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Item 2. Management’s Discussion and Analysis

2026-08-28 compared with 2026-05-29 · 120 added, 100 removed, 211 unchanged (51% of the section changed)

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Financial Summary

First quarter 2026 included the following:

Second quarter 2026 included the following:

• Net Sales of $26.5 billion, an increase of 5.3 percent from the comparable prior-year period, driven by:

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• Non-merchandise sales growth of 20.1 percent, primarily driven by growth in our Roundel digital advertising business offering.

• GAAP and Adjusted operating income 1 of $1.1 billion was 22.9 percent lower than prior year GAAP operating income, which included $593 million of pretax net gains on interchange fee settlements.

Excluding the settlement gains, Adjusted operating income was 29.1 percent higher than $0.9 billion in the prior-year.

Earnings Per Share Three Months Ended

May 2, 2026 May 3, 2025 Change

GAAP diluted earnings per share $ 1.71 $ 2.27 (24.5) %

• Operating Income of $2.6 billion, an increase of $1.3 billion, or 94.4 percent, compared to the prior year, including $994 million related to tariff refunds received during the period.

Excluding the impact of tariff refunds, Operating Income growth was approximately 19 percent.

• GAAP and Adjusted EPS 1 of $4.11, an increase of 100.3 percent compared to the prior year, including $1.65 related to after-tax benefits of tariff refunds received during the period.

Earnings Per Share Three Months Ended Six Months Ended

August 1, 2026 August 2, 2025 Change August 1, 2026 August 2, 2025 Change

GAAP diluted earnings per share $ 4.11 (a)

$ 2.05 100.3 % $ 5.83 (a)

$ 4.32 34.8 %

Adjustments — — — (0.97)

Adjusted diluted earnings per share 1

$ 2.05 100.3 % $ 5.83 (a)

$ 3.35 73.7 %

Amounts may not foot due to rounding.

1 Adjusted diluted earnings per share (Adjusted EPS) and Adjusted operating income, non-GAAP metrics, exclude the impact of certain items.

Management believes that Adjusted EPS and Adjusted operating income are useful in providing period-to-period comparisons of the results of our operations.

1 Adjusted diluted earnings per share (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items.

Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our operations.

A reconciliation of non-GAAP financial measures to GAAP measures is provid ed on page 19 .

We report after-tax return on invested capital (ROIC) because we believe ROIC provides a meaningful measure of our capital allocation effectiveness over time.

For the trailing twelve months ended May 2, 2026, after-tax ROIC was 12.4 percent , compared with 15.1 percent for the trailing twelve months ended May 3, 2025.

For the trailing twelve months ended August 1, 2026, after-tax ROIC was 15.4 percent , compared with 14.3 percent for the trailing twelve months ended August 2, 2025.

The calculation of ROIC is provided on page 21 .

Business Environment

Beginning in 2025, the U.S.

imposed additional tariffs on a wide range of imported products using various legal authorities, including the International Emergency Economic Powers Act (IEEPA).

These tariffs were subsequently modified through incremental increases, decreases, pauses, and limited exemptions.

Approximately one-half of the merchandise we offer is sourced from outside the U.S., either directly or through our vendors, with China as the single largest source of merchandise we import.

On February 20, 2026, the U.S.

Supreme Court ruled that tariffs imposed under IEEPA were not authorized by the statute.

While the ruling did not establish a refund process, the U.S.

Court of International Trade (CIT) subsequently ordered U.S.

Customs and Border Protection (CBP) to implement a process to administer refunds, which CBP began executing with the April 20, 2026 deployment of the Consolidated Administration and Processing of Entries (CAPE) system for certain IEEPA refund claims.

We incurred tariffs under IEEPA, and are following the established refund filing and validation process through the CAPE system, along with other importers seeking IEEPA refunds.

As of May 2, 2026, no refunds had been received and no receivable was r ecorded.

Subsequent to quarter-end, we began receiving refunds, which to date have not been material.

Due to the remaining uncertainties related to the process, timing, and amount of potential refunds, as well as a potential appeal of the CIT's order to issue refunds, we are unable to estimate the ultimate financial effects of IEEPA refunds.

After the Supreme Court ruling in February, the U.S.

administration instituted new tariffs against most major trading partners, and has previewed future actions that could restore or exceed the level of the IEEPA tariffs.

