v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Loss before provision for (benefit from) income taxes consisted of the following for the years ended December 31, 2025, 2024, and 2023 (in thousands):
Year Ended December 31,
202520242023
United States$(420,193)$(517,547)$(900,325)
Foreign24,995 (149,586)102,480 
Total$(395,198)$(667,133)$(797,845)
The components of the provision for income taxes consists of the following for the years ended December 31, 2025, 2024, and 2023 (in thousands):
Year Ended December 31,
202520242023
Current:
Federal$1,504 $4,063 $3,393 
State(308)1,022 584 
Foreign27,249 17,748 29,502 
Total current tax expense28,445 22,833 33,479 
Deferred:
Federal3,406 (421)5,184 
State— 861 (3,749)
Foreign(25,556)(26,119)(6,437)
Total deferred tax benefit(22,150)(25,679)(5,002)
Total tax provision (benefit)$6,295 $(2,846)$28,477 
Reconciliations of the income tax provision at the U.S. federal statutory tax rate to the provision for (benefit from) income taxes for the year ended December 31, 2025, is as follows (in thousands, except percentages):
Year Ended December 31, 2025
$
%
U.S. federal statutory tax rate$(82,992)21.00 %
Changes in income taxes resulting from:
State and local income taxes, net of federal benefit (1)
(308)0.08 %
Foreign tax effects
Israel
Incentive tax rate15,089 (3.82)%
Other(4,905)1.24 %
Denmark
Changes in valuation allowance(16,142)4.08 %
Other(2,357)0.60 %
United Kingdom
Foreign currency exchange5,695 (1.44)%
Other(11,093)2.81 %
Other foreign jurisdictions13,430 (3.41)%
Effect of changes in tax laws or rates enacted in the current period— — %
Effect of cross-border tax laws1,323 (0.33)%
Tax Credits
Research & Development Credits(7,146)1.81 %
Changes in valuation allowances104,386 (26.41)%
Nontaxable or nondeductible items
Stock-based compensation(17,819)4.51 %
Non-deductible compensation14,365 (3.64)%
Other(3,462)0.88 %
Changes in unrecognized tax benefits(1,769)0.45 %
Total tax provision (benefit)$6,295 (1.59)%
(1)    State taxes in New York and New York City made up the majority (greater than 50%) of the tax effect in this category.
Reconciliations of the income tax provision at the U.S. federal statutory tax rate to the provision for (benefit from) income taxes for the years ended December 31, 2024 and 2023 are as follows (in thousands):
Year Ended December 31,
20242023
U.S. federal statutory tax rate$(167,584)$(138,742)
Changes in income taxes resulting from:
State tax expense, net of federal benefit1,529 (1,980)
Foreign income taxed at different rates10,606 1,543 
Federal research and development credits(3,358)(10,172)
Stock-based compensation50,954 50,640 
Tax effects of restructuring3,253 (293,435)
Base-erosion and anti-abuse tax— — 
Change in valuation allowance90,598 420,846 
Other11,156 (223)
Total tax provision (benefit)$(2,846)$28,477 
Our income tax provision for the year ended December 31, 2025 was primarily driven by losses that cannot be benefited due to the U.S. valuation allowance and taxable income in certain foreign jurisdictions.
Our income tax provision for the year ended December 31, 2024 was primarily driven by losses that cannot be benefited due to the valuation allowance on U.S., Denmark, U.K., China, and Canada entities, and to a lesser extent, foreign earnings taxed at different tax rates. In addition, we undertook certain tax restructuring efforts during the first quarter of 2024 that enhanced our ability to offset deferred tax liabilities in the U.S. in future periods, thereby partially reducing the need for a valuation allowance.
The types of temporary differences that give rise to significant portions of our deferred tax assets and liabilities as of December 31, 2025 and 2024 are set forth below (in thousands):
As of December 31,
20252024
Deferred tax assets:
Net operating losses$440,347 $401,330 
Tax credits129,428 119,681 
Stock-based compensation51,376 68,178 
Capitalized R&D expenditures651,267 672,828 
Operating lease liabilities29,601 39,615 
Other68,026 62,340 
Gross deferred tax assets1,370,045 1,363,972 
Valuation allowance(1,264,670)(1,167,316)
Total deferred tax assets105,375 196,656 
Deferred tax liabilities:
Intangible Asset(123,225)(221,869)
Depreciation and Amortization(11,972)(21,694)
Operating lease ROU assets(20,978)(25,762)
Total deferred tax liabilities(156,175)(269,325)
Net deferred tax assets (liabilities), net of valuation allowances$(50,800)$(72,669)
1)    Certain prior year amounts have been reclassified to conform to current year presentation.
