Item 1. Condensed Consolidated Financial Statements

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Item 1. Condensed Consolidated Financial Statements

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)



	Three months ended				Six months ended
	June 30,				June 30,
In millions, except per share amounts	2026		2025		2026		2025
NET SALES (Notes 1 and 2)	$	9,457	$	8,643	$	17,855	$	16,817
Cost of sales	6,992		6,362		13,147		12,381
GROSS MARGIN	2,465		2,281		4,708		4,436

OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	893		779		1,738		1,550
Research, development and engineering expenses	385		357		743		701
Equity, royalty and interest income from investees (Note 4)	154		118		302		249



Other operating expense, net (Note 14)	62		37		301		74
OPERATING INCOME	1,279		1,226		2,228		2,360


Interest expense	80		87		156		164
Other income, net	94		86		155		146
INCOME BEFORE INCOME TAXES	1,293		1,225		2,227		2,342

Income tax expense (Note 5)	325		297		579		564
CONSOLIDATED NET INCOME	968		928		1,648		1,778

Less: Net income attributable to noncontrolling interests	36		38		62		64
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	932	$	890	$	1,586	$	1,714

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic	$	6.76	$	6.46	$	11.48	$	12.45
Diluted	$	6.73	$	6.43	$	11.44	$	12.38

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic	137.9		137.8		138.1		137.7
Dilutive effect of stock compensation awards	0.6		0.7		0.5		0.7
Diluted	138.5		138.5		138.6		138.4

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
CONSOLIDATED NET INCOME	$	968	$	928	$	1,648	$	1,778
Other comprehensive income (loss), net of tax (Note 12)
Change in pension and other postretirement defined benefit plans	8		7		(7)		(20)
Foreign currency translation adjustments	23		197		(86)		314

Unrealized gain (loss) on derivatives	8		(3)		5		(12)
Total other comprehensive income (loss), net of tax	39		201		(88)		282
COMPREHENSIVE INCOME	1,007		1,129		1,560		2,060
Less: Comprehensive income attributable to noncontrolling interests	38		40		36		68
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC.	$	969	$	1,089	$	1,524	$	1,992

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In millions, except par value	June 30, 2026		December 31, 2025
ASSETS
Current assets
Cash and cash equivalents	$	3,179	$	2,845

Marketable securities (Note 6)	745		764
Total cash, cash equivalents and marketable securities	3,924		3,609
Accounts and notes receivable, net	6,585		5,818


Inventories (Note 7)	6,397		5,822
Prepaid expenses and other current assets	1,528		1,676
Total current assets	18,434		16,925
Long-term assets
Property, plant and equipment	13,236		12,919
Accumulated depreciation	(6,223)		(5,961)
Property, plant and equipment, net	7,013		6,958
Investments and advances related to equity method investees	2,265		2,133
Goodwill	2,222		2,224
Other intangible assets, net	2,168		2,167
Pension assets	1,008		1,033
Other assets (Note 8)	2,520		2,552
Total assets	$	35,630	$	33,992

LIABILITIES
Current liabilities
Accounts payable (principally trade)	$	4,654	$	3,800
Loans payable (Note 9)	459		313
Commercial paper (Note 9)	348		353
Current maturities of long-term debt (Note 9)	151		94
Accrued compensation, benefits and retirement costs	812		825
Current portion of accrued product warranty (Note 10)	658		693
Current portion of deferred revenue (Note 2)	1,592		1,606

Other accrued expenses (Note 8)	1,999		1,926
Total current liabilities	10,673		9,610
Long-term liabilities
Long-term debt (Note 9)	6,737		6,792


Deferred revenue (Note 2)	1,066		1,054
Other liabilities (Note 8)	3,248		3,128
Total liabilities	$	21,724	$	20,584

Commitments and contingencies (Note 11)



EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.5 and 222.5 shares issued	$	2,626	$	2,673
Retained earnings	23,650		22,616
Treasury stock, at cost, 84.9 and 84.4 shares	(11,089)		(10,662)

Accumulated other comprehensive loss (Note 12)	(2,340)		(2,278)



Total Cummins Inc. shareholders’ equity	12,847		12,349
Noncontrolling interests	1,059		1,059
Total equity	$	13,906	$	13,408
Total liabilities and equity	$	35,630	$	33,992

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended
	June 30,
In millions	2026		2025
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$	1,648	$	1,778
Adjustments to reconcile consolidated net income to net cash provided by operating activities

Depreciation and amortization	563		548



Deferred income taxes	15		(138)
Equity in income of investees, net of dividends	(116)		(88)
Pension and OPEB expense (Note 3)	37		39
Pension contributions and OPEB payments (Note 3)	(28)		(26)









Changes in current assets and liabilities, net of acquisitions and divestiture
Accounts and notes receivable	(738)		(643)
Inventories	(612)		(436)
Other current assets	(37)		(172)
Accounts payable	860		148
Accrued expenses	150		(244)


Other, net	66		16
Net cash provided by operating activities	1,808		782

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(438)		(393)






Investments in marketable securities—acquisitions	(633)		(783)
Investments in marketable securities—liquidations (Note 6)	641		636



Other, net	1		(75)
Net cash used in investing activities	(429)		(615)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings	320		2,146
Net payments of commercial paper	(5)		(906)
Payments on borrowings and finance lease obligations	(248)		(210)


Dividend payments on common stock	(552)		(502)
Repurchases of common stock	(468)		—



Payments for purchase of redeemable noncontrolling interests	—		(55)
Other, net	(88)		(49)
Net cash (used in) provided by financing activities	(1,041)		424
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(4)		57
Net increase in cash and cash equivalents	334		648
Cash and cash equivalents at beginning of year	2,845		1,671
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,179	$	2,319

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


	Three months ended
In millions, except per share amounts	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Cummins Inc. Shareholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE AT MARCH 31, 2026	$	556	$	2,046	$	22,994	$	(10,868)	$	(2,377)	$	12,351	$	1,021	$	13,372

Net income					932						932		36		968
Other comprehensive income, net of tax (Note 12)									37		37		2		39
Issuance of common stock			1								1		—		1

