10-K – 2026-02-09 – on-20251231.htm

During 2024, to further align with the "Fab Right" manufacturing strategy and consolidate its global footprint, the Company announced a restructuring plan that impacted approximately 1,500 employees. Approximately 1,200 employees were notified of their employment termination and around 300 additional employees were relocated to another onsemi site. In connection with these actions, severance costs, related benefit expenses and other ancillary charges of $ 77.9  million were recorded during the year ended December 31, 2024. Certain employees notified of their employment termination were required to render future service beyond a minimum retention period in order to receive severance benefits, and the related expense were recognized ratably over the respective service periods.

Of the aggregate expenses, during the years ended December 31, 2025 and 2024, the Company paid $ 36.1 million, and $ 39.5  million respectively, in connection with the approximately 1,200 employees who exited and $ 2.3 million remained accrued as of December 31, 2025.

2023 Business Realignment

During 2023, the Company announced the elimination of approximately 1,900 jobs in an effort to realign its operating models, drive organizational effectiveness and efficiencies, increase collaboration within its AMG (formerly the "Advanced Solutions Group") operating segment and IT support organizations, and right-size its workforce to consolidate manufacturing resources into fewer, common sites across the world to align with the next phase of the Company's multi-year "Fab Right" manufacturing strategy. As a result, AMG ceased its design and test operations in certain locations and there were changes in the IT operating model by transferring selected IT functions to strategic service providers. In connection with these actions, severance costs, related benefit expenses and other ancillary charges of $ 59.1  million were recorded during the year ended December 31, 2023.

Of the aggregate expense, during the years ended December 31, 2025, 2024, and 2023 the Company paid $ 5.1 million, $ 11.1  million, and $ 41.9  million, respectively, in connection with the employees who exited and $ 1.0  million remained accrued as of December 31, 2025.

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Note 8: Balance Sheet Information

Certain significant amounts included in the Company's Consolidated Balance Sheets consist of the following (in millions):

As of December 31,
2025 2024

Inventories:
Raw materials $ 263.6   $ 349.8  
Work in process 1,388.9   1,391.9  
Finished goods 337.1   500.3  
Total $ 1,989.6   $ 2,242.0  

Property, plant and equipment, net:
Land $ 116.5   $ 115.7  
Buildings and improvements 1,497.0   1,423.2  
Machinery, equipment and other 5,927.2   6,781.3  
Property, plant and equipment, gross 7,540.7   8,320.2  
Less: Accumulated depreciation ( 4,171.7 ) ( 3,958.8 )
Total $ 3,369.0   $ 4,361.4  
Accrued expenses and other current liabilities:
Accrued payroll and related benefits $ 177.3   $ 134.5  

Sales-related reserves (1)
250.8   225.5  

Contract liabilities 51.8   98.2  
Income taxes payable 14.7   25.1  
Other (2)
220.3   276.7  
Total $ 714.9   $ 760.0  

(1) Included within sales-related reserves are ship and credit reserves for distributors amounting to $ 190.3  million and $ 147.6  million as of December 31, 2025 and 2024, respectively.
(2) The current portion of operating lease liabilities is included in this amount. See discussion below.

Depreciation expense for property, plant and equipment totaled $ 548.9 million, $ 523.6 million and $ 485.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Leases

Operating and financing lease arrangements are comprised primarily of real estate and equipment agreements. The Company's existing leases do not contain significant restrictive provisions or residual value guarantees; however, certain leases contain renewal options and provisions for payment of real estate taxes, insurance and maintenance costs by the Company.

The components of operating lease expense (including accelerated amortization discussed in Note 7) were as follows (in millions):
Year ended December 31,
2025 2024 2023
Operating lease $ 77.8   $ 54.7   $ 48.0  

Variable lease 6.1   5.0   5.1  
Short-term lease 2.6   1.9   1.7  
Total lease expense $ 86.5   $ 61.6   $ 54.8  

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The operating lease liabilities included in the Consolidated Balance Sheets were as follows (in millions):

As of December 31,
2025 2024
Operating lease liabilities included in:
Accrued expenses and other current liabilities $ 33.9   $ 31.5  
Other long-term liabilities 214.5   244.7  
Total $ 248.4   $ 276.2  
Operating ROU assets included in:
Other assets $ 200.8   $ 249.7  

As of December 31, 2025 and 2024 , 78 % and 67 % of Operating ROU assets, respectively, were held within the United States. Of the remaining assets, 14 % and 24 % were held in Asia as of December 31, 2025 and 2024, respectively, and 8 % were held in Europe as of December 31, 2025 and 2024 . All Financing ROU assets were held within the Czech Republic as of December 31, 2025 and 2024 .

As of December 31, 2025, the weighted-average remaining lease-terms and weighted-average discount rates were 10.9 years and 17.3 years, and 5.1 % and 5.8 %, for operating and financing leases, respectively.

As of December 31, 2025, there was an insignificant amount of commitments for operating leases that have not yet commenced. The reconciliation of the maturities of the operating and financing leases to the lease liabilities recorded in the Consolidated Balance Sheet as of December 31, 2025 was as follows (in millions):

Operating Leases Financing Leases
2026 $ 45.0   $ 1.8  
2027 34.5   1.9  
2028 28.4   1.9  
2029 25.7   2.0  
2030 23.7   2.1  
Thereafter 164.3   28.3  
Total lease payments 321.6   38.0  
Less: Interest ( 73.2 ) ( 13.7 )
Total lease liabilities $ 248.4   $ 24.3  

Note 9: Long-Term Debt

The Company's long-term debt consists of the following (annualized interest rates, dollars in millions):  

As of December 31,
2025 2024
Revolving Credit Facility due 2028 $ —   $ 375.0  
0.50 % Notes due 2029 (1)
1,500.0   1,500.0  
0 % Notes due 2027
804.9   804.9  
3.875 % Notes due 2028 (2)
700.0   700.0  
Gross long-term debt, including current maturities 3,004.9   3,379.9  
Less: Unamortized debt discount (3)
( 2.5 ) ( 3.4 )
Less: Unamortized debt issuance costs (4)
( 21.9 ) ( 30.6 )

 Net long-term debt $ 2,980.5   $ 3,345.9  

(1) Interest is payable on March 1 and September 1 of each year at 0.50 % annually.
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(2) Fixed rate note due September 1, 2028 with interest payable on March 1 and September 1 of each year at 3.875 % annually.
(3) Debt discount of $ 2.5 million and $ 3.4 million for the 3.875 % Notes as of December 31, 2025 and December 31, 2024, respectively.
(4) Debt issuance costs of $ 16.5  million and $ 21.7  million for the 0.50 % Notes, $ 4.5 million and $ 7.7 million for the 0 % Notes, $ 0.9 million and $ 1.2 million for the 3.875 % Notes, in each case as of December 31, 2025 and December 31, 2024, respectively.

The Company’s long-term debt instruments are senior unsecured obligations and are fully and unconditionally guaranteed, on a joint and several basis, by each of the Company’s subsidiaries that is a borrower or guarantor under the Revolving Credit Facility.

Maturities

Expected maturities of gross long-term debt as of December 31, 2025 are as follows (in millions):

  Expected
Maturities
2026 $ —  
2027 804.9  
2028 700.0  
2029 1,500.0  
2030 —  
Thereafter —  
Total $ 3,004.9  

Revolving Credit Facility

In 2023, the Company entered into a new $ 1.5  billion Revolving Credit Facility. On December 31, 2025, the Company repaid $ 375.0  million of borrowings that were outstanding on the Revolving Credit Facility. As of December 31, 2025, the Company had approximately $ 1.5  billion available under the Revolving Credit Facility for future borrowings, except for amounts utilized for the letters of credit. Future borrowings are available for general corporate purposes, including working capital, capital expenditures, and acquisitions, but also include a $ 25.0  million sub-limit for the issuance of letters of credit and a foreign currency sub-limit of $ 75.0  million.

The maturity date for the borrowings under the Credit Agreement is June 22, 2028. Interest is payable based on either Secured Overnight Financing Rate (“SOFR”) or base rate options, as established at the commencement of each borrowing period, plus an applicable rate that varies based on the total leverage ratio. Lenders are owed certain fees, including a commitment fee that varies based on the total leverage ratio. The Company may prepay loans under the Credit Agreement at any time, in whole or in part, upon payment of accrued interest and break funding payments, if applicable. As of December 31, 2025, there were no borrowings outstanding on the Revolving Credit Facility, and as such, no related interest rate. As of December 31, 2024, the interest rate for borrowings on the Revolving Credit Facility was 5.69 %.

