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Income Tax Expense
 12 Months Ended
Jun. 27, 2025
Income Tax Disclosure [Abstract]  
Income Tax Expense Income Tax Expense
Income (Loss) Before Taxes
The domestic and foreign components of Income (loss) before taxes were as follows:
202520242023
(in millions)
Foreign$(1,348)$(543)$(2,253)
Domestic(131)40 251 
Income (loss) before taxes$(1,479)$(503)$(2,002)
Income Tax Expense
The components of income tax expense were as follows:
202520242023
(in millions)
Current:
Foreign$165 $158 $138 
U.S. - Federal7 20 76 
U.S. - State2 7 8 
174 185 222 
Deferred:
Foreign(13)7 (15)
U.S. - Federal1 (19)(65)
U.S. - State— (4)(1)
(12)(16)(81)
Income tax expense$162 $169 $141 
H.R.1, more widely known as the One Big Beautiful Bill Act, was recently signed into law on July 4, 2025. It reversed the requirement for capitalization of U.S. research and development expenditures that came into law under the Tax Cuts and Jobs Act of 2017, but the mandatory requirement of capitalization of foreign research and development expenditures remains. The tax rates for income earned by our foreign subsidiaries will also be changed under H.R. 1. Depending on the Company’s operating results, these changes can materially impact the Company’s effective tax rate and reduce its operating cash flows. As H.R.1 was enacted after our fiscal year 2025, its impact on the tax provision will be reflected in fiscal year 2026.
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, which contained significant changes to laws related to tax, climate, energy, and health care. The tax measures include, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.0 billion. The Company does not expect to be subject to the CAMT of 15% for 2025 as its average annual AFSI did not exceed $1.0 billion for the preceding three-year period.
On December 20, 2021, the Organization for Economic Co-operation and Development G20 (“OECD/G20”) Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two (“Pillar Two”). Several non-U.S. jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of Pillar Two, some of which are effective for the Company in 2025. For 2025, the Company currently expects to be able to meet certain transitional safe harbors and does not expect any material Pillar Two taxes. As more jurisdictions adopt this legislation in 2026, there may be material increases in the Company’s future tax obligations in certain jurisdictions.
The following table presents the Company’s Income tax expense and the effective tax rate:
202520242023
(in millions)
Income (loss) before taxes$(1,479)$(503)$(2,002)
Income tax expense162 169 141 
Effective tax rate(11)%(34)%(7)%
The relative mix of earnings and losses by jurisdiction, the goodwill impairment, the foreign income inclusion, credits, and tax holidays in Malaysia that will expire at various dates during years 2028 through 2031 resulted in decreases to the effective tax rate below the U.S. statutory rate for the year ended June 27, 2025.
The primary drivers of the difference between the effective tax rate for the years ended June 28, 2024 and the U.S. federal statutory rate of 21% are the relative mix of earnings and losses by jurisdiction, the foreign income inclusion, credits, and tax holidays in Malaysia.
Deferred Taxes
Temporary differences and carryforwards, which give rise to a significant portion of deferred tax assets and liabilities were as follows:
June 27,
2025		June 28,
2024
(in millions)
Deferred tax assets:
Sales related reserves and accrued expenses not currently deductible$38 $$45 
Accrued compensation and benefits not currently deductible2934
Net operating loss carryforward4119
Business credit carryforward44— 
Long-lived assets2215
Interest and hedging costs not currently deductible1567
Other1527
Total deferred tax assets204 207 
Deferred tax liabilities:
Long-lived assets(7)(3)
Unremitted Earnings of Certain Non-US Entities(77)(86)
Other(18)(10)
Total deferred tax liabilities(102)(99)
Valuation allowances(61)(27)
Deferred tax assets, net$41 $81 
The decrease in the net deferred tax assets is attributable primarily to a decrease in hedging costs not currently deductible and is based on the Company’s position in its foreign exchange contracts. The Company continues to assess and adjust its valuation allowance based on operating results and market conditions. After weighing both the positive and negative evidence available, including, but not limited to, earnings history, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets, the Company determined that it is able to realize its deferred tax assets except for certain loss and credit carryforwards.
