Arrow Electronics, Inc.: Form 10-Q for the period ended Sep 27, 2025

Information Relating to Forward-Looking Statements

This report includes “forward-looking statements,” as the term is defined under the federal securities laws. Forward-looking statements are those statements which are not statements of historical or current fact. These forward-looking statements can be identified by forward-looking words such as “expects,” “anticipates,” “intends,” “plans,” “may,” “will,” “would,” “could,” “believes,” “seeks,” “projected,” “potential,” “estimates,” and similar expressions. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which could cause actual results or facts to differ materially from such statements for a variety of reasons, including, but not limited to: unfavorable economic conditions; disruptions, shortages, or inefficiencies in the supply chain; trade protection measures, tariffs, increased trade tensions, trade agreements and policies, and other restrictions, duties, and value-added taxes, and the associated macroeconomic impacts; non-compliance with certain regulations, such as trade, export, antitrust, and anti-corruption laws, or regulatory restrictions relating to the company or its subsidiaries or the permissibility of third-parties to transact therewith; the inability to realize sufficient sales to cover non-cancellable purchase obligations under certain ECS distribution agreements; management transitions, including the separation of Mr. Kerins from the company and the appointment of Mr. Austen as the company’s interim president and chief executive officer; the incurrence of additional charges not currently contemplated and failure to realize contemplated cost savings due to unanticipated events that may occur in connection with the implementation of the Operating Expense Efficiency Plan; political instability and changes; impacts of military conflict and sanctions; industry conditions; changes in product supply, pricing and customer demand; competition; other vagaries in the global components and the global ECS markets; deteriorating economic conditions, including economic recession, inflation, tax rates, foreign currency exchange rates, or the availability of capital; the effects of natural or man-made catastrophic events; changes in relationships with key suppliers; increased profit margin pressure; changes in legal and regulatory matters; foreign tax and other loss contingencies; breaches of security or privacy of business information and information system failures, including related to current or future implementations, integrations and upgrades; outbreaks, epidemics, pandemics, or public health crises; executive orders and regulatory trends and the resulting legal and reputational exposure, including but not limited to those relating to environmental, social, governance, cybersecurity, data privacy, and artificial intelligence issues; and the company’s ability to generate positive cash flow. For a further discussion of these and other factors that could cause the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and the company’s most recent Annual Report on Form 10-K, as well as in other filings the company makes with the Securities and Exchange Commission. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update publicly or revise any of the forward-looking statements.

Certain Non-GAAP Financial Information

In addition to disclosing financial results that are determined in accordance with GAAP, the company also discloses certain non-GAAP financial information in the sections below captioned “Sales”, “Gross Profit”, “Operating Expenses”, “Operating Income”, “Income Tax”, and “Net Income Attributable to Shareholders”. Refer to these sections below for reconciliations of non-GAAP financial measures to the most directly comparable reported GAAP financial measures. Non-GAAP financial information includes the following:

• Non-GAAP sales exclude the impact of changes in foreign currencies by retranslating prior period results at current period foreign exchange rates.
• Non-GAAP gross profit excludes inventory (recoveries) write-downs related to the wind down of businesses within the global components segment (“impact of wind down to inventory”) and “impact of changes in foreign currencies”.
• Non-GAAP operating expenses exclude identifiable intangible asset amortization, restructuring, integration, and other, and the impact of changes in foreign currencies.
• Non-GAAP operating income excludes identifiable intangible asset amortization, restructuring, integration, and other, and impact of wind down to inventory.
• Non-GAAP effective tax rate and non-GAAP net income attributable to shareholders exclude identifiable intangible asset amortization, restructuring, integration, and other, impact of wind down to inventory, gain (loss) on investments, net, and impact from tax settlements related to the U.S. federal tax law changes enacted as part of the 2017 Tax Cuts and Jobs Act (“impact of TCJA Tax Act settlements”).

