.

As of July 3, 2026, our liability for unrecognized tax benefits (excluding accrued interest and penalties) was approximately $323 million.

Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of July 3, 2026 and June 27, 2025 was $16 million and $11 million, respectively.

Of these amounts, approximately $259 million could result in potential cash payments.

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We purchase foreign exchange contracts to hedge the impact of foreign currency fluctuations on certain underlying assets, liabilities and commitments for operating expenses and product costs denominated in foreign currencies.

See Part II, Item 7A., Quantitative and Qualitative Disclosures About Market Risk included in this Annual Report on Form 10-K for additional information.

See Part II, Item 7A., Quantitative and Qualitative Disclosures About Market Risk included in this Annual Report on Form 10-K for additional disclosures.

Indemnifications

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As a result of this agreement, we recorded a tax indemnification liability of $112 million on February 21, 2025 , which was recognized as an adjustment to the Net investment from Western Digital Corporation.

This liability was subsequently reduced by approximately $2 million, reflecting the outstanding balance as of June 27, 2025 .

The remaining tax indemnification liability of $110 million is classified as Other liabilities in the Consolidated Balance Sheets as of June 27, 2025 .

The remaining tax indemnification liability of $128 million is classified as Other liabilities in the Consolidated Balance Sheets as of July 3, 2026 .

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements, products or services to be provided by us, environmental compliance, or intellectual property infringement claims made by third parties.

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Historically, we have not incurred material costs as a result of obligations under these agreements.

Long-Term Agreements

In connection with entering into long-term agreements with certain customers, we received customer advances that increased our available cash and cash equivalents.

We record these customer payments as contract liabilities in advance of performance under such contract.

As of July 3, 2026, our contract liabilities were $1,242 million , which primarily relate to the remaining performance obligations under these long-term agreements.

Our long-term agreements may also require customers to maintain refundable security deposits with the Company or establish and maintain collateral with third-party financial institutions during the contract term.

Security deposits are recorded as refund liabilities within the Consolidated Balance Sheets.

As of July 3, 2026, our refund liabilities were $1,500 million .

See Part II, Item 8., Note 4, Revenue of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our contract liabilities.

Share Repurchase Authorization

On April 30, 2026, we announced that our Board of Directors had approved a $6.0 billion (exclusive of fees and commissions) share repurchase program (the “Initial Repurchase Program”).

On August 5, 2026, we announced that our Board of Directors had approved an additional $14.0 billion share repurchase program (exclusive of fees and commissions) (each of the share repurchase programs, collectively and separately, the “Repurchase Program”).

The acquisition of shares under the Repurchase Program may be effected from time to time through open market purchases (including under a plan adopted pursuant to Rule 10b5-1 promulgated under the Securities Exchange Act of 1934) or other methods of acquiring shares, in each case on such terms and at such times as shall be permitted by applicable securities laws and determined by our management.

We expect shares repurchased under the Repurchase Program to be funded by operating cash flows.

The amount and timing of share repurchases will depend on market conditions and other relevant factors.

We may suspend or discontinue the Repurchase Program at any time.

The approval of the Repurchase Program does not obligate us to repurchase any common shares.

During the year ended July 3, 2026, we repurchased 3 million shares of our common stock for an aggregate purchase price of $4.5 billion, and $1.5 billion remained available for future repurchases under the Repurchase Program as of July 3, 2026.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” This ASU calls for enhanced income tax disclosure requirements surrounding the tabular rate reconciliation and income taxes paid.

The Company is currently compiling the information required for these disclosures.

These incremental disclosures will be required beginning with the Company’s financial statements for the year ending July 3, 2026, with early adoption permitted.

The Company expects to provide any required disclosures at that time.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses,” which is intended to improve disclosures about the expenses of public entities.

This ASU requires more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales and selling, general and administrative expenses) and requires public entities to disclose, on an annual and interim basis, the amounts of expenses included in each relevant expense caption presented on the face of the income statement within continuing operations, in a tabular format.

Additionally, public entities will be required to disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, the total amount of selling expenses, and, in annual reporting periods, the definition of selling expenses.

This ASU is effective on either a prospective or retrospective basis for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The Company is currently compiling the information required for these disclosures and assessing the basis of adoption.

The Company expects to provide any required disclosures for annual reporting periods included in the Company’s financial statements for the year ending June 30, 2028.