Repurchases of common stock							(225)				(225)		—		(225)
Cash dividends on common stock, $2.00 per share					(276)						(276)		—		(276)


Share-based awards			1				3				4		—		4





Other shareholder transactions			22				1				23		—		23
BALANCE AT JUNE 30, 2026	$	556	$	2,070	$	23,650	$	(11,089)	$	(2,340)	$	12,847	$	1,059	$	13,906

BALANCE AT MARCH 31, 2025	$	556	$	2,044	$	21,401	$	(10,711)	$	(2,366)	$	10,924	$	1,047	$	11,971

Net income					890						890		38		928
Other comprehensive income, net of tax (Note 12)									199		199		2		201
Issuance of common stock			1								1		—		1

Cash dividends on common stock, $1.82 per share					(251)						(251)		—		(251)
Distributions to noncontrolling interests											—		(1)		(1)
Share-based awards			1				1				2		—		2





Other shareholder transactions			22				2				24		(2)		22
BALANCE AT JUNE 30, 2025	$	556	$	2,068	$	22,040	$	(10,708)	$	(2,167)	$	11,789	$	1,084	$	12,873

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.


	Six months ended
In millions, except per share amounts	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Cummins Inc. Shareholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE AT DECEMBER 31, 2025	$	556	$	2,117	$	22,616	$	(10,662)	$	(2,278)	$	12,349	$	1,059	$	13,408

Net income					1,586						1,586		62		1,648
Other comprehensive loss, net of tax (Note 12)									(62)		(62)		(26)		(88)
Issuance of common stock			1								1		—		1
Repurchases of common stock							(468)				(468)		—		(468)
Cash dividends on common stock, $4.00 per share					(552)						(552)		—		(552)
Distributions to noncontrolling interests											—		(36)		(36)
Share-based awards			(27)				39				12		—		12




Other shareholder transactions			(21)				2				(19)		—		(19)
BALANCE AT JUNE 30, 2026	$	556	$	2,070	$	23,650	$	(11,089)	$	(2,340)	$	12,847	$	1,059	$	13,906

BALANCE AT DECEMBER 31, 2024	$	556	$	2,080	$	20,828	$	(10,748)	$	(2,445)	$	10,271	$	1,037	$	11,308

Net income					1,714						1,714		64		1,778
Other comprehensive income, net of tax (Note 12)									278		278		4		282
Issuance of common stock			1								1		—		1
Cash dividends on common stock, $3.64 per share					(502)						(502)		—		(502)
Distributions to noncontrolling interests											—		(32)		(32)
Share-based awards			(18)				36				18		—		18



Other shareholder transactions			5				4				9		11		20
BALANCE AT JUNE 30, 2025	$	556	$	2,068	$	22,040	$	(10,708)	$	(2,167)	$	11,789	$	1,084	$	12,873

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

CUMMINS INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

INDEX TO THE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Footnote		Page
NOTE 1	NATURE OF OPERATIONS AND BASIS OF PRESENTATION	10
NOTE 2	REVENUE FROM CONTRACTS WITH CUSTOMERS	11
NOTE 3	PENSIONS AND OTHER POSTRETIREMENT BENEFITS	13
NOTE 4	EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES	15
NOTE 5	INCOME TAXES	15
NOTE 6	MARKETABLE SECURITIES	16
NOTE 7	INVENTORIES	17
NOTE 8	SUPPLEMENTAL BALANCE SHEET DATA	17
NOTE 9	DEBT	18
NOTE 10	PRODUCT WARRANTY LIABILITY	20
NOTE 11	COMMITMENTS AND CONTINGENCIES	21
NOTE 12	ACCUMULATED OTHER COMPREHENSIVE LOSS	23
NOTE 13	DERIVATIVES	25


NOTE 14	REPORTABLE SEGMENTS	26
NOTE 15	RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS	30

NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Overview

Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana, and one of the first diesel engine manufacturers. In 2001, we changed our name to Cummins Inc. 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 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.

Interim Condensed Financial Statements

The unaudited Condensed Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The Condensed Consolidated Financial Statements were prepared in accordance with accounting principles in the United States of America (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Certain information and footnote disclosures normally included in annual financial statements were condensed or omitted as permitted by such rules and regulations.

These interim condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. Our interim period financial results for the three and six month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all required annual disclosures.

Reclassifications

Certain amounts for prior year periods were reclassified to conform to the current year presentation.

Use of Estimates in Preparation of Financial Statements

Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Condensed Consolidated Financial Statements. Significant estimates and assumptions in these Condensed Consolidated Financial Statements require the exercise of judgment. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.

Weighted-Average Diluted Shares Outstanding

The weighted-average diluted common shares outstanding exclude the anti-dilutive effect of certain stock options. The options excluded from diluted earnings per share were as follows:


	Three months ended		Six months ended
	June 30,		June 30,
	2026	2025	2026	2025
Options excluded	342	11,267	942	6,958

Related Party Transactions

In accordance with the provisions of various joint venture agreements, we may purchase products and components from our joint ventures, sell products and components to our joint ventures and our joint ventures may sell products and components to unrelated parties.

The following is a summary of sales to and purchases from nonconsolidated equity investees:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
Sales to nonconsolidated equity investees	$	458	$	411	$	911	$	799
Purchases from nonconsolidated equity investees	688		564		1,279		1,164

The following is a summary of accounts receivable from and accounts payable to nonconsolidated equity investees:


In millions	June 30, 2026		December 31, 2025		Balance Sheet Location
Accounts receivable from nonconsolidated equity investees	$	518	$	523	Accounts and notes receivable, net
Accounts payable to nonconsolidated equity investees	451		263		Accounts payable (principally trade)

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 June 30, 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. Amounts due to the financial intermediaries reflected in accounts payable at June 30, 2026 and December 31, 2025, were $171 million and $153 million, respectively.

NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS

Long-term Contracts

We have certain arrangements, primarily long-term maintenance agreements, construction contracts, product sales with associated performance obligations extending beyond a year, product sales with lead times extending beyond one year that are non-cancellable or for which the customer incurs a penalty for cancellation and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for these contracts, excluding extended warranty coverage arrangements, at June 30, 2026, was $7.6 billion. We expect to recognize the related revenue of $4.1 billion over the next 12 months and $3.5 billion over periods up to 10 years. See NOTE 10, “PRODUCT WARRANTY LIABILITY,” for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of costs incurred when providing goods and services to our customers or represent sales-based royalties.

Deferred and Unbilled Revenue

The following is a summary of our unbilled and deferred revenue and related activity:


In millions	June 30, 2026		December 31, 2025
Unbilled revenue	$	328	$	439
Deferred revenue	2,658		2,660

We recognized revenue of $305 million and $824 million for the three and six months ended June 30, 2026, compared with $242 million and $592 million for the comparable periods in 2025, that was included in the deferred revenue balance at the beginning of each year. We did not record any impairment losses on our unbilled revenues during the three and six months ended June 30, 2026 or 2025.

Disaggregation of Revenue

Consolidated Revenue

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


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
United States	$	5,305	$	4,865	$	9,802	$	9,615

China	1,074		826		2,074		1,605


India	446		415		917		841

Other international	2,632		2,537		5,062		4,756
Total net sales	$	9,457	$	8,643	$	17,855	$	16,817

Segment Revenue

Engine segment external sales by market were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
Heavy-duty truck	$	739	$	727	$	1,302	$	1,381
Medium-duty truck and bus	772		676		1,385		1,376
Light-duty automotive	490		482		938		907
Total on-highway	2,001		1,885		3,625		3,664
Off-highway	348		277		690		538
Total sales	$	2,349	$	2,162	$	4,315	$	4,202

Components segment external sales by business were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
Drivetrain and braking systems	$	1,119	$	1,094	$	2,037	$	2,150
Emission solutions	853		777		1,660		1,568
Components and software	335		301		660		607
Automated transmissions	124		123		212		240

Total sales	$	2,431	$	2,295	$	4,569	$	4,565

Distribution segment external sales by region were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
North America	$	2,353	$	2,074	$	4,521	$	4,173
Asia Pacific	319		280		646		520
Europe	300		323		603		592
China	130		123		250		236
India	92		91		176		163
Africa and Middle East	70		60		126		119
Latin America	56		83		107		133
Total sales	$	3,320	$	3,034	$	6,429	$	5,936

Distribution segment external sales by product line were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
Power generation	$	1,377	$	1,200	$	2,648	$	2,290
Parts	1,078		1,011		2,141		2,037
Service	470		439		903		855
Engines	395		384		737		754
Total sales	$	3,320	$	3,034	$	6,429	$	5,936

Power Systems segment external sales by product line were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
Power generation	$	744	$	584	$	1,384	$	1,029
Industrial	298		298		591		582
Generator technologies	175		172		335		315
Total sales	$	1,217	$	1,054	$	2,310	$	1,926

NOTE 3. PENSIONS AND OTHER POSTRETIREMENT BENEFITS

We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit (OPEB) plans. Contributions to these plans were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025



Defined benefit pension contributions	$	12	$	11	$	24	$	23


OPEB payments, net	3		2		4		3


Defined contribution pension plans	25		27		69		76

We anticipate making additional defined benefit pension contributions during the remainder of 2026 of $23 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.

The components of net periodic pension and OPEB expense under our plans were as follows:


	Pension
	U.S. Plans				U.K. Plans				OPEB
	Three months ended June 30,
In millions	2026		2025		2026		2025		2026		2025
Service cost	$	34	$	33	$	4	$	3	$	—	$	—
Interest cost	44		44		19		20		1		2
Expected return on plan assets	(70)		(67)		(25)		(23)		—		—
Amortization of prior service cost	1		—		1		1		—		—
Recognized net actuarial loss (gain)	2		3		8		6		(1)		(2)
Net periodic benefit expense	$	11	$	13	$	7	$	7	$	—	$	—

	Pension
	U.S. Plans				U.K. Plans				OPEB
	Six months ended June 30,
In millions	2026		2025		2026		2025		2026		2025
Service cost	$	69	$	66	$	7	$	7	$	—	$	—
Interest cost	88		87		39		38		2		3
Expected return on plan assets	(140)		(134)		(50)		(45)		—		—
Amortization of prior service cost	1		1		1		1		—		—
Recognized net actuarial loss (gain)	5		5		17		13		(2)		(3)
Net periodic benefit expense	$	23	$	25	$	14	$	14	$	—	$	—

NOTE 4. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

Equity, royalty and interest income from investees, net of applicable taxes, was as follows:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
Manufacturing entities
Chongqing Cummins Engine Company, Ltd.	$	29	$	22	$	58	$	45
Dongfeng Cummins Engine Company, Ltd.	27		19		50		39
Beijing Foton Cummins Engine Co., Ltd.	22		15		43		30
Tata Cummins, Ltd.	8		7		20		17
All other manufacturers	19		14		35		21


Distribution entities
Komatsu Cummins Chile, Ltda.	18		15		32		29
All other distributors	6		4		14		12


Cummins share of net income	129		96		252		193
Royalty and interest income	25		22		50		56
Equity, royalty and interest income from investees	$	154	$	118	$	302	$	249

Our Amplify Cell Technologies LLC (Amplify) joint venture was formed in May 2024 and meets the definition of a variable interest entity since the equity-at-risk is not currently sufficient to support the future operations of the joint venture. Accelera, Daimler Trucks and Buses U.S. Holding LLC and PACCAR, Inc. each own 30 percent of the joint venture and have two board positions, while EVE Energy owns 10 percent and has one board position. All significant decisions require majority or super-majority approval of the board. As a result, we are not the primary beneficiary of the joint venture, and it is not consolidated. We account for the joint venture using the equity method. Our Amplify joint venture will manufacture battery cells for electric commercial vehicles and industrial applications.

