v3.26.1
Income Taxes
 12 Months Ended
Jul. 25, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
(a)Provision for Income Taxes
The provision for income taxes consists of the following (in millions):
Years EndedJuly 25, 2026July 26, 2025July 27, 2024
Federal:
Current$1,385 $956 $1,939 
Deferred(256)(838)(883)
1,129 118 1,056 
State:
Current271 431 388 
Deferred452 (250)11 
723 181 399 
Foreign:
Current860 665 559 
Deferred30 (44)(100)
890 621 459 
Total$2,742 $920 $1,914 
Income before provision for income taxes consists of the following (in millions):
Years EndedJuly 25, 2026July 26, 2025July 27, 2024
United States$14,062 $9,500 $10,790 
International1,947 1,600 1,444 
Total$16,009 $11,100 $12,234 
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consist of the following for fiscal 2026 (in millions, except percentages):
Year EndedJuly 25, 2026
Federal statutory rate$3,362 21.0 %
State taxes, net of federal tax benefit (1)
565 3.5 
Foreign tax effects300 1.9 
Effect of cross-border tax laws:
Foreign-derived intangible income deduction(625)(3.9)
Subpart F inclusion285 1.8 
Other15 0.1 
Tax credits:
R&D tax credits(430)(2.7)
Foreign tax credits(592)(3.7)
Other credits(4)— 
Nontaxable or nondeductible items:
Stock-based compensation(292)(1.8)
Other(19)(0.2)
Changes in unrecognized tax benefits177 1.1 
Total$2,742 17.1 %
(1) California state tax made up the majority (greater than 50 percent) of the tax effect in this category.
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consist of the following for fiscal 2025 and 2024:
Years EndedJuly 26, 2025July 27, 2024
Federal statutory rate21.0 %21.0 %
Effect of:
State taxes, net of federal tax benefit1.3 2.8 
Foreign income at other than U.S. rates0.7 (0.3)
Tax credits(2.7)(2.4)
Foreign-derived intangible income deduction(6.0)(5.5)
Stock-based compensation0.7 0.7 
Impact of the Tax Act(6.5)— 
Other, net(0.2)(0.7)
Total8.3 %15.6 %
On August 26, 2024, the U.S. Tax Court issued an opinion in Varian Medical Systems, Inc. v. Commissioner. The opinion related to the U.S. taxation of deemed foreign dividends in the transition year of the Tax Act (our fiscal 2018). While we were not a party to the case, the opinion resulted in a change to our tax position. As such, we recorded a tax benefit of $720 million as a reduction to the provision for income taxes in fiscal 2025 due to this U.S. Tax Court opinion. The income tax receivable associated with this tax benefit was included in other assets in the Consolidated Balance Sheets.
During fiscal 2025, we changed our assertion regarding our intent to indefinitely reinvest $6.5 billion of undistributed earnings for certain foreign subsidiaries and determined that those earnings are no longer considered permanently reinvested.
During fiscal 2024, we resolved all remaining items with the IRS related to the audit of our federal income tax returns for the fiscal years ended July 26, 2014 through July 30, 2016. As a result of this resolution, we recognized a net benefit to the provision for income taxes of $55 million, which included a reduction of interest expense of $18 million.
Cash paid for income taxes, net of refunds, for fiscal 2026 is as follows (in millions):
Year EndedJuly 25, 2026
Federal$3,672 
State360 
Foreign789 
Total$4,821 
We made our final transition tax payment of $2.3 billion in fiscal 2026 as a result of the Tax Act.
Our cash paid for income taxes, net was $3.9 billion and $7.4 billion for fiscal 2025 and 2024, respectively.