The obligations are guaranteed by certain of the Company’s domestic subsidiaries and SCI LLC and are collateralized by, among other things, a pledge of the equity interests in certain of the Company’s and SCI LLC’s domestic subsidiaries and material first tier foreign subsidiaries. The affirmative and negative covenants are customary for credit agreements of this nature. The Credit Agreement contains customary events of default, the occurrence of which could result in the acceleration of the associated obligations. The financial covenant relates to a maximum total net leverage ratio of 4.00 to 1.00 calculated using the consolidated total indebtedness to consolidated earnings before interest, taxes, depreciation and amortization and other adjustments for the trailing four consecutive quarters. The Company was in compliance with the total net leverage ratio as of December 31, 2025.

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0.50 % Notes and 0 % Notes

The 0.50 % Notes and 0 % Notes are convertible and will mature on March 1, 2029 and May 1, 2027, respectively, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms. The maximum number of shares of common stock issuable in connection with the conversion of the 0.50 % Notes and 0 % Notes is approximately 19.1  million and 21.7  million, respectively. As of December 31, 2025, neither the 0.50 % Notes nor the 0 % Notes were eligible for conversion by noteholders and as such, the 0 % Notes were reclassified from current to long-term as of December 31, 2025. On or after the first business day of the month immediately prior to each note’s respective maturity date, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the notes may convert all or a portion of their respective notes at any time.

The Company may redeem for cash all or any portion of the notes, at the Company’s option, on or after March 6, 2026 and May 1, 2024 in the case of the 0.50 % Notes and 0 % Notes, respectively, if the last reported sale price of the Company’s common stock has been at least 130 % ($ 135.03 and $ 68.86 for the 0.50 % Notes and 0 % Notes, respectively) of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the related notice of redemption at a redemption price equal to 100 % of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Company has not elected to redeem any portion of the 0 % Notes. Prior to the respective dates upon which the holders may convert their notes at any time, the holders may convert their notes at their option only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on December 31, 2025 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day; (ii) during the five consecutive business-day period after any five consecutive trading-day period in which the trading price per $1,000 principal amount of the notes for each trading day of such period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (iii) if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate transactions described in each note's respective indenture agreement. The if-converted value of the 0 % Notes exceeded its principal amount by $ 0.0 million as of December 31, 2025, calculated using the stock price on that date.

The Company also entered into warrant transactions with certain other financial institutions, whereby the Company sold warrants to acquire 14.4  million and 15.2  million shares of the Company's common stock with respect to the 0.50 % Notes and 0 % Notes, respectively. The number of shares of the Company’s common stock acquired for each sale of warrants is the same covered by the associated convertible note. The maximum number of shares of common stock issuable in connection with the warrants is approximately 28.9  million and 30.4  million with respect to the 0.50 % Notes and 0 % Notes, respectively.

In addition, for the 0.50 % Notes and 0 % Notes, the Company entered into convertible note hedge transactions with respect to the common stock with the initial purchasers or their affiliates and certain other financial institutions. The Company will exercise the note hedges simultaneously when the notes are settled. The convertible note hedges cover, subject to customary anti-dilution adjustments, the number of shares of common stock that initially underlie the associated note and that are expected to reduce the potential dilution to the common stock and/or offset potential cash payments in excess of the principal amount upon conversion of the notes.

The Company analyzed both the warrant and convertible note hedge transactions under ASC 815-40 - "Derivatives and Hedging - Contracts in Entity's Own Equity" and determined that the instruments met the criteria for classification as an equity transaction with no subsequent remeasurement.

See Note 10: ''Earnings Per Share and Equity'' for more information regarding outstanding warrants and convertible note hedges.

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Note 10: Earnings Per Share and Equity

Earnings Per Share

Net income per share of common stock attributable to ON Semiconductor Corporation is shown below (in millions, except per share data):

Year ended December 31,
  2025 2024 2023
Net income for basic earnings per share of common stock $ 121.0   $ 1,572.8   $ 2,183.7  
Add: Interest on 1.625 % Notes
—   —   1.3  
Net income for diluted earnings per share of common stock $ 121.0   $ 1,572.8   $ 2,185.0  

Basic weighted-average shares of common stock outstanding 411.0   427.4   430.7  
Dilutive effect of share-based awards 0.8   0.6   1.2  
Dilutive effect of convertible notes and warrants —   4.7   14.9  
Diluted weighted average shares of common stock outstanding 411.8   432.7   446.8  

Net income per share of common stock:
Basic $ 0.29   $ 3.68   $ 5.07  
Diluted $ 0.29   $ 3.63   $ 4.89  

Basic income per share of common stock is computed by dividing net income attributable to the Company by the weighted average number of shares of common stock outstanding during the period. To calculate the diluted weighted-average shares of common stock outstanding, treasury stock method has been applied to calculate the number of incremental shares from the assumed issuance of shares relating to RSUs. The excluded number of anti-dilutive share-based awards was approximately 1.4 million, 0.5 million and 0.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

The dilutive impact related to the Company’s 0.50 % Notes and 0 % Notes has been calculated using the if-converted method. The 0.50 % Notes and the 0 % Notes are repayable in cash up to the par value and in cash or shares of common stock for the excess over par value.

Prior to conversion, the convertible note hedges are not considered for purposes of the earnings per share calculations, as their effect would be anti-dilutive. Upon conversion, the convertible note hedges are expected to offset the dilutive effect of the 0.50 % Notes and 0 % Notes when the stock price is above $ 103.87 and $ 52.97 per share, respectively.

The dilutive impact of the warrants issued concurrently with the issuance of the 0.50 % Notes and 0 % Notes with exercise prices of $ 156.78 and $ 74.34 , respectively, has been included in the calculation of diluted weighted-average common shares outstanding for the years ended December 31, 2024 and 2023 only, as not applicable for 2025

Warrants Settlement

At the time of issuance of the 1.625 % Notes, the Company sold warrants to bank counterparties whereby the holders of the warrants had the option to purchase the equivalent number of shares of the Company’s common stock at a price of $ 30.70 per share from the Company beginning on January 16, 2024. The bank counterparties exercised 6.7  million warrants during the first quarter of 2024, and the Company settled them by issuing 4.0  million shares of common stock on a net-share basis based on the average stock price on the day of exercise, for which no cash was exchanged. All outstanding warrants related to the 1.625 % Notes were settled entirely during the quarter ended March 29, 2024.

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Equity

Share Repurchase Program

In February 2023, the Board of Directors approved a new share repurchase program (the “Share Repurchase Program”) under which the Company could repurchase up to an aggregate of $ 3.0  billion of the Company's common stock (exclusive of fees, commissions and other expenses). Under the Share Repurchase Program, which did not require the Company to purchase any minimum amount of common stock or at all, the Company could repurchase shares from February 8, 2023 through December 31, 2025. The repurchases under the Share Repurchase Program amounted to $ 1,375.0  million, $ 650.0  million and $ 564.0  million for the year ended December 31, 2025, 2024 and 2023, respectively, excluding fees, commissions and excise tax.

Activity under the Share Repurchase Program was as follows (in millions, except per share data):

Year ended December 31,
  2025 2024 2023
Number of repurchased shares (1)
27.9   9.1   7.6  

Aggregate purchase price $ 1,375.0   $ 650.0   $ 564.0  
Fees, commissions and excise tax 13.3   2.3   4.1  

Total $ 1,388.3   $ 652.3   $ 568.1  

Weighted-average purchase price per share (2)
$ 49.24   $ 71.21   $ 74.54  
Available amounts $ 411.0   $ 1,786.0   $ 2,436.0  

(1) None of these shares had been reissued or retired as of December 31, 2025 but may be reissued or retired later.
(2)     Exclusive of fees, commission or other expenses.

In November 2025, the Board of Directors approved a new Share Repurchase Program (the "New Share Repurchase Program") under which the Company may repurchase up to an aggregate of $ 6.0  billion of the Company's common stock (exclusive of fees, commissions and other expenses). Under the New Share Repurchase Program, which does not require the Company to purchase any minimum amount of common stock or at all, the Company may repurchase shares from January 1, 2026 through December 31, 2028. Through February 4, 2026, the Company acquired, subject to a 10b5-1 trading arrangement, 2.9  million shares for $ 175.6  million under the New Share Repurchase Program.

Shares for Restricted Stock Units Tax Withholding

The amounts remitted for tax withholding during the years ended December 31, 2025, 2024 and 2023 were $ 29.1  million, $ 50.8  million and $ 67.1  million, respectively, for which the Company withheld approximately 0.6 million, 0.7 million and 0.8 million shares of common stock, respectively, that were underlying the RSUs that vested. This activity in connection with tax withholding upon vesting was not made under the New Share Repurchase Program or the Share Repurchase Program.