During the first quarter of 2026, expectations on electric vehicle demand in the commercial vehicle market continued to change. As a result, the joint venture partners agreed to finish building out the facility while delaying the timing for installing the manufacturing capacity. At this time, the production start date is uncertain. We evaluated the recoverability of our investment for a potential impairment and concluded that no impairment currently exists. As of June 30, 2026, we contributed $412 million and are contractually committed to future contributions of $418 million. The timing of those future contributions is uncertain. Our investment balance at June 30, 2026, net of operating losses, was $350 million. We will continue to monitor future events and developments that could impact our assessment of fair value which could result in an impairment in the future.

NOTE 5. INCOME TAXES

Our effective tax rates for the three and six months ended June 30, 2026, were 25.1 percent and 26.0 percent, respectively. Our effective tax rates for the three and six months ended June 30, 2025, were 24.2 percent and 24.1 percent, respectively.

The three months ended June 30, 2026, contained net unfavorable discrete items of $29 million, primarily due to $17 million of unfavorable return to provision adjustments and $12 million of other net unfavorable discrete tax items.

The six months ended June 30, 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 unfavorable $22 million, primarily due to $23 million of unfavorable return to provision adjustments, partially offset by $1 million of other net favorable discrete tax items. See NOTE 14, “REPORTABLE SEGMENTS,” for additional information on loss on sale of business and settlement of current and future customer obligations.

The three months ended June 30, 2025, contained net favorable discrete tax items of $3 million, primarily due to $4 million of favorable adjustments for uncertain tax positions, partially offset by $1 million of other unfavorable adjustments.

The six months ended June 30, 2025, contained net favorable discrete tax items of $10 million, primarily due to $8 million of favorable adjustments for share-based compensation tax benefits and $5 million of favorable adjustments for uncertain tax positions, partially offset by $3 million of other unfavorable tax items.

NOTE 6. MARKETABLE SECURITIES

A summary of marketable securities, all of which were classified as current, was as follows:


	June 30, 2026						December 31, 2025
In millions	Cost		Gross unrealized gains/(losses) (1)		Estimated fair value		Cost		Gross unrealized gains/(losses) (1)		Estimated fair value

Equity securities
Level 1

Publicly-traded shares	$	—	$	—	$	—	$	7	$	(7)	$	—

Level 2
Debt mutual funds	443		14		457		416		10		426
Certificates of deposit	238		—		238		280		—		280


Equity mutual funds	11		13		24		13		11		24

Debt securities	26		—		26		34		—		34







Marketable securities	$	718	$	27	$	745	$	750	$	14	$	764

(1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in our Condensed Consolidated Statements of Net Income.

The fair value of Level 1 securities is derived from the market price at the end of the period. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities, and there were no transfers between levels during the six months ended June 30, 2026, or the year ended December 31, 2025. All debt securities are Level 2 and classified as available-for-sale.

A description of the valuation techniques and inputs used for our Level 2 fair value measures is as follows:

*•*Debt mutual funds — The fair value measures for the vast majority of these investments are the daily net asset values published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input measure.

*•*Certificates of deposit — These investments provide us with a contractual rate of return and generally range in maturity from three months to five years. The counterparties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institution's month-end statement.

Equity mutual funds — The fair value measures for these investments are the net asset values published by the issuing brokerage. Daily quoted prices are available from reputable third-party pricing services and are used on a test basis to corroborate this Level 2 input measure.

*•*Debt securities — The fair value measures for these securities are broker quotes received from reputable firms. These securities are infrequently traded on a national exchange and these values are used on a test basis to corroborate our Level 2 input measure.

The proceeds from sales and maturities of marketable securities were as follows:


	Six months ended
	June 30,
In millions		2026		2025
Proceeds from sales of marketable securities		$	527	$	562
Proceeds from maturities of marketable securities		114		74
Investments in marketable securities - liquidations		$	641	$	636

NOTE 7. INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Inventories included the following:


In millions	June 30, 2026		December 31, 2025
Finished products	$	3,368	$	3,091
Work-in-process and raw materials	3,250		2,987
Inventories at FIFO cost	6,618		6,078
Excess of FIFO over LIFO	(221)		(256)
Inventories	$	6,397	$	5,822

NOTE 8. SUPPLEMENTAL BALANCE SHEET DATA

Other assets included the following:



In millions	June 30, 2026		December 31, 2025
Deferred income taxes	$	1,054	$	1,063
Operating lease assets	566		537
Corporate-owned life insurance	446		454

Other	454		498
Other assets	$	2,520	$	2,552

Other accrued expenses included the following:



In millions	June 30, 2026		December 31, 2025
Marketing accruals	$	370	$	346
Other taxes payable	281		318
Income taxes payable	177		156
Current portion of operating lease liabilities	141		138
Other	1,030		968
Other accrued expenses	$	1,999	$	1,926

Other liabilities included the following:



In millions	June 30, 2026		December 31, 2025

Accrued product warranty	$	943	$	887
Operating lease liabilities	450		424
Pensions	443		443
Deferred income taxes	381		388
Accrued compensation	211		210
Long-term derivative liabilities	97		72
Other postretirement benefits	92		94
Other	631		610
Other liabilities	$	3,248	$	3,128

NOTE 9. DEBT

Loans Payable and Commercial Paper

Loans payable, commercial paper and the related weighted-average interest rates were as follows:


In millions	June 30, 2026		December 31, 2025


Loans payable (1)	$	459	$	313

Commercial paper (2)	348		353




(1) Loans payable consist primarily of loans payable to various international and domestic financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate.
(2) The weighted-average interest rate, inclusive of all brokerage fees, was 3.23 percent and 3.20 percent at June 30, 2026 and December 31, 2025, respectively.

We can issue 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.

Revolving Credit Facilities

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. We intend to maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. There were no outstanding borrowings under these facilities at June 30, 2026 and December 31, 2025. At June 30, 2026, the $348 million of outstanding commercial paper effectively reduced the $4.0 billion of revolving credit capacity to $3.7 billion.

At June 30, 2026, we also had an additional $781 million available for borrowings under our uncommitted international and other domestic credit facilities.