Unrecognized Tax Benefits
The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in millions):
Years EndedJuly 25, 2026July 26, 2025July 27, 2024
Beginning balance$2,337 $2,156 $2,137 
Additions based on tax positions related to the current year270 283 205 
Additions for tax positions of prior years128 81 256 
Reductions for tax positions of prior years(112)(68)(344)
Settlements(37)(75)(53)
Lapse of statute of limitations(96)(40)(45)
Ending balance$2,490 $2,337 $2,156 
As of July 25, 2026, $1.7 billion of the unrecognized tax benefits would affect the effective tax rate if realized. We recognized net interest expense of $44 million, $77 million and $21 million during fiscal 2026, 2025, and 2024, respectively. Our net penalty expense for fiscal 2026, 2025, and 2024 was not material. Our total accrual for interest and penalties was $539 million, $497 million, and $401 million as of the end of fiscal 2026, 2025, and 2024, respectively. We are no longer subject to U.S.
federal income tax audit for returns covering tax years through fiscal 2016. We are no longer subject to foreign or state income tax audits for returns covering tax years through fiscal 2003 and fiscal 2015, respectively.
As a result of the resolution of the IRS audit of our federal tax income tax returns for the fiscal years ended July 26, 2014 through July 30, 2016, the amount of gross unrecognized tax benefits was reduced by approximately $245 million in fiscal 2024.
(b)Deferred Tax Assets and Liabilities
The following table presents the breakdown for net deferred tax assets (in millions):
July 25, 2026July 26, 2025
Deferred tax assets$7,109 $7,356 
Deferred tax liabilities(85)(75)
Total net deferred tax assets$7,024 $7,281 
The following table presents the components of the deferred tax assets and liabilities (in millions):
July 25, 2026July 26, 2025
ASSETS
Inventory write-downs and capitalization$684 $532 
Deferred foreign income178 221 
IPR&D and purchased intangible assets878 961 
Depreciation208 242 
Deferred revenue1,819 1,933 
Credits and net operating loss carryforwards1,490 1,350 
Share-based compensation expense360 319 
Accrued compensation248 175 
Lease liabilities400 379 
Capitalized research expenditures4,396 4,182 
Other555 678 
Gross deferred tax assets11,216 10,972 
Valuation allowance(1,408)(910)
Total deferred tax assets9,808 10,062 
LIABILITIES
Goodwill and purchased intangible assets(1,946)(2,288)
ROU lease assets(340)(315)
Unrealized gains on investments(341)(50)
Other(157)(128)
Total deferred tax liabilities(2,784)(2,781)
Total net deferred tax assets$7,024 $7,281 
The changes in the valuation allowance for deferred tax assets are summarized as follows (in millions):
July 25, 2026July 26, 2025July 27, 2024
Balance at beginning of fiscal year$910 $1,024 $754 
Additions498 33 148 
Additions from Splunk— — 147 
Deductions(2)(4)(4)
Write-offs— (145)(20)
Foreign exchange and other2 2 (1)
Balance at end of fiscal year$1,408 $910 $1,024 
We increased our valuation allowance in fiscal 2026, primarily due to the expectation that our future California taxable income will be insufficient to fully utilize our accumulated California tax credits and net operating loss carryforwards.
As of July 25, 2026, our federal, state, and foreign net operating loss carryforwards for income tax purposes were $265 million, $2.3 billion, and $616 million, respectively. A significant amount of the net operating loss carryforwards relates to acquisitions and, as a result, is limited in the amount that can be recognized in any one year. If not utilized, the federal, state, and foreign net operating loss carryforwards will begin to expire in fiscal 2027. We have provided a valuation allowance of $65 million and $102 million for deferred tax assets related to state and foreign net operating losses respectively that are not expected to be realized.
As of July 25, 2026, our federal, state, and foreign tax credit carryforwards for income tax purposes were $5 million, $1.9 billion, and $17 million, respectively. If not utilized, the federal and foreign tax credit carryforwards will begin to expire in fiscal 2027 and fiscal 2032, respectively. The majority of state tax credit carryforwards do not expire. We have provided a valuation allowance of $1.2 billion for deferred tax assets related to state and foreign tax credit carryforwards that are not expected to be realized.