Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cummins Inc. and its consolidated subsidiaries are hereinafter sometimes referred to as “Cummins,” “we,” “our” or “us.”

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

Certain parts of this quarterly report contain forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those that are based on current expectations, estimates and projections about the industries in which we operate and management’s beliefs and assumptions. Forward-looking statements are generally accompanied by words such as “anticipates,” “expects,” “forecasts,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “could,” “should,” “may” or words of similar meaning. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which we refer to as “future factors,” which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some future factors that could cause our results to differ materially from the results discussed in such forward-looking statements are discussed below and shareholders, potential investors and other readers are urged to consider these future factors carefully in evaluating forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Future factors that could affect the outcome of forward-looking statements include the following:

GOVERNMENT REGULATION

• any adverse consequences resulting from entering into agreements with the U.S. Environmental Protection Agency (EPA), California Air Resources Board (CARB), the Environmental and Natural Resources Division of the U.S. Department of Justice (DOJ) and the California Attorney General's Office to resolve certain regulatory civil claims regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S., which became final and effective in April 2024, (collectively, the Settlement Agreements), including required additional mitigation projects, adverse reputational impacts and potential resulting legal actions;

• increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world;

• evolving environmental and climate change legislation and regulatory initiatives;

• any adverse consequences from changes in tariffs and other trade disruptions;

• changes in international, national and regional trade laws, regulations and policies;

• emissions deregulation;

• changes in taxation;

• global legal and ethical compliance costs and risks;

• future bans or limitations on the use of diesel-powered products;

BUSINESS CONDITIONS / DISRUPTIONS

• raw material, transportation and labor price fluctuations and supply shortages;

• aligning our capacity and production with our demand;

• the actions of, and income from, joint ventures and other investees that we do not directly control;

• large truck manufacturers' and original equipment manufacturers' customers discontinuing outsourcing their engine supply needs or experiencing financial distress, or change in control;

PRODUCTS AND TECHNOLOGY

• product recalls;

• variability in material and commodity costs;

• the development of new technologies that reduce demand for our current products and services or not successfully developing new technologies and products to effectively address the energy transition;

• lower than expected acceptance of new or existing products or services;

• product liability claims;

• our sales mix of products;

GENERAL

• climate change, global warming, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation designed to address climate change;

• our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions, divestitures or exiting the production of certain product lines or product categories and related uncertainties of such decisions;

• increasing interest rates;

• challenging markets for talent and ability to attract, develop and retain key personnel;

• exposure to potential security breaches or other disruptions to our information technology (IT) environment and data security;

• the use of artificial intelligence (AI) in our business and in our products, services and features, and challenges with properly managing its use;

• political, economic and other risks from operations among, between and within numerous countries including political, economic and social uncertainty and the evolving globalization of our business;

• competitor activity;

• increasing competition, including increased global competition among our customers in emerging markets;

• failure to meet sustainability expectations or standards, or achieve our sustainability goals;

• labor relations or work stoppages;

• foreign currency exchange rate changes;

• the performance of our pension plan assets and volatility of discount rates;

• the price and availability of energy;

• continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business; and

• other risk factors described in Part II, Item 1A in this quarterly report and our 2025 Form 10-K, Part I, Item 1A, under the caption “Risk Factors.”

Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this quarterly report and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

ORGANIZATION OF INFORMATION

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) was prepared to provide the reader with a view and perspective of our business through the eyes of management and should be read in conjunction with our Management's Discussion and Analysis of Financial Condition and Results of Operations section of our 2025 Form 10-K. Our MD&A is presented in the following sections:

• EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS

• RESULTS OF OPERATIONS

• REPORTABLE SEGMENT RESULTS

• OUTLOOK

• LIQUIDITY AND CAPITAL RESOURCES

• APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

• RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS

Overview

We are a global power leader committed to powering a more prosperous world. Since 1919, we have delivered innovative solutions that move people, goods and economies forward. Our five reportable segments - Engine, Components, Distribution, Power Systems and Accelera - offer a broad portfolio, including advanced diesel, electric and hybrid powertrains; integrated power generation systems; critical components such as aftertreatment, turbochargers, fuel systems, controls, transmissions, axles and brakes; and zero emissions technologies like battery and electric powertrain systems. With a global footprint, deep technical expertise and an extensive service network, we deliver dependable, cutting-edge solutions tailored to our customers' needs, supporting them through the energy transition with our Destination Zero strategy. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We have long-standing relationships with many of the leading manufacturers in the markets we serve, including PACCAR Inc., Traton Group, Daimler Trucks AG and Stellantis N.V. We serve our customers through a service network of approximately 640 wholly-owned, joint venture and independent distributor locations and more than 13,000 Cummins certified dealer locations in approximately 190 countries and territories.

Our segment reporting structure is organized according to the products and markets each segment serves. The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Components segment sells axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, automated transmissions and electronics. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products, maintaining relationships with various OEMs throughout the world and providing selected sales and aftermarket support for our Accelera business. The Power Systems segment is an integrated power provider, which designs, manufactures and sells standby and prime power generators, engines (16 liters and larger) for standby and prime power generator sets and industrial applications (including mining, oil and gas, marine, rail and defense), alternators and other power components. The Accelera segment designs, manufactures, sells and supports electrified power systems with innovative components and subsystems, including battery and electric powertrain technologies. The Accelera segment is currently in the early stages of commercializing these technologies with efforts primarily focused on the development of electrified power systems and related components and subsystems. We continue to serve all our markets as they adopt electrification, meeting the needs of our OEM partners and end customers.