Non-Controlling Interest

Leshan operates assembly and test operations in Leshan, China. The Company owns 80 % of the outstanding equity interests in Leshan, and the results of Leshan have been consolidated in the Company's financial statements. As of December 31, 2025, the Leshan non-controlling interest balance was $ 18.6  million. This balance included the Leshan non-controlling interest's $ 2.6  million share of the earnings for the year ended December 31, 2025, partially offset by $ 2.1  million of dividends paid to the non-controlling shareholder. As of December 31, 2024, the Leshan non-controlling interest balance was $ 18.1  million. This balance included the Leshan non-controlling interest's $ 1.8  million share of the earnings for the year ended December 31, 2024 offset by $ 1.7  million of dividends declared to the non-controlling shareholder.

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Note 11: Share-Based Compensation

Total share-based compensation expense related to the Company's RSUs, stock grant awards and ESPP was recorded within the Consolidated Statements of Operations and Comprehensive Income as follows (in millions):

Year ended December 31,
2025 2024 2023
Cost of revenue $ 27.0   $ 24.6   $ 18.1  
Research and development 27.5   24.7   20.5  
Selling and marketing 20.8   21.3   18.6  
General and administrative 69.0   65.5   63.9  

Share-based compensation expense 144.3   136.1   121.1  
Income tax benefit ( 30.3 ) ( 28.6 ) ( 25.4 )
Share-based compensation expense, net of taxes $ 114.0   $ 107.5   $ 95.7  

As of December 31, 2025, total unrecognized share-based compensation expense, net of estimated forfeitures, related to non-vested RSUs with service, performance and market conditions was $ 153.0 million, which is expected to be recognized over a weighted-average period of 1.7 years. Upon vesting of RSUs, stock grant awards or completion of a purchase under the ESPP, the Company issues new shares of common stock.

Share-Based Compensation Information

The fair value per unit of each RSU and stock grant award is determined on the grant date. Share-based compensation expense is based on awards ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The annualized pre-vesting forfeitures for RSUs were estimated to be approximately 8 % for the years ended December 31, 2025, 2024 and 2023.

Plan and Award Descriptions

On March 23, 2010, the Company adopted the Amended and Restated SIP which has been subsequently amended over the years primarily to increase the number of shares of common stock subject to all awards. Generally, RSUs granted under the Amended and Restated SIP vest ratably over three years for awards with service conditions and over two , three , or five years for awards with performance or market conditions, or a combination thereof, and are settled in shares of the Company's common stock upon vesting. Generally, upon the termination of an RSU holder's employment, all unvested RSUs will immediately cancel, except under circumstances where the service condition has been fulfilled.

On May 20, 2021, the Company's stockholders approved certain amendments to the Amended and Restated SIP to extend the expiration date from 2022 to 2031 and to increase the number of shares of common stock subject to all awards by 22.5  million to 109.5  million. As of December 31, 2025, there was an aggregate of 28.5 million shares of common stock available for grant under the Amended and Restated SIP.

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Restricted Stock Units

A summary of activity of RSUs during the year ended December 31, 2025 was as follows (number of shares in millions):

  Number of Shares Weighted-Average Grant Date Fair Value
Nonvested shares of RSUs at December 31, 2024 3.5   $ 76.27  
Granted 3.4   $ 47.00  
Achieved 0.2   $ 73.27  
Released ( 1.7 ) $ 73.88  
Forfeited ( 0.4 ) $ 67.35  
Nonvested shares of RSUs at December 31, 2025 5.0  

The RSUs awarded during 2025 include RSUs that vest upon satisfaction of service conditions and 1.0 million RSUs granted to certain officers and employees of the Company that vest upon the achievement of certain performance criteria and market conditions. The number of units expected to vest is evaluated each reporting period and compensation expense is recognized for those units for which achievement of the performance criteria is considered probable. Compensation expense for RSUs with market conditions is recognized based on the grant date fair value irrespective of the achievement of the condition. The fair values of the vested awards are based on the stock price as of the vesting dates, and during the years ended December 31, 2025, 2024 and 2023 totaled $ 83.6  million, $ 142.9  million and $ 202.6  million, respectively.
 
As of December 31, 2025, unrecognized compensation expense, net of estimated forfeitures related to non-vested RSUs granted under the Amended and Restated SIP with service, performance and market conditions, was $ 109.2 million, $ 12.1 million and $ 31.7 million, respectively. For RSUs with time-based service conditions, expense is being recognized over the vesting period; for RSUs with performance criteria, expense is recognized over the period when the performance criteria is expected to be achieved; for RSUs with market conditions, expense is recognized over the period in which the condition is assessed irrespective of whether it would be achieved or not. Unrecognized compensation cost for awards with certain performance criteria that are not expected to be achieved is not included here. Total compensation expense related to service-based, performance-based and market-based RSUs was $ 137.6 million for the year ended December 31, 2025, which included $ 82.1  million for RSUs with time-based service conditions that were granted in 2025 and prior that are expected to vest.

Employee Stock Purchase Plan
 
On February 17, 2000, the Company adopted the ESPP. During the years ended December 31, 2025, 2024 and 2023, employees purchased approximately 0.6 million, 0.4 million and 0.4 million shares, respectively, under the ESPP. On May 20, 2021, the stockholders approved an amendment to the ESPP, which increased the number of shares available to be issued pursuant to the ESPP by 6.0  million to 34.5  million. As of December 31, 2025, there were approximately 6.3 million shares available for issuance under the ESPP. Total compensation expense related to the ESPP for the year ended December 31, 2025 was $ 6.7  million.

Note 12: Employee Benefit Plans

Defined Benefit Pension Plans
 
The Company maintains defined benefit pension plans for employees of certain of its foreign subsidiaries. Such plans conform to local practice in terms of providing minimum benefits mandated by law, collective agreements or customary practice. The Company recognizes the aggregate amount of all overfunded plans as assets and the aggregate amount of all underfunded plans as liabilities in its Consolidated Balance Sheets. The Company's expected long-term rate of return on plan assets is updated at least annually, taking into consideration its asset allocation, historical returns on similar types of assets and the current economic environment. For estimation purposes, the Company assumes its long-term asset mix will generally be consistent with the current mix. The Company determines its discount rates using highly rated corporate bond yields and government bond yields.

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Benefits under all of the plans are valued utilizing the projected unit credit cost method. The Company's policy is to fund its defined benefit plans in accordance with local requirements and regulations. The funding is primarily driven by the current assessment of the economic environment and projected benefit payments of foreign subsidiaries. The measurement date for determining the defined benefit obligations for all plans is December 31 of each year.

The Company recognizes actuarial gains and losses during the period that the Company's annual pension plan actuarial valuations are prepared, which generally occurs during the fourth calendar quarter of each year, or during any interim period where a revaluation is deemed necessary. The Company recognized an actuarial gain of $ 12.9 million for the year ended December 31, 2025, an actuarial gain of $ 12.2 million for the year ended December 31, 2024 and an actuarial loss of $ 4.0  million for the year ended December 31, 2023. Of the actuarial gain for 2025, $ 11.6  million was primarily due to an increase in the discount rates and plan expense and $ 1.3  million was due to higher-than-expected returns on plan assets.

The following tables summarize the status of the Company's foreign defined benefit pension plans and the net periodic pension cost (dollars in millions):

Year ended December 31,
2025 2024 2023
Service cost $ 4.8   $ 5.0   $ 4.7  
Interest cost 6.0   5.6   6.3  
Expected return on plan assets ( 4.9 ) ( 4.7 ) ( 4.7 )

Curtailment loss 1.5   —   —  
Actuarial (gains) losses ( 12.9 ) ( 12.2 ) 4.0  
Total net periodic pension (gain) cost $ ( 5.5 ) $ ( 6.3 ) $ 10.3  
Weighted average assumptions:
Discount rate used for net periodic pension costs 3.84   % 3.28   % 3.27   %
Discount rate used for pension benefit obligations 4.41   % 3.84   % 3.63   %
Expected return on plan assets 3.78   % 3.65   % 3.46   %
Rate of compensation increase 4.32   % 4.32   % 4.26   %

The long-term rate of return on plan assets was determined using the weighted-average method, which incorporates factors that include the historical inflation rates, interest rate yield curve and current market conditions.