During the second quarter of 2026, we received refunds of certain IEEPA tariffs previously paid and recognized $994 million related to these refunds as a reduction of Cost of Sales.

Refer to Note 3 and the Gross Margin Rate section for additional information.

We continue to pursue additional refund claims in accordance with the established refund filing and validation process, along with other importers seeking tariff refunds.

However, due to uncertainties related to the refund process, timing, and amount of potential refunds, as well as ongoing legal and regulatory developments, we are unable to estimate the ultimate financial effects of any potential additional tariff refunds.

administration has instituted new tariffs against most major trading partners.

We continue to assess and respond to the evolving consumer, legal and regulatory environment.

The collective interaction of tariffs, tariff refunds, sourcing strategies, pricing actions, consumer response and behaviors, and other factors could materially impact our sales, results of operations, and financial condition in future periods.

TARGET CORPORATION

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

FINANCIAL SUMMARY Index to Notes

The collective interaction of tariffs, IEEPA refunds, sourcing strategies, pricing actions, consumer response and behaviors, and other factors could materially impact our sales, results of operations, and financial condition in future periods.

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Business Transformation Initiatives

In 2025, we announced a multi-year initiative to transform various aspects of our business—including our organizational structure, processes, and technology—to enable greater agility and optimize the use of the Company's assets.

We incurred costs and charges related to our business transformation initiatives in 2025, including a reduction in our headquarters workforce.

Refer to Note 7 to the Financial Statements in our Form 10-K for the fiscal year ended January 31, 2026, for additional information.

We did not incur any costs or charges related to these initiatives during the three months ended May 2, 2026, or the comparable prior-year period.

Our multi-year business transformation initiatives are discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.

We did not incur any significant non-recurring costs or charges related to these initiatives during the three and six months ended August 1, 2026, or the comparable prior-year periods.

We may incur additional costs and charges related to these initiatives in future periods, which may adversely affect our results of operations and financial condition;

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Analysis of Results of Operations

Summary of Operating Income Three Months Ended

(dollars in millions) May 2, 2026 May 3, 2025 Change

Summary of Operating Income Three Months Ended Six Months Ended

(dollars in millions) August 1, 2026 August 2, 2025 Change August 1, 2026 August 2, 2025 Change

Net sales $ 26,539 $ 25,211 5.3 % $ 51,982 $ 49,057 6.0 %

Cost of sales 18,061 17,128 5.4

Cost of sales (a)

17,603 17,903 (1.7) 35,664 35,031 1.8

SG&A expenses 5,725 5,359 6.8 11,286 9,950 13.4

Depreciation and amortization (exclusive of depreciation included in cost of sales) 651 632 3.2 1,337 1,287 3.9

Operating income $ 1,135 $ 1,472 (22.9) %

Adjusted SG&A expenses (a)

Operating income (a)

$ 2,560 $ 1,317 94.4 % $ 3,695 $ 2,789 32.5 %

Adjusted operating income (a)

Adjusted SG&A expenses (b)

$ 5,725 $ 5,359 6.8 % $ 11,286 $ 10,543 7.1 %

Rate Analysis Three Months Ended

May 2, 2026 May 3, 2025

Gross margin rate 29.0 % 28.2 %

Adjusted operating income (a)(b)

2,560 1,317 94.4 3,695 2,196 68.3

Rate Analysis Three Months Ended Six Months Ended

August 1, 2026 August 2, 2025 August 1, 2026 August 2, 2025

Gross margin rate (a)

33.7 % 29.0 % 31.4 % 28.6 %

SG&A expense rate 21.6 21.3 21.7 20.3

Adjusted SG&A expense rate (a)

Adjusted SG&A expense rate (b)

21.6 21.3 21.7 21.5

Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales) 2.5 2.5 2.6 2.6

Operating income margin rate 4.5 6.2

Adjusted operating income margin rate (a)

Operating income margin rate (a)

9.6 5.2 7.1 5.7

Adjusted operating income margin rate (a)(b)

9.6 5.2 7.1 4.5

Gross margin (GM) is calculated as Net Sales less Cost of Sales.

All rates are calculated by dividing the applicable amount by Net Sales.

(a) Adjusted SG&A expenses, Adjusted SG&A expense rate, Adjusted operating income, and Adjusted operating income margin rate, which are non-GAAP measures, exclude the impact of certain items.