Long-term Debt

A summary of long-term debt was as follows:


In millions	Interest Rate	June 30, 2026		December 31, 2025
Long-term debt



Debentures, due 2027	6.75%	$	58	$	58
Debentures, due 2028	7.125%	250		250
Senior notes, due 2028	4.25%	300		300
Senior notes, due 2029	4.90%	500		500
Senior notes, due 2030 (1)	1.50%	850		850
Senior notes, due 2031	4.70%	700		700
Senior notes, due 2034	5.15%	750		750
Senior notes, due 2035	5.30%	1,000		1,000
Senior notes, due 2043	4.875%	500		500
Senior notes, due 2050	2.60%	650		650
Senior notes, due 2054 (1)	5.45%	1,000		1,000
Debentures, due 2098 (2)	5.65%	165		165

Other debt		197		175

Unamortized discount and deferred issuance costs		(87)		(91)
Fair value adjustments due to hedge on indebtedness		(77)		(57)
Finance leases		132		136
Total long-term debt		6,888		6,886
Less: Current maturities of long-term debt		151		94
Long-term debt		$	6,737	$	6,792

(1) We entered into interest rate swaps on the noted debt instruments to effectively convert from a fixed rate to a floating rate. See "Interest Rate Risk" in NOTE 13, “DERIVATIVES,” for additional information.
(2) The effective interest rate is 7.48 percent.

Principal payments required on long-term debt during the next five years are as follows:



In millions	2026		2027		2028		2029		2030
Principal payments	$	63	$	155	$	632	$	541	$	864

Shelf Registration

As a well-known seasoned issuer, we filed an automatic shelf registration for an undetermined amount of debt and equity securities with the 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.

Interest Rate Risk

In the first half of 2026, we entered into a series of interest rates swaps to convert $350 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,” for additional information.

Fair Value of Debt

Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair values and carrying values of total debt, including current maturities, were as follows:


In millions	June 30, 2026		December 31, 2025
Fair value of total debt (1)	$	7,382	$	7,337
Carrying value of total debt	7,695		7,552

(1) The fair value of debt is derived from Level 2 input measures.

NOTE 10. PRODUCT WARRANTY LIABILITY

A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued product campaigns, was as follows:


	Six months ended
	June 30,
In millions	2026		2025
Balance at beginning of year	$	2,778	$	2,623
Provision for base warranties issued	337		316
Deferred revenue on extended warranty contracts sold	195		213
Provision for product campaigns issued	33		20
Payments made during period	(386)		(358)

Amortization of deferred revenue on extended warranty contracts	(158)		(144)
Changes in estimates for pre-existing product warranties and campaigns	36		30

Foreign currency translation adjustments and other	1		(7)

Balance at end of period	$	2,836	$	2,693

We recognized supplier recoveries of $4 million and $18 million for the three and six months ended June 30, 2026, compared with $13 million and $19 million for the comparable periods in 2025.

Warranty related deferred revenues and warranty liabilities on our Condensed Consolidated Balance Sheets were as follows:


In millions	June 30, 2026		December 31, 2025		Balance Sheet Location
Deferred revenue related to extended coverage programs
Current portion	$	305	$	303	Current portion of deferred revenue
Long-term portion	930		895		Deferred revenue
Total	$	1,235	$	1,198

Product warranty
Current portion	$	658	$	693	Current portion of accrued product warranty
Long-term portion	943		887		Other liabilities
Total	$	1,601	$	1,580

Total warranty accrual	$	2,836	$	2,778

NOTE 11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; product recalls; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; environmental and regulatory matters, including the enforcement of environmental and emissions standards; and asbestos claims. We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. We do not believe that these lawsuits are material individually or in the aggregate. While we believe we have also established adequate accruals for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability is probable and can be reasonably estimated based upon presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition or cash flows.

We conduct significant business operations in Brazil that are subject to the Brazilian federal, state and local labor, social security, tax and customs laws. While we believe we comply with such laws, they are complex, subject to varying interpretations and we are often engaged in litigation regarding the application of these laws to particular circumstances.

In December 2023, we reached an agreement in principle with the U.S. Environmental Protection Agency, the California Air Resources Board, the Environmental and Natural Resources Division of the 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 approximately one million of our pick-up truck applications in the U.S., which became final and effective in April 2024 (collectively, the Settlement Agreements). As part of the Settlement Agreements, among other things, we agreed to pay civil penalties, complete recall requirements, undertake mitigation projects, provide extended warranties, undertake certain testing, take certain corporate compliance measures and make other payments. Failure to comply with the terms and conditions of the Settlement Agreements will subject us to further stipulated penalties. We recorded a charge of $2.0 billion in 2023 to resolve the matters addressed by the Settlement Agreements and made $1.9 billion of required payments in 2024. Of the $2.0 billion charge, $1.7 billion (primarily related to penalties) was non-deductible for U.S. federal income tax purposes. The remaining amount, related to emissions mitigation projects and payments, extended warranties and other related compliance expenses, was deductible for U.S. federal income tax purposes. Subsequently we recorded additional immaterial amounts related to stipulated penalties we determined to be probable and estimable. Any future non-compliance with the Settlement Agreements will likely subject us to further stipulated penalties and other adverse consequences.

In connection with our announcement of our entry into the agreement in principle, we became subject to shareholder, consumer and third-party litigation regarding the matters covered by the Settlement Agreements.

The consequences resulting from the resolution of the foregoing matters are uncertain and the related expenses and reputational damage could have a material adverse impact on our results of operations, financial condition and cash flows.

Commitments

Periodically, we enter into guarantee arrangements, including guarantees of non-U.S. distributor financings, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of joint ventures or third-party obligations. At June 30, 2026, the maximum potential loss related to these guarantees was $50 million.

We have arrangements with certain suppliers or other third parties that require us to purchase minimum volumes or be subject to monetary penalties. At June 30, 2026, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $556 million. These arrangements enable us to secure supplies of critical components and IT services. We do not currently anticipate paying any penalties under these contracts.

We enter into physical forward contracts with suppliers of platinum and palladium to purchase certain volumes of the commodities at contractually stated prices for various periods, which generally fall within two years. At June 30, 2026, the total commitments under these contracts were $90 million. These arrangements enable us to guarantee the purchase prices of these commodities, which otherwise are subject to market volatility.