Management believes that providing this additional information is useful to the reader to better assess and understand the company’s operating performance and future prospects in the same manner as management, especially when comparing results with previous periods. Management typically monitors the business as adjusted for these items, in addition to GAAP results, to understand and compare operating results across accounting periods, for internal budgeting purposes, for short-term and long-term operating plans, and to evaluate the company’s financial performance. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP. For a discussion of what is included within “Restructuring, integration, and other” refer to the similarly captioned section of this item below.

Key Business Metrics

Management uses gross billings as an operational metric to monitor operating performance of its global ECS segment, including performance by geographic region, as it provides meaningful supplemental information in evaluating the overall performance of the global ECS business. The company uses this key metric to develop financial forecasts, make strategic decisions, and prepare and approve annual budgets. Gross billings represent amounts invoiced to customers for goods and services during a specified period and does not include the impact of recording sales on a net basis or sales adjustments, such as trade discounts and other allowances. Refer to Note 1 “Summary of Significant Accounting Policies” in the company’s Annual Report on Form 10-K for the year ended December 31, 2024, for further discussion of the company’s revenue recognition policies. The use of gross billings has certain limitations as an analytical tool and should not be considered in isolation or as a substitute for revenue.

Overview

The company sources and engineers technology for thousands of leading manufacturers, services providers, and users of enterprise computing solutions. The company has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers. The company’s revenues originate primarily from the sales of semiconductor, interconnect, passive & electromechanical components (“IP&E”), and IT hardware and software products. Coupled with a range of services, solutions, and tools, the company enables its suppliers to distribute their technologies and helps its industrial and commercial customers source, build, and leverage these technologies, reduce their time to market, grow their businesses, and enhance their overall competitiveness. The company is a trusted partner in a complex value chain and is uniquely positioned through its electronics components and IT content portfolios to increase value for stakeholders.

The company has two reportable segments, the global components segment and the global ECS segment. The global components segment, enabled by a comprehensive range of value-added capabilities and services, markets and distributes electronic components primarily to OEMs and EMS providers. The global ECS segment is a leading value-added provider of comprehensive computing solutions and services. Its portfolio includes datacenter, cloud, security, and analytics solutions. The global ECS segment brings broad market access, extensive supplier relationships, scale, and value-added solutions to help its VARs and MSPs meet the needs of their end-users. For the third quarter of 2025, approximately 72% and 28% of the company’s sales were from the global components segment and the global ECS segment, respectively.

Strategic initiatives within each reportable segment include the following:

Global components segment:

• Offering a variety of value-added services, including demand creation, design, engineering, global marketing, and integration services to promote the future sale of suppliers’ products, which generally lead to longer and more profitable relationships with the company’s suppliers and customers.
• Focusing on further penetrating the market for IP&E, which tends to be a margin accretive segment of the broader available market.
• Providing global supply chain services offerings such as procurement, logistics, warehousing, and insights from data analytics.

Global ECS segment:

• Enabling customer cloud solutions through the company’s cloud marketplace and management platform, ArrowSphere, which helps VARs and MSPs to manage, differentiate, and scale their cloud businesses while providing the business intelligence and tools that IT solution providers need to drive growth. ArrowSphere was enhanced to include an AI-enabled digital go-to-market platform aimed at helping the company’s channel partners sell and support a variety of cloud offerings at higher rates.
• Providing value-added distribution services including sales and marketing, demand generation, support and managed services, digital platforms and other services on behalf of certain suppliers.

The company’s long-term financial objectives are to grow sales faster than the market, increase the markets served, grow profits faster than sales, generate earnings per share growth in excess of competitors’ earnings per share growth and market expectations, allocate and deploy capital effectively so that return on invested capital exceeds the company’s cost of capital, and increase return on invested capital. To achieve its objectives, the company seeks to capture significant opportunities to grow across products, markets, and geographies. To supplement its organic growth strategy, the company continually evaluates strategic acquisitions to broaden its product and value-added service offerings, increase its market penetration, and expand its geographic reach. The company is also committed to improving operational efficiency.

