v3.26.1
Income Taxes
 12 Months Ended
Jul. 03, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (Loss) Before Taxes

The domestic and foreign components of Income (loss) before taxes were as follows:
202620252024
(in millions)
Foreign$925 $2,602 $(492)
Domestic8,980 (1,472)(247)
Income (loss) before taxes$9,905 $1,130 $(739)

Income Tax Expense (Benefit)

The components of Income tax expense (benefit) were as follows:
202620252024
(in millions)
Current:
Foreign$189 $213 $77 
Domestic - Federal125 90 34 
Domestic - State38 (1)6 
352 302 117 
Deferred:
Foreign(64)(1)(8)
Domestic - Federal193 (773)(68)
Domestic - State— (41)(15)
129 (815)(91)
Income tax expense (benefit)
$481 $(513)$26 

Previously, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the ability to deduct R&D expenditures in the year incurred, requiring capitalization and amortization under Internal Revenue Code Section 174. In July 2025, the One Big Beautiful Bill Act of 2025 was signed into law, which includes broad tax reform provisions that extend and modify key elements of the TCJA. Notably, the new legislation now allows an option for the immediate expensing of domestic R&D expenditures, beginning with 2026. The legislation also includes favorable modifications to international tax provisions, including changes to the Global Intangible Low-Taxed Income regime and enhancements to the Foreign Derived Deduction Eligible Income (“FDDEI”) deduction that will become effective for the Company in 2027.

In August 2022, the Inflation Reduction Act of 2022 was signed into law, which contained, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.0 billion. Although CAMT went into effect in 2024, the Company was not subject to CAMT in 2024 and 2025. The Company is not subject to CAMT in 2026 as its average annual AFSI did not exceed $1.0 billion for the preceding three-year period.
In December 2021, the Organization for Economic Co-operation and Development G20 (“OECD/G20”) Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two. Several non-U.S. jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of Pillar Two, also known as Global Minimum Tax (“GMT”). For 2026, the Company is subject to GMT in Malaysia and Thailand.

Deferred Taxes

Temporary differences and carryforwards, which give rise to a significant portion of deferred tax assets and liabilities were as follows:
July 3,
2026		June 27,
2025
(in millions)
Deferred tax assets:
Sales related reserves and accrued expenses not currently deductible$71 $38 
Accrued compensation and benefits not currently deductible101 75 
Net operating loss carryforward114 133 
Business credit carryforward562 562 
Long-lived assets748 796 
Interest and hedging costs not currently deductible22 166 
Other44 29 
Total deferred tax assets1,662 1,799 
Deferred tax liabilities:
Long-lived assets(69)(40)
Unremitted earnings of certain non-U.S. entities(114)(149)
Other(1)(12)
Total deferred tax liabilities(184)(201)
Valuation allowances(611)(598)
Deferred tax assets, net$867 $1,000 

The decrease in the deferred tax assets is attributable primarily to the utilization of interest expense carryforwards that had been previously deferred due to interest expense limitations. This decrease includes the interest paid in connection with the IRS settlement for years 2008 through 2015 that was previously deferred.

The Company continues to assess and adjust its valuation allowance based on operating results and market conditions. After weighing both the positive and negative evidence available, including, but not limited to, earnings history, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets, the Company determined that it is able to realize its deferred tax assets except for certain loss and credit carryforwards.

The Company is permanently reinvested with respect to certain foreign earnings. There is no unrecognized deferred tax liability associated with the repatriation of these foreign undistributed earnings as it can be achieved without additional federal tax consequences.
Effective Tax Rate

The following table reconciles the income tax provision with the amount calculated using the U.S. federal statutory rate applied to pretax income, reflecting the adoption of ASU 2023-09 (amounts in millions, except for percentages):

