Annual report [Section 13 and 15(d), not S-K Item 405]

INCOME TAXES

v3.26.1
INCOME TAXES
 12 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of income before income taxes were as follows:
Year Ended June 30,
(In thousands) 2026 2025 2024
Domestic income before income taxes $ 3,629,727  $ 3,070,097  $ 1,997,090 
Foreign income before income taxes 1,976,198  1,574,351  1,192,942 
Total income before income taxes $ 5,605,925  $ 4,644,448  $ 3,190,032 
The provision for income taxes was comprised of the following:
(In thousands) Year Ended June 30,
2026 2025 2024
Current:
Federal $ 330,215  $ 624,002  $ 395,876 
State 9,621  21,161  10,737 
Foreign 348,301  182,448  160,401 
688,137  827,611  567,014 
Deferred:
Federal 80,690  (222,907) (110,686)
State 952  (5,433) (2,770)
Foreign 5,375  (16,466) (25,422)
87,017  (244,806) (138,878)
Provision for income taxes $ 775,154  $ 582,805  $ 428,136 
The significant components of deferred income tax assets and liabilities were as follows:
(In thousands) As of June 30,
2026 2025
Deferred tax assets:
Tax credits and net operating losses $ 364,290  $ 327,618 
Capitalized R&D expenses 361,467  447,043 
Depreciation and amortization 220,997  190,256 
Inventory reserves 144,298  135,121 
Employee benefits accrual 125,406  106,746 
Non-deductible reserves 63,679  69,790 
Unearned revenue 52,454  48,372 
SBC 19,978  18,835 
Other 17,936  43,843 
Gross deferred tax assets 1,370,505  1,387,624 
Valuation allowance (356,639) (310,599)
Net deferred tax assets $ 1,013,866  $ 1,077,025 
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries not indefinitely reinvested $ (411,657) $ (360,544)
Deferred profit (31,064) (41,378)
Unrealized gain on investments (7,569) (16,278)
Total deferred tax liabilities (450,290) (418,200)
Total net deferred tax assets $ 563,576  $ 658,825 
Our deferred tax assets for the years ended June 30, 2026 and 2025 reflect the impact of the mandatory capitalization of research and experimental expenditures as required by the 2017 Tax Cuts and Jobs Act, which was subsequently modified by the OBBBA to require capitalization of only foreign research expenses.
As of June 30, 2026, we had U.S. federal, state and foreign net operating loss (“NOL”) carry-forwards of $1.3 million, $10.0 million and $83.2 million, respectively. We also had foreign capital loss carry-forwards of $1.7 million as of June 30, 2026. The U.S. federal NOL carry-forwards will expire at various dates from 2027 through 2035. The utilization of NOLs created by acquired companies is subject to annual limitations under Section 382 of the Internal Revenue Code. However, it is not expected that such annual limitation will significantly impair the realization of these NOLs. The state NOLs will expire at various dates beginning in 2031 through 2036. Foreign NOLs and capital loss carry-forwards will be carried forward indefinitely. State credits of $440.8 million will also be carried forward indefinitely.
The net deferred tax asset valuation allowance was $356.6 million and $310.6 million as of June 30, 2026 and 2025, respectively. The change was primarily due to an increase in the valuation allowance related to state credit carry-forwards generated in the fiscal year ended June 30, 2026. The valuation allowance is based on our assessment that it is more likely than not that certain deferred tax assets will not be realized in the foreseeable future. Of the valuation allowance as of June 30, 2026, $355.9 million was related to federal and state credit carry-forwards. The remainder of the valuation allowance was related to state NOL carry-forwards.
 As of June 30, 2026, we intend to indefinitely reinvest $185.9 million of cumulative undistributed earnings held by certain non-U.S. subsidiaries. If these undistributed earnings were repatriated to the U.S., the potential deferred tax liability associated with the undistributed earnings would be approximately $39 million.
We benefit from tax holidays in Singapore where we manufacture certain of our products. These tax holidays are on approved investments. The tax holidays were amended and renewed under substantially similar terms as of July 1, 2025, and are scheduled to expire through December 2032. We are in compliance with all the terms and conditions of the tax holidays as of June 30, 2026. The net impact of these tax holidays was to decrease our tax expense by $120.9 million, $198.6 million, and $159.4 million in the fiscal years ended June 30, 2026, 2025, and 2024, respectively. The benefits of the tax holidays on diluted net income per share were $0.09, $0.15 and $0.12 for the fiscal years ended June 30, 2026, 2025, and 2024, respectively.