Executive Summary

(millions except per share data)

During the third quarter and first nine months of 2025, changes in foreign currencies increased sales by approximately $128.2 million and $167.2 million, respectively, and operating income by $4.7 million and $5.8 million, respectively, compared to the year-earlier periods. During the third quarter and first nine months of 2025, changes in foreign currencies increased earnings per share on a diluted basis by $0.08 and $0.09, respectively, compared to the year-earlier periods.

Business environment and other trends:

• Within the global ECS segment, the company has entered into certain non-cancellable multi-year purchase obligations through 2030, designating it as the exclusive partner for certain suppliers and granting it the right to sell a broad set of IT solutions. In the first nine months of 2025, the company recorded losses due to lower profit expectations on underperforming contracts which negatively impacted gross profit margins. While the long-term performance of the agreements cannot be reasonably estimated at this time, due to the early stages and expected variability in the margins related to these agreements, the company is anticipating there could be additional losses in the coming quarters.
• During 2024, the global components segment experienced a cyclical downturn characterized by elevated customer inventory levels, and a challenging global macroeconomic environment, contributing to lower demand for the company’s products. During the first half of 2025, the company noted positive meaningful demand trends, signaling a modest recovery. Demand trends increased on a sequential basis in the third quarter of 2025, however, due to geopolitical and economic uncertainty, the company cannot currently predict whether this trend will continue or how it may impact future quarters. Consistent with historical trends from past cyclical downturns, the Asia/Pacific region has returned to growth ahead of the Americas and EMEA regions.
• On October 8, 2025, three of the company’s subsidiaries in China were added to the “Entity List” of the Bureau of Industry and Security of the U.S. Department of Commerce (“BIS”), which restricted their ability to receive exports of U.S. technology from suppliers. On October 17, 2025, the BIS informed the company that it will remove these subsidiaries from the Entity List and granted a letter of authorization to resume normal business activities with these entities; however, during the intervening time period, the subsidiaries were unable to receive shipments from many suppliers and fulfill corresponding customer orders, which has resulted in marginal lost sales within the global components Asia/Pacific region in the fourth quarter of 2025. The company has been in communication with affected customers and suppliers to resume business and is currently assessing the impacts of this event, however, the company cannot reasonably predict future impacts beyond the fourth quarter of 2025.
• The company’s global business continues to face uncertainty around ongoing developments related to U.S. and foreign tariff policies, which may increase the prices of products that the company purchases from its suppliers and passes to its customers, which in turn may decrease demand for the company's products or negatively impact the company’s margins. The company is continuing to evaluate and further implement mitigating actions, including potential supply chain optimization and improved solutions around processing tariffs. The global components segment is seeing a marginal increase in revenue and cost of sales due to price increases. However, given the uncertain and evolving nature of U.S. and foreign tariff policies, the company cannot currently predict whether this trend will continue or how it may impact future quarters. Refer to Part I, Item 1A - Risk Factors in the company’s Annual Report on Form 10-K for the year ended December 31, 2024, for further discussion related to tariffs and tariff drawbacks.

Results of Operations

Sales by reportable segment

The following is an analysis of the company’s sales by reportable segment:

The sum of the components for sales, as reported, and sales on a non-GAAP basis may not agree to totals, as presented, due to rounding.

Reportable segment sales by geographic region

The following is an analysis of the company’s reportable segment sales by geographic region:

The sum of the components for sales by geographic region and consolidated sales may not agree to totals, as presented, due to rounding.

During the third quarter of 2025, the global components segment sales increased compared to the year-earlier period primarily due to the following:

• increase in sales in the Americas region primarily due to higher demand for the integrated services offerings, partially offset by a decrease in demand for aerospace and defense, transportation, and automative verticals;
• increase in sales in the EMEA region primarily due to higher demand for industrial and aerospace and defense verticals coupled with changes in foreign currencies; and
• increase in sales in the Asia/Pacific region primarily due to higher demand for industrial, computing, and networking and communications verticals.

During the first nine months of 2025, the global components segment sales increased compared to the year-earlier period, primarily due to increase in sales in the Americas and Asia/Pacific regions discussed above. This increase was partially offset by a decline in sales in the EMEA region, primarily due to decreased demand for the industrial, transportation and automotive verticals.

