TRIMBLE INC.

Previous wording

There have been no material changes to our critical accounting policies and estimates during the first two quarters of 2025. For a complete discussion of our critical accounting policies and estimates, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2024 Form 10-K.

Current wording

There have been no material changes to our critical accounting policies and estimates during the first three quarters of 2025. For a complete discussion of our critical accounting policies and estimates, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2024 Form 10-K.

Previous wording

Our focus on these growth drivers has led over time to growth in revenue and profitability and an increasingly diversified business model. We continue to experience a shift toward a more significant mix of recurring revenue as demonstrated by our success in driving annualized recurring revenue (“ARR”) of $2,210.4 million, which represents growth of 5% year-over-year at the end of the second quarter of 2025. Excluding the impact of foreign currency, acquisitions, and divestitures, organic ARR growth was 13%. This shift toward recurring revenue has positively impacted our revenue mix, growth, and profitability over time and is leading to improved visibility in our businesses. Our software, services, and recurring revenue represented 79% and 75% of total revenue for the second quarter of 2025 and 2024 and 78% and 74% of total revenue for the first two quarters of 2025 and 2024. Additionally, we continue to maintain focus on increasing our mix of higher margin recurring revenue, which was accelerated by the Ag divestiture that closed in the second quarter of 2024 and the Mobility divestiture that closed in the first quarter of 2025.

Current wording

Our focus on these growth drivers has led over time to growth in revenue and profitability and an increasingly diversified business model. We continue to experience a shift toward a more significant mix of recurring revenue as demonstrated by our success in driving annualized recurring revenue (“ARR”) of $2,310.3 million, which represents growth of 6% year-over-year at the end of the third quarter of 2025. Excluding the impact of foreign currency, acquisitions, and divestitures, organic ARR growth was 14%. This shift toward recurring revenue has positively impacted our revenue mix, growth, and profitability over time and is leading to improved visibility in our businesses. Our software, services, and recurring revenue represented 78% and 76% of total revenue for the third quarter of 2025 and 2024, and 78% and 75% of total revenue for the first three quarters of 2025 and 2024. Additionally, we continue to maintain focus on increasing our mix of higher margin recurring revenue, which was accelerated by the Ag divestiture that closed in the second quarter of 2024 and the Mobility divestiture that closed in the first quarter of 2025.

Previous wording

Macroeconomic conditions continue to present significant challenges globally, driven by geopolitical tensions, tariff and trade policies, exchange rate and interest rate volatility, and persistent inflationary pressures. The heightened trade tensions and related imposition of tariffs between the United States and its trading partners, the extent and duration of these tariffs, and their impact on global economic conditions remain uncertain and depend on various factors, including international negotiations, policy responses, potential exemptions, and shifts in global supply and demand. If there were to be a deterioration in the global economy, the economies of the countries or regions where our customers are located or do business, or the industries that we or our customers serve, the demand for our products and services may decrease. We are closely monitoring global trade developments and have contingency plans in place to respond to a variety of potential market scenarios.

Current wording

Macroeconomic conditions continue to present significant challenges globally, driven by geopolitical tensions, tariff and trade policies, exchange rate and interest rate volatility, and persistent inflationary pressures. The heightened trade tensions and related imposition of tariffs and export control restrictions between the United States and its trading partners, the extent and duration of these tariffs, and their impact on global economic conditions remain uncertain and depend on various factors, including international negotiations, policy responses, potential exemptions, and shifts in global supply and demand. If there were to be a deterioration in the global economy, the economies of the countries or regions where our customers are located or do business, or the industries that we or our customers serve, the demand for our products and services may decrease. We are closely monitoring global trade developments and have contingency plans in place to respond to a variety of potential market scenarios. We are also monitoring the impact of the U.S. federal government shutdown, which has not had a material impact on our business to date.

Previous wording

Second Quarter and First Two Quarters of 2025 as Compared to 2024

Current wording

Third Quarter and First Three Quarters of 2025 as Compared to 2024

Previous wording

Note that the fiscal year of 2025 began on January 4, 2025 compared to the fiscal year of 2024, which began on December 30, 2023. This significantly impacted overall Company and AECO year-over-year comparisons in the first quarter and first two quarters due to the timing of revenue recognition for January 1 annual software term license renewals (“software renewals”). At an overall Company level, the estimated impact of the software renewals was$49.6 million or a 3% negative impact on revenue growth for the first two quarters. For AECO, the estimated impact was $49.0 million or an 8% negative impact on AECO segment revenue growth for the first two quarters.