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As of December 31,
2025 2024
Change in projected benefit obligation ("PBO"):
PBO at the beginning of the year $ 143.0   $ 191.1  
Divestiture of business —   ( 21.5 )
Service cost 4.8   5.0  
Interest cost 6.0   5.6  
Net actuarial gain ( 11.6 ) ( 9.5 )
Benefits paid by plan assets ( 14.7 ) ( 12.8 )
Benefits paid by the Company ( 3.9 ) ( 4.2 )

Curtailments 1.5   —  
Translation and other (gain) loss 6.7   ( 10.7 )
PBO at the end of the year 131.8   143.0  
Accumulated benefit obligation at the end of the year $ 107.0   $ 116.8  
Change in plan assets:
Fair value of plan assets at the beginning of the year $ 106.1   $ 140.3  

Divestiture of business —   ( 22.2 )
Actual return on plan assets 6.2   7.4  
Benefits paid from plan assets ( 14.7 ) ( 12.8 )
Employer contributions 2.7   2.5  

Translation and other gain (loss) 5.1   ( 9.1 )
Fair value of plan assets at the end of the year $ 105.4   $ 106.1  

 As of December 31,
2025 2024
Plans with underfunded or non-funded PBO:
PBO $ 95.0   $ 101.0  
Fair value of plan assets 38.6   42.1  
Plans with underfunded or non-funded accumulated benefit obligation:
Accumulated benefit obligation $ 71.9   $ 76.4  
Fair value of plan assets 38.6   42.1  
Amounts recognized in the balance sheet consist of:
Current assets —   —  
Non-current assets 30.1   22.5  
Current liabilities ( 1.5 ) ( 1.9 )
Non-current liabilities ( 55.0 ) ( 57.5 )
Funded status $ ( 26.4 ) $ ( 36.9 )

The PBO and pension asset balances for the divested fab in Niigata, Japan were derecognized during 2024 upon approval from the appropriate authorities.
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Plan Assets

The Company's overall investment strategy is to focus on stable and low credit risk investments aimed at providing a positive rate of return to the plan assets. The Company has an investment mix with a wide diversification of asset types and fund strategies that are aligned with each region and foreign location's economy and market conditions. Investments in government securities are generally guaranteed by the respective government offering the securities. Investments in corporate bonds, equity securities, and foreign mutual funds are made with the expectation that these investments will give an adequate rate of long-term returns despite periods of high volatility. Other types of investments include investments in cash deposits, money market funds and insurance contracts. Asset allocations are based on the anticipated required funding amounts, timing of benefit payments, historical returns on similar assets and the influence of the current economic environment.

The following table sets forth, by level within the fair value hierarchy, a summary of investments measured at fair value and the asset allocations of the plan assets in the Company's foreign pension plans (in millions):                            

As of December 31, 2025
Allocation Total Level 1 Level 2 Level 3
Asset Category:
Cash/Money Markets 2   % $ 2.6   $ 2.6   $ —   $ —  
Foreign government/treasury securities (1)
9   % 9.2   9.2   —   —  
Corporate bonds, debentures (2)
26   % 27.2   —   27.2   —  
Equity securities (3)
31   % 32.9   —   32.9   —  

Investment and insurance contracts (4)
32   % 33.5   —   11.2   22.3  
Total 100   % $ 105.4   $ 11.8   $ 71.3   $ 22.3  

As of December 31, 2024
Allocation Total Level 1 Level 2 Level 3
Asset Category:
Cash/Money Markets 3   % $ 3.2   $ 3.2   $ —   $ —  
Foreign government/treasury securities (1)
14   % 14.5   14.5   —   —  
Corporate bonds, debentures (2)
24   % 25.3   —   25.3   —  
Equity securities (3)
34   % 36.1   —   36.1   —  

Investment and insurance contracts (4)
25   % 27.0   —   7.5   19.5  
Total 100   % $ 106.1   $ 17.7   $ 68.9   $ 19.5  

(1)     Includes investments primarily in guaranteed return securities.
(2)     Includes investments in government bonds and corporate bonds of developed countries, emerging market government bonds, emerging market corporate bonds and convertible bonds.
(3)     Includes investments in equity securities of developed countries and emerging markets.
(4)     Includes certain investments with insurance companies that guarantee a minimum rate of return on the investment.

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When available, the Company uses observable market data, including pricing on recently closed market transactions and quoted prices, which are included in Level 2. When data is unobservable, valuation methodologies using comparable market data are utilized and included in Level 3. Activity during the years ended December 31, 2025 and 2024, respectively, for plan assets with fair value measurement using significant unobservable inputs (Level 3) was as follows (in millions):

Investment and Insurance Contracts
Balance at December 31, 2023 $ 24.5  
Actual return on plan assets 0.8  
Purchase, sales and settlements, net ( 4.5 )
Foreign currency impact ( 1.3 )
Balance at December 31, 2024 19.5  
Actual return on plan assets 1.4  
Purchase, sales and settlements, net ( 1.1 )
Foreign currency impact 2.5  
Balance at December 31, 2025 $ 22.3  

The Company generally contributes to its foreign defined benefit plans based on specific plan or statutory requirements. In 2026, the Company expects contributions to be immaterial . The expected benefit payments from the Company's defined benefit plans from 2026 through 2030 and the five years thereafter are as follows (in millions):

2026 $ 5.0  
2027 7.0  
2028 8.5  
2029 11.6  
2030 7.7  
Five years thereafter 54.9  
Total $ 94.7  

Defined Contribution Plans
 
The Company has a deferred compensation savings plan for all eligible U.S. employees established under the provisions of Section 401(k) of the Internal Revenue Code. Eligible employees may contribute a percentage of their salary subject to certain limitations. The Company has elected to match 100 % of employee contributions between 0 % and 4 % of their salary, with an annual limit as mandated by the Internal Revenue Service. The Company recognized $ 18.3 million, $ 20.0 million and $ 19.9 million of expense relating to matching contributions in 2025, 2024 and 2023, respectively.
 
Certain foreign subsidiaries have defined contribution plans in which eligible employees participate. The Company recognized compensation expense of $ 18.5 million, $ 23.7 million and $ 22.3 million relating to these plans for the years ended 2025, 2024 and 2023, respectively.

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Note 13: Commitments and Contingencies

Purchase Obligations

The Company has agreements with suppliers, external manufacturers and other vendors for capital expenditures, inventory purchases, manufacturing services, information technology and other goods and services. The following is a schedule by year of future minimum purchase obligations under non-cancelable arrangements entered into during the ordinary course of business as of December 31, 2025 (in millions):

2026 $ 354.3  
2027 128.5  
2028 53.2  
2029 34.0  
2030 28.3  
Thereafter 7.4  
Total
$ 605.7  

Environmental Contingencies

The Company currently leases its headquarters in Scottsdale, Arizona on Salt River Maricopa Indian Community property.

Though the Company has encountered and dealt with a number of environmental issues over time relating to the various locations that comprise its operations, any costs to the Company in connection with such matters have not been, and, based on the information available, are not expected to be material.

The following presents a summary of such environmental contingencies:

• East Greenwich, Rhode Island . The Company’s design center in East Greenwich, Rhode Island is located on property that has localized soil contamination. In connection with the purchase of the facility, the Company entered into a Settlement Agreement and Covenant Not to Sue with the State of Rhode Island. This agreement requires that remedial actions be undertaken and a quarterly groundwater monitoring program be initiated by the former owners of the property.

• Santa Clara, California . As a result of the acquisition of AMIS in 2008, the Company is a "primary responsible party" to an environmental remediation and clean-up plan at AMIS’s former corporate headquarters in Santa Clara, California. Costs incurred by AMIS include implementation of the clean-up plan, operations and maintenance of remediation systems, and other project management costs. However, AMIS’s former parent company, a subsidiary of Nippon Mining, contractually agreed to indemnify AMIS and the Company for any obligations relating to environmental remediation and clean-up activities at this location. This facility was divested to Lincoln Property Company Commercial, Inc. in 2022.

• South Portland, Maine . Through its acquisition of Fairchild, the Company acquired a facility in South Portland, Maine. This facility was divested to Diodes, Inc. in 2022. This facility has ongoing environmental remediation projects to respond to certain releases of hazardous substances that occurred prior to the leveraged recapitalization of Fairchild from its former parent company, National Semiconductor Corporation, which is now owned by TI. To the extent the Company could still incur liabilities with respect to these remediation projects, pursuant to a 1997 asset purchase agreement entered into in connection with the Fairchild recapitalization, National Semiconductor Corporation agreed to indemnify Fairchild, without limitation and for an indefinite period of time, for all future costs related to these projects.

• Bucheon, South Korea . Under a 1999 asset purchase agreement pursuant to which Fairchild purchased the power device business of Samsung, Samsung agreed to indemnify Fairchild in an amount up to $ 150.0 million for remediation costs and other liabilities related to historical contamination at Samsung’s Bucheon, South Korea operations.