(a) Includes $994 million related to tariff refunds for the three and six months ended August 1, 2026, which provided a benefit to Gross margin rate, Operating income rate, and Adjusted operating income rate of 3.7 percentage points and 1.9 percentage points for the three and six month periods, respectively.

Note 3 to the Financial Statements provides additional information.

(b) Adjusted SG&A expenses, Adjusted SG&A expense rate, Adjusted operating income, and Adjusted operating income margin rate, which are non-GAAP measures, exclude the impact of certain items.

Management believes that these measures are useful in providing period-to-period comparisons of the results of our operations.

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We believe that our ability to successfully differentiate our guests’ shopping experience through a careful combination of merchandise assortment, price, convenience, guest experience, and other factors will over the long-term drive both increasing shopping frequency (number of transactions, or "traffic") and the amount spent each visit (average transaction amount).

Comparable Sales Three Months Ended

May 2, 2026 May 3, 2025

Comparable Sales Three Months Ended Six Months Ended

August 1, 2026 August 2, 2025 August 1, 2026 August 2, 2025

Comparable sales change 3.8 % (1.9) % 4.7 % (2.8) %

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Average transaction amount 0.2 (0.6) 0.7 (1.0)

Comparable Sales by Channel Three Months Ended

May 2, 2026 May 3, 2025

Comparable Sales by Channel Three Months Ended Six Months Ended

August 1, 2026 August 2, 2025 August 1, 2026 August 2, 2025

Stores originated comparable sales change 2.7 % (3.2) % 3.7 % (4.4) %

Digitally originated comparable sales change 8.7 4.3 8.8 4.5

Merchandise Sales by Channel Three Months Ended

May 2, 2026 May 3, 2025

Merchandise Sales by Channel Three Months Ended Six Months Ended

August 1, 2026 August 2, 2025 August 1, 2026 August 2, 2025

Stores originated 80.4 % 81.1 % 80.1 % 80.7 %

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Total 100 % 100 % 100 % 100 %

Merchandise Sales by Fulfillment Channel Three Months Ended

May 2, 2026 May 3, 2025

Merchandise Sales by Fulfillment Channel Three Months Ended Six Months Ended

August 1, 2026 August 2, 2025 August 1, 2026 August 2, 2025

Stores 97.6 % 97.7 % 97.6 % 97.7 %

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ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Merchandise Sales by Product Category Three Months Ended

May 2, 2026 May 3, 2025

Merchandise Sales by Product Category Three Months Ended Six Months Ended

August 1, 2026 August 2, 2025 August 1, 2026 August 2, 2025

Apparel & accessories 16 % 16 % 16 % 16 %

Beauty 14 14 14 14

Food & beverage 23 23 24 24

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The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix and the transfer of sales to new stores, makes further analysis of sales metrics infeasible.

Change in Number of Stores Three Months Ended

May 2, 2026 May 3, 2025

Change in Number of Stores Three Months Ended Six Months Ended

August 1, 2026 August 2, 2025 August 1, 2026 August 2, 2025

Beginning store count 2,002 1,981 1,995 1,978

Opened 17 1 24 4

Ending store count 2,019 1,982 2,019 1,982

Number of Stores and Number of Stores Retail Square Feet (a)

Retail Square Feet May 2, 2026 January 31, 2026 May 3, 2025 May 2, 2026 January 31, 2026 May 3, 2025

Retail Square Feet August 1, 2026 January 31, 2026 August 2, 2025 August 1, 2026 January 31, 2026 August 2, 2025

170,000 or more sq.

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Quarter-to-Date

For the three months ended May 2, 2026, our gross margin rate was 29.0 percent compared with 28.2 percent in the comparable prior-year period.

The increase reflected net benefits from:

• merchandising, primarily due to lower markdown rates and growth in advertising and other revenues, partially offset by higher product costs;

For the three months ended August 1, 2026, our gross margin rate was 33.7 percent compared with 29.0 percent in the comparable prior-year period.

The increase reflected benefits from tariff refunds and net merchandising impacts, including lower purchase order cancellation costs compared to the prior year, as well as growth in advertising and other revenues.

The Business Environment section provides additional information about tariff refunds.