Current wording

Note that the fiscal year of 2025 began on January 4, 2025 compared to the fiscal year of 2024, which began on December 30, 2023. This significantly impacted overall Company and AECO year-over-year comparisons in the first quarter and first three quarters due to the timing of revenue recognition for January 1 annual software term license renewals (“software renewals”). For the total Company, the estimated impact of the software renewals was $49.6 million or a 2% negative impact on revenue growth for the first three quarters. For AECO, the estimated impact was $49.0 million or a 5% negative impact on AECO segment revenue growth for the first three quarters.

Previous wording

Total organic revenue increased for the second quarter and the first two quarters primarily due to subscription and services growth, partially offset by decreased product revenue, mostly in hardware sales. In addition, the revenue increase for the first two quarters was partially offset by the impact of prior year AECO software renewals.

Current wording

Total organic revenue increased for the third quarter and the first three quarters primarily due to subscription and services growth. In addition, the revenue increase for the first three quarters was partially offset by the timing impact of prior year AECO software renewals.

Previous wording

Organic product revenue decreased for the second quarter and the first two quarters primarily due to Surveying, which had an unusually large order in the prior year, partially offset by relatively strong end-user demand for Civil Construction solutions. Product revenue was also negatively impacted by the conversion of software perpetual licenses to term licenses for Civil Construction and Surveying products.

Current wording

Organic product revenue increased for the third quarter primarily due to strong end-user demand for Civil Construction solutions. Organic product revenue was flat for the first three quarters due to strong end-user demand for Civil Construction solutions, mostly offset by lower demand in surveying.

Previous wording

Organic subscription and services revenue increased for the second quarter and the first two quarters primarily due to strong subscription growth, and to a lesser extent, software term license growth with the largest impact in AECO. The increase for the first two quarters was partially offset by the impact of prior year AECO software renewals.

Current wording

Organic subscription and services revenue increased for the third quarter and the first three quarters primarily due to strong subscription growth across all segments, with particular strength in both AECO and Field Systems and, to a lesser extent, software term license growth. The increase for the first three quarters was partially offset by the impact of prior year AECO software renewals.

Previous wording

Gross margin and gross margin as a percentage of revenue increased for the second quarter and first two quarters primarily due to the improved mix of higher margin subscription and software term license sales, lower intangible amortization cost due to fully amortized intangibles, as well as the divestiture of lower margin businesses.

Current wording

Gross margin and gross margin as a percentage of revenue increased for the third quarter and first three quarters primarily due to the improved mix of higher margin subscription and software term license sales, lower intangible amortization cost due to fully amortized intangibles, as well as the divestiture of lower margin businesses.

Previous wording

Operating income increased for the second quarter and first two quarters primarily due to organic revenue and gross margin expansion, partially offset by the loss of divestiture income. In addition to organic revenue and gross margin expansion, operating income as a percentage of revenue was favorably impacted by the loss of lower margin divestiture income.

Current wording

Operating income increased for the third quarter and first three quarters primarily due to organic revenue and gross margin expansion, partially offset by the loss of divestiture income and higher operating expenses related to higher compensation costs. In addition to organic revenue and gross margin expansion, operating income as a percentage of revenue was favorably impacted by the loss of lower margin divestiture income.

Previous wording

R&D expense slightly increased for the second quarter primarily due to higher compensation expense, partially offset by the impact of the divestitures. R&D expense decreased for the first two quarters primarily due to the impact of the divestitures, partially offset by increased compensation expenses. We believe that the development and introduction of new solutions are critical to our future success, and we expect to continue the active development of new products.

Current wording

R&D expense slightly decreased for the third quarter and first three quarters primarily due to the impact of the divestitures, partially offset by increased compensation expenses. We believe that the development and introduction of new solutions are critical to our future success, and we expect to continue the active development of new products.

Previous wording

S&M expense increased for the second quarter and first two quarters primarily due to higher compensation expense, including commissions, as well as higher marketing and consulting costs related to revenue growth, partially offset by the impact of the divestitures.

Current wording

S&M expense increased for the third quarter and first three quarters primarily due to higher compensation expense, including commissions, as well as higher marketing and consulting costs related to revenue growth, partially offset by the impact of the divestitures.

Previous wording

G&A expense decreased for the second quarter and first two quarters primarily due to higher consulting and transaction costs in the prior year and the impact of the divestitures, partially offset by higher investment costs associated with our Connect & Scale strategy and higher incentive compensation.