2026
AmountPercent
US Federal Statutory Income Tax Rate$2,080 21 %
State and Local Income Taxes, Net of Federal Income Tax Effect (1)
40 1 
Foreign Tax Effects
Thailand
Tax Holiday Exempt Income(140)(1)
Pillar Two82 1 
Other(17)— 
Other Foreign Jurisdictions(30)(1)
Effect of Changes in Tax Laws or Rates Enacted in the Current Period— — 
Effect of Cross-Border Tax Laws
FDDEI Deduction(112)(1)
Other(20)— 
Tax Credits(64)(1)
Valuation Allowance— — 
Non-taxable or Non-deductible Items:
Stock-based Compensation (2)
(202)(2)
Tax-free disposition of retained interest in Sandisk(1,199)(12)
Other14 — 
Uncertain Tax Positions (3)
87 1 
Other(38)(1)
Total Tax Provision and Effective Tax Rate$481 5 %
(1)     State taxes in Illinois, New Jersey, and Utah comprised greater than 50% of the tax effect in this category.
(2)     Includes amounts related to non-deductible stock-based compensation, in addition to excess tax benefits or shortfalls from stock-based compensation. Our tax provision includes $155 million of tax windfalls from stock-based compensation.
(3)     Changes in unrecognized tax benefits are presented on an aggregated basis for all jurisdictions.
Cash paid for income taxes, net of refunds received, by jurisdiction, pursuant to the disclosure requirements of ASU 2023-09, is as follows:

2026
(in millions)
Federal$506 
State49 
Foreign
Thailand39 
Malaysia41 
Other99 
Cash paid for income taxes, net of refunds received$734 

Reconciliation of the U.S. Federal statutory rate to the Company’s effective tax rate is as follows:
20252024
U.S. Federal statutory rate21 %21 %
Tax rate differential on international income(36)(22)
Tax effect of U.S. foreign income inclusion1 (1)
Tax effect of U.S. foreign minimum tax25 (6)
Tax effect of U.S. stock-based compensation(2)(1)
Tax effect of non-deductible loss on retained interest in Sandisk16 — 
Tax effect of U.S. permanent differences— 5 
State income tax, net of federal tax— 2 
Change in valuation allowance6 (3)
Unremitted earnings of certain non-U.S. entities(2)(2)
Foreign income tax credits(8)1 
R&D tax credits(6)5 
U.S. return to provision1 — 
Tax reserves1 (3)
Inter-entity asset transfer(61)— 
Other(1)— 
Effective tax rate(45)%(4)%

The tax rate differential on international income is comprised primarily of reduced tax rates from the Company tax holidays.

Tax Holidays

A substantial portion of the Company’s manufacturing operations in the Philippines and Thailand operate under various tax holidays and tax incentive programs, which will expire in whole or in part at various dates beginning in the first quarter of 2027 through 2033. Certain tax holidays and tax incentive programs may be extended if specific conditions are met.

The Company’s tax holiday in Malaysia expired on November 1, 2023. The Company has applied for a new incentive and is engaged in active discussions with the Malaysian Investment Development Authority. Because no formal agreement is in place, the Company is applying the Malaysia corporate statutory tax rate on its post-expiration Malaysian income. If a new incentive is granted, the Company will make an adjustment to its effective tax rate in that period.
One of the Company’s tax holidays in Thailand is scheduled to expire on August 31, 2026. While the Company’s earnings in Thailand for the current fiscal year remain eligible for this incentive, certain deferred tax balances are scheduled to reverse after the expiration date. The Company is in active discussions with the Thailand Board of Investment regarding an extension; however, because no formal agreement is in place, the Company has measured these reversing deferred taxes using the Thailand statutory corporate tax rate. If an extension is granted, the Company will make an adjustment to its effective tax rate in the period of enactment.

The direct tax impact of these tax holidays and tax incentives was an increase to the Company’s net earnings by $60 million, or $0.16 per diluted share, $551 million, or $1.54 per diluted share, and $209 million, or $0.64 per diluted share, in 2026, 2025 and 2024, respectively. The direct tax impact of these tax holidays and tax incentives amount was reduced for GMT in Thailand, which became applicable for the Company in 2026.

Tax Carryforwards

As of July 3, 2026, the Company had varying amounts of federal and state NOL/tax credit carryforwards that do not expire or, if not used, expire in various years. Following is a summary of the Company’s federal and state NOL/tax credit carryforwards and the related expiration dates of these NOL/tax credit carryforwards:
JurisdictionNOL/Tax Credit Carryforward AmountExpiration
(in millions)
Federal NOL (Pre 2017 Act Generation)$546 2027 to 2038
California NOL
353 2028 to 2047
Other State NOL
194 
Various
Federal tax credits49 2027 to 2035
State tax credits774 No expiration

The federal and state NOLs and credits relating to various acquisitions are subject to limitations under Sections 382 and 383 of the U.S. Internal Revenue Code. The Company expects the total amount of federal and state NOLs to be ultimately realized will be reduced because of these provisions by $116 million and $240 million, respectively. The Company expects the total amount of federal and state credits ultimately realized will be reduced because of these provisions by $27 million and $2 million, respectively.