For the six months ended August 1, 2026, our gross margin rate was 31.4 percent compared with 28.6 percent in the comparable prior-year period.

The increase reflected benefits from:

• tariff refunds;

• merchandising, including lower purchase order cancellation costs and markdown rates compared to the prior year and growth in advertising and other revenues;

• supply chain and digital fulfillment, including productivity improvements in supply chain facilities, and the leveraging impact of higher sales.

Selling, General, and Administrative Expense Rate

For the three months ended May 2, 2026, our SG&A expense rate was 21.9 percent compared with 19.3 percent for the comparable prior-year period.

Our comparable prior-period rate included a 2.5 percentage point benefit from interchange fee settlements, which are further described in Note 3 to the Financial Statements.

Excluding this item, our Adjusted SG&A expense rate was 21.7 percent.

The remaining 0.2 percentage point increase in 2026 reflected higher compensation expense, including stores payroll and incentive compensation, new store and remodel-related expenses, and the net impact of other cost increases.

These cost increases more than offset the leverage benefit of higher sales.

For the three months ended August 1, 2026, our SG&A expense rate was 21.6 percent compared with 21.3 percent for the comparable prior-year period.

The increase reflected higher compensation expense, including stores payroll and incentive compensation, new store and remodel-related expenses, and the net impact of other cost increases.

These cost increases were partially offset by the leverage benefit of higher sales.

TARGET CORPORATION

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

OTHER PERFORMANCE FACTORS

Index to Notes

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

For the six months ended August 1, 2026, our SG&A expense rate was 21.7 percent compared with 20.3 percent for the comparable prior-year period.

The comparable prior-period rate included a 1.2 percentage point benefit from interchange fee settlements, which are further described in Note 4 to the Financial Statements.

Excluding this item, our Adjusted SG&A expense rate for the six months ended August 2, 2025, was 21.5 percent.

These cost increases were partially offset by the leverage benefit of higher sales.

Other Performance Factors

Net Interest Expense

For the three months ended May 2, 2026, n et interest expense was $117 million compared with $116 million in the comparable prior-year period.

Net interest expense was $98 million and $215 million for the three and six months ended August 1, 2026, respectively, compared with $116 million and $232 million in the comparable prior-year periods.

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

Provision for Income Taxes

Our effective income tax rate for the three months ended May 2, 2026, was 24.4 percent compared with 25.0 percent in the comparable prior-year period.

The decrease reflects lower discrete tax expense in the current year, primarily related to share-based compensation.

TARGET CORPORATION

Q1 2026 Form 10-Q 19

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Notes

Our effective income tax rates for the three and six months ended August 1, 2026, were 23.7 percent and 23.9 percent, respectively, compared with 23.2 percent and 24.2 percent in the comparable prior-year periods.

For the three month period, the increase was driven by higher pretax earnings, partially offset by additional tax credit benefits.

For the six month period, the decrease reflects additional tax credit benefits and lower discrete tax expenses related to share-based compensation, partially offset by higher pretax earnings.

Reconciliation of Non-GAAP Financial Measures to GAAP Measures

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Reconciliation of Non-GAAP Adjusted EPS Three Months Ended

May 2, 2026 May 3, 2025

August 1, 2026 August 2, 2025

(millions, except per share data) Pretax Net of Tax Per Share Pretax Net of Tax Per Share

GAAP and Adjusted EPS $ 4.11 $ 2.05

Reconciliation of Non-GAAP Adjusted EPS Six Months Ended

August 1, 2026 August 2, 2025

(millions, except per share data) Pretax Net of Tax Per Share Pretax Net of Tax Per Share

GAAP diluted earnings per share $ 5.83 $ 4.32

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Adjusted EPS $ 5.83 $ 3.35

TARGET CORPORATION

Q2 2026 Form 10-Q 19

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Notes

Reconciliation of Non-GAAP Adjusted SG&A Expenses and Adjusted Operating Income Three Months Ended

May 2, 2026 May 3, 2025

SG&A Expenses Operating Income SG&A Expenses Operating Income

August 1, 2026 August 2, 2025

SG&A Expenses Operating Income (b)

SG&A Expenses Operating Income

(dollars in millions) Dollars Rate Dollars Rate Dollars Rate Dollars Rate

GAAP and Adjusted measures $ 5,725 21.6 % $ 2,560 9.6 % $ 5,359 21.3 % $ 1,317 5.2 %

Reconciliation of Non-GAAP Adjusted SG&A Expenses and Adjusted Operating Income Six Months Ended

August 1, 2026 August 2, 2025

SG&A Expenses Operating Income (b)

SG&A Expenses Operating Income

(dollars in millions) Dollars Rate Dollars Rate Dollars Rate Dollars Rate

Reported, GAAP measure $ 11,286 21.7 % $ 3,695 7.1 % $ 9,950 20.3 % $ 2,789 5.7 %

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Note 4 to the Financial Statements provides additional information.