Within the global ECS segment, growth was primarily due to an increase in sales in the EMEA region for the third quarter and first nine months of 2025, relative to the year-earlier periods, mainly due to growth across most major technologies, most notably, cloud-based solutions and infrastructure software, and a shift in sales mix towards more sales recognized on a gross basis. Refer to Note 1 “Summary of Significant Accounting Policies” in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Substantially all of the company’s sales are made on an order-by-order basis, rather than through long-term sales contracts. As such, the nature of the company’s business does not provide for the visibility of material forward-looking information from its customers and suppliers beyond a few months.

Gross Billings

The following table summarizes gross billings by geographic region for the global ECS segment:

The sum of the components for global ECS gross billings may not agree to totals, as presented, due to rounding.

Gross Profit

The following is an analysis of the company’s consolidated gross profit:

The sum of the components for non-GAAP gross profit may not agree to totals, as presented, due to rounding.

Global components gross profit margins decreased during the third quarter and first nine months of 2025 compared with the year-earlier periods due to regional mix shifting towards the Asia/Pacific region which generally has lower margins compared to Americas and EMEA regions coupled with customer mix within EMEA region. Global components supply chain services offerings continued to have a positive impact on gross profit margins.

Global ECS gross profit margins decreased during the third quarter and first nine months of 2025 compared with the year-earlier periods primarily due to $21.4 million and $25.2 million, respectively, in losses related to underperformance of certain non-cancellable multi-year purchase obligations and a shift in sales mix towards more sales recognized on a gross basis in the EMEA region. Refer to Note 1 “Summary of Significant Accounting Policies” in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Operating Expenses

The following is an analysis of the company’s consolidated operating expenses as of:

The sum of the components for non-GAAP operating expenses may not agree to totals, as presented, due to rounding.

Operating expenses increased during the third quarter of 2025 compared to the year-earlier period, primarily due to changes in foreign currencies and increases in variable costs to support sales growth for both the global components and global ECS segments and an increase in corporate professional fees. These increases were partially offset by a decrease in stock-based compensation expense, which was primarily attributable to equity-award forfeitures.

Operating expenses increased during the first nine months of 2025 compared to the year-earlier period, primarily due to the following:

• changes in foreign currencies;
• increase in expenses for the global ECS segment primarily due to increased employee headcount and higher sales incentives, in line with the increase in sales discussed above and a $20.0 million benefit related to the reversal of an allowance for credit losses due to the collection of certain aged receivables related to one customer in 2024 with no similar items recorded in 2025; offset by
• decrease in corporate operating expenses primarily due to a decrease in restructuring, integration and other charges (see discussion below), reversal of stock-based compensation expense mainly due to equity-award forfeitures partially offset by an increase in professional fees; and
• decrease in expenses in the global components segment primarily due to cost savings resulting from the Operating Expense Efficiency Plan, defined below, and other cost reduction initiatives, partially offset by higher variable costs.

Restructuring, Integration, and Other

Restructuring initiatives and integration costs are due to the company’s continued efforts to lower costs, drive operational efficiency, integrate acquired businesses, and consolidate certain operations, as necessary. The company recorded restructuring, integration, and other charges as follows:

The sum of the components for restructuring, integration, and other may not agree to totals, as presented, due to rounding.

(a) See details related to the Operating Expense Efficiency Plan discussed below.

(b) Primarily related to employee severance and benefit costs. As of September 27, 2025, the accrued liabilities related to these costs totaled $20.0 million and substantially all accrued amounts are expected to be spent in cash within two years.

Operating Expense Efficiency Plan

On October 31, 2024, in response to evolving business needs and as part of an initiative to optimize operating expenses, the company announced a multi-year restructuring plan (the “Operating Expense Efficiency Plan” or “the Plan”). The Plan is designed to improve operational efficiency through the following measures: (i) reorganizing and consolidating certain areas of the company’s operations to centralize functions and streamline resources, with a focus on more cost-efficient regions; (ii) enhancing warehouse and logistics operations; (iii) investing in information technology to support automation and process improvements; (iv) consolidating the company’s global real estate footprint; (v) reducing third-party spending; and (vi) winding down certain non-core businesses that are not aligned with the company’s strategic objectives. The company expects to substantially complete the Plan by the end of fiscal year 2026, subject to, among other things, local legal and consultation requirements.