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• Mountain Top, Pennsylvania . Under a 2001 asset purchase agreement pursuant to which Fairchild purchased a manufacturing facility in Mountain Top, Pennsylvania, Intersil Corp. (subsequently acquired by Renesas Electronics Corporation) agreed to indemnify Fairchild for remediation costs and other liabilities related to historical contamination at the facility.

• Hartford, Illinois . The Company was notified by the EPA that it has been identified as a PRP under the Comprehensive Environmental, Response, Compensation, and Liability Act in the Chemetco Superfund matter. Chemetco, a defunct reclamation services supplier that operated in Hartford, Illinois at what is now a Superfund site, has performed reclamation services for the Company in the past. The EPA is pursuing Chemetco customers for contribution to the site clean-up activities. The Company has joined a PRP group, which is cooperating with the EPA in the evaluation and funding of the clean-up activities. 

Financing Contingencies

In the ordinary course of business, the Company provides standby letters of credit or other guarantee instruments to certain parties initiated by either the Company or its subsidiaries, as required for transactions, including, but not limited to, material purchase commitments, agreements to mitigate collection risk, leases, utilities or customs guarantees. As of December 31, 2025, the Company's Revolving Credit Facility included $ 25.0 million available for the issuance of letters of credit. There were $ 1.6 million letters of credit outstanding under the Revolving Credit Facility as of December 31, 2025, which reduced the Company's borrowing capacity. The Company also had outstanding guarantees and letters of credit outside of its Revolving Credit Facility totaling $ 7.2 million as of December 31, 2025.

As part of obtaining financing in the ordinary course of business, the Company issued guarantees related to certain of its subsidiaries, which totaled $ 0.9 million as of December 31, 2025. Based on historical experience and information currently available, the Company believes that it will not be required to make payments under the standby letters of credit or guarantee arrangements for the foreseeable future.

Indemnification Contingencies

The Company is a party to a variety of agreements entered into in the ordinary course of business, including acquisition agreements, pursuant to which it may be obligated to indemnify the other parties for certain liabilities that arise out of or relate to the subject matter of the agreements. Some of the agreements entered into by the Company require it to indemnify the other party against losses due to IP infringement, property damage (including environmental contamination), personal injury, failure to comply with applicable laws, the Company’s negligence or willful misconduct or breach of representations and warranties and covenants related to such matters as title to sold assets. In the case of certain acquisition agreements, these agreements may require us to maintain such indemnification provisions for the acquiree’s directors, officers and other employees and agents, in certain cases for a number of years following the acquisition.

The Company faces risk of exposure to warranty and product liability claims in the event that its products fail to perform as expected or such failure of its products results, or is alleged to result, in economic damage, bodily injury or property damage. In addition, if any of the Company’s designed products are alleged to be defective, the Company may be required to participate in their recall. Depending on the significance of any particular customer and other relevant factors, the Company may agree to provide more favorable rights to such customer for valid defective product claims.

The Company and its subsidiaries provide for indemnification of directors, officers and other persons in accordance with limited liability company operating agreements, certificates of incorporation, by-laws, articles of association or similar organizational documents, as the case may be. Section 145 of the Delaware General Corporation Law ("DGCL") authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the DGCL are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Exchange Act. As permitted by the DGCL, the Company’s Amended and Restated Certificate of Incorporation (as amended, the "Certificate of Incorporation") contains provisions relating to the limitation of liability and indemnification of directors and officers. The Certificate of Incorporation eliminates the personal liability of each of the Company’s directors to the fullest extent permitted by Section 102(b)(7) of the DGCL, as it may be amended or supplemented, and provides that the Company will indemnify its directors and officers to the fullest extent permitted by Section 145 of the DGCL, as amended from time to time.

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The Company has entered into indemnification agreements with each of its directors and executive officers. The form of agreement (the "Indemnification Agreement") provides, subject to certain exceptions and conditions specified in the Indemnification Agreement, that the Company will indemnify each indemnitee to the fullest extent permitted by Delaware law against all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with a proceeding or claim in which such person is involved because of his or her status as one of the Company’s directors or executive officers. In addition, the Indemnification Agreement provides that the Company will, to the extent not prohibited by law and subject to certain exceptions and repayment conditions, advance specified indemnifiable expenses incurred by the indemnitee in connection with such proceeding or claim.

The Company also maintains directors’ and officers’ insurance policies that indemnify its directors and officers against various liabilities, including certain liabilities under the Exchange Act, which might be incurred by any director or officer in his or her capacity as such.

While the Company’s future obligations under certain agreements may contain limitations on liability for indemnification, other agreements do not contain such limitations and under such agreements it is not possible to predict the maximum potential amount of future payments due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under any of these indemnities have not had a material effect on the Company’s business, financial condition, results of operations or cash flows. Additionally, the Company does not believe that any amounts that it may be required to pay under these indemnities in the future will be material to the Company’s business, financial position, results of operations, or cash flows.

Government Assistance

2025 Government Incentives

The Company receives government incentives from U.S. federal and state governments and non-U.S. governments in the form of cash grants and tax abatements, which in most cases attach conditions for a specific duration period, generally related to hiring, training and/or retaining employees, the construction or acquisition of assets and placing them in service or the development of specific technologies. If conditions are not satisfied or the duration period for the agreement is infringed, the incentives are subject to reduction, termination, or recapture.

As of December 31, 2025, relating to government incentives, $ 91.8  million and $ 2.5  million were included in other current assets and other non-current assets , respectively, substantially all of which represents the benefit of investment tax credits in excess of taxes payable. As December 31, 2025, $ 151.9  million was recorded as a net decrease to property, plant and equipment, net . Additionally, $ 15.5  million and $ 3.9  million were recorded as a reduction to cost of revenue and operating expenses , respectively, for the year ended December 31, 2025.

The duration of the agreements for the incentives received by the Company in 2025 ranges from one to twenty years , with a recapture period that can extend up to ten years .

2024 Government Incentives

As of December 31, 2024, relating to government incentives, $ 86.3  million and $ 2.4  million were included in other current assets and other non-current assets , respectively, substantially all of which represents the benefit of investment tax credits in excess of taxes payable. As December 31, 2024, $ 104.4  million was recorded as a net decrease to property, plant and equipment, net . Additionally, $ 10.8  million and $ 5.3  million were recorded as a reduction to cost of revenue and operating expenses , respectively, for the year ended December 31, 2024.

2023 Government Incentives

As of December 31, 2023, relating to government incentives, $ 12.9  million and $ 5.2  million were included in other current assets and other non-current assets , respectively, representing the amounts receivable, $ 80.4  million was recorded as a net decrease to property, plant and equipment, net , and $ 83.6  million was recorded as a reduction to taxes payable included in accrued expenses and other current liabilities . Additionally, $ 5.1  million and $ 4.9  million were recorded as a reduction to cost of revenue and operating expenses , respectively, for the year ended December 31, 2023.

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Legal Matters

From time to time, the Company is party to various legal proceedings arising in the ordinary course of business, including indemnification claims, claims of alleged infringement of patents, trademarks, copyrights and other IP rights, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. The Company evaluates the status of the legal proceedings in which it is involved to assess whether a loss is reasonably estimable and either remote, reasonably possible or probable of occurring. The Company further evaluates each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made for disclosure purposes. Although litigation is inherently unpredictable, the Company believes that it has adequate provisions for any probable and reasonably estimable losses. However, the Company’s estimates may not represent its maximum possible exposure in any particular legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.

The Company is currently involved in a variety of legal matters that arise in the ordinary course of business. Based on information currently available, except as disclosed below, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations or liquidity. The litigation process is inherently uncertain, and the Company cannot guarantee that the outcome of any litigation matter will be favorable to the Company.

Securities Class Action and Derivative Litigation Concerning the Company's SiC Business

On December 13, 2023, a putative class action captioned Hubacek v. On Semiconductor Corp., et al., Case No. 1:23-cv-01429 (D. Del.), was filed by an alleged stockholder of the Company in the U.S. District Court for the District of Delaware against the Company and certain of its officers. This action was transferred to the U.S. District Court for the District of Arizona in March of 2024. The initial complaint asserted claims for alleged violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The initial complaint alleged that the defendants made misleading statements regarding the Company's SiC business. An amended complaint was filed on May 31, 2024. The amended complaint again asserts claims for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The plaintiff seeks a ruling that this case may proceed as a class action, and seeks damages, attorneys’ fees and costs. The Company filed a motion to dismiss the amended complaint on July 30, 2024. Upon reviewing the Company’s motion to dismiss the amended complaint, plaintiff deemed it necessary to further amend their complaint. On September 6, 2024, the plaintiff filed their second amended complaint. The Company filed a motion to dismiss this second amended complaint on October 10, 2024. Full briefing for this motion to dismiss the second amended complaint was completed on December 20, 2024. Oral arguments for this motion to dismiss were heard by the court on June 27, 2025. On July 11, 2025, the court granted the Company's motion to dismiss the plaintiff's second amended complaint without prejudice. On August 11, 2025, the plaintiff filed their third amended complaint. The Company filed a motion to dismiss this third amended complaint on September 25, 2025. Full briefing on this motion to dismiss the third amended complaint was completed on December 10, 2025. The Company believes that it has strong legal defenses to the claims asserted and will vigorously defend itself.