Our financial performance depends, in large part, on varying conditions in the markets we serve, particularly the on-highway, off-highway, power generation and general industrial markets. Demand in these markets tends to fluctuate in response to overall economic conditions. Our sales may also be impacted by OEM inventory levels, production schedules, stoppages and supply chain challenges. Economic downturns in markets we serve generally result in reduced sales of our products and can result in price reductions in certain products and/or markets. As a worldwide business, our operations are also affected by geopolitical risks, currency fluctuations, political and economic uncertainty, tariffs and related trade disruptions, public health crises (epidemics or pandemics) and regulatory matters, including adoption and enforcement of environmental and emission standards. As part of our growth strategy, we invest in businesses in certain countries that carry higher levels of these risks such as China, Brazil, India, Mexico and other countries in Europe, the Middle East and Africa. At the same time, our geographic diversity and broad product and service offerings have helped

limit the impact from a drop in demand in any one industry, region, customer or the economy of any single country on our consolidated results.

Global Trade Environment

As disclosed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, we operate our business on a global basis and changes in international, national and regional trade laws, regulations and policies affecting and/or restricting international trade, including higher tariffs, trade disruptions (such as embargoes, sanctions and export controls) and broader geopolitical tensions, could adversely impact the demand for our products and our competitive position. In 2025, the U.S. imposed tariffs on certain countries and products, which was followed by retaliatory tariffs and other trade actions against U.S. goods and services. On February 20, 2026, the U.S. Supreme Court ruled that U.S. tariffs imposed under the International Emergency Economic Powers Act (IEEPA) on goods imported into the U.S. were unauthorized. After this ruling, new tariffs were subsequently imposed under different statutes. The global trade environment has contributed to ongoing market volatility and heightened concerns about potential economic impacts. Our primary risks include reduced global movement of goods impacting freight activity, increased costs for suppliers and end-users and uncertainty around supply availability. These factors could lead to a decline in business confidence, reduced demand for our products and increased product costs. We continue to pursue mitigation strategies, including engaging with our suppliers, exploring alternative sourcing and negotiating agreements with our customers to recover tariff-related costs. The financial impact of tariffs, net of mitigation actions and U.S. government tariff refunds (net of amounts to be returned to customers), was immaterial to our profitability and operating cash flows during the first quarter of 2026. However, continued and increasing tariff costs, the effectiveness of our mitigation efforts and ongoing market volatility could materially and adversely affect our results of operations, financial condition and cash flows in the future. We continue to monitor developments and take actions to minimize the related impacts to our business to the extent possible. See the “OUTLOOK” section for a discussion of the potential tariff impacts for the remainder of 2026.

2026 First Quarter Results

A summary of our results is as follows:

						Three months ended
						March 31,
In millions, except per share amounts						2026						2025
Net sales						$	8,398					$	8,174
Net income attributable to Cummins Inc.						654						824
Earnings per common share attributable to Cummins Inc.
Basic						$	4.73					$	5.99
Diluted						4.71						5.96

Net income attributable to Cummins Inc. was $654 million, or $4.71 per diluted share, on sales of $8.4 billion for the three months ended March 31, 2026, versus the comparable prior year period net income attributable to Cummins Inc. of $824 million, or $5.96 per diluted share, on sales of $8.2 billion. The decreases in net income attributable to Cummins Inc. and earnings per diluted share were driven by the loss on sale of business and settlement of current and future customer obligations as well as higher compensation costs, partially offset by improved gross margin and favorable foreign currency fluctuations (primarily in the Euro). See NOTE 14, “REPORTABLE SEGMENTS,” to our Condensed Consolidated Financial Statements for additional information on loss on sale of business and settlement of current and future customer obligations.

The table below presents our consolidated net sales by geographic area based on the location of the customer:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
United States and Canada						$	4,772					$	5,054					$	(282)					(6)		%
International						3,626						3,120						506						16		%
Total net sales						$	8,398					$	8,174					$	224					3		%

Worldwide revenues increased by 3 percent in the three months ended March 31, 2026, compared to the same period in 2025, primarily due to higher demand in power generation markets, especially data center and commercial markets, partially offset by weaker demand in on-highway commercial truck markets. International sales (excludes the U.S. and Canada) improved 16 percent primarily due to higher sales in China and Europe. The increase in international sales was primarily due to higher power generation demand and favorable foreign currency fluctuation impacts of 5 percent (primarily the Euro and Chinese renminbi). Net sales in the U.S. and Canada declined 6 percent primarily due to lower demand in medium-duty and heavy-duty truck markets, partially offset by higher sales in power generation markets.

The following table contains sales and EBITDA (defined as earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests) by reportable segment for the three months ended March 31, 2026 and 2025. See NOTE 14, “REPORTABLE SEGMENTS,” to our Condensed Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Condensed Consolidated Statements of Net Income.

						Three months ended March 31,
Reportable Segments						2026																		2025																		Percent change
												Percent																		Percent												2026 vs. 2025
In millions						Sales						of Total						EBITDA						Sales						of Total						EBITDA						Sales						EBITDA
Engine						$	2,672					26		%				$	279					$	2,771					28		%				$	458					(4)		%				(39)		%
Components						2,530						24		%				337						2,670						26		%				382						(5)		%				(12)		%
Distribution						3,116						30		%				444						2,907						29		%				376						7		%				18		%
Power Systems						1,956						19		%				577						1,649						16		%				389						19		%				48		%
Accelera						101						1		%				(277)			(1)			103						1		%				(86)						(2)		%				NM
Total segments						10,375						100		%				1,360						10,100						100		%				1,519						3		%				(10)		%
Intersegment eliminations						(1,977)												(70)						(1,926)												(59)						3		%				19
Total						$	8,398											$	1,290					$	8,174											$	1,460					3		%				(12)		%
“NM” - not meaningful information
(1) On March 31, 2026, we sold our low pressure fuel cell business to a customer, cancelled future commitments and resolved certain claims against us with that customer resulting in a net payment by us of $175 million. These transactions resulted in a net charge of $199 million which is reflected in other operating expense, net in our Condensed Consolidated Statements of Net Income.