Under the Plan, the company anticipates to incur pre-tax restructuring charges of approximately $185.0 million. While the composition of these costs will continue to evolve over time, the company currently expects to incur approximately $80.0 million of employee severance and other personnel cash expenditures; approximately $75.0 million of non-cash asset impairments, inventory write-downs and foreign currency translation adjustment write-offs related to the wind-down of certain business operations; and approximately $30.0 million of other related cash expenditures.

As a result of the Plan, the company expects to reduce annual operating expenses by approximately $90.0 million to $100.0 million by the end of fiscal year 2026. The estimates of charges or savings related to the Plan could differ materially from actual charges or savings recognized.

Refer to Note I, “Restructuring, Integration, and Other” of the Notes to the Consolidated Financial Statements for further discussion of the company’s restructuring and integration activities.

Operating Income

The following is an analysis of the company’s consolidated operating income, and operating income for the company’s two reportable segments:

The sum of the components of consolidated operating income do not agree to totals, as presented, because unallocated corporate amounts are not included in the table above. Refer to Note M “Segment and Geographic Information” of the Notes to the Consolidated Financial Statements for further discussion.

The decrease in consolidated operating income as a percentage of sales for the third quarter and first nine months of 2025 relates primarily to the changes in sales, gross profit margins, and operating expenses discussed above.

Gain (Loss) on Investments, Net

The gain on investments during the first nine months of 2025, is primarily related to a $99.0 million gain on the sale of an investment in certain equity securities. Refer to Note D “Investments in Affiliated Companies” of the Notes to the Consolidated Financial Statements.

Interest and Other Financing Expense, Net

The company recorded net interest and other financing expense as follows:

The decrease in interest and other financing expense, net for the third quarter and first nine months of 2025 compared to the year-earlier periods was primarily related to lower interest rates on floating rate credit facilities. Refer to the section below titled “Liquidity and Capital Resources” for more information on changes in borrowings.

Income Tax

Income taxes for the interim periods presented have been included in the accompanying consolidated financial statements on the basis of an estimated annual effective tax rate. The determination of the consolidated provision for income taxes requires management to make certain judgments and estimates. Changes in the estimated level of annual pre-tax earnings, tax laws, and changes resulting from tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the company’s projections and assumptions are inherently uncertain, therefore, actual results could differ from projections.

The following is an analysis of the company’s consolidated effective income tax rate:

The sum of the components for non-GAAP effective income tax rate may not agree to totals, as presented, due to rounding.

The year-over-year increase in the effective tax rate for the third quarter and first nine months of 2025 was primarily driven by a shift in jurisdictional mix of earnings, the impact of foreign currency exchange rate fluctuations in certain locations, the tax treatment of stock-based compensation, and adjustments to reserves for uncertain tax positions. The increase in the first nine months of 2025 was also driven by the increase in gain on investments compared to the year-earlier period.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, significantly amending U.S. federal tax law, including changes to international tax provisions, expensing of research and experimental expenditures, depreciation, and interest deduction rules. The company does not expect the OBBBA to have a material impact on its effective tax rate in 2025.

Net Income Attributable to Shareholders

The following is an analysis of the company’s consolidated net income attributable to shareholders:

The sum of the components for non-GAAP net income attributable to shareholders may not agree to totals, as presented, due to rounding.

* Identifiable intangible asset amortization excludes amortization attributable to the noncontrolling interest.

The increase in net income attributable to shareholders in the third quarter of 2025 compared to the year-earlier period relates primarily to changes in sales, gross margins, and impact of TCJA Tax Act settlements as discussed above. The increase in net income attributable to shareholders in the first nine months of 2025 compared to the year-earlier period relates primarily to (gain) loss on investments, net, and impact of TCJA Tax Act settlements as discussed above.

