Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2025

Notes to Financial Statements

Income Tax Disclosure [Text Block]

13.  INCOME TAXES

The components of income before income taxes were as follows for the periods presented (in thousands):

	Year Ended December 31,
	2025			2024			2023
U.S.	$	(118,484	)	$	(46,263	)	$	(15,066	)
Foreign		884,700			619,175			520,907
Income before income taxes	$	766,216		$	572,912		$	505,841

The components of the income tax expense (benefit), net were as follows for the periods presented (in thousands):

	Year Ended December 31,
	2025			2024 (As Restated)			2023
Current:
Federal	$	19,428		$	72,576		$	61,064
State		1,345			348			4,257
Foreign		84,284			11,155			5,702
Deferred:
Federal		(314	)		2,773			(1,705	)
State		(212	)		160			(744	)
Foreign		40,202			(1,106,158	)		9,893
Income tax expense (benefit), net	$	144,733		$	(1,019,146	)	$	78,467

Beginning in 2025 annual reporting, we adopted ASU 2023-09 prospectively. Refer to Note 1, Summary of Significant Accounting Policies for additional details on the adoption of ASU 2023-09. A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows (in thousands, except percentages):

	Year Ended December 31, 2025
	Amount			Percent
U.S. federal statutory income tax rate	$	160,905			21.0	%
Domestic federal
Tax credits
Research credits		(19,491	)		(2.5	)
Nontaxable and nondeductible items, net
Share-based payments		39,963			5.2
Other		4,064			0.5
Cross-border tax laws
Global intangible low-taxed income		22,514			2.9
Subpart F income		3,541			0.5
Effects of changes in tax laws or rates enacted in the current period		-			-
Changes in valuation allowances		-			-
Other		508			0.1
Domestic state and local income taxes, net of federal effect (a)		(67	)		-
Foreign tax effects
Switzerland
Statutory income tax rate differential		(106,770	)		(13.9	)
Cantonal taxes, net of federal effect		59,864			7.8
Nontaxable and nondeductible items, net		(21,381	)		(2.8	)
Other		3,499			0.4
Other foreign jurisdictions		(4,069	)		(0.5	)
Worldwide changes in unrecognized tax benefits		1,653			0.2
Effective tax rate	$	144,733			18.9	%

(a) State taxes in Arizona, California and Florida make up the majority (greater than 50%) of the tax effect in this category.

	Year Ended December 31,
	2024 (As Restated)			2023
U.S. statutory federal tax rate		21.0	%		21.0	%
Foreign income tax at lower rates		(21.4	)		(21.9	)
U.S. tax impact of foreign earnings and losses		15.1			14.5
Changes in valuation allowance		623.8			2.9
Stock-based compensation		1.9			2.2
Return to Provision True Up Adjustment		(0.1	)		(2.0	)
Tax attributes, net of reserves		(210.4	)		(1.3	)
Effects of intercompany transactions		(608.5	)		-
Other adjustments		0.7			0.1
Effective tax rate		(177.9	)%		15.5	%

The amount of cash paid for income taxes (net of refunds) is as follows (in thousands):

	Year Ended December 31,
	2025
U.S. federal	$	16,162
State and local		940
Foreign
Switzerland		72,005
Other foreign		5,954
Total foreign		77,959
Total income taxes paid, net	$	95,061

The budget reconciliation bill H.R.1 (“H.R.1 Act”) signed into law on July 4, 2025, makes permanent certain expiring provisions of the 2017 Tax Cuts and Jobs Act and makes modifications to the existing tax framework. The primary impact for the current year is the immediate tax expensing of prior year unamortized and current year domestic R&D expenses and accelerated depreciation in the year ended December 31, 2025. The Company’s tax provision for the year ended December 31, 2025 includes the estimated impact of the H.R.1 Act.  

In 2024, one of the Company’s foreign subsidiaries was granted a ten-year tax incentive, beginning in tax year 2025. A deferred tax benefit of $1.1 billion, net of $0.2 billion of deferred tax liability and $0.1 billion of valuation allowance, was recorded during the year ended December 31, 2024 to reflect the estimated future reductions in cash tax paid in that jurisdiction associated with the incentive. The deferred tax asset was $1.1 billion, net of $0.2 billion of deferred tax liability and $0.1 billion of valuation allowance, as of December 31, 2025.

In December 2024, the Company completed an intercompany transaction that resulted in one of its foreign subsidiaries recording a step up in the tax basis of intangible assets of $23.2 billion. This resulted in a deferred tax difference between the U.S. GAAP basis and local tax basis of the specified intangibles. The Company does not expect to realize the deferred tax asset for U.S. GAAP purposes; therefore, the Company has recorded a full valuation allowance as of December 31, 2024 and December 31, 2025.

In January 2025, the OECD released new Administrative Guidance on the application of the Global Anti-Base Erosion (“GloBE”) Model Rules. The Company will continue to evaluate the impact of this release or of other prospective guidance on its future global tax provision. 

