v3.26.1
Income Taxes
 12 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
    The domestic and foreign components of income before taxes are:

Year Ended June 30, 
202620252024
(in thousands)
U.S. operations$11,311 $8,229 $9,079 
Non-U.S. operations(46,942)(36,025)(11,722)
Net loss before income taxes$(35,631)$(27,796)$(2,643)

    The provision (benefit) for income taxes is comprised of:
Year Ended June 30, 
202620252024
(in thousands)
U.S. federal taxes:
Current$1,002 $721 $485 
Deferred(445)190 1,652 
Non-U.S. taxes:
Current17,702 3,972 3,187 
Deferred(10,793)(13,502)(1,669)
State taxes, net of federal benefit:
Current2 (6)(6)
Total provision (benefit) for income taxes$7,468 $(8,625)$3,649 

The table below provides the income tax rate reconciliation for the years ended June 30, 2025 and June 30, 2024, prepared in accordance with the disclosure requirements in effect prior to the Company's adoption of ASU 2023-09. As the Company adopted ASU 2023-09 on a prospective basis, the rate reconciliation for periods prior to the year ended June 30, 2026 has not been recast to reflect the updated categories and disaggregation requirements of ASU 2023-09. See Note 1 Summary of Significant Accounting Policies—Recent Accounting Pronouncements for additional details on the adoption of ASU 2023-09.

The reconciliation of the federal statutory income tax rate to our effective income tax rate for the years ended June 30, 2025 and June 30, 2024 is as follows (in percentage):

Year Ended June 30,
20252024
United States statutory rate21.0 %21.0 %
Stock-based compensation(0.3)(3.7)
Foreign taxes, net(38.9)(186.9)
Outside basis difference on equity method investment45.1 27.4 
Tax credits 7.7 86.2 
Non-deductible expenses(1.0)(6.9)
Tax exempt income— 2.8 
Non-deductible executive compensation(6.0)(78.6)
Foreign derived intangible income deduction2.0 — 
Other1.4 0.6 
31.0 %(138.1)%
    
The Company adopted ASU 2023-09 guidance for the year ended June 30, 2026 on a prospective basis. The following table presents a reconciliation of income taxes computed at the statutory federal income tax rate to the effective tax rate implied by the accompanying Consolidated Statements of Operations for the year ended June 30, 2026 in accordance with ASU 2023-09. In preparing the rate reconciliation, the Company is using the United States federal tax rate of 21% as the starting point in the rate reconciliation. While the Company is incorporated in Bermuda with a zero percent statutory tax rate, the Company has significant operations in the United States. Furthermore, using the 21% United States federal tax rate is consistent with prior period rate reconciliation reporting.

The reconciliation of the effective tax rate for income taxes from the federal statutory rate were as follows (in thousands, except percentages):

Year Ended June 30, 2026
Amount (in thousands)Percentages
Tax at federal statutory rate$(7,482)21.00 %
State and local income tax, net of federal (national) income tax effect *2 (0.01)%
Foreign tax effects:
   Cayman - foreign rate differential between Cayman and U.S.12,925 (36.28)%
   China
          Withholding tax2,639 (7.41)%
          Outside basis difference on equity method investment930 (2.61)%
          Other193 (0.54)%
   Hong Kong
          Hong Kong - Foreign rate differential between Hong Kong and U.S.(460)1.29 %
          Other405 (1.14)%
   India
          Withholding tax395 (1.11)%
          Other(2)0.01 %
   Other foreign jurisdictions(140)0.39 %
Effect of cross-border tax laws
          FDII(610)1.73 %
Tax credits
          Federal research and development credit(2,324)6.52 %
Nontaxable or nondeductible items
          Non-deductible compensation972 (2.73)%
          Other203 (0.57)%
Changes in unrecognized tax benefits (report all jurisdictions)(178)0.50 %
Provision for income taxes$7,468 (20.96)%
*California and Oregon make up the majority of state tax expense in this category
Analysis of Effective Tax Rate Between Fiscal Years