Liquidity and Capital Resources

Management believes that the company’s current cash availability, its current borrowing capacity under its revolving credit facility and asset securitization programs, and its expected ability to generate future operating cash flows are sufficient to meet its projected cash flow needs for the next 12 months and the foreseeable future. The company’s current committed and undrawn liquidity stands at approximately $2.5 billion in addition to $213.6 million of cash on hand at September 27, 2025. The company also may issue debt or equity securities in the future, and management believes the company will have adequate access to the capital markets, if needed. The company continually evaluates its liquidity requirements and may seek to amend its existing borrowing capacity or access the financial markets as deemed necessary.

The company’s principal sources of liquidity are existing cash and cash equivalents, cash generated from operations and cash provided by its revolving credit facilities and debt. The company’s principal uses of liquidity include cash used in operations, investments to grow working capital, scheduled interest and principal payments on its borrowings, and the return of cash to shareholders through share repurchases.

The following table presents selected financial information related to liquidity:

Working Capital

The company maintains a significant investment in working capital which the company defines as accounts receivable, net, plus inventories less accounts payable. The change in working capital during the first nine months of 2025 was attributable to timing of payments and changes in foreign currencies.

Working capital as a percentage of sales, which is defined as working capital divided by annualized quarterly sales, decreased to 23.5% for the third quarter of 2025, compared to 25.1% in the year-earlier period, primarily due to an increase in sales.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments, which are readily convertible into cash, with original maturities of three months or less. At September 27, 2025 and December 31, 2024, the company had cash and cash equivalents of $213.6 million and $188.8 million, respectively, of which $186.1 million and $164.0 million, respectively, were held outside the United States.

The company has $5.2 billion of undistributed earnings of its foreign subsidiaries which it deems indefinitely reinvested and recognizes that it may be subject to additional foreign taxes and U.S. state income taxes if it reverses its indefinite reinvestment assertion on these foreign earnings. The company also has $2.3 billion of foreign earnings that are not deemed permanently reinvested and are available for distribution in future periods as of September 27, 2025.

Revolving Credit Facilities and Debt

The following tables summarize the company’s credit facilities:

(a) Amounts outstanding under the commercial paper program are backstopped by available commitments under the company’s revolving credit facility.

The company also has an EMEA asset securitization program under which it continuously sells its interest in designated pools of trade accounts receivable of certain of its subsidiaries in the EMEA region. Receivables sold under the program are excluded from “Accounts receivable, net” and no corresponding liability is recorded on the company’s consolidated balance sheets. During the first nine months of 2025 and 2024, the average daily balance outstanding under the EMEA asset securitization program was $327.5 million and $408.9 million, respectively. Refer to Note E “Accounts Receivable” of the Notes to the Consolidated Financial Statements for further discussion.

The following table summarizes recent events impacting the company’s capital resources:

Refer to Note G “Debt” of the Notes to the Consolidated Financial Statements for further discussion of the company’s short-term and long-term debt and available financing.

Cash Flows

The following table summarizes the company’s cash flows by category for the periods presented:

Cash Flows from Operating Activities

The net amount of cash used for the company’s operating activities during the first nine months of 2025 was $135.9 million compared to cash provided by the company’s operating activities of $803.9 million during the first nine months of 2024. The change in cash used for operating activities during 2025, compared to the year-earlier period, relates primarily to changes in working capital accounts, most notably timing of payments and inventory purchases. The fluctuations in both “Accounts receivable, net” and “Accounts payable” are primarily related to the global components supply chain services offerings and generally offset as the company acts as an agent in the transaction and remits payments to the supplier upon receipt from the customer. Refer to Note E “Accounts Receivable” of the Notes to the Consolidated Financial Statements.

Cash Flows from Investing Activities

The net amount of cash provided by investing activities was $51.0 million during the first nine months of 2025 compared to cash used for investing activities of $53.0 million in the year-earlier period. The change in cash provided by investing activities related primarily to proceeds from the sale of an investment in certain equity securities (Refer to Note D “Investments in Affiliated Companies” of the Notes to the Consolidated Financial Statements) and proceeds for the settlement of net investment hedges (Refer to Note H “Financial Instruments Measured at Fair Value” of the Notes to the Consolidated Financial Statements).