Current wording

G&A expense decreased for the third quarter and first three quarters primarily due to higher consulting and transaction costs in the prior year and the impact of the divestitures, partially offset by higher investment costs associated with our Connect & Scale strategy and higher compensation expense.

Previous wording

Total amortization expense of purchased intangibles decreased for the second quarter and first two quarters primarily due to the expiration of prior years’ acquisition amortization.

Current wording

Total amortization expense of purchased intangibles decreased for the third quarter and first three quarters primarily due to the expiration of prior years’ acquisition amortization.

Previous wording

Non-operating expense, net increased for the second quarter and first two quarters primarily due to the Ag divestiture gain in the prior year.

Current wording

Non-operating expense, net decreased for the third quarter primarily due to the held for sale loss in the prior year. Non-operating expense, net increased for the first three quarters primarily due to the Ag divestiture gain in the prior year.

Previous wording

For the second quarter of 2025, our effective income tax rate was 21.3%, as compared to 25.3% in the corresponding period in 2024. For the first two quarters, our effective income tax rate was 21.9%, as compared to 25.1% in the prior year. The decrease was primarily due to gains from the Ag divestiture in 2024.

Current wording

For the third quarter of 2025, our effective income tax rate was 10.9%, as compared to 44.5% in the corresponding period in 2024. The decrease was primarily due to certain disallowed losses in 2024 related to the Mobility divestiture and, to a lesser extent, a one-time benefit from the revaluation of deferred tax liabilities resulting from the German tax rate decrease in the current quarter. For the first three quarters, our effective income tax rate was 17.7%, as compared to 25.9% in the prior year. The decrease was primarily due to gains from the Ag divestiture in 2024 and, to a lesser extent, the one-time deferred tax benefit mentioned above.

Previous wording

The OBBBA, signed into law on July 4, 2025, includes changes to U.S. federal tax regulations. We have accounted for its tax implications based on our current interpretation of the legislation in the second quarter of 2025, and the impact to our tax rate for this period is immaterial. The Company continues to evaluate the OBBBA and does not currently believe it will have a material impact on our effective income tax rate.

Current wording

The OBBBA, signed into law on July 4, 2025, includes changes to U.S. federal tax regulations. We have accounted for its tax implications during the second and third quarters based on our current interpretation of the legislation, and the impact to our tax rate for this period is immaterial. The Company continues to evaluate the impact of the OBBBA and believes it will not have a material impact on our effective income tax rate.

Previous wording

Our CODM views and evaluates operations based on the results of our reportable operating segments under our management reporting system. For additional discussion of our segments, refer to Note 7 “Reporting Segment and Geographic Information” of this report.

Current wording

Our CODM views and evaluates operations based on the results of our reportable operating segments under our management reporting system. For additional discussion of our segments, refer to Note 7 “Segment and Geographic Information” of this report.

Previous wording

Organic subscription and services revenue increased for the second quarter and the first two quarters primarily due to strong subscription revenue, and to a lesser extent, software term licenses. Revenue benefited from cumulative growth along with an expansion of customers across many products, with the largest impacts resulting from Construction Management Systems, Architecture & Design, MEP, and Structures solutions. The increase for the first two quarters was partially offset by the impact of prior year software renewals for Structures products.

Current wording

Organic revenue increased for the third quarter and the first three quarters primarily due to strong subscription revenue and, to a lesser extent, software term licenses. Revenue benefited from cumulative growth along with an expansion of customers across many products, with the largest impacts resulting from Construction Management Systems, Architecture & Design, MEP, and Structures solutions. The increase for the first three quarters was partially offset by the impact of prior year software renewals for Structures products.

Previous wording

Operating income and operating income as a percentage of revenue increased for the second quarter primarily due to increased revenue and gross margin expansion. Operating income and operating income as a percentage of revenue decreased for the first two quarters primarily due to the impact of prior year software renewals, partially offset by increased subscription revenue.

Current wording

Operating income and operating income as a percentage of revenue increased for the third quarter primarily due to increased revenue and gross margin expansion. Operating income increased for the first three quarters primarily due to revenue and gross margin expansion, partially offset by the impact of prior year software renewals. Operating income as a percentage of revenue for the first three quarters was relatively flat.

Previous wording

Organic revenue increased for the second quarter and first two quarters primarily due to relatively strong end-user demand and competitive wins for Civil Construction solutions, offset by a decline in Surveying due to unusually large orders in the prior year. Revenue was also negatively impacted by the conversion of software perpetual licenses to term licenses for Civil Construction and Surveying products.