(b) Note (a) to the Summary of Operating Income and Rate Analysis tables provides information about the impact of tariff refunds on Operating Income and Operating Income margin rate.

TARGET CORPORATION

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Trailing Twelve Months

Numerator May 2, 2026 May 3, 2025

Numerator August 1, 2026 August 2, 2025

Operating income $ 6,024 $ 5,425

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Net operating profit after taxes $ 4,858 $ 4,385

Denominator May 2, 2026 May 3, 2025 May 4, 2024

Denominator August 1, 2026 August 2, 2025 August 3, 2024

Current portion of long-term debt and other borrowings $ 1,136 $ 1,136 $ 1,640

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Operating lease interest is added back to Operating Income in the ROIC calculation to control for differences in capital structure between us and our competitors.

(b) Calculated using the effective tax rates, which were 21.9 percent and 22.8 percent for the trailing twelve months ended May 2, 2026, and May 3, 2025, respectively.

For the trailing twelve months ended May 2, 2026, and May 3, 2025, includes tax effect of $1.1 billion and $1.3 billion, respectively, related to EBIT, and $38 million related to operating lease interest.

(b) Calculated using the effective tax rates, which were 22.4 percent and 22.9 percent for the trailing twelve months ended August 1, 2026, and August 2, 2025, respectively.

For the trailing twelve months ended August 1, 2026, and August 2, 2025, includes tax effect of $1.4 billion and $1.3 billion, respectively, related to EBIT, and $39 million and $38 million, respectively, related to operating lease interest.

(c) Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively.

(d) Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.

(e) For the trailing twelve months ended May 2, 2026, includes the impact of business transformation costs incurred within the trailing twelve-month period, which decreased after-tax ROIC by 0.6 percentage points.

For the trailing twelve months ended May 3, 2025, includes the impact of after-tax net gains on interchange fee settlements, which increased after-tax ROIC by 1.4 percentage points.

Note 3 to the Financial Statements provides additional information.

(e) For the trailing twelve months ended August 1, 2026, includes the impact of tariff refunds, which increased after-tax ROIC by 2.4 percentage points, and business transformation costs recognized in the trailing twelve-month period, which decreased after-tax ROIC by 0.6 percentage points.

For the trailing twelve months ended August 2, 2025, includes the impact of after-tax net gains on interchange fee settlements, which increased after-tax ROIC by 1.4 percentage points.

TARGET CORPORATION

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and finally, we return any excess cash to shareholders by repurchasing shares within the limits of our credit rating goals.

Our cash and cash equivalents balance was $3.5 billion, $5.5 billion, and $2.9 billion as of May 2, 2026, January 31, 2026, and May 3, 2025, respectively.

Our cash and cash equivalents balance includes short-term investments of $2.5 billion, $4.6 billion, and $2.0 billion as of May 2, 2026, January 31, 2026, and May 3, 2025, respectively.

Our cash and cash equivalents balance was $5.4 billion, $5.5 billion, and $4.3 billion as of August 1, 2026, January 31, 2026, and August 2, 2025, respectively.

Our cash and cash equivalents balance includes short-term investments of $4.3 billion, $4.6 billion, and $3.3 billion as of August 1, 2026, January 31, 2026, and August 2, 2025, respectively.

Our investment policy is designed to preserve principal and liquidity of our short-term investments.

This policy allows investments in large money market funds or in highly-rated direct short-term instruments that mature in 60 days or less.

This policy allows investments in large money market funds or in highly-rated direct short-term instruments that mature in three months or less.

We also place dollar limits on our investments in individual funds or instruments.

Operating Cash Flows

Cash flows provided by operating activities were $0.7 billion and $0.3 billion for the three months ended May 2, 2026, and May 3, 2025, respectively.