Cash Flows from Financing Activities

The net amount of cash used for financing activities during the first nine months of 2025 and 2024 was $109.4 million and $755.4 million, respectively. The change in cash used for financing activities relates primarily to an increase in short-term borrowings and lower stock repurchases in 2025.

Capital Expenditures

Capital expenditures for the third quarter of 2025 and 2024 were $73.9 million and $70.2 million, respectively. The company expects capital expenditures to be approximately $100.0 million for the fiscal year 2025.

Share Repurchase Program

The company repurchased 0.9 million shares of its common stock for $99.9 million and 1.6 million shares of its common stock for $200.0 million in the first nine months of 2025 and 2024, respectively, under its share repurchase program, excluding excise taxes. As of September 27, 2025, approximately $223.4 million remained available for repurchase under the share repurchase program. The share repurchase authorization does not have an expiration date and the pace of the repurchase activity will depend on factors such as the company’s working capital needs, cash requirements for acquisitions, debt repayment obligations or repurchases of debt, share price, and economic and market conditions. The share repurchase program may be accelerated, suspended, delayed, or discontinued at any time subject to the approval of the company’s Board of Directors.

Contractual Obligations

The company has contractual obligations for short-term and long-term debt, interest on short-term and long-term debt, purchase obligations, operating leases, and other sources and uses of capital that are summarized in the sections titled “Contractual Obligations” and “Additional Capital Requirements and Sources” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Refer to the section above titled “Revolving Credit Facilities and Debt” for updates to the company’s short-term and long-term debt obligations. Refer to the section above titled “Restructuring, Integration, and Other” for updates related to discussion of planned restructuring costs. Refer to Note H “Financial Instruments Measured at Fair Value” of the Notes to Consolidated Financial Statements for further discussion on hedging activities. Refer to Note D “Investments in Affiliated Companies” of the Notes to Consolidated Financial Statements for discussion of proceeds from the sale of investments in certain equity securities which occurred in the second quarter of 2025.

As of September 27, 2025, the company had purchase obligations of $14.9 billion, which represent an estimate of non-cancellable inventory purchase orders, future payments under IT distribution arrangements, and other contractual obligations related to information technology and facilities with $5.9 billion expected to be paid in the fourth quarter of 2025, $3.7 billion in 2026, $2.1 billion in 2027, $1.6 billion in 2028, $1.3 billion in 2029, and $216.9 million in 2030. Some of these purchase obligations relate to sales where the company acts as an agent in the transaction. Refer to discussion of the company’s revenue recognition policy in Note 1 “Summary of Significant Accounting Policies” in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.

With the exception of the item noted above, there were no other material changes to the capital requirements and sources of the company as of September 27, 2025.

Critical Accounting Estimates

The company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires the company to make significant estimates and judgments that have had or are reasonably likely to have a material impact on the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. The company has established detailed policies and control procedures intended to ensure the appropriateness of such estimates and assumptions and their consistent application from period to period. The company bases its estimates on historical experience and on various other assumptions that are believed reasonable under the circumstances; the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no significant changes to the company’s critical accounting estimates during the nine months ended September 27, 2025. Refer to the section titled “Critical Accounting Estimates” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Impact of Recently Issued Accounting Standards

See Note B “Impact of Recently Issued Accounting Standards” of the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the anticipated dates of adoption and the effects on the company’s consolidated financial position and results of operations.

During the nine months ended September 27, 2025, there were no material changes in market risk for changes in foreign currency exchange rates and interest rates from the information provided in Part II, Item 7A – Quantitative and Qualitative Disclosures About Market Risk in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Evaluation of Disclosure Controls and Procedures

The company’s management, under the supervision and with the participation of the company’s Interim Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the company’s disclosure controls and procedures as of September 27, 2025 (the “Evaluation”). Based upon the Evaluation, the company’s Interim Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) were effective as of September 27, 2025.