We have guarantees with certain customers that require us to satisfactorily honor contractual or regulatory obligations or compensate for monetary losses related to nonperformance. These performance bonds and other performance-related guarantees were $257 million at June 30, 2026.

Indemnifications

Periodically, we enter into various contractual arrangements where we agree to indemnify a third-party against certain types of losses. Common types of indemnities include:

product liability and license, patent or trademark indemnifications;
asset sale agreements where we agree to indemnify the purchaser against future environmental exposures related to the asset sold; and
any contractual agreement where we agree to indemnify the counterparty for losses suffered as a result of a misrepresentation in the contract.

We regularly evaluate the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable. Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications.

NOTE 12. ACCUMULATED OTHER COMPREHENSIVE LOSS

Following are the changes in accumulated other comprehensive (loss) income by component for the three and six months ended:



	Three months ended
In millions	Change in pension and OPEB plans		Foreign currency translation adjustment		Unrealized gain (loss) on derivatives		Total attributable to Cummins Inc.		Noncontrolling interests		Total
Balance at March 31, 2026	$	(927)	$	(1,541)	$	91	$	(2,377)
Other comprehensive (loss) income before reclassifications
Before-tax amount	(1)		18		13		30		$	2	$	32
Tax benefit (expense)	—		3		(3)		—		—		—
After-tax amount	(1)		21		10		30		2		32
Amounts reclassified from accumulated other comprehensive income (loss) (1)	9		—		(2)		7		—		7

Net current period other comprehensive income	8		21		8		37		$	2	$	39
Balance at June 30, 2026	$	(919)	$	(1,520)	$	99	$	(2,340)

Balance at March 31, 2025	$	(870)	$	(1,602)	$	106	$	(2,366)
Other comprehensive income (loss) before reclassifications
Before-tax amount	—		173		3		176		$	2	$	178
Tax benefit (expense)	—		22		(1)		21		—		21
After-tax amount	—		195		2		197		2		199
Amounts reclassified from accumulated other comprehensive income (loss) (1)	7		—		(5)		2		—		2
Net current period other comprehensive income (loss)	7		195		(3)		199		$	2	$	201
Balance at June 30, 2025	$	(863)	$	(1,407)	$	103	$	(2,167)

(1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive (loss) income and the related tax effects are immaterial for separate disclosure.


	Six months ended
In millions	Change in pension and OPEB plans		Foreign currency translation adjustment		Unrealized gain (loss) on derivatives		Total attributable to Cummins Inc.		Noncontrolling interests		Total
Balance at December 31, 2025	$	(912)	$	(1,460)	$	94	$	(2,278)
Other comprehensive (loss) income before reclassifications
Before-tax amount	(32)		(58)		10		(80)		$	(26)	$	(106)
Tax benefit (expense)	7		(2)		(2)		3		—		3
After-tax amount	(25)		(60)		8		(77)		(26)		(103)
Amounts reclassified from accumulated other comprehensive income (loss) (1)	18		—		(3)		15		—		15
Net current period other comprehensive (loss) income	(7)		(60)		5		(62)		$	(26)	$	(88)
Balance at June 30, 2026	$	(919)	$	(1,520)	$	99	$	(2,340)

Balance at December 31, 2024	$	(843)	$	(1,717)	$	115	$	(2,445)
Other comprehensive (loss) income before reclassifications
Before-tax amount	(44)		277		1		234		$	4	$	238
Tax benefit	10		33		—		43		—		43
After-tax amount	(34)		310		1		277		4		281
Amounts reclassified from accumulated other comprehensive income (loss) (1)	14		—		(13)		1		—		1
Net current period other comprehensive (loss) income	(20)		310		(12)		278		$	4	$	282
Balance at June 30, 2025	$	(863)	$	(1,407)	$	103	$	(2,167)















(1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive (loss) income and the related tax effects are immaterial for separate disclosure.

NOTE 13. DERIVATIVES

We are exposed to financial risk resulting from volatility in foreign exchange rates, interest rates and commodity prices. This risk is closely monitored and managed through the use of physical forward contracts (which are not considered derivatives) and financial derivative instruments including foreign currency forward contracts, commodity swap contracts and interest rate swaps and locks. Financial derivatives are used expressly for hedging purposes and under no circumstances are they used for speculative purposes. When material, we adjust the estimated fair value of our derivative contracts for counterparty or our credit risk. None of our derivative instruments are subject to collateral requirements. Substantially all of our derivative contracts are subject to master netting arrangements, which provide us with the option to settle certain contracts on a net basis when they settle on the same day with the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event.

Foreign Currency Exchange Rate Risk

We had foreign currency forward contracts with notional amounts of $4.8 billion at June 30, 2026, with the following currencies comprising 81 percent of outstanding foreign currency forward contracts: British pound, Chinese renminbi, Australian dollar, Canadian dollar and Swedish krona. We had foreign currency forward contracts with notional amounts of $5.2 billion at December 31, 2025, with the following currencies comprising 82 percent of outstanding foreign currency forward contracts: British pound, Chinese renminbi, Euro, Australian dollar and Canadian dollar.

We are further exposed to foreign currency exchange risk as many of our subsidiaries are subject to fluctuations as the functional currencies of the underlying entities are not our U.S. dollar reporting currency. To help reduce volatility in the equity value of our subsidiaries, we enter into foreign exchange forwards designated as net investment hedges for certain of our investments. Under the terms of our foreign exchange forwards, we agreed with third parties to sell British pounds, Chinese renminbi and Euros in exchange for U.S. dollar currency at a specified rate at the maturity of the contract. The notional amount of these hedges at June 30, 2026, was $1.1 billion. We also enter into cross-currency interest rate swaps designated as net investment hedges for certain of our investments to help reduce volatility in the equity value of our subsidiaries. Under the current terms of our cross-currency interest rate swaps, we generally pay fixed-rate interest in Euros or Chinese renminbi and receive fixed-rate interest in U.S. dollars. The notional amount of these hedges at June 30, 2026, was $500 million.