2026 Highlights

We generated $309 million in cash from operations for the three months ended March 31, 2026, compared to using $3 million for the comparable period in 2025. See the section titled “Cash Flows” in the “LIQUIDITY AND CAPITAL RESOURCES” section for a discussion of items impacting cash flows.

Our debt to capital ratio (total capital defined as debt plus equity) at March 31, 2026, was 36.5 percent, compared to 36.0 percent at December 31, 2025. The increase was primarily due to a higher debt balance since December 31, 2025. At March 31, 2026, we had $3.2 billion in cash and marketable securities on hand and access to our $4.0 billion credit facilities (net of $349 million of commercial paper outstanding), if necessary, to meet working capital, investment, acquisition and funding needs.

In the first quarter of 2026, we repurchased $243 million, or 0.5 million shares, of common stock.

On March 31, 2026, we sold our low pressure fuel cell business to a customer, cancelled future commitments and resolved certain claims against us with that customer resulting in a net payment by us of $175 million. These transactions resulted in a net charge of $199 million, which is reflected in other operating expense, net in our Condensed Consolidated Statements of Net Income.

In January 2026, we entered into a series of interest rates swaps to convert $150 million of our senior notes, due in 2054, from a fixed rate of 5.45 percent to a floating rate equal to the daily Secured Overnight Financing Rate (SOFR) plus a spread. See NOTE 13, “DERIVATIVES,” to our Condensed Consolidated Financial Statements.

As of the date of this filing, our credit ratings and outlooks from the credit rating agencies remain unchanged. See the section titled “Credit Ratings” in the “LIQUIDITY AND CAPITAL RESOURCES” section for our current ratings.

RESULTS OF OPERATIONS

															Three months ended												Favorable/
															March 31,												(Unfavorable)
						In millions, except per share amounts									2026						2025						Amount						Percent
						NET SALES									$	8,398					$	8,174					$	224					3		%
						Cost of sales									6,155						6,019						(136)						(2)		%
						GROSS MARGIN									2,243						2,155						88						4		%
						OPERATING EXPENSES AND INCOME
						Selling, general and administrative expenses									845						771						(74)						(10)		%
						Research, development and engineering expenses									358						344						(14)						(4)		%
						Equity, royalty and interest income from investees									148						131						17						13		%
						Other operating expense, net									239						37						(202)						NM
						OPERATING INCOME									949						1,134						(185)						(16)		%
						Interest expense									76						77						1						1		%
						Other income, net									61						60						1						2		%
						INCOME BEFORE INCOME TAXES									934						1,117						(183)						(16)		%
						Income tax expense									254						267						13						5		%
						CONSOLIDATED NET INCOME									680						850						(170)						(20)		%
						Less: Net income attributable to noncontrolling interests									26						26						—						—		%
						NET INCOME ATTRIBUTABLE TO CUMMINS INC.									$	654					$	824					$	(170)					(21)		%
						Diluted Earnings Per Common Share Attributable to Cummins Inc.									$	4.71					$	5.96					$	(1.25)					(21)		%
						“NM” - not meaningful information

						Three months ended												Favorable/ (Unfavorable)
						March 31,
Percent of sales						2026						2025						Percentage Points
Gross margin						26.7		%				26.4		%				0.3
Selling, general and administrative expenses						10.1		%				9.4		%				(0.7)
Research, development and engineering expenses						4.3		%				4.2		%				(0.1)

Net Sales

Net sales for the three months ended March 31, 2026, increased by $224 million versus the comparable period in 2025. The primary drivers were as follows:

• Power Systems segment sales increased 19 percent primarily due to higher demand in power generation markets, especially in China and North America.

• Distribution segment sales increased 7 percent principally due to higher demand in power generation markets, especially in Asia Pacific and North America.

• Favorable foreign currency fluctuations (primarily in the Euro, Chinese renminbi and Brazilian real).

These increases were partially offset by the following:

• Components segment sales decreased 5 percent mainly due to lower demand in North American medium-duty and heavy-duty truck markets.

• Engine segment sales decreased 4 percent largely due to lower demand in North American medium-duty and heavy-duty truck markets.

Cost of Sales

The types of expenses included in cost of sales are the following: parts and material consumption, including direct and indirect materials; compensation and related expenses, including variable compensation, salaries and fringe benefits; depreciation on production equipment and facilities and amortization of technology intangibles; estimated costs of warranty programs and campaigns; production utilities; production-related purchasing; warehousing, including receiving and inspection; freight costs; engineering support costs; repairs and maintenance; production and warehousing facility property insurance and rent for production facilities and other production overhead.

Gross Margin

Gross margin increased $88 million for the three months ended March 31, 2026, and increased 0.3 points as a percentage of net sales versus the comparable period in 2025. The increases in gross margin and gross margin as a percentage of sales were primarily due to favorable pricing, improved mix and favorable foreign currency impacts (primarily in the Euro and Brazilian real), partially offset by increased compensation expenses. The net impact of tariff costs and related recoveries was immaterial for the three month period ended March 31, 2026.