As shown in the above effective tax rate analysis, the Company’s effective tax rate was (21.0)% , 31.0%, and (138.1)% for fiscal years 2026, 2025 and 2024, respectively, a 52% difference between fiscal years 2026 and 2025. The primary reason for the large percentage differences in the overall effective tax rate reconciliation between fiscal year 2026 and fiscal year 2025 was a result of fiscal year 2025 reporting a tax benefit of $12.5 million (a 45.1% effective tax rate impact in fiscal year 2025) vs. a fiscal year 2026 tax expense of $0.9 million (a negative 2.6% effective tax rate impact) on the outside basis difference on the equity method investment, for a total 47.7% effective tax rate impact between the two years. A secondary reason for the difference in the effective tax rate difference between fiscal year 2026 and fiscal year 2025 is that the Company incurred
$3.0 million (a negative 8.5% effective tax rate impact) of withholding taxes in fiscal year 2026 vs $0 withholding taxes in fiscal year 2025.

The primary reason for the large percentage differences in the overall effective tax rate reconciliation between fiscal year 2024 and fiscal year 2026 as well as between the fiscal year 2024 and fiscal year 2025 is mainly due to the smaller amount of pretax book loss of $2.6 million as the denominator in the calculation of effective tax rate reconciliation in fiscal year 2024, as compared to the larger amount of pretax book loss of $35.6 million in fiscal year 2026 as the denominator as well as the pretax book loss of $27.8 million in fiscal year 2025 as the denominator in calculating the effective tax rates for these years. When comparing the effective tax rate impact on the differences in pretax book loss between fiscal year 2026 versus fiscal year 2024, the net value of fiscal year 2026 loss is approximately 13.5 times higher than the pretax book loss in fiscal year 2024. Therefore, the percentage impact on the effective tax rate in fiscal year 2026 is approximately 13.5 times higher than in fiscal year 2024, simply due to the large variance in pretax book loss between the two years. The impact of the pretax book loss denominator effect also largely explains the differences in the effective tax rate differences between fiscal years 2026 and 2024 for tax credits and non-deductible executive compensation expense. The differences between “Foreign Taxes, net” is a result of changes in the mix of earnings in various geographic jurisdictions between fiscal year 2026 and fiscal year 2024.

Similarly, when comparing the effective tax rate impact on the differences in pretax book loss between fiscal year 2025 versus fiscal year 2024, the net value of fiscal year 2025 loss is approximately 10.5 times higher than the pretax book loss in fiscal year 2024. Therefore, the percentage impact on the effective tax rate in fiscal year 2025 is approximately 10.5 times higher than in fiscal year 2024, simply due to the large variance in pretax book loss between the two years. The impact of the pretax book loss denominator effect also fully explains the differences in the effective tax rate differences between fiscal years 2025 and 2024 for tax credits and non-deductible executive compensation expense. The differences between “Foreign Taxes, net” is a result of changes in the mix of earnings in various geographic jurisdictions between fiscal year 2025 and fiscal year 2024. The differences concerning “Outside Basis Differences on Equity Method Investment” between the two years is a result of the larger amount of equity method loss in fiscal year 2025 in comparison with that of fiscal year 2024.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:
June 30, 
20262025
(in thousands)
Deferred tax assets:
Accrued compensation$2,715 $2,327 
Net operating loss carryforwards— — 
Depreciation8,002 7,210 
Tax credits17,355 16,957 
Operating lease liabilities3,299 3,953 
Capitalized R&D costs1,016 1,302 
Accruals and reserves495 434 
Total deferred tax assets32,882 32,183 
Valuation allowance(10,071)(8,751)
Total deferred tax assets, net of valuation allowance22,811 23,432 
Deferred tax liabilities:
Depreciation and amortization(17,275)(18,538)
Right of use assets(3,090)(3,724)
Investments(5,752)(13,763)
Total deferred tax liabilities(26,117)(36,025)
Net deferred tax liabilities
$(3,306)$(12,593)
The breakdown between deferred tax assets and liabilities is as follows:
June 30, 
20262025
(in thousands)
Deferred tax assets$8,630 $599 
Deferred tax liabilities(11,936)(13,192)
Net deferred tax liabilities$(3,306)$(12,593)

The Company’s valuation allowance related to deferred income taxes as reflected in the consolidated balance sheets was $10.1 million and $8.8 million as of June 30, 2026 and 2025, respectively. The change in valuation allowance for June 30, 2026 and 2025 was an increase of $1.3 million and an increase of $1.5 million, respectively.