The following table summarizes the losses recognized in accumulated other comprehensive loss (AOCL):


	Three months ended		Six months ended
	June 30,		June 30,
In millions	2026			2025		2026			2025


Foreign exchange forwards (1)	$	(7)		$	(45)		$	(2)		$	(69)
Cross-currency interest rate swaps (1)	(8)			(8)			(9)			(8)

(1) There were no material gains or losses reclassified from AOCL into earnings for the three and six months ended June 30, 2026.

Interest Rate Risk

In 2021, we entered into a series of interest rate swaps to effectively convert $765 million of our $850 million senior notes, due in 2030, from a fixed rate of 1.50 percent to a floating rate currently equal to the three-month SOFR.

In the fourth quarter of 2025 and the first half of 2026, we entered into $150 million and $350 million, respectively, of interest rate swaps. These series of swaps effectively convert a portion 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, of which $50 million matures in 2036, $250 million matures in 2041 and $200 million matures in 2046.

We designated the swaps as fair value hedges. The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, were recognized in current income as interest expense. The interest rate swaps on our 2030 debt and 2054 debt had notional amounts outstanding at June 30, 2026 of $680 million and $500 million, respectively.

The following table summarizes the gains and losses:


	Three months ended								Six months ended
	June 30,								June 30,
In millions	2026				2025				2026				2025
Type of Swap	Gain (Loss) on Swaps		Gain (Loss) on Borrowings		Gain (Loss) on Swaps		Gain (Loss) on Borrowings		Gain (Loss) on Swaps		Gain (Loss) on Borrowings		Gain (Loss) on Swaps		Gain (Loss) on Borrowings
Interest rate swaps (1)	$	(11)	$	12	$	10	$	(12)	$	(13)	$	18	$	27	$	(26)

(1) The difference between the gain (loss) on swaps and borrowings represents hedge ineffectiveness.

Derivatives Not Designated as Hedging Instruments

The following table summarizes the effect on our Condensed Consolidated Statements of Net Income for derivative instruments not designated as hedging instruments:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
Loss recognized in income - Cost of sales (1)	$	—	$	(1)	$	—	$	(4)
Gain (loss) recognized in income - Other income, net (1)	15		89		(5)		150


(1) Includes foreign currency forward contracts.

Fair Value Amount and Location of Derivative Instruments

The following table summarizes the location and fair value of derivative instruments on our Condensed Consolidated Balance Sheets:


	Derivatives Designated as Hedging Instruments				Derivatives Not Designated as Hedging Instruments
In millions	June 30, 2026		December 31, 2025		June 30, 2026		December 31, 2025
Notional amount	$	4,158	$	3,241	$	3,607	$	4,316

Derivative assets
Prepaid expenses and other current assets (1)	$	33	$	16	$	37	$	39




Derivative liabilities
Other accrued expenses	$	22	$	29	$	3	$	3
Other liabilities	97		72		—		—
Total derivative liabilities (1)	$	119	$	101	$	3	$	3

(1) Estimates of the fair value of all derivative assets and liabilities above are derived from Level 2 inputs, which are estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 input measures and there were no transfers into or out of Level 2 or 3 during the six months ended June 30, 2026, or the year ended December 31, 2025.

We elected to present our derivative contracts on a gross basis in our Condensed Consolidated Balance Sheets. Had we chosen to present on a net basis, we would have derivatives in a net asset position of $22 million and $20 million and derivatives in a net liability position of $74 million and $69 million at June 30, 2026 and December 31, 2025, respectively.

NOTE 14. REPORTABLE SEGMENTS

Reportable segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is the Chief Executive Officer.

Our reportable segments consist of Engine, Components, Distribution, Power Systems and Accelera. This 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 CODM uses segment earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests (EBITDA) as the basis to evaluate the performance of each of our reportable segments. EBITDA provides our CODM with a full picture of the profitability of a segment to drive decisions and resource allocation. EBITDA is used as the key profitability measure when we set our annual operating plan, is the metric with which our CODM assesses results and is a key component of our annual variable compensation plans. Segment amounts exclude certain expenses not specifically identifiable to segments.

The accounting policies of our reportable segments are the same as those applied in our Condensed Consolidated Financial Statements. We prepared the financial results of our reportable segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We allocate certain common costs and expenses, primarily corporate functions, among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. These include certain costs and expenses of shared services, such as IT, human resources, legal, finance and supply chain management. We do not allocate gains or losses of corporate-owned life insurance. EBITDA may not be consistent with measures used by other companies.

Summarized financial information regarding our reportable segments for the three and six months ended June 30, 2026 and 2025 is shown in the table below:


In millions	Engine		Components		Distribution		Power Systems		Accelera		Total Segments
Three months ended June 30, 2026
External sales	$	2,349	$	2,431	$	3,320	$	1,217	$	140	$	9,457
Intersegment sales	735		460		6		1,038		5		2,244
Total sales	3,084		2,891		3,326		2,255		145		11,701
Cost of goods sold (excluding warranty expenses)	2,337		2,300		2,633		1,516		151		8,937
Warranty expenses	100		62		14		25		30		231
Selling expenses	69		52		175		50		5		351
Administrative expenses	173		141		110		106		12		542
Research, development and engineering expenses	181		88		15		79		22		385
Equity, royalty and interest income (loss) from investees	79		10		34		34		(3)		154
Other income (expense) (1)	6		(3)		4		4		1		12
Add back: Depreciation and amortization (2)	77		126		34		35		8		280
Segment EBITDA	$	386	$	381	$	451	$	552	$	(69)	$	1,701

Interest income (3)	$	10	$	11	$	7	$	5	$	—	$	33

Three months ended June 30, 2025
External sales	$	2,162	$	2,295	$	3,034	$	1,054	$	98	$	8,643
Intersegment sales	737		410		7		835		7		1,996
Total sales	2,899		2,705		3,041		1,889		105		10,639
Cost of goods sold (excluding warranty expenses)	2,168		2,161		2,419		1,290		132		8,170
Warranty expenses	119		28		5		26		12		190
Selling expenses	61		40		154		41		7		303
Administrative expenses	146		121		89		106		14		476
Research, development and engineering expenses	151		77		14		69		46		357
Equity, royalty and interest income (loss) from investees	60		10		26		27		(5)		118
Other income (expense) (1)	18		(18)		27		11		(2)		36
Add back: Depreciation and amortization (2)	68		127		32		35		13		275
Segment EBITDA	$	400	$	397	$	445	$	430	$	(100)	$	1,572