The provision for base warranties issued as a percentage of sales for the three months ended March 31, 2026, was 1.9 percent compared to 1.9 percent for the comparable period in 2025.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $74 million for the three months ended March 31, 2026, and increased 0.7 points as a percentage of net sales versus the comparable period in 2025. The increases were mainly due to higher compensation expenses. Compensation and related expenses included salaries, fringe benefits and variable compensation.

Research, Development and Engineering Expenses

Research, development and engineering expenses increased $14 million for the three months ended March 31, 2026, and increased 0.1 points as a percentage of net sales versus the comparable period in 2025. The increases were mainly due to higher compensation expenses. Compensation and related expenses included salaries, fringe benefits and variable compensation.

Research activities continue to focus on development of new products and improvements of current technologies to meet future emission standards around the world, improvements in fuel economy performance of diesel and natural gas-powered engines and related components, as well as development activities around electrified power systems with innovative components and systems including battery and electric power technologies.

Equity, Royalty and Interest Income from Investees

Equity, royalty and interest income from investees increased $17 million for the three months ended March 31, 2026, versus the comparable period in 2025, primarily due to increased earnings at Beijing Foton Cummins Engine Co., Ltd., Chongqing Cummins Engine Co., Ltd., Dongfeng Cummins Engine Co., Ltd., Guangxi Cummins Industrial Power Co., Ltd. and Xian Cummins Engine Company Limited, partially offset by lower royalty and interest income from investees.

Other Operating Expense, Net

Other operating expense, net was as follows:

						Three months ended
						March 31,
In millions						2026						2025
Loss on sale of business and settlement of current and future customer obligations						$	(199)		(1)			$	—
Amortization of intangible assets						(33)						(32)
Other, net						(7)						(5)
Total other operating expense, net						$	(239)					$	(37)
(1) See NOTE 14, “REPORTABLE SEGMENTS,” to our Condensed Consolidated Financial Statements for additional information.

Other Income, Net

Other income, net was as follows:

						Three months ended
						March 31,
In millions						2026									2025
Interest income						$	32								$	26
Non-service pension and OPEB income						19									17
Foreign currency gain (loss), net						4									(5)
Gain on sale of marketable securities, net						3									4
(Loss) gain on corporate owned life insurance						(6)									10
Other, net						9									8
Total other income, net						$	61								$	60

Income Tax Expense

Our effective tax rate for 2026 is expected to approximate 23.0 percent, excluding any discrete items that may arise.

Our effective tax rates for the three months ended March 31, 2026 and 2025, were 27.2 percent and 23.9 percent, respectively.

The three months ended March 31, 2026, had an unfavorable discrete tax impact due to the $199 million loss on sale of business and settlement of current and future customer obligations for which no tax benefit was recognized. Other discrete items were net favorable by $7 million. See NOTE 14, “REPORTABLE SEGMENTS,” to our Condensed Consolidated Financial Statements for additional information on loss on sale and settlement of current and future customer obligations.

The three months ended March 31, 2025, contained net favorable discrete tax items of $7 million, primarily due to $8 million of favorable share-based compensation tax benefits, partially offset by $1 million of other unfavorable adjustments.

Comprehensive Income - Foreign Currency Translation Adjustment

The foreign currency translation adjustment was a net loss of $109 million for the three months ended March 31, 2026, compared to a net gain of $117 million for the three months ended March 31, 2025, driven by the following:

						Three months ended
						March 31,
						2026												2025
In millions						Translation adjustment						Primary currency driver vs. U.S. dollar						Translation adjustment						Primary currency driver vs. U.S. dollar
Wholly-owned subsidiaries						$	(79)					Indian rupee, Euro and British pound, partially offset by Brazilian real						$	110					Brazilian real, British pound and Euro
Equity method investments						(2)						Indian rupee, partially offset by Chinese renminbi						5						Chinese renminbi
Consolidated subsidiaries with a noncontrolling interest						(28)						Indian rupee						2						Indian rupee and Euro
Total						$	(109)											$	117

REPORTABLE SEGMENT RESULTS

Our reportable segments consist of the Engine, Components, Distribution, Power Systems and Accelera segments. This reporting structure is organized according to the products and markets each segment serves. We use segment EBITDA as the basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable segments. We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors. Segment amounts exclude certain expenses not specifically identifiable to segments. See NOTE 14, “REPORTABLE SEGMENTS,” to our Condensed Consolidated Financial Statements for additional information and a reconciliation of our segment information to the corresponding amounts in our Condensed Consolidated Statements of Net Income.

Tariff related costs and recoveries were evaluated independently of all other drivers included in the disclosures below and all references to “price” and “material cost” variances exclude these separately evaluated tariff costs and recoveries. The net impact of tariff costs and related recoveries were immaterial to each reportable segment's EBITDA, unless specifically noted.

Following is a discussion of results for each of our reportable segments.

Engine Segment Results

Financial data for the Engine segment was as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
External sales						$	1,966					$	2,040					$	(74)					(4)		%
Intersegment sales						706						731						(25)						(3)		%
Total sales						2,672						2,771						(99)						(4)		%
Research, development and engineering expenses						164						155						(9)						(6)		%
Equity, royalty and interest income from investees						80						73						7						10		%
Interest income						10						10						—						—		%
Segment EBITDA						279						458						(179)						(39)		%
																		Percentage Points
Segment EBITDA as a percentage of total sales						10.4		%				16.5		%										(6.1)

Sales for our Engine segment by market were as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
Heavy-duty truck						$	799					$	921					$	(122)					(13)		%
Medium-duty truck and bus						871						986						(115)						(12)		%
Light-duty automotive						448						421						27						6		%
Total on-highway						2,118						2,328						(210)						(9)		%
Off-highway						554						443						111						25		%
Total sales						$	2,672					$	2,771					$	(99)					(4)		%
																		Percentage Points
On-highway sales as percentage of total sales						79		%				84		%										(5)

Unit shipments by engine classification (including unit shipments to Power Systems and off-highway engine units included in their respective classification) were as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
						2026						2025						Amount						Percent
Heavy-duty						24,700						26,700						(2,000)						(7)		%
Medium-duty						79,100						75,200						3,900						5		%
Light-duty						40,500						39,100						1,400						4		%
Total unit shipments (1)						144,300						141,000						3,300						2		%
(1) Unit shipments exclude aftermarket parts.