The components of net deferred tax assets consist of the following (in thousands):

	December 31,
	2025			2024 (As Restated)
Deferred tax assets:
Tax attributes	$	1,205,863		$	1,254,928
Depreciation and amortization		3,482,782			3,465,739
Stock-based compensation		3,977			3,432
Deferred compensation		10,920			11,202
Other expenses not currently deductible		11,357			9,505
Deferred tax assets, gross		4,714,899			4,744,806
Valuation allowance		(3,617,562	)		(3,608,471	)
Deferred tax assets, net of valuation allowance		1,097,337			1,136,335
Deferred tax liabilities:
Undistributed foreign earnings		(781	)		(953	)
Other expenses currently deductible		(4,153	)		(3,184	)
Deferred tax liabilities		(4,934	)		(4,137	)
Net deferred tax assets	$	1,092,403		$	1,132,198
Reported as:
Deferred tax assets, net	$	1,182,883		$	1,225,565
Deferred tax liabilities		(90,480	)		(93,367	)
Net deferred tax assets	$	1,092,403		$	1,132,198

GILTI:

The Company accounts for GILTI as a period cost. 

Valuation Allowance:

The Company periodically evaluates its deferred tax assets, including a determination of whether a valuation allowance is necessary, based upon its ability to utilize the assets using a more likely than not analysis. The realizability of the Company’s most significant deferred tax asset is dependent on its ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. As of December 31, 2025 and 2024, the Company has evaluated the realization of its deferred tax assets and recorded a valuation allowance for assets that do not meet the more-likely-than-not recognition threshold.

A reconciliation of the beginning and ending balance of valuation allowances was as follows for the periods presented (in thousands):

Period	Balance at Beginning of Period		Additions		Reductions			Balance at End of Period
Year ended December 31, 2023	$	20,321	$	15,405	$	(718	)	$	35,008
Year ended December 31, 2024 (As Restated)	$	35,008	$	3,575,542	$	(2,079	)	$	3,608,471
Year ended December 31, 2025	$	3,608,471	$	21,618	$	(12,527	)	$	3,617,562

The additions in the year ended December 31, 2024 were primarily the result of the step up in tax basis of intangible assets and a tax incentive received by one of our foreign subsidiaries. The Company has evaluated the deferred tax assets generated by each of these events and recorded a valuation allowance for any deferred tax assets that are not realizable on a more-likely-than-not basis.

Undistributed Earnings of Subsidiaries:

The Company has analyzed its global working capital and cash requirements, and has determined that it plans to repatriate cash from a foreign subsidiary on an ongoing basis to fund its future U.S.-based expenditures and dividends. For the years ended December 31, 2025 and 2024, the Company repatriated $275.0 million and $642.0 million, respectively, with immaterial tax impact, from this foreign subsidiary. 

For all other foreign subsidiaries, the Company expects to indefinitely reinvest undistributed earnings to fund their operations and research and development. An actual repatriation of the undistributed earnings could be subject to additional foreign withholding taxes and U.S. state taxes. Determination of the unrecognized state and withholding deferred tax liability is not practicable at this time due to the complexities associated with the hypothetical calculation.

Other Income Tax Provision Matters

As of December 31, 2025, the state net operating loss carryforwards for income tax purposes were $4.3 million, which will expire beginning in 2031. As of December 31, 2025, the Company’s foreign net operating loss carryforwards for income tax purposes in non-U.S. jurisdictions were $19.2 million, $1.8 million of which can be carried forward indefinitely, while $17.4 million will begin to expire in 2029. 

As of December 31, 2025, the Company had no R&D tax credit carryforwards for federal income tax purposes. As of December 31, 2025, the Company had $48.2 million for state income tax purposes, which can be carried forward indefinitely.

In the event of a change in ownership, as defined under federal and state tax laws, the Company’s net operating loss and tax credit carryforwards could be subject to annual limitations. The annual limitations could result in the expiration of the net operating loss and tax credit carryforwards prior to utilization.

As of December 31, 2025, the Company had $81.1 million of unrecognized tax benefits, $66.9 million of which would affect its effective tax rate if recognized after considering the valuation allowance. As of December 31, 2024, the Company had $74.4 million of unrecognized tax benefits, $58.9 million of which would affect its effective tax rate if recognized after considering the valuation allowance. 

A reconciliation of the gross unrecognized tax benefits was as follows (in thousands): 

Balance as of January 1, 2023	$	49,277
Increase for tax position of current year		14,108
Increase for tax position of prior year		2,209
Decrease due to settlement with tax authorities		(1,926	)
Decrease due to lapse of statute of limitation		(1,008	)
Balance as of December 31, 2023		62,660
Increase for tax position of current year		18,125
Increase for tax position of prior year		2,180
Decrease due to lapse of statute of limitation		(8,579	)
Balance as of December 31, 2024		74,386
Increase for tax position of current year		17,411
Decrease for tax position of prior year		(1,374	)
Decrease due to lapse of statute of limitation		(9,359	)
Balance as of December 31, 2025	$	81,064

The Company recognizes interest and penalties, if any, related to uncertain tax positions in its income tax provision. As of December 31, 2025 and 2024, the Company has $8.2 million and $6.3 million, respectively, of accrued interest related to uncertain tax positions, which were recorded in income tax liabilities on the Consolidated Balance Sheets.

  

The Company currently has reduced tax rates in its subsidiaries in Chengdu and Hangzhou, China through 2025 for performing R&D activities.

Income Tax Examination

The Company is subject to examination of its income tax returns by the U.S. IRS and other tax authorities. In general, the tax years for 2022 and forward are open for examination for U.S. federal and state income tax purposes.