The Company is permanently reinvested with respect to certain foreign earnings. There is no unrecognized deferred tax liability associated with the repatriation of these foreign undistributed earnings as it can be achieved without additional federal tax consequences.
Effective Tax Rate
Reconciliation of the U.S. federal statutory rate to the Company’s effective tax rate is as follows:
202520242023
(in millions)
U.S. federal statutory rate21 %21 %21 %
Tax rate differential on international incomes(1)(42)(29)
Foreign withholding tax(1)(11)(2)
Change in valuation allowance— (2)— 
Tax effect of U.S foreign income inclusion(7)(1)— 
Tax effect of U.S. foreign derived intangible income1 2 3 
Tax effect of permanent differences— (2)(1)
Tax effect of goodwill impairment(26)— (7)
Tax effect of intangible assets— 1 4 
Tax rate change— 1 — 
Unremitted earnings of certain non-U.S. entities(2)2 — 
Change in uncertain tax positions(1)(12)1 
Return to provision adjustment1 (1)— 
Foreign income tax credits4 5 1 
R&D tax credits1 3 1 
Federal audit settlements— 3 — 
Other(1)(1)1 
Effective income tax rate(11)%(34)%(7)%
Tax Holidays and Carryforwards
A substantial portion of the Company’s manufacturing operations in Malaysia operate under various tax holidays and tax incentive programs, which will expire in whole or in part at various dates during 2028 through 2031. Certain tax holidays and tax incentive programs may be extended if specific conditions are met.
The net impact of these tax holidays and tax incentives was an increase to the Company’s net earnings by $82 million, or $0.56 per share, in 2025. The Company was at loss in Malaysia during 2024 and 2023. The tax incentives had no impact on the Company’s net earnings.
As of June 27, 2025, the Company had $38 million of state tax credit carryforwards that do not expire.
As of June 27, 2025, the Company had varying amounts of NOL carryforwards, totaling $2.1 billion, that do not expire or, if not used, expire in various years beginning in 2028, depending on the country. The majority of the NOL carryforwards reside in Malaysia.
Uncertain Tax Positions
With the exception of certain unrecognized tax benefits that are directly associated with the tax position taken, unrecognized tax benefits are presented gross in the Consolidated Balance Sheets.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding accrued interest and penalties for the year ended June 27, 2025:
202520242023
(in millions)
Unrecognized tax benefit, beginning balance$47 $25 $17 
Gross increases related to prior year tax positions 6 10 1 
Gross increases related to current year tax positions 17 15 10 
Gross decrease related to prior year tax positions(1)(3)(3)
Gross increase related to transfer from Western Digital Corporation78 — — 
Gross decrease related to settlement(7)— — 
Unrecognized tax benefit, ending balance$140 $47 $25 
As of June 27, 2025 and June 28, 2024, the liability for unrecognized tax benefits (excluding accrued interest and penalties) was $140 million and $47 million, respectively. Interest and penalties related to unrecognized tax benefits are recognized in liabilities recorded for uncertain tax positions and are recorded in the provision for income taxes. Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of June 27, 2025 and June 28, 2024 was $11 million and $9 million, respectively.
The Company files U.S. federal, U.S. state, and foreign tax returns. Its U.S. federal and state tax returns for fiscal year 2025 are initial filings. The Company is currently subject to, or could become subject to, tax authority examinations in various jurisdictions for previously filed returns dating back as early as 2009.
The Company believes that an adequate provision has been made for any adjustments that may result from any other tax examinations. However, the outcome of such tax examinations cannot be predicted with certainty. If any issues addressed in the Company’s tax examinations are resolved in a manner inconsistent with management’s expectations, the Company may be required to adjust its provision for income taxes in the period in which such resolution occurs. As of June 27, 2025, it was not possible to estimate the amount of change, if any, in the unrecognized tax benefits that is reasonably possible within the next twelve months. Any significant change in the amount of the Company’s liability for unrecognized tax benefits would most likely result from additional information resulting from the examination of the Company’s tax returns.