Sales

Engine segment sales for the three months ended March 31, 2026, decreased $99 million versus the comparable period in 2025. The following were the primary drivers by market:

• Heavy-duty truck sales decreased $122 million mainly due to weaker demand, especially in North America with shipments down 16 percent.

• Medium-duty truck and bus sales decreased $115 million primarily due to lower truck demand, especially in North America with shipments down 25 percent.

These decreases were partially offset by an increase in off-highway sales of $111 million principally due to higher international construction demand, especially in China.

Segment EBITDA

Engine segment EBITDA for the three months ended March 31, 2026, decreased $179 million versus the comparable period in 2025, primarily due to lower volumes, higher compensation expenses and increased product coverage costs.

Components Segment Results

Financial data for the Components segment was as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
External sales						$	2,138					$	2,270					$	(132)					(6)		%
Intersegment sales						392						400						(8)						(2)		%
Total sales						2,530						2,670						(140)						(5)		%
Research, development and engineering expenses						81						75						(6)						(8)		%
Equity, royalty and interest income from investees						10						7						3						43		%
Interest income						11						7						4						57		%
Segment EBITDA						337						382						(45)						(12)		%
																		Percentage Points
Segment EBITDA as a percentage of total sales						13.3		%				14.3		%										(1.0)

Sales for our Components segment by business were as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
Drivetrain and braking systems						$	919					$	1,056					$	(137)					(13)		%
Emission solutions						915						902						13						1		%
Components and software						608						595						13						2		%
Automated transmissions						88						117						(29)						(25)		%
Total sales						$	2,530					$	2,670					$	(140)					(5)		%

Sales

Components segment sales for the three months ended March 31, 2026, decreased $140 million versus the comparable period in 2025 primarily due to lower demand in North American medium-duty and heavy-duty truck markets. The following were the primary drivers by business:

• Drivetrain and braking systems sales decreased $137 million mainly due to lower demand in North America and lower sales in India due to changes in our business model.

• Automated transmissions sales decreased $29 million primarily due to lower demand in North America.

These decreases were partially offset by favorable foreign currency fluctuations, primarily in the Euro and Chinese renminbi.

Segment EBITDA

Components segment EBITDA for the three months ended March 31, 2026, decreased $45 million versus the comparable period in 2025, mainly due to lower volumes and higher material costs, partially offset by favorable pricing.

Distribution Segment Results

Financial data for the Distribution segment was as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
External sales						$	3,109					$	2,902					$	207					7		%
Intersegment sales						7						5						2						40		%
Total sales						3,116						2,907						209						7		%
Research, development and engineering expenses						15						14						(1)						(7)		%
Equity, royalty and interest income from investees						28						28						—						—		%
Interest income						6						5						1						20		%
Segment EBITDA						444						376						68						18		%
																		Percentage Points
Segment EBITDA as a percentage of total sales						14.2		%				12.9		%										1.3

Sales for our Distribution segment by region were as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
North America						$	2,166					$	2,100					$	66					3		%
Asia Pacific						328						240						88						37		%
Europe						304						270						34						13		%
China						123						114						9						8		%
India						85						74						11						15		%
Africa and Middle East						59						59						—						—		%
Latin America						51						50						1						2		%
Total sales						$	3,116					$	2,907					$	209					7		%

Sales for our Distribution segment by product line were as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
Power generation						$	1,275					$	1,090					$	185					17		%
Parts						1,064						1,031						33						3		%
Service						433						416						17						4		%
Engines						344						370						(26)						(7)		%
Total sales						$	3,116					$	2,907					$	209					7		%

Sales

Distribution segment sales for the three months ended March 31, 2026, increased $209 million versus the comparable period in 2025, primarily due to increased demand in power generation markets in North America and Asia Pacific, especially in data center and commercial markets, and favorable foreign currency fluctuations, primarily in the Euro, Australian dollar and Canadian dollar.

Segment EBITDA

Distribution segment EBITDA for the three months ended March 31, 2026, increased $68 million versus the comparable period in 2025, primarily due to favorable mix and increased volumes, partially offset by higher compensation expenses.

Power Systems Segment Results

Financial data for the Power Systems segment was as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
External sales						$	1,093					$	872					$	221					25		%
Intersegment sales						863						777						86						11		%
Total sales						1,956						1,649						307						19		%
Research, development and engineering expenses						66						57						(9)						(16)		%
Equity, royalty and interest income from investees						36						29						7						24		%
Interest income						5						4						1						25		%
Segment EBITDA						577						389						188						48		%
																		Percentage Points
Segment EBITDA as a percentage of total sales						29.5		%				23.6		%										5.9

Sales for our Power Systems segment by product line were as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
Power generation						$	1,283					$	1,001					$	282					28		%
Industrial						506						498						8						2		%
Generator technologies						167						150						17						11		%
Total sales						$	1,956					$	1,649					$	307					19		%

Sales

Power Systems segment sales for the three months ended March 31, 2026, increased $307 million versus the comparable period in 2025, primarily due to increased power generation sales of $282 million resulting from higher demand in China and North America.