In the tax years ended December 31, 2025 and 2024, we capitalized certain research and development costs incurred by our U.S. and foreign subsidiaries, which resulted in deferred tax assets of $651 million and $673 million respectively. These deferred tax assets associated with capitalized research and development costs are offset by valuation allowances and future taxable temporary differences.
The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We regularly assess the ability to realize our deferred tax assets and establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. Due to the weight of objectively verifiable negative evidence, including our history of losses, we believe that it is more likely than not that our U.S. federal, state, and certain foreign deferred tax assets will not be realized as of December 31, 2025 and 2024, and as such, we have maintained a valuation allowance against such deferred tax assets.
In the event we determine that we will be able to realize all or part of our net deferred tax assets in the future, the valuation allowance against deferred tax assets will be reversed in the period in which we make such determination. The release of a valuation allowance against deferred tax assets may cause greater volatility in the effective tax rate in the periods in which the valuation allowance is released. The valuation allowance against our U.S. federal, state and foreign deferred tax assets increased by $97 million and $79 million in the years ended December 31, 2025 and 2024, respectively. The increase in the valuation allowance in the years ended December 31, 2025 and 2024 was primarily related to deferred tax assets for which insufficient positive evidence exists to support their realizability, including NOL carryforwards, capitalized research and development expenses, and credits for research and development.
Our NOL carryforwards for U.S. federal, state, and foreign purposes were $685 million, $477 million, and $1.1 billion, respectively, with most of our foreign NOL carryforward balances arising from Denmark and the U.K. jurisdictions. Portions of the U.S. federal and state NOL carryforwards, if not utilized, will begin to expire in 2032 and 2026, respectively. The foreign NOL carryforwards, if not utilized,
will not expire. Our U.S. federal and state research and development credit carryforwards were $115 million and $43.9 million, respectively. The U.S. federal credit carryforwards, if not utilized, will begin to expire in 2033, while the California credit carryforwards have no expiration. The foreign credit carryforwards, if not utilized, will begin to expire in 2045.
Federal and state tax laws impose restrictions on the utilization of NOL and research and development credit carryforwards in the event of a change in ownership of our business as defined by the Internal Revenue Code, Sections 382 and 383. Under Section 382 and 383 of the Code, substantial changes in our ownership may limit the amount of NOL and research and development credit carryforwards that are available to offset taxable income. The annual limitation would not automatically result in the loss of NOL or research and development credit carryforwards but may limit the amount available in any given future period.
We maintain our reinvestment assertion with respect to foreign earnings for the period ended December 31, 2025, which is that all earnings are permanently reinvested for all jurisdictions. Based on our reinvestment assertion and losses from our foreign entities, we have not recorded a liability for the period ended December 31, 2025.
A reconciliation of the beginning and ending amount of total gross unrecognized tax benefits, excluding accrued net interest and penalties, is as follows (in thousands):
As of December 31,
202520242023
Unrecognized tax benefits, beginning balance$179,780 $182,515 $176,584 
Gross increases for tax positions taken in prior years379 454 4,215 
Gross decreases for tax positions taken in prior years(3,049)(11,338)(8,361)
Gross increases for tax positions taken in current year5,254 9,001 10,573 
Reductions resulting from lapses of statues of limitations— (668)(660)
Foreign exchange gains and losses377 (184)164 
Unrecognized tax benefits, ending balance$182,741 $179,780 $182,515 
As of December 31, 2025 and 2024, we had $183 million and $180 million, respectively, of gross unrecognized tax benefits, of which $32.4 million and $31.8 million, respectively, would impact the effective tax rate, if recognized. We recognize interest and penalties related to our unrecognized tax benefits within our provision for income taxes. The amount of interest and penalties accrued as of December 31, 2025 and 2024 were $10.9 million and $7.7 million, respectively.
We are subject to taxation in the United States and various other state and foreign jurisdictions. The material jurisdictions in which we are subject to potential examination include the United States, Denmark, and Israel. Our 2012 and subsequent tax years remain open to examination by the Internal Revenue Service. Our 2019 and subsequent tax years remain open to examination in Denmark, Finland, France, and Israel.
The components of the cash paid for (refunded from) income taxes, net, consists of the following for the year ended December 31, 2025 (in thousands):
Year Ended December 31,
2025
Federal$580 
State(543)
Foreign10,552 
Total cash paid for income taxes, net of refunds:$10,589 
Individual jurisdictions equaling 5% or more of the total cash paid for (refunded from) income taxes, net, for the year ended December 31, 2025 include: Israel $(9.5) million, Denmark $4.1 million, Canada $3.0 million, China $2.6 million, Finland $1.5 million, France $1.4 million, UK $1.3 million, Spain $1.0 million, Japan $1.0 million, India $0.8 million, Korea $0.7 million, U.S. Federal $0.6 million.