As of July 3, 2026, the Company had varying amounts of foreign NOL carryforwards that do not expire or, if not used, expire in various years, depending on the country. The major jurisdictions that the Company receives foreign NOL carryforwards and the related amounts and expiration dates of these NOL carryforwards are as follows:
JurisdictionNOL Carryforward AmountExpiration
(in millions)
Malaysia$76 2029

Uncertain Tax Positions

With the exception of certain unrecognized tax benefits that are directly associated with the tax position taken, unrecognized tax benefits are presented gross in the Consolidated Balance Sheets.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits excluding accrued interest and penalties:
202620252024
(in millions)
Unrecognized tax benefit, beginning balance$569 $721 $1,021 
Gross increases related to current year tax positions13 11 25 
Gross increases related to prior year tax positions34 26 73 
Gross decreases related to prior year tax positions— (13)(32)
Settlements(4)(40)(363)
Lapse of statute of limitations(2)(10)(3)
Distribution in connection with the Separation
— (126)— 
Unrecognized tax benefit, ending balance$610 $569 $721 

As of July 3, 2026, June 27, 2025 and June 28, 2024, the portion of the gross unrecognized tax benefits, if recognized, that would affect the effective tax rate is $455 million, $416 million and $555 million, respectively. It is the Company’s policy to include interest and penalties related to its gross unrecognized tax benefits as a component of the provision for income taxes. Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of July 3, 2026, June 27, 2025 and June 28, 2024 was $130 million, $82 million and $181 million, respectively. As of July 3, 2026, June 27, 2025 and June 28, 2024, the Company’s payables related to unrecognized tax benefits, including accrued interest and penalties, were $585 million, $498 million and $736 million, respectively. Of these amounts, approximately $349 million, including interest and penalties, could result in potential cash payments to be made within the next twelve months and have been included in Income taxes payable on the Consolidated Balance Sheets as of July 3, 2026. The remaining payables related to unrecognized tax benefits, including accrued interest and penalties, are included in Other liabilities on the Consolidated Balance Sheets as of July 3, 2026 and June 27, 2025.

The potential cash payments of $349 million is expected to be netted with offsetting favorable tax receivables totaling $213 million, including among other things, a reduction to our mandatory deemed repatriation tax obligations related to the settlement for the years 2008 through 2015, for potential net cash payments of $136 million. These tax receivables are classified in Other current assets on the Consolidated Balance Sheets as of July 3, 2026.

In connection with Internal Revenue Service (“IRS”) settlements for the years 2008 through 2015, the Company expects to realize reductions to its mandatory deemed repatriation tax obligations and tax savings from interest deductions in future years aggregating to approximately $166 million. Of this amount, $65 million of interest savings from the interest paid with respect to years 2008 through 2015 that were previously classified as a deferred tax asset due to interest expense limitation rules have been utilized during the fiscal year.

The Company files U.S. Federal, U.S. state and foreign tax returns. For both federal and state tax returns, with few exceptions, the Company is subject to examination for 2016 through 2025. The Company is no longer subject to examination by the IRS for periods prior to 2016, although carry forwards generated prior to those periods may still be adjusted upon examination by the IRS or state taxing authority if they either have been or will be used in a subsequent period. In the following major foreign jurisdictions, the Company could be subject to examination as noted below:
JurisdictionPeriod Subject to Examination
China (calendar)2015-2025
India (fiscal)2018-2025
Japan (fiscal)2017-2025
Malaysia (fiscal)2019-2025
Thailand (fiscal)2015-2025
Singapore (fiscal)2022-2025
United Kingdom (fiscal)2024-2025

The Company believes that adequate provision has been made for any adjustments that may result from any other tax examinations. The outcome of such tax examinations, however, cannot be predicted with certainty. If any issues addressed in the Company’s tax examinations are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. As of July 3, 2026, with the exception of the net potential cash payment of $136 million, it was not possible to estimate the amount of change, if any, in the unrecognized tax benefits that is reasonably possible within the next twelve months. Any significant change in the amount of the Company’s liability for unrecognized tax benefits would most likely result from additional information relating to the examination of the Company’s tax returns.