The increase was primarily due to higher accounts payable leverage and lower inventory levels.

These benefits were partially offset by lower net earnings, reflecting the prior-year benefit from gains on interchange fee settlements, and higher income tax payments in the current year, reflecting timing.

Inventory was $12.3 billion as of May 2, 2026 and January 31, 2026, and $13.0 billion as of May 3, 2025.

The year-over-year decrease reflects higher than expected sales in the current year and the timing of inventory receipts.

Cash flows provided by operating activities were $4.5 billion and $2.4 billion for the six months ended August 1, 2026, and August 2, 2025, respectively.

The increase was primarily due to higher accounts payable leverage that more than offset increased inventory purchases to support sales growth, as well as higher net earnings.

Inventory increased to $13.2 billion as of August 1, 2026, compared with $12.3 billion and $12.9 billion as of January 31, 2026, and August 2, 2025, in support of sales growth.

Investing Cash Flows

Cash required for investing activities increased to $1.0 billion for the three months ended May 2, 2026, compared to $0.8 billion for the three months ended May 3, 2025, due to higher capital expenditures.

We paid dividends totaling $516 million ($1.14 per share) for the three months ended May 2, 2026, and $510 million ($1.12 per share) for the three months ended May 3, 2025, a per share increase of 1.8 percent.

We declared dividends totaling $526 million ($1.14 per share) during the first quarter of 2026 and $515 million ($1.12 per share) during the first quarter of 2025, a per share increase of 1.8 percent.

Cash used in investing activities increased to $2.4 billion for the six months ended August 1, 2026, compared to $1.9 billion for the six months ended August 2, 2025, due to higher capital expenditures.

We paid dividends totaling $518 million ($1.14 per share) and $1,034 million ($2.28 per share) for the three and six months ended August 1, 2026, and $509 million ($1.12 per share) and $1,019 million ($2.24 per share) for the three and six months ended August 2, 2025, a per share increase of 1.8 percent.

We declared dividends totaling $539 million ($1.16 per share) during the second quarter of 2026 and $529 million ($1.14 per share) during the second quarter of 2025, a per share increase of 1.8 percent.

We have paid dividends every quarter since our 1967 initial public offering, and it is our intent to continue to do so in the future.

Share Repurchase

We did not repurchase any shares during the three months ended May 2, 2026.

We did not repurchase any shares during the six months ended August 1, 2026.

See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 10 to the Financial Statements for more information.

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Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and maintaining strong credit ratings.

As of May 2, 2026, our credit ratings were as follows:

As of August 1, 2026, our credit ratings were as follows:

Credit Ratings Moody’s S&P

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We have the ability to obtain short-term financing from time to time under our commercial paper program and credit facilities.

Our committed $1.0 billion 364-day and $3.0 billion unsecured revolving credit facilities that will expire in October 2026 and October 2028, respectively, provide a liquidity backstop to our commercial paper program.

No balances were outstanding under either credit facility or our commercial paper program at any time during 2026 or 2025.

In August 2026, we obtained a committed $4.0 billion unsecured revolving credit facility that will expire in August 2031.

This new facility replaced our $1.0 billion and $3.0 billion unsecured revolving credit facilities that were set to expire in October 2026 and October 2028, respectively.

These credit facilities provide a liquidity backstop to our commercial paper program.

No balances were outstanding under any credit facility or our commercial paper program at any time during 2026 or 2025.

Note 8 to the Financial Statements provides additional information.

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We are, and expect to remain, in compliance with these covenants.

Additionally, as of May 2, 2026, no notes or debentures contained provisions requiring acceleration of payment upon a credit rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control and (ii) our long-term credit ratings are either reduced and the resulting rating is non-investment grade, or our long-term credit ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is non-investment grade.

Additionally, as of August 1, 2026, no notes or debentures contained provisions requiring acceleration of payment upon a credit rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control and (ii) our long-term credit ratings are either reduced and the resulting rating is non-investment grade, or our long-term credit ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is non-investment grade.

We believe our sources of liquidity, namely operating cash flows, credit facility capacity, and access to capital markets, will continue to be adequate to meet our contractual obligations, working capital, and planned capital expenditures, finance anticipated expansion and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under our share repurchase program for the foreseeable future.

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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-Q

Item 2. Management’s Discussion and Analysis