Segment EBITDA

Power Systems segment EBITDA for the three months ended March 31, 2026, increased $188 million versus the comparable period in 2025, mainly due to higher volumes, improved operational leverage, lower net tariff costs and favorable pricing.

Accelera Segment Results

Financial data for the Accelera segment was as follows:

						Three months ended												Favorable/
						March 31,												(Unfavorable)
In millions						2026						2025						Amount						Percent
External sales						$	92					$	90					$	2					2		%
Intersegment sales						9						13						(4)						(31)		%
Total sales						101						103						(2)						(2)		%
Research, development and engineering expenses						32						43						11						26		%
Equity, royalty and interest loss from investees						(6)						(6)						—						—		%
Segment EBITDA						(277)						(86)						(191)						NM
“NM” - not meaningful information

Accelera segment sales for the three months ended March 31, 2026, decreased $2 million versus the comparable period in 2025, mainly due to lower sales for electrified powertrains, partially offset by increased sales for electrolyzers.

On March 31, 2026, we sold our low pressure fuel cell business to a customer, cancelled future commitments and resolved certain claims against us with that customer resulting in a net payment by us of $175 million. These transactions resulted in a net charge of $199 million which is reflected in other operating expense, net in our Condensed Consolidated Statements of Net Income.

OUTLOOK

The global trade environment, characterized by tariffs, export controls and broader geopolitical tensions, has created significant market volatility while introducing uncertainty around future demand for capital goods as well as potential impacts to our supply chain and our related product costs. Given the breadth, severity and uncertain duration of these global trade measures, our outlook presented below could be negatively impacted by policy-driven volatility. We are proactively taking steps in our supply chain to mitigate impacts where possible and we are working with our customers to pass through incremental costs.

2026 Outlook

Our outlook reflects the following positive trends and challenges to our business that could impact our revenue and earnings potential in 2026.

Positive Trends

• We expect demand within markets served by our Power Systems business to remain strong, including the power generation and industrial markets.

• We anticipate our aftermarket business will remain stable, driven primarily by demand in our Engine and Power Systems businesses.

• We expect demand for medium-duty and heavy-duty trucks in North America to begin improving over the remainder of 2026.

Challenges

• Increases in costs, tariffs, as well as other inflationary pressures, could negatively impact earnings.

• The potential for trade disruptions (including embargoes, sanctions, export controls and the ongoing conflict in Iran) could cause disruptions in production, further increases in the price of oil and other inputs and could negatively impact earnings.

• The slower adoption of zero-emission solutions reduced Accelera’s near-term revenue outlook, prompting significant restructuring actions in 2024 and 2025 and a refined strategic investment approach. While we anticipate these actions will gradually improve the cost structure, we expect ongoing investments in priority technologies to result in continued near-term operating losses.

Current Regulatory Challenges For 2026 and Beyond

• Changes in government policies (such as reduced incentives, delayed infrastructure mandates or revised emissions standards) may impact Accelera’s ability to compete, scale or recover investments in zero-emission technologies.

• Our engines are subject to extensive statutory and regulatory requirements governing emissions, including greenhouse gas (GHG) standards set by the EPA and fuel consumption standards set by the National Highway Traffic Safety Administration (NHTSA). To comply with these regulations, we utilize banking and trading of regulatory compliance credits. In June 2025, NHTSA published an interpretive rule questioning the current regulatory framework of allowing credits as a compliance vehicle. In July 2025, the EPA published a proposed rule that would repeal GHG emissions standards and thus remove the requirement for vehicle and engine manufacturers to measure, control and report these emissions from vehicles. In February 2026, the EPA finalized the rescission of the 2009 Greenhouse Gas Endangerment Finding and repealed all GHG emission standards for on-highway vehicles and engines with an effective date of April 20, 2026. NHTSA rules currently still allow credits as a compliance vehicle. Depending on NHTSA's future rulemaking as indicated by the June 2025 interpretive rule, we may no longer utilize emission compliance credits on future engines sales and the credits could have a minimal, if any value to us. While the rules will likely be subject to legal challenges, in the period NHTSA finalizes a rule, we could be required to incur a non-cash expense up to the value of our existing credits. At March 31, 2026, we had $99 million of emission compliance credits.

• We are navigating a dynamic regulatory environment in the U.S. that could impact future product launches and we are actively engaged with customers, regulators and suppliers to ensure product development and certification requirements are met while delivering high-quality, dependable products that align with customer needs.

LIQUIDITY AND CAPITAL RESOURCES

Key Working Capital and Balance Sheet Data

We fund our working capital with cash from operations and short-term borrowings, including commercial paper, when necessary. Various assets and liabilities, including short-term debt, can fluctuate significantly from month-to-month depending on short-term liquidity needs. As a result, working capital is a prime focus of management's attention. Working capital and balance sheet measures are provided in the following table:

Dollars in millions						March 31, 2026						December 31, 2025
Working capital (1)						$	7,212					$	7,315
Current ratio						1.71						1.76
Accounts and notes receivable, net						$	6,528					$	5,818
Days' sales in receivables						67						60
Inventories						$	6,126					$	5,822
Inventory turnover						4.0						4.2
Accounts payable (principally trade)						$	4,433					$	3,800
Days' payable outstanding						60						58
Total debt						$	7,686					$	7,552
Total debt as a percent of total capital						36.5		%				36.0		%
(1) Working capital included cash and cash equivalents.