Beginning in the fiscal year ended June 30, 2026, we adopted ASU 2023-09 on a prospective basis. The reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate pursuant to the disclosure requirements of ASU 2023-09 for the fiscal year ended June 30, 2026 was as follows:
(Dollar amounts in thousands) Year Ended June 30, 2026
Federal statutory income tax rate $ 1,177,244  21.0  %
State and local income taxes, net of federal income tax effect(1)
8,553  0.2  %
Effect of cross border tax laws
FDII (222,284) (4.0) %
Other 17,952  0.3  %
Tax credits
R&D credit (59,203) (1.0) %
Other (9,043) (0.2) %
Nontaxable or nondeductible items 12,380  0.2  %
Changes in unrecognized tax benefits (8,439) (0.2) %
Other adjustments
SBC (72,329) (1.3) %
Other (4,499) (0.1) %
Foreign tax effects
Singapore
Tax incentives (95,804) (1.7) %
Other(2)
(38,928) (0.7) %
China 48,337  0.9  %
Other jurisdictions 21,217  0.4  %
Effective income tax rate $ 775,154  13.8  %
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(1)Oregon makes up the majority of the effect of the state and local income tax category.
(2)Includes foreign tax rate differential.
The reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate was as follows:
Year Ended June 30,
2025 2024
Federal statutory rate 21.0  % 21.0  %
GILTI 2.9  % 3.7  %
Goodwill impairment 1.1  % 1.7  %
Net change in tax reserves 0.3  % 1.1  %
State income taxes, net of federal benefit 0.3  % 0.3  %
FDII (6.6) % (5.9) %
Effect of foreign operations taxed at various rates (5.1) % (6.6) %
R&D tax credit (1.1) % (1.6) %
Other (0.3) % (0.3) %
Effective income tax rate 12.5  % 13.4  %
Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended June 30, 2026 was as follows:
(In thousands) Year Ended June 30, 2026
Federal $ 509,387 
State 12,426 
Foreign
China 91,214 
Other 168,382 
Cash paid for income taxes, net of refunds received $ 781,409 
A reconciliation of gross unrecognized tax benefits was as follows:
Year Ended June 30,
(In thousands) 2026 2025 2024
Unrecognized tax benefits at the beginning of the year $ 258,604  $ 245,707  $ 213,092 
Increases for tax positions taken in current year 38,538  35,429  40,209 
Increases for tax positions taken in prior years 10,685  10,862  23,291 
Increases (decreases) for settlements with taxing authorities 1,808  (4,687) — 
Decreases for tax positions taken in prior years (31,840) (11,607) (26,766)
Decreases for lapsing of statutes of limitations (20,028) (17,100) (4,119)
Unrecognized tax benefits at the end of the year $ 257,767  $ 258,604  $ 245,707 
The amounts of unrecognized tax benefits that would impact the effective tax rate were $237.7 million, $244.9 million and $244.6 million as of June 30, 2026, 2025 and 2024, respectively. The amounts of interest and penalties recognized during the years ended June 30, 2026, 2025 and 2024 were expenses (benefits) of ($4.5 million), $9.0 million and $8.3 million, respectively. Our policy is to include interest and penalties related to unrecognized tax benefits within Other expense (income), net. The amounts of interest and penalties accrued as of June 30, 2026 and 2025 were $45.8 million and $50.1 million, respectively.
In the normal course of business, we are subject to examination by tax authorities throughout the world. We are subject to U.S. federal income tax examinations for all years beginning from the fiscal year ended June 30, 2023 and are under U.S. federal income tax examination for the fiscal year ended June 30, 2018. We are subject to state income tax examinations for all years beginning from the fiscal year ended June 30, 2022. We are also subject to examinations in other major foreign jurisdictions, including Singapore and Israel, for all years beginning from the fiscal year ended June 30, 2019. We have completed the audit in Israel for calendar year ended December 31, 2019 to the fiscal year ended June 30, 2022. We believe our current unrecognized tax benefits are sufficient.