Current wording

Organic revenue increased for the third quarter and first three quarters primarily due to strong end-user demand and competitive wins for Civil Construction solutions. The increase for the first three quarters was partially offset by lower demand in surveying.

Previous wording

Operating income and operating income as a percentage of revenue increased for the second quarter due to organic revenue and gross margin expansion. Operating income and operating income as a percentage of revenue increased for the first two quarters due to organic revenue and gross margin expansion, partially offset by the loss of Ag divestiture income. In addition to organic revenue and gross margin expansion, operating income as a percentage of revenue was favorably impacted by the loss of lower margin Ag divestiture income.

Current wording

Operating income increased for the third quarter due to organic revenue expansion. Operating income as a percentage of revenue for the third quarter was relatively flat. Operating income and operating income as a percentage of revenue increased for the first three quarters due to organic revenue and gross margin expansion, partially offset by the loss of Ag divestiture income. In addition to organic revenue and gross margin expansion, operating income as a percentage of revenue was favorably impacted by the loss of lower margin Ag divestiture income.

Previous wording

Organic revenue increased for the second quarter and first two quarters primarily driven by MAPS and Transporeon subscription revenue growth.

Current wording

Organic revenue increased for the third quarter and first three quarters primarily driven by MAPS and Transporeon subscription revenue growth.

Previous wording

Operating income decreased for the second quarter and first two quarters primarily due to the loss of the Mobility divestiture income. Operating income as a percentage of revenue increased for the second quarter and first two quarters primarily due to the loss of lower margin Mobility divestiture income.

Current wording

Operating income decreased for the third quarter and first three quarters primarily due to the loss of the Mobility divestiture income. Operating income as a percentage of revenue increased for the third quarter and first three quarters primarily due to the loss of lower margin Mobility divestiture income.

Previous wording

The decrease in cash used in financing activities was primarily driven by the $1.3 billion repayment of debt in the prior year, offset by $677.4 million in repurchases of common stock in the current year, as compared to $175.0 million of repurchases in the prior year.

Current wording

The decrease in cash used in financing activities was primarily driven by the $1.3 billion repayment of debt in the prior year, offset by $727.4 million in repurchases of common stock in the current year, as compared to $175.0 million of repurchases in the prior year.

Previous wording

Our 2022 credit facility allows us to borrow up to $1.25 billion, with an option to increase the borrowings for up to $1.75 billion with lender approval. As of July 4, 2025, $50.0 million was outstanding under the 2022 credit facility, and $71.0 million was outstanding under our uncommitted credit facilities.

Current wording

Our 2022 credit facility allows us to borrow up to $1.25 billion, with an option to increase the borrowings for up to $1.75 billion with lender approval. As of October 3, 2025, there was no outstanding debt under the 2022 credit facility.

Previous wording

(D). Restructuring and other costs. Non-GAAP gross margin and operating expenses exclude restructuring and other costs comprised of termination benefits related to reductions in employee headcount and closure or exit of facilities and incremental expenses resulting from the 2023 re-audit. Non-GAAP non-operating expense net, excludes our proportionate share of items recorded in income from equity method investment items, such as goodwill impairment, amortization of purchased intangibles, stock-based compensation, and restructuring costs.

Current wording

(D). Restructuring and other costs. Non-GAAP gross margin and operating expenses exclude restructuring costs composed of termination benefits related to reductions in employee headcount and closure or exit of facilities; and other costs composed of one-time incremental expenses resulting from the re-audit and related remediation of control deficiencies.

Previous wording

(F). Difference in GAAP and non-GAAP tax rate. This amount represents the difference between the GAAP and non-GAAP tax rates applied to the non-GAAP operating income plus the non-GAAP non-operating expense, net. The non-GAAP tax rate excludes charges and benefits such as (i) deferred tax impacts from tax amortization relating to a non-U.S. intercompany transfer of intellectual property, (ii) deferred tax impacts from global intangible low-taxed income, and (iii) significant reserve releases upon statute of limitations expirations.

Current wording

(F). Difference in GAAP and non-GAAP tax rate. This amount represents the difference between the GAAP and non-GAAP tax rates applied to the non-GAAP operating income plus the non-GAAP non-operating expense, net. The non-GAAP tax rate excludes charges and benefits such as (i) deferred tax impacts from tax amortization relating to a non-U.S. intercompany transfer of intellectual property, (ii) deferred tax impacts from global intangible low-taxed income, and (iii) significant reserve releases upon statute of limitations expirations and audit closures.