Cash Flows

Cash and cash equivalents were impacted as follows:

						Three months ended
						March 31,
In millions						2026						2025						Change
Net cash provided by (used in) operating activities						$	309					$	(3)					$	312
Net cash used in investing activities						(10)						(246)						236
Net cash (used in) provided by financing activities						(517)						92						(609)
Effect of exchange rate changes on cash and cash equivalents						(13)						18						(31)
Net decrease in cash and cash equivalents						$	(231)					$	(139)					$	(92)

Net cash provided by operating activities increased $312 million for the three months ended March 31, 2026, versus the comparable period in 2025, primarily due to lower working capital requirements of $382 million. The lower working capital requirements resulted in a cash outflow of $599 million compared to a cash outflow of $981 million in the comparable period of 2025, mainly due to favorable changes in accrued expenses and accounts payable, partially offset by unfavorable changes in accounts and notes receivable.

Net cash used in investing activities decreased $236 million for the three months ended March 31, 2026, versus the comparable period in 2025, primarily due to lower net investments in marketable securities.

Net cash used in financing activities increased $609 million for the three months ended March 31, 2026, versus the comparable period in 2025, primarily due to decreased net borrowings of commercial paper of $485 million and higher repurchases of common stock of $243 million, partially offset by increased proceeds from borrowings of $161 million.

The effect of exchange rate changes on cash and cash equivalents for the three months ended March 31, 2026, versus the comparable period in 2025, declined $31 million primarily due to unfavorable fluctuations in the British pound and Euro.

Sources of Liquidity

We typically generate significant ongoing cash flow and cash provided by operations is generally our principal source of liquidity. Our sources of liquidity include the following:

						March 31, 2026
In millions						Total						U.S.						International						Primary location of international balances
Cash and cash equivalents						$	2,614					$	861					$	1,753					Singapore, China, Australia, Belgium, United Kingdom, Mexico, India, Romania, France and Germany
Marketable securities (1)						568						85						483						India
Total						$	3,182					$	946					$	2,236
Available credit capacity
Revolving credit facilities (2)						$	3,651
International and other uncommitted domestic credit facilities						$	777
(1) The majority of marketable securities could be liquidated into cash within a few days.
(2) The 5-year credit facility for $2.0 billion and the 3-year credit facility for $2.0 billion, maturing June 2030 and June 2028, respectively, are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. At March 31, 2026, we had $349 million of commercial paper outstanding, which effectively reduced our available capacity under our revolving credit facilities to $3.7 billion.

Cash, Cash Equivalents and Marketable Securities

A significant portion of our cash flow is generated outside the U.S. We manage our worldwide cash requirements considering available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. As a result, we do not anticipate any local liquidity restrictions to preclude us from funding our operating needs with local resources.

If we distribute our foreign cash balances to the U.S. or to other foreign subsidiaries, we could be required to accrue and pay withholding taxes, for example, if we repatriated cash from certain foreign subsidiaries whose earnings we asserted are completely or partially permanently reinvested. Foreign earnings for which we assert permanent reinvestment outside the U.S. consist primarily of earnings of our China, India, Canada (including underlying subsidiaries) and Netherlands domiciled subsidiaries. At present, we do not foresee a need to repatriate any earnings for which we assert permanent reinvestment. However, to help fund cash needs of the U.S. or other international subsidiaries as they arise, we repatriate available cash from certain foreign subsidiaries whose earnings are not completely permanently reinvested when cost effective to do so.

Debt Facilities and Other Sources of Liquidity

Our committed credit facilities provide access up to $4.0 billion from our $2.0 billion 3-year credit facility and our $2.0 billion 5-year facility. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. We intend to maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration. There were no outstanding borrowings under these facilities at March 31, 2026.

Our committed credit facilities also provide access up to $4.0 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board of Directors (the Board) authorized commercial paper programs. These programs facilitate the private placement of unsecured short-term debt through third-party brokers. We intend to use the net proceeds from the commercial paper borrowings for general corporate purposes. The total combined borrowing capacity under the revolving credit facilities and commercial paper programs should not exceed $4.0 billion. At March 31, 2026, we had $349 million of commercial paper outstanding, which effectively reduced our available capacity under our revolving credit facilities to $3.7 billion. See NOTE 9, “DEBT,” to our Condensed Consolidated Financial Statements for additional information.

In January 2026, we entered into a series of interest rates swaps to convert $150 million of our senior notes, due in 2054, from a fixed rate of 5.45 percent to a floating rate equal to the daily SOFR plus a spread. See NOTE 13, “DERIVATIVES,” to our Condensed Consolidated Financial Statements for additional information.

As a well-known seasoned issuer, we filed an automatic shelf registration for an undetermined amount of debt and equity securities with the Securities and Exchange Commission (SEC) on February 13, 2025. Under this shelf registration we may offer, from time-to-time, debt securities, common stock, preferred and preference stock, depositary shares, warrants, stock purchase contracts and stock purchase units.

Supply Chain Financing

We currently have supply chain financing programs with financial intermediaries, which provide certain vendors the option to be paid by financial intermediaries earlier than the due date on the applicable invoice. When a vendor utilizes the program and receives an early payment from a financial intermediary, they take a discount on the invoice. We then pay the financial intermediary the face amount of the invoice on the original due date, which generally have 60 to 90 day payment terms. The maximum amount that we could have outstanding under these programs was $564 million at March 31, 2026. We do not reimburse vendors for any costs they incur for participation in the program; their participation is completely voluntary and there are no assets pledged as security or other forms of guarantees provided for the committed payment to the finance provider or intermediary. As a result, all amounts owed to the financial intermediaries are presented as accounts payable in our Condensed Consolidated Balance Sheets. The amount due to the financial intermediaries reflected in accounts payable at March 31, 2026, was $157 million.