Legislative Developments
In January 2026, the Organization for Economic Co-operation and Development (“OECD”) introduced two new Pillar Two safe harbors which are expected to be available for fiscal years beginning on or after January 1, 2026: (1) the Side-by-Side Safe Harbor (“SBSSH”) for multinational entities headquartered in the jurisdictions with both eligible domestic and worldwide tax systems, and (2) the Ultimate Parent Entity (“UPE”) Safe Harbor for multinational entities with a UPE located in a jurisdiction that has only an eligible domestic tax system. The U.S. is an eligible jurisdiction for the SBSSH. We are not expecting a material tax impact to our Consolidated Financial Statements when countries begin to enact legislation to adopt the SBSSH provisions.
In December 2025, Israel adopted the Pillar Two Global Anti-Base Erosion (“GloBE”) rules under the Multinational Enterprise (“Minimum Tax”) Act, which includes a domestic minimum tax of 15% that will be effective for us beginning in the fiscal year ending June 30, 2027. The Pillar Two GloBE rules are deemed an alternative minimum tax so we did not recognize any deferred taxes for the estimated effects of the future minimum tax under current GAAP. We are not expecting a material tax impact to our Consolidated Financial Statements.
On July 4, 2025, President Trump signed into law the OBBBA. The OBBBA provides for several permanent changes to the U.S. tax code among other items, including modifying the GILTI and FDII rules from the Tax Cuts and Jobs Act; restoring full expensing for domestic research expenses; and reinstating 100% bonus depreciation provisions. ASC 740, Income Taxes, requires that the tax effects of changes in tax rates and laws be recognized in the period in which the legislation is enacted. The OBBBA provisions resulted in an increase to our cash flows from operating activities and an increase to our effective tax rate in our fiscal year ended June 30, 2026. The effective tax rate changes have been reflected in the Consolidated Financial Statements for the fiscal year ended June 30, 2026, and did not have a material impact to our Consolidated Financial Statements.
In November 2024, Singapore adopted the Pillar Two GloBE rules under the Minimum Tax Act, which includes a domestic minimum tax of 15% that is effective for us in the fiscal year ended June 30, 2026. There was no material impact to our Consolidated Financial Statements during the fiscal year ended June 30, 2026. The Pillar Two GloBE rules are deemed an alternative minimum tax so we did not recognize any deferred taxes for the estimated effects of the future minimum tax under current GAAP.
California Governor Newsom approved the 2024-25 California State Budget on June 27, 2024, which includes a provision to suspend the use of all NOLs and limits the use of R&D tax credits to $5 million for tax years 2024 through 2026. On June 29, 2026, Governor Newsom approved the 2026-27 California State Budget, which extends the $5 million limitation through tax years beginning before January 1, 2030. Effective for tax years beginning on or after January 1, 2030, the business credit limitation will apply permanently and it will equal the greater of 70% of the total taxes imposed or $5 million per tax year. There was no material tax impact to our Consolidated Financial Statements in our fiscal years ended June 30, 2026 and June 30, 2025 from the California State Budget provisions.
President Biden signed into law the CHIPS and Science Act of 2022 (“CHIPS Act,” where “CHIPS” stands for Creating Helpful Incentives to Produce Semiconductors) on August 9, 2022. The CHIPS Act provides for various incentives and tax credits among other items, including the Advanced Manufacturing Investment Credit (“AMIC”), which equals 25% of qualified investments in an advanced manufacturing facility that is placed in service after December 31, 2022. There was no material tax impact to our Consolidated Financial Statements from the AMIC provision.
President Biden also signed into law the IRA on August 16, 2022. The IRA has several provisions including a 15% corporate alternative minimum tax (“CAMT”) for certain large corporations that have at least an average of $1.0 billion of adjusted financial statement income over a consecutive three-tax-year period. There was no material tax impact to our Consolidated Financial Statements in our fiscal year ended June 30, 2026 from the CAMT provision.
In December 2021, the OECD’s Inclusive Framework on Base Erosion and Profit Shifting released GloBE rules under Pillar Two. For the countries that have enacted legislation to adopt the Pillar Two GloBE rules, the provision requiring a 15% minimum effective tax rate on income earned in the respective countries and a global 15% minimum effective top-up tax are effective for us beginning in our fiscal year ended June 30, 2025. There was no material tax impact to our Consolidated Financial Statements from these Pillar Two provisions during our fiscal years ended June 30, 2026 and June 30, 2025.