On January 3, 2024, a purported stockholder derivative action captioned Silva v. El-Khoury, et al., Case No. 1:24-cv-00007 (D. Del.), was filed by a purported stockholder of the Company in the U.S. District Court for the District of Delaware. On February 12, 2024, a purported stockholder derivative action captioned Smalley et al. v. El-Khoury et al. Case No. 1:24-cv-00183 (D. Del.), was filed by a purported stockholder of the Company in the U.S. District Court for the District of Delaware. Both aforementioned derivative actions, Silva and Smalley, were voluntarily dismissed without prejudice on April 15, 2024. On February 28, 2024, a purported stockholder derivative action captioned Mumme et al. v. El-Khoury et al. Case No. CV2024-003974 (D. AZ.), was filed by a purported stockholder of the Company in the Superior Court of the State of Arizona in and for the County of Maricopa. On March 15, 2024, a purported stockholder derivative action captioned Chan et al. v. Abe et al. Case No. 2:24-cv-00552 (D. AZ.), was filed by a purported stockholder of the Company in the U.S. District Court for the District of Arizona. On June 16, 2025, a purported stockholder derivative action captioned Balsam-Respler et al. v. El-Khoury et al. Case No. 2:25-cv-001672 (D. AZ.), was filed by a purported stockholder of the Company in the U.S. District Court for the District of Arizona. On September 23, 2025, the U.S. District Court for the District of Arizona consolidated the Balsam-Respler and Chan derivative complaints into a consolidated action entitled In re ON Semiconductor Corporation Stockholder Derivative Litigation, Case No. CV-24-00552 (D.AZ.). The allegations in these derivative complaints are substantially similar to the allegations in the securities class action complaint discussed above. The derivative suits purport to assert claims (1) on behalf of the Company against certain of its officers for contribution under the federal securities laws and (2) against all of the defendants for breach of fiduciary duty, aiding and abetting, unjust enrichment, abuse of control, gross mismanagement, and waste. The plaintiffs seek an award of damages, pre-judgment interest, punitive damages, attorneys’ fees, and other costs and expenses
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related to the litigation. The Company believes that the plaintiffs lack standing to assert claims on the Company’s behalf. These pending derivative actions were stayed by agreement, pending the resolution of Hubacek v. On Semiconductor Corp.

Intellectual Property Matters

The Company faces risk of exposure from claims of infringement of the IP rights of others. In the ordinary course of business, the Company receives letters asserting that the Company’s products or components breach another party’s rights. Such letters may request royalty payments from the Company, that the Company cease and desist using certain IP and/or other remedies.

Note 14: Fair Value Measurements

Fair Value of Financial Instruments

The following fair value tier level hierarchy is used to determine fair values of financial instruments:

• Level 1: based on observable inputs that reflect quoted prices for identical assets or liabilities in active markets.
• Level 2: based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly.
• Level 3: based on the use of unobservable inputs for the assets and liabilities and other types of analyses.

The carrying value of cash and cash equivalents, which include money market funds and demand and time deposits, approximates fair value because of the short-term maturity of these instruments. The carrying amount of other current assets and liabilities, such as accounts receivable and accounts payable, approximates fair value due to the short-term maturity of the amounts, and such amounts are considered Level 2 in the fair value hierarchy.

The Company held $ 400.0  million of short-term investments in time deposits and an insignificant amount of cash equivalents in the form of time deposits and money market funds as of December 31, 2025. The Company held $ 300.0  million of short-term investments in time deposits and an insignificant amount of cash equivalents in the form of time deposits and money market funds as of December 31, 2024. Money market funds and demand deposits are classified as Level 1 while time deposits are classified as Level 2 within the fair value hierarchy.

In connection with the Vcore acquisition, the Company is required to pay additional cash consideration upon the achievement of specified products and the achievement of certain revenue milestones. The maximum contingent cash consideration to be distributed is $ 144.0 million. The fair value of the contingent consideration was $ 109.9 million as of December 31, 2025. Contingent consideration is classified as Level 3 within the fair value hierarchy. See Note 5: ''Acquisitions'' for additional information regarding the valuation of the contingent consideration.

Fair Value of Long-Term Debt, including Current Portion

The carrying amounts and fair value of the Company’s long-term borrowings were as follows (in millions):

As of December 31,
  2025 2024
  Carrying Amount Fair Value Carrying Amount Fair Value
Long-term debt, including current portion (1) :

Revolving Credit Facility $ —   $ —   $ 375.0   $ 373.4  
0.50 % Notes
1,483.5   1,424.2   1,478.2   1,450.4  
0 % Notes
800.4   965.0   797.2   1,054.4  
3.875 % Notes
696.6   684.2   695.5   656.3  

(1) Long-term debt is carried on the Consolidated Balance Sheets at historical cost net of debt discount and issuance costs.

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The fair value of the 0 % Notes, 0.50 % Notes and 3.875 % Notes was estimated based on market prices in active markets (Level 1), and the Revolving Credit Facility was estimated based on discounting the remaining principal and interest payments using current market rates for similar debt (Level 2).

Fair Values Measured on a Non-Recurring Basis

The Company's non-financial assets, such as property, plant and equipment, goodwill and intangible assets, are recorded at fair value upon a business combination and are remeasured at fair value only if an impairment charge is recognized. The Company uses unobservable inputs to the valuation methodologies that are significant to the fair value measurements, and the valuations require management's judgment due to the absence of quoted market prices. The Company determines the fair value of its held and used assets, goodwill and intangible assets using an income, cost or market approach as determined reasonable.

During the years ended December 31, 2025, 2024 and 2023, there were no non-financial assets included in the Company's Consolidated Balance Sheet that were remeasured at fair value on a non-recurring basis. The following table shows the adjustments to fair value of certain of the Company's non-financial assets that had an impact on the Company's results of operations (in millions):

Year ended December 31,
2025 2024 2023

Asset impairments (Level 3) $ 496.0   $ 37.8   $ 10.5  

Note 15: Financial Instruments

Foreign Currencies

As a multinational business, the Company's transactions are denominated in a variety of currencies. When appropriate, the Company uses forward foreign currency contracts to reduce its overall exposure to the effects of currency fluctuations on its results of operations and cash flows. The Company's policy prohibits trading in currencies for which there are no underlying exposures and entering into trades for any currency to intentionally increase the underlying exposure. The Company primarily hedges existing assets and liabilities associated with transactions currently on its balance sheet, which are undesignated hedges for accounting purposes.
 
As of December 31, 2025 and 2024, the Company had outstanding foreign exchange contracts with notional amounts of $ 190.5  million and $ 256.8 million, respectively. Such contracts were obtained through financial institutions and were scheduled to mature within two months from the time of purchase. Management believes that these financial instruments should not subject the Company to increased risks from foreign exchange movements because gains and losses on these contracts should offset gains and losses on the underlying assets, liabilities and transactions to which they are related.

The following schedule summarizes the Company's net foreign exchange positions in U.S. dollars (in millions):

 As of December 31,
2025 2024
Buy (Sell) Notional Amount Buy (Sell) Notional Amount
Euro $ 44.8   $ 44.8   $ 71.1   $ 71.1  
Philippine Peso 36.5   36.5   41.0   41.0  
Korean Won ( 46.0 ) 46.0   ( 39.5 ) 39.5  
Japanese Yen —   —   35.0   35.0  

Czech Koruna 20.3   20.3   24.0   24.0  

Other currencies - Buy 42.9   42.9   39.6   39.6  
Other currencies - Sell —   —   ( 6.6 ) 6.6  
Total $ 98.5   $ 190.5   $ 164.6   $ 256.8  

Amounts receivable or payable under the contracts were not material as of December 31, 2025 and 2024, and are included in other current assets or accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets.
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Realized and unrealized foreign currency transactions totaled a loss of $ 5.5 million, a gain of $ 0.9 million, and a loss of $ 7.9  million for the years ended December 31, 2025, 2024, and 2023, respectively. The realized and unrealized foreign currency transactions are included in other income (expense) in the Company's Consolidated Statements of Operations and Comprehensive Income.