Changes in Internal Control over Financial Reporting

There were no changes in the company’s internal control over financial reporting during the company’s most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

Except for the following, there have been no material changes to the company’s risk factors from those discussed in Part I, Item 1A – Risk Factors in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The company is subject to laws and regulations that could have a negative impact on our business, including, without limitation, U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, anti- bribery laws, and anti-money laundering laws and regulations, as well as tariffs and trade protectionism. In the event of non-compliance, the company can face serious consequences, which can harm its business.

The company is subject to complex and evolving laws and regulations worldwide that differ among jurisdictions and affect our operations, including the U.S. Export Administration Regulations (the “EAR”), U.S. Customs regulations, and various other trade laws, regulations, and sanctions administered by the U.S. Departments of State, Commerce, and Treasury, as well as other U.S. and foreign governmental agencies. Products the company sells which are either manufactured in the United States or based on U.S. technology (“U.S. Products”) are subject to the EAR when exported and re-exported to and from all international jurisdictions, in addition to the local jurisdiction’s export regulations applicable to individual shipments. If a regulator determines, even in error, that the company or its subsidiaries are not in compliance with applicable laws and regulations or designates the company or its subsidiaries as sanctioned entities or otherwise prohibits third-parties from transacting with them, such determination could result in negative impacts to the company’s sales, customer relationships, and reputation that could have a material negative impact on the company’s business and financial condition.

For example, on October 8, 2025, three of the company’s subsidiaries in China were added to the “Entity List” of the BIS, which restricted their ability to receive exports of U.S. technology from suppliers. On October 17, 2025, the BIS informed the company that it will remove these subsidiaries from the Entity List and granted a temporary authorization to resume normal business activities with these entities; however, during the intervening time period, the subsidiaries were unable to receive shipments from many suppliers and fulfill corresponding customer orders, which had an adverse impact on the Company’s operating results for the fourth quarter of 2025 and may continue to have an adverse impact beyond 2025.

In addition, licenses or proper license exemptions may be required by local jurisdictions’ export regulations, including EAR, for the shipment of certain U.S. Products to certain countries, including China, India, and other countries in which the company operates. The company may not be able to effectively monitor the activities of all of its employees involved in regulated export or shipment activities, which may lead to the company’s failure to prevent violations of such regulations.

Non-compliance with the EAR, OFAC regulations, or other applicable export regulations can result in a wide range of penalties including the denial or restriction of export privileges, significant fines, criminal penalties, and the seizure of inventories, any of which could have a material adverse effect on the company’s business. The company’s distribution process also includes the use of third parties that operate outside of the company’s direct control. Noncompliance with applicable import, export, and other laws and regulations by these third parties may result in substantial liability to the company and harm the company’s reputation.

Further, the company is also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, and other national and sub-national anti-bribery and anti-money laundering laws in the countries in which it conducts business. Anti-corruption laws have been enforced aggressively in recent years and are interpreted broadly. The company can be held liable under these laws for the corrupt or other illegal activities of its employees, agents, contractors, counterparties, and third parties it engages to provide services, even if it does not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.

The company’s global business also could be negatively affected by trade barriers, such as tariffs, and other governmental protectionist measures, which may decrease demand for the company’s products. Such measures can be imposed suddenly and unpredictably and may increase the prices of many of the products that the company purchases from its suppliers. Tariffs and other protectionist measures, and the additional operational costs incurred in minimizing the number of products subject to them, could adversely affect the operating profits for certain of the company’s businesses and customer demand for certain products, which could have an adverse effect on its business and results of operations.

In the event that the company pays tariffs for products it imports from China, which are then re-exported to other locations outside of the United States, the company may be eligible for refunds of certain tariffs. In order to qualify for these tariff drawbacks, the company must provide data and documentation to the U.S. government that it must obtain from third-party sources, such as its suppliers. There is no guarantee the company will be able to obtain this additional data and documentation from those other sources, which could result in the U.S. government rejecting the drawback requests. There have been, and there could be, additional administrative costs in furtherance of these efforts.