Accounts Receivable Sales Program

In May 2024, we entered into an accounts receivable sales agreement with Wells Fargo Bank, N.A., to sell certain accounts receivable up to the Board approved limit of $500 million. There was no activity under the program during the three months ended March 31, 2026.

Uses of Cash

Dividends

We paid dividends of $276 million during the three months ended March 31, 2026.

Capital Expenditures

Capital expenditures for the three months ended March 31, 2026, were $189 million versus $162 million in the comparable period in 2025. We continue to invest in new product lines and targeted capacity expansions. We plan to spend an estimated $1.35 billion to $1.45 billion in 2026 on capital expenditures with over 65 percent of these expenditures expected to be invested in North America.

Current Maturities of Short and Long-Term Debt

We had $349 million of commercial paper outstanding at March 31, 2026, that matures in less than one year. Required annual long-term debt principal payments range from $83 million to $863 million over the next five years (including the remainder of 2026). See NOTE 9, “DEBT,” to our Condensed Consolidated Financial Statements for additional information.

Stock Repurchases

In December 2021, the Board authorized the acquisition of up to $2.0 billion of additional common stock upon completion of the $2.0 billion repurchase plan authorized in 2019. In the first three months of March 31, 2026, we made the following purchases under our stock repurchase programs:

In millions (except per share amounts) For each quarter ended						Shares Purchased						Average Cost Per Share						Total Cost of Repurchases												Remaining Authorized Capacity
December 2019, $2 billion repurchase program
March 31						0.4						$	539.09					$	218											$	—
December 2021, $2 billion repurchase program
March 31						0.1						519.00						25												1,975
Total						0.5						536.97						$	243

We intend to repurchase outstanding shares from time to time during 2026 to enhance shareholder value.

Settlement of Current and Future Customer Obligations

On March 31, 2026, we sold our low pressure fuel cell business to a customer, cancelled future commitments and resolved certain claims against us with that customer resulting in a net payment by us of $175 million. See NOTE 14, “REPORTABLE SEGMENTS,” to our Condensed Consolidated Financial Statements for additional information.

Pensions

Our global pension plans, including our unfunded and non-qualified plans, were 112 percent funded at December 31, 2025. Our U.S. defined benefit plans (qualified and non-qualified), which represented approximately 70 percent of the worldwide pension obligation, were 115 percent funded, and our U.K. defined benefit plans were 105 percent funded at December 31, 2025. The funded status of our pension plans is dependent upon a variety of variables and assumptions including return on invested assets, market interest rates and levels of voluntary contributions to the plans. In the first three months of 2026, the investment loss on our U.S. pension trust was 0.3 percent, while our U.K. pension trusts' loss was 0.5 percent. We anticipate making additional defined benefit pension contributions during the remainder of 2026 of $35 million for our U.S. and U.K. qualified and non-qualified pension plans. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2026 annual net periodic pension cost to approximate $75 million.

Credit Ratings

Our rating and outlook from each of the credit rating agencies as of the date of filing are shown in the table below:

						Long-Term												Short-Term
Credit Rating Agency (1)						Senior Debt Rating												Debt Rating												Outlook
Standard and Poor’s Rating Services						A												A1												Stable
Moody’s Investors Service, Inc.						A2												P1												Stable
(1) Credit ratings are not recommendations to buy, are subject to change, and each rating should be evaluated independently of any other rating. In addition, we undertake no obligation to update disclosures concerning our credit ratings, whether as a result of new information, future events or otherwise.

Management's Assessment of Liquidity

Our financial condition and liquidity remain strong. Our solid balance sheet and credit ratings enable us to have ready access to credit and the capital markets. We assess our liquidity in terms of our ability to generate adequate cash to fund our operating, investing and financing activities in combination with access to our revolving credit facilities and commercial paper programs as noted above. We believe our access to the capital markets, our existing cash and marketable securities, operating cash flow and revolving credit facilities provide us with the financial flexibility needed to fund dividend payments, targeted capital expenditures, debt service obligations, common stock repurchases, projected pension obligations, joint venture contributions and acquisitions through 2026 and beyond.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

A summary of our significant accounting policies is included in NOTE 1, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” of the Notes to the Consolidated Financial Statements of our 2025 Form 10-K, which discusses accounting policies that we have selected from acceptable alternatives.

Our Condensed Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles that often require management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts presented and disclosed in the financial statements. Management reviews these estimates and assumptions based on historical experience, changes in business conditions and other relevant factors they believe to be reasonable under the circumstances. In any given reporting period, our actual results may differ from the estimates and assumptions used in preparing our Condensed Consolidated Financial Statements.

Critical accounting estimates are defined as follows: the estimate requires management to make assumptions about matters that were highly uncertain at the time the estimate was made; different estimates reasonably could have been used; or if changes in the estimate are reasonably likely to occur from period to period and the change would have a material impact on our financial condition or results of operations. Our senior management has discussed the development and selection of our accounting policies, related accounting estimates and the disclosures set forth below with the Audit Committee of the Board. Our critical accounting estimates disclosed in the Form 10-K address estimating liabilities for warranty programs, assessing goodwill impairment and accounting for income taxes and pension benefits.

A discussion of our critical accounting estimates may be found in the “Management’s Discussion and Analysis” section of our 2025 Form 10-K under the caption “APPLICATION OF CRITICAL ACCOUNTING ESTIMATES.” Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in different policies or estimates being reported in the first three months of 2026.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See NOTE 15, “RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS,” in our Notes to our Condensed Consolidated Financial Statements for additional information.