At June 30, 2026 and 2025, the Company provided a valuation allowance for its state research and development credit carryforward deferred tax assets of $10.1 million and $8.8 million, respectively, as it generated more state tax credits each year than it can utilize. The Company intends to maintain a valuation allowance equal to the state research and development credit carryforwards in excess of the state net deferred tax liabilities on all other state book and tax differences and net operating loss carryforward.

At June 30, 2026, the Company had federal research and development tax credit carryforwards of approximately $7.2 million. The federal tax credits begin to expire in 2043, if not utilized. At June 30, 2026, the Company had state tax credit carryforwards of approximately $12.7 million, of which $11.3 million carryforward indefinitely, $1.1 million have a 10 to 15 years life (beginning to expire in 2033) and $0.3 million with a 20 years life, (beginning to expire in 2038).

The Company intends to reinvest the undistributed earnings of its foreign subsidiaries indefinitely, except for Alpha and Omega Semiconductor (Cayman) Ltd. and AOS International LP. Should the Company decide to remit this income to its Bermuda parent company in a future period, its provision for income taxes may increase materially in that period. The determination of the unrecognized deferred tax liability on these earnings is not practicable due to the complexity and variety of assumptions necessary to estimate the tax. As of June 30, 2026, the Company has recorded a deferred tax liability of $7.2 million for the basis difference related to our investment in the JV Company.

The following table presents the net cash paid by the Company for income taxes during the year ended June 30, 2026.
Dollars (in thousands)
Domestic
   U.S. Federal$1,220 
   U.S. State— 
Foreign
   China14,959 
   Other1,306 
$17,485 
A reconciliation of the beginning and ending amount of unrecognized tax benefits from July 1, 2023 to June 30, 2026 is as follows:
Year Ended June 30, 
202620252024
(in thousands)
Balance at beginning of year$10,742 $10,088 $9,335 
Additions based on tax positions related to the current year825 826 764 
Reductions based on tax positions related to prior years(2)(5)(11)
Reductions due to lapse of applicable statute of limitations(178)(167)— 
Balance at end of year$11,387 $10,742 $10,088 
At June 30, 2026, the total unrecognized tax benefits of $11.4 million included $7.6 million of unrecognized tax benefits that have been netted against the related deferred tax assets. The remaining $3.8 million of unrecognized tax benefits was recorded within long-term income tax payable on the Company's consolidated balance sheet as of June 30, 2026.

The total unrecognized tax benefits of $11.4 million at June 30, 2026 included $7.9 million that, if recognized, would reduce the effective income tax rate in future periods.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. The amount of interest and penalties accrued at June 30, 2026 was $1.0 million, of which $0.2 million was recognized in the year ended June 30, 2026. The amount of interest and penalties accrued at June 30, 2025 was $0.8 million, of which $0.2 million was recognized in the year ended June 30, 2025.

The Company files its income tax returns in the United States and in various foreign jurisdictions. The tax years 2009 to 2026 remain open to examination by U.S. federal tax authorities due to tax attribute carryovers. The tax years 2006 to 2026 remain open to examination by U.S. state tax authorities due to tax attribute carryovers. The tax years 2020 to 2026 remain open to examination by foreign tax authorities.

The Company's income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. If the Company's estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary.

One Big Beautiful Bill Act, Enacted July 4, 2025

On July 4, 2025, H.R. 1, commonly known as the One Big Beautiful Bill Act (the “OBBB”), was signed into law. This includes significant changes to the federal corporate tax provisions and extends certain otherwise expiring provisions of the 2017 Tax Cuts and Jobs Act. The key provisions include allowing immediate expensing of domestic research and experimental expenditures, new limitations on interest expense deductibility, reinstatement of 100% bonus depreciation for qualified assets placed in service in the United States after January 19, 2025 as well as changes to the calculation of taxable income resulting from the foreign derived intangible income deduction. The Company has concluded that the impact of OBBB for the current year is immaterial.