For a description of recently issued and adopted accounting pronouncements, including the respective dates of adoption and expected effects on our results of operations and financial condition, see Part II, Item 8., Note 2, Recent Accounting Pronouncements of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Critical Accounting Estimates

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We constrain variable consideration until the likelihood of a significant revenue reversal is not probable and believe that the expected value method is the appropriate estimate of the amount of variable consideration based on the fact that we have a large number of contracts with similar characteristics.

For sales to OEMs, our methodology for estimating variable consideration is based on the amount of consideration expected to be earned based on the OEMs’ volume of purchases from agreed-upon sales incentive programs.

For sales to resellers, the methodology for estimating variable consideration is based on several factors, including historical pricing information, current pricing trends and channel inventory levels.

Estimating the impact of these factors requires significant judgment and differences between the estimated and actual amounts of variable consideration can be significant.

For sales to OEMs, the methodology for estimating variable consideration is based on the amount of consideration expected to be earned based on the OEMs’ volume of purchases under agreed-upon sales incentive programs.

For sales to resellers, the methodology for estimating variable consideration is based on the amount of consideration expected to be earned from sell-through activity under agreed-upon sales incentive programs.

The amount of consideration expected to be earned by the reseller is based on historical pricing information, current pricing trends and channel inventory levels.

Estimating the impact of these factors requires judgment and differences between estimated and actual amounts of variable consideration can occur.

We value inventories at the lower of cost or net realizable value, or “NRV,” with cost determined on a first-in, first-out basis.

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If in any period, we can sell inventories that had been written down to a level below the realized selling price in the previous period, higher gross profit would be recognized in that period.

Although adjustments to these reserves have typically been immaterial, in 2024, we recorded a charge to cost of revenue of $95 million, primarily to reduce component inventory to NRV as a result of a sudden change in demand for certain products.

Adjustments to the reserve in 2026 were immaterial .

Goodwill attributed to us represents the amount by which the purchase price of businesses acquired in a business combination exceeded the estimated fair value of acquired net assets.

Goodwill is not amortized.

Instead, it is tested for impairment at least annually, as of the beginning of the Company’s fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired.

We use qualitative factors to determine whether goodwill is more-likely-than-not impaired and whether a quantitative test for impairment is considered necessary.

If we conclude from the qualitative assessment that goodwill is more-likely-than-not impaired, we are required to perform a quantitative assessment to determine the amount of impairment.

We are required to use judgment when assessing goodwill for impairment, including evaluating the impact of industry and macroeconomic conditions and the determination of the fair value of the reporting unit.

In addition, the estimates and assumptions used to determine the fair value as well as the actual carrying value may change based on future changes in our results of operations, macroeconomic conditions, or other factors.

Changes in these estimates and assumptions could materially affect our assessment of the fair value and goodwill impairment.

In addition, if negative macroeconomic conditions continue or worsen, goodwill could become impaired, which could result in an impairment charge and materially adversely affect our financial condition and results of operations.

Subsequent to the completion of the separation in February 2025, we identified potential impairment indicators related to macroeconomic indicators, industry developments, the trading price of our common stock and resulting market capitalization that warranted a quantitative impairment analysis of long-lived assets and goodwill.

Subsequently, we performed a quantitative test, which indicated that the carrying value of our reporting unit exceeded its estimated fair value, resulting in the recognition of a $1.8 billion impairment charge during the third quarter of the year ended June 27, 2025 which was recorded in the accompanying Consolidated Statements of Operations.

We performed a qualitative impairment test on the first day of the fourth fiscal quarter, which did not indicate that goodwill was more-likely-than-not impaired.

As a result, no additional quantitative analysis was required and no additional impairment charge was recorded during the fiscal year ended June 27, 2025, other than as stated above.

The tests for goodwill and long-lived asset impairment are further explained in Part II, Item 8., Note 5, Supplemental Financial Statement Data of the Notes to the Consolidated Financial Statements.

Determining the fair value used in our impairment calculations involves using significant estimates and assumptions, including revenue forecasts, terminal growth rate, tax rate, and a weighted average cost of capital adjusted for company-specific risk.

These estimates and assumptions are based on the most current information available to the Company, and there is no assurance that these estimates and assumptions will accurately predict future outcomes.

If our assumptions are not realized, or if any of these assumptions change due to changes in economic conditions, our results of operations, or other factors, it is possible that an additional impairment charge may be recorded.

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