Cash Flow Hedges

Foreign currency risk

During 2023, the Company entered into foreign currency forward contracts to hedge its exposure to foreign currency exchange rate risk related to future forecasted transactions denominated in certain currencies other than the U.S. dollar. These contracts generally mature within 12 months and are designated as cash flow hedges for accounting purposes.

As of December 31, 2025 and 2024, the notional value of outstanding foreign currency forward contracts designated as cash flow hedges was $ 386.7  million and $ 145.1  million, respectively, with a fair value of $ 0.3  million recorded as other current assets for 2025 and $ 8.2  million recorded as accrued expenses and other current liabilities for 2024. A loss of $ 3.5  million, $ 10.0  million, and $ 0.1  million was recognized as a component of cost of revenue for the years ended December 31, 2025, 2024, and 2023, respectively. The Company did not identify any ineffectiveness with respect to the notional amounts of the foreign currency forward contracts effective as of December 31, 2025.

Interest rate risk

During 2023, the Company terminated its interest rate swap agreements with a notional value of $ 500  million, received cash proceeds of $ 27.7  million, net of termination fees, and recognized $ 6.9  million of other income related to the termination. At the time of termination, approximately $ 20.7  million was recorded in accumulated other comprehensive loss, of which $ 11.9  million and $ 6.9  million were subsequently recognized as other income during the years ended December 31, 2024 and 2023, respectively, with the remaining portion recognized as part of the loss on debt refinancing and prepayment during 2023.

See Note 17: ''Changes in Accumulated Other Comprehensive Loss'' for the effective amounts related to derivative instruments designated as cash flow hedges affecting accumulated other comprehensive loss and the Consolidated Statements of Operations and Comprehensive Income for the year ended December 31, 2025.

Convertible Note Hedges

The Company entered into convertible note hedges in connection with the issuance of the 0 % Notes, 0.50 % Notes and 1.625 % Notes. See Note 9: ''Long-Term Debt'' for more information.

Other

As of December 31, 2025, the Company had no outstanding commodity derivatives, currency swaps, options or equity contracts held at subsidiaries or affiliated companies. The Company does not hedge the value of its equity investments in its subsidiaries or affiliated companies.

The Company is exposed to credit-related losses if its hedge counterparties fail to perform their obligations. As of December 31, 2025, the counterparties to the Company's hedge contracts were held at financial institutions which the Company believes to be highly rated, and no credit-related losses are anticipated.

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Note 16: Income Taxes

The Company's geographic sources of income before income taxes were as follows (in millions):

Year ended December 31,
2025 2024 2023
United States $ ( 102.2 ) $ 1,584.3   $ 2,222.2  
Foreign 233.5   253.1   313.6  
Income before income taxes $ 131.3   $ 1,837.4   $ 2,535.8  

The Company's provision for income taxes was as follows (in millions):
Year ended December 31,
2025 2024 2023
Current:
Federal $ 110.1   $ 276.6   $ 372.7  
State and local 8.7   20.4   21.6  
Foreign 59.5   52.0   76.9  
Total 178.3   349.0   471.2  
Deferred:
Federal ( 177.2 ) ( 58.2 ) ( 107.9 )
State and local ( 7.1 ) ( 18.1 ) 13.2  
Foreign 13.7   ( 9.9 ) ( 26.3 )
Total ( 170.6 ) ( 86.2 ) ( 121.0 )
Total provision $ 7.7   $ 262.8   $ 350.2  

As further provided in Note 4: ''Recent Accounting Pronouncements and Other Developments,'' the Company has elected to prospectively adopt the guidance in ASU 2023-09. The following table is a reconciliation of the U.S. federal statutory income tax rate to the Company's effective tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09 (in millions):
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Year ended December 31,
2025
Amount Percent
U.S. federal statutory rate $ 27.5   21.0   %
State and local income taxes, net of federal income tax effect (1)
( 1.2 ) ( 0.9 ) %
Foreign tax effects:
Japan:
Withholding taxes 5.4   4.1   %
Change in valuation allowance 7.6   5.8   %
Other 4.7   3.6   %
Malaysia:
Investment credit expiration 30.8   23.4   %
Change in valuation allowance ( 27.1 ) ( 20.7 ) %

Other 0.6   0.4   %
Korea:
Currency translation gain (loss) 11.2   8.5   %
Other 4.0   3.0   %
Switzerland:

Nontaxable foreign exchange gain ( 7.0 ) ( 5.3 ) %

Foreign tax rate differential ( 5.2 ) ( 4.0 ) %
Other 1.7   1.3   %
Other foreign jurisdictions ( 1.7 ) ( 1.2 ) %
Effect of cross-border tax laws:
Foreign-derived intangible income ( 34.7 ) ( 26.4 ) %
Subpart F 31.0   23.6   %
Foreign tax credits ( 57.3 ) ( 43.6 ) %
Other ( 1.9 ) ( 1.4 ) %
Tax credits:
Federal research and development credit ( 12.0 ) ( 9.1 ) %
Change in valuation allowance ( 0.4 ) ( 0.3 ) %
Nontaxable or nondeductible items:
Stock-based compensation 11.3   8.6   %
Non-deductible officer compensation 8.5   6.4   %
Other 5.7   4.4   %
Changes in unrecognized tax benefits 6.1   4.6   %

Other adjustments 0.1   0.1   %

Effective tax rate $ 7.7   5.9   %

(1) State taxes in Arizona and Minnesota make up the majority (greater than 50 percent) of the tax effect in this category.
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A reconciliation of the U.S. federal statutory income tax rate to the Company's effective income tax rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 is as follows:

Year ended December 31,
2024 2023
U.S. federal statutory rate 21.0   % 21.0   %
Increase (decrease) resulting from:
  State and local taxes, net of federal tax benefit 0.4   0.7  

Impact of foreign operations 1.4   0.3  

Foreign-derived intangible income benefit ( 6.9 ) ( 6.8 )

  Change in valuation allowance and related effects (1)
0.2   0.5  

Share-based compensation costs 0.2   ( 0.2 )
U.S. federal R&D credit ( 1.1 ) ( 0.4 )
Non-deductible officer compensation 0.4   0.3  
Impact of audit settlement ( 0.7 ) ( 1.8 )
  Other ( 0.6 ) 0.2  
Total 14.3   % 13.8   %

(1) For the year ended December 31, 2024, this included a benefit of $ 7.5  million, or 0.4 % related to the decrease in the valuation allowance for the expiration of Japan net operating losses ("NOLs"), partially netted with an offsetting expense of $ 6.2  million or 0.3 % related to the expiration of those same Japan NOLs. For the year ended December 31, 2023, this included a benefit of $ 13.7  million, or 0.5 % related to a decrease in the valuation allowance for the expiration of Japan NOLs, partially netted with an offsetting expense of $ 15.3  million, or 0.6 % related to the expiration of those same Japan NOLs.

The tax effects of temporary differences in the recognition of income and expense for tax and financial reporting purposes that give rise to significant portions of the net deferred tax asset (liability) were as follows (in millions):

As of December 31,
2025 2024
NOL and tax credit carryforwards $ 278.4   $ 308.7  
163 (j) interest expense carryforward 0.3   4.4  
Lease liabilities 51.0   57.6  
ROU asset ( 41.0 ) ( 52.7 )
Tax-deductible goodwill and amortizable intangibles ( 58.6 ) ( 31.6 )
Capitalization of research and development expenses 566.0   523.7  
Reserves and accruals 108.7   61.7  
Property, plant and equipment 20.7   ( 122.1 )
Inventories 151.4   116.0  
Undistributed earnings of foreign subsidiaries ( 71.3 ) ( 77.8 )
Share-based compensation 10.1   10.4  
Pension ( 2.1 ) 0.2  
Convertible Debt 68.6   89.0  
Other 12.3   21.0  
Deferred tax assets and liabilities before valuation allowance 1,094.5   908.5  
Valuation allowance ( 207.1 ) ( 216.2 )
Net deferred tax asset $ 887.4   $ 692.3  

The Company has investment tax credits, which are accounted for pursuant to ASC 740, in Korea and the Czech Republic. The Company uses the deferral method of accounting for investment tax credits under which the credits are recognized as reductions
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in the carrying value of the related assets. Deferred tax related to differences in GAAP versus tax carrying value is recorded pursuant to the gross-up method.

As of December 31, 2025 and 2024, the Company had approximately $ 2.5 million and $ 4.4 million, respectively, of U.S. federal NOL carryforwards, before the impact of unrecognized tax benefits. The decrease is due to current year utilization. These NOL carryforwards can be carried forward indefinitely until utilized. As of December 31, 2025 and 2024, the Company had approximately $ 1.4 million and $ 0.5 million, respectively, of U.S. federal credit carryforwards, before consideration of the impact of unrecognized tax benefits and the valuation allowance. The credits will expire in 2032 if unutilized. These NOL and credit carryforwards relate to acquisitions and, consequently, are limited in the amount that can be utilized in any one year.

