v3.26.3
Income Tax Expense
 3 Months Ended
Oct. 02, 2026
Income Tax Disclosure [Abstract]  
Income Tax Expense Income Tax Expense
H.R. 1, more widely known as the One Big Beautiful Bill Act (“OBBBA”), was signed into law on July 4, 2025. It reversed the requirement for capitalization of U.S. research and development expenditures that came into law under the Tax Cuts and Jobs Act of 2017, but the mandatory requirement of capitalization of foreign research and development expenditures remains. The tax rates for income earned by the Company’s foreign subsidiaries are also changed under H.R. 1, which applies to our fiscal years 2027 and onward. Depending on the Company’s operating results, these changes can materially impact the Company’s effective tax rate and operating cash flows.
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, which contained significant changes to laws related to tax, climate, energy, and health care. The tax measures include, 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. The Company assesses the impact of CAMT and recognizes it as a component of its income tax expenses.
On December 20, 2021, the Organisation for Economic Co-operation and Development G20 Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two (“Pillar Two”). Pillar Two is currently effective in most of the jurisdictions in which the Company operates. Accordingly, these taxes are included in the Company’s Income tax expense for the three months ended October 2, 2026. No such taxes were included in the Company’s Income Tax expense for the three months ended October 3, 2025.
The following table presents the Company’s Income tax expense and effective tax rate:
Three Months Ended
October 2,
2026		October 3,
2025
(in millions)
Income before taxes$9,319 $124 
Income tax expense1,218 12 
Effective tax rate13 %10 %
The relative mix of earnings and losses by jurisdiction, foreign-derived deduction eligible income, credits and tax holidays in Malaysia that will expire at various dates during years 2028 through 2031 resulted in decreases to the effective tax rate below the U.S. statutory rate for the three months ended October 2, 2026.
The relative mix of earnings and losses by jurisdiction, credits and tax holidays in Malaysia that will expire at various dates during years 2028 through 2031 resulted in decreases to the effective tax rate below the U.S. statutory rate for the three months ended October 3, 2025.
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 Condensed Consolidated Balance Sheets.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding accrued interest and penalties for the three months ended October 2, 2026:
(in millions)
Accrual balance at July 3, 2026$323 
Gross increases related to prior year tax positions 3 
Gross increases related to current year tax positions 24 
Gross decrease related to prior year tax positions— 
Accrual balance at October 2, 2026$350 
As of October 2, 2026 and July 3, 2026, the liability for unrecognized tax benefits (excluding accrued interest and penalties) was $350 million and $323 million, respectively. Interest and penalties related to unrecognized tax benefits are recognized in liabilities recorded for uncertain tax positions and are recorded in the provision for income taxes. Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of October 2, 2026 and July 3, 2026 was $17 million and $16 million, respectively.
The Company believes that adequate provision has been made for any adjustments that may result from any other tax examinations. However, the outcome of such tax examinations 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. 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.