Interest income (3)	$	8	$	10	$	7	$	4	$	1	$	30


In millions	Engine		Components		Distribution		Power Systems		Accelera			Total Segments
Six months ended June 30, 2026
External sales	$	4,315	$	4,569	$	6,429	$	2,310	$	232		$	17,855
Intersegment sales	1,441		852		13		1,901		14			4,221
Total sales	5,756		5,421		6,442		4,211		246			22,076
Cost of goods sold (excluding warranty expenses)	4,411		4,324		5,096		2,744		272			16,847
Warranty expenses	193		89		21		42		43			388
Selling expenses	138		99		339		98		11			685
Administrative expenses	335		275		214		207		22			1,053
Research, development and engineering expenses	345		169		30		145		54			743
Equity, royalty and interest income (loss) from investees	159		20		62		70		(9)			302
Other income (expense) (1)	23		(21)		22		13		(198)		(4)	(161)
Add back: Depreciation and amortization (2)	149		254		69		71		17			560
Segment EBITDA	$	665	$	718	$	895	$	1,129	$	(346)	(4)	$	3,061

Interest income (3)	$	20	$	22	$	13	$	10	$	—		$	65

Six months ended June 30, 2025
External sales	$	4,202	$	4,565	$	5,936	$	1,926	$	188		$	16,817
Intersegment sales	1,468		810		12		1,612		20			3,922
Total sales	5,670		5,375		5,948		3,538		208			20,739
Cost of goods sold (excluding warranty expenses)	4,204		4,300		4,751		2,380		253			15,888
Warranty expenses	204		54		11		58		20			347
Selling expenses	120		81		311		87		14			613
Administrative expenses	284		240		180		206		27			937
Research, development and engineering expenses	306		152		28		126		89			701
Equity, royalty and interest income (loss) from investees	133		17		54		56		(11)			249
Other income (expense) (1)	38		(35)		36		14		(5)			48
Add back: Depreciation and amortization (2)	135		249		64		68		25			541
Segment EBITDA	$	858	$	779	$	821	$	819	$	(186)		$	3,091

Interest income (3)	$	18	$	17	$	12	$	8	$	1		$	56



(1) Other income (expense) includes other operating expense, net and other income, net (excluding unallocated corporate expenses) from our Condensed Consolidated Statements of Net Income.
(2) Depreciation and amortization are not considered significant segment expenses but are presented here to reconcile to EBITDA, the measure used by our CODM. Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in our Condensed Consolidated Statements of Net Income as interest expense. A portion of depreciation expense is included in research, development and engineering expenses.
(3) Interest income is a component of other income (expense).
(4) In the first quarter of 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.

A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below:


	Three months ended				Six months ended
	June 30,				June 30,
In millions	2026		2025		2026		2025
TOTAL SEGMENT EBITDA	$	1,701	$	1,572	$	3,061	$	3,091

Intersegment eliminations and other (1)	(48)		15		(118)		(44)

Less:
Interest expense	80		87		156		164
Depreciation and amortization	280		275		560		541
INCOME BEFORE INCOME TAXES	$	1,293	$	1,225	$	2,227	$	2,342





(1) Included intersegment sales, intersegment profit in inventory and unallocated corporate expenses.

NOTE 15. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)”, which requires public business entities to disclose in the notes to the financial statements more detailed information about the types of expenses included in certain expense captions in the consolidated financial statements, including purchases of inventory, employee compensation and depreciation and amortization. The amendments are effective for us beginning with our 2027 annual period and in interim periods beginning in 2028. Early adoption is permitted. The ASU may be adopted prospectively or retrospectively. We are currently evaluating the impact of ASU 2024-03 on our Condensed Consolidated Financial Statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)”, to modernize the accounting guidance for costs to develop software for internal use. The new guidance amends the existing standard to remove references to various stages of a software development project to better align with current software development methods such as agile programming. The types of costs required to be capitalized has not significantly changed. In addition, the new standard requires costs to begin capitalization when (1) management has authorized and committed to funding the project and (2) it is probable that the project will be completed and the software will be used to perform its intended function. The new standard is effective for us beginning January 1, 2028, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our Condensed Consolidated Financial Statements.

In December 2025, the FASB issued ASU 2025-10, “Accounting for Government Grants Received by Business Entities (Topic 832)”, which establishes accounting requirements for grants received by a business entity. A government grant is defined as a transfer of a monetary asset or a tangible non-monetary asset, other than in an exchange transaction. The scope does not include income taxes or guarantees. The amendments are effective for us beginning January 1, 2029. Early adoption is permitted. The ASU may be adopted prospectively or retrospectively. As the standard is largely consistent with our current policy on accounting for government grants (as disclosed in NOTE 1, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” of the Notes to the Consolidated Financial Statements of our 2025 Form 10-K), we do not expect implementation of the new standard to have a material impact on our Condensed Consolidated Financial Statements.

In May 2026, the FASB issued ASU 2026-02, “Environmental Credits and Environmental Credit Obligations (Topic 818)”, which establishes accounting and disclosure requirements for environmental credits and related environmental obligations as current GAAP does not contain specific guidance. Under this standard, environmental credits are generally recognized at cost while environmental obligations are generally recognized at the cost of the related environmental credits. To the extent an entity does not have enough credits to satisfy the obligation, the difference is generally recognized at fair value. While we are still evaluating the impact of the new standard on our Condensed Consolidated Financial Statements, we do not expect a material impact to our Condensed Consolidated Statements of Net Income. The new standard requires assets and obligations to be recorded on a gross basis on our Condensed Consolidated Balance Sheets, whereas our current practice is to record them on a net basis. The new standard is effective for us beginning January 1, 2028.

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