As of December 31, 2025 and 2024, the Company had approximately $ 224.5 million and $ 245.7 million, respectively, of U.S. state NOL carryforwards, before consideration of valuation allowance or the impact of unrecognized tax benefits. The decrease is primarily due to current year utilization. The U.S. state NOL carryforwards will expire in varying amounts beginning in 2026 while an amount of the state NOLs carryforward indefinitely. As of December 31, 2025 and 2024, the Company had $ 114.1 million and $ 110.2 million, respectively, of U.S. state credit carryforwards before consideration of valuation allowance or the impact of unrecognized tax benefits. The U.S. state credits will expire in varying amounts beginning in 2026 while a substantial amount of the state credits carryforward indefinitely.

As of December 31, 2025 and 2024, the Company had approximately $ 237.1  million and $ 244.1  million, respectively, of foreign NOL carryforwards, before consideration of valuation allowance. The decrease is primarily due to current year utilization. As of December 31, 2025 and 2024, the Company had $ 145.6  million and $ 157.6  million, respectively, of foreign credit carryforwards before consideration of valuation allowance. A significant portion of the foreign NOLs and credit carryforwards will expire in varying amounts prior to 2035, if unutilized.

The Company analyzes the need for a valuation allowance related to its deferred tax assets. As of December 31, 2025, the Company recorded a partial valuation of $ 73.1  million against the Korea investment tax credits forecasted to expire unutilized. Of the remaining valuation allowance of $ 134.0  million, $ 40.6  million primarily relates to NOLs and tax credits in certain other foreign jurisdictions that primarily expire in 2026, and $ 93.4  million, net of federal benefit on its U.S. state NOL and credit deferred tax assets forecasted to expire unutilized. See Schedule II - "Valuation and Qualifying Accounts" included elsewhere in this Form 10-K.

As of December 31, 2025, the Company was not indefinitely reinvested with respect to the earnings of its foreign subsidiaries and has therefore accrued withholding taxes that would be owed upon future distributions of such earnings.
 
The activity for unrecognized gross tax benefits was as follows (in millions):

2025 2024 2023
Balance at beginning of year $ 45.7   $ 67.7   $ 136.8  

Additions for tax benefits related to the current year 3.7   5.2   3.4  
Additions for tax benefits of prior years 9.4   1.4   0.7  
Reductions for tax benefits of prior years —   ( 22.3 ) ( 48.0 )
Lapse of statute ( 4.1 ) ( 4.0 ) ( 9.9 )
Settlements ( 6.0 ) ( 2.3 ) ( 15.3 )

Balance at end of year $ 48.7   $ 45.7   $ 67.7  

Included in the December 31, 2025 balance of $ 48.7 million is $ 39.5 million related to unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. Also included in the balance of unrecognized tax benefits as of December 31, 2025 is $ 9.2 million of benefit that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.
 
The Company recognizes interest and penalties accrued related to uncertain tax positions in tax expense in the Consolidated Statements of Operations and Comprehensive Income. The Company recognized approximately $ 0.4 million of net tax benefit, $ 1.6 million of net tax expense and $ 0.8 million of tax benefit for interest and penalties during the year ended December 31, 2025, 2024 and 2023, respectively. The Company had approximately $ 3.2 million, $ 3.6 million, and $ 2.0 million of accrued interest and penalties as of December 31, 2025, 2024, and 2023, respectively.
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The Company is currently under IRS examination for the 2022 and 2023 tax years. Tax years prior to 2021 are generally not subject to examination by the IRS. For state tax returns, the Company is generally not subject to income tax examinations for tax years prior to 2021. With respect to jurisdictions outside the United States, the Company is generally not subject to examination for tax years prior to 2015.

Note 17: Changes in Accumulated Other Comprehensive Loss

Amounts comprising the Company's accumulated other comprehensive loss and reclassifications were as follows (in millions):

  Currency Translation Adjustments Effects of Cash Flow Hedges Total
Balance December 31, 2023 $ ( 52.5 ) $ 7.3   $ ( 45.2 )
Other comprehensive income (loss) prior to reclassifications ( 3.4 ) 8.1   4.7  
Amounts reclassified from accumulated other comprehensive loss —   ( 21.9 ) ( 21.9 )
Net current period other comprehensive loss (1)
( 3.4 ) ( 13.8 ) ( 17.2 )
Balance December 31, 2024 ( 55.9 ) ( 6.5 ) ( 62.4 )
Other comprehensive income prior to reclassifications 0.4   3.0   3.4  
Amounts reclassified from accumulated other comprehensive income —   3.5   3.5  
Net current period other comprehensive income (1)
0.4   6.5   6.9  
Balance December 31, 2025 $ ( 55.5 ) $ —   $ ( 55.5 )

(1) Effects of cash flow hedges are net of $ 1.9 million of tax benefit and $ 2.0 million of tax expense for the years ended December 31, 2025 and 2024, respectively.

Amounts reclassified from accumulated other comprehensive loss to the specific caption within the Consolidated Statements of Operations and Comprehensive Income were as follows (in millions):

Year ended December 31,
  2025 2024 2023 To caption
Cash flow hedges $ 3.5   $ ( 10.0 ) $ ( 0.1 ) Cost of revenue
Interest rate swaps —   —   ( 13.8 ) Interest expense
Interest rate swaps terminations —   ( 11.9 ) ( 6.9 ) Other (income) expense, net
Total $ 3.5   $ ( 21.9 ) $ ( 20.8 )

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Note 18: Supplemental Disclosures

Supplemental Disclosure of Cash Flow Information

Certain of the Company's cash and non-cash activities were as follows (in millions):

Year ended December 31,
2025 2024 2023
Non-cash investing activities:
Capital expenditures in accounts payable and other long-term liabilities $ 84.1   $ 210.4   $ 303.0  
Non-cash deposit for equipment 26.5   —   —  
Contingent consideration in accrued expense and other long-term liabilities related to the Vcore acquisition 109.9   —   —  
Operating ROU assets obtained in exchange of lease liabilities 14.6   53.8   25.8  
Finance ROU assets obtained in exchange of lease liabilities —   0.5   —  

Cash paid for:

     Interest expense $ 58.3   $ 62.7   $ 73.2  
     Income taxes (1) :
347.5   428.2  
Federal income taxes 68.3  
State income taxes 10.3  
Foreign income taxes:
South Korea 25.5  
Singapore 15.5  
China 14.8  
Other Foreign Jurisdictions 33.2  
Operating lease payments in operating cash flows 56.2   44.2   45.7  

(1) The Company adopted ASU 2023-09 on a prospective basis. As such, cash paid for income taxes for the years ended December 2024 and 2023 were not adjusted to reflect current year presentation.

Following is a reconciliation of the captions in the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows (in millions):

As of December 31,
2025 2024 2023
Consolidated Balance Sheets:
Cash and cash equivalents $ 2,147.6   $ 2,691.3   $ 2,483.0  
Restricted cash (included in other current assets) 1.4   2.1   2.0  

Cash, cash equivalents and restricted cash in Consolidated Statements of Cash Flows $ 2,149.0   $ 2,693.4   $ 2,485.0  

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

The table below details the activity of the valuation allowance against assets for the years ended December 31, 2025, 2024 and 2023 (in millions):

Description Balance at Beginning of Period Charged (Credited) to Income Charged to Other Accounts Deductions/Write-offs Balance at End of Period

Allowance for deferred tax assets
Year ended December 31, 2023 $ 152.4   $ 0.4   $ 0.2   (1) $ ( 2.7 ) (2) $ 150.3  
Year ended December 31, 2024 150.3   5.1   68.6   (3) ( 7.8 ) (2) 216.2  
Year ended December 31, 2025 216.2   10.1   6.4   (3) ( 25.6 ) (4) 207.1  

(1) Primarily represents the effects of cumulative translation adjustments.
(2) Primarily relates to the expiration of Japan NOLs. See Note 16: ''Income Taxes'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K.
(3) Primarily relates to the valuation allowance recorded against Korea Investment Tax Credits, accounted for under the deferral method. The benefit of the ITC was recognized as a reduction in the carrying value of the related assets. In addition to the ITC, this amount was partially offset by cumulative translation adjustments. See Note 16: ''Income Taxes'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K.
(4) Primarily relates to the expiration of Malaysia tax credits. See Note 16: ''Income Taxes'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K.

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