Enphase Energy, Inc.

9. FAIR VALUE MEASUREMENTS

The accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

•Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of such assets or liabilities do not entail a significant degree of judgment.

•Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The following table presents assets and liabilities measured at fair value on a recurring basis using the above input categories:

Notes due 2028

The Company carries the Notes due 2028 (as defined in Note 11, “Debt”) at face value less unamortized debt issuance costs on its condensed consolidated balance sheets. The fair value as of September 30, 2026 was determined based on the closing trading price per $100 principal amount as of the last day of trading for the period. The Company considers the fair value of the Notes due 2028 to be a Level 2 measurement as they are not actively traded. As of September 30, 2026, the carrying amount and fair value of the Notes due 2028 was as follows:

Investments in debt securities

Investments in debt securities are recorded in Other current assets and Other assets on the condensed consolidated balance sheets. The changes in the balance of investments in debt securities were as follows:

In January 2021, the Company invested approximately $25.0 million in Series C preferred units issued by a privately-held company. The investment qualifies as a debt security, as it accrues interest and principal plus accrued interest becomes payable to the Company at certain dates unless it is converted to equity at a pre-determined price. As the investment includes a conversion option, the Company has elected the fair value option, with changes in fair value recognized in Other income (expense), net in the condensed consolidated statements of operations. The fair value option was elected to reduce the operational complexity of accounting for embedded features that would otherwise require bifurcation as a separate unit of account. The fair value of approximately $20.3 million and approximately $29.6 million as of September 30, 2026 and December 31, 2025, respectively, for Series C preferred units are categorized as Level 3 within the fair value hierarchy, as the valuation incorporates significant unobservable inputs. The Company uses a scenario-based probability weighted discounted cash flow model that includes significant assumptions, including the discount rate and probability weighting of the various redemption scenarios that impact the settlement of the Series C preferred units. The decrease in fair value of approximately $7.9 million and $9.3 million during the three and nine months ended September 30, 2026, respectively, reflects updated inputs.

In September 2021, the Company invested approximately $13.0 million in secured convertible promissory notes issued by the stockholders of a privately-held company. In February 2026, the notes were amended to extend the maturity date and modify certain other contractual terms. The notes are classified as debt securities, and the Company has elected the fair value option, with changes in fair value recognized in Other income (expense), net in the condensed consolidated statements of operations. The fair value option was elected to reduce the operational complexity of accounting for embedded features that would otherwise require bifurcation as a separate unit of account. The fair value of approximately $3.8 million and approximately $11.0 million as of September 30, 2026 and December 31, 2025, respectively, for the notes are categorized as Level 3 within the fair value hierarchy, as the valuation incorporates significant unobservable inputs. The Company uses a scenario-based probability weighted discounted cash flow model that includes significant assumptions, including the discount rate and probability weighting of the various redemption scenarios that impact the settlement of the notes. The decrease in fair value of approximately $6.4 million and $7.2 million during the three and nine months ended September 30, 2026, respectively, reflects updated inputs.

In July 2023, the Company invested approximately $15.0 million in a secured convertible promissory note issued by the stockholders of a privately-held company. In July 2026, the notes were amended to extend the maturity date and modify certain other contractual terms. The notes are classified as debt securities, and the Company has elected the fair value option, with changes in fair value recognized in Other income (expense), net in the condensed consolidated statements of operations. The fair value option was elected to reduce the operational complexity of accounting for embedded features that would otherwise require bifurcation as a separate unit of account. The fair value of approximately $5.7 million and approximately $14.5 million as of September 30, 2026 and December 31, 2025, respectively, for the notes are categorized as Level 3 within the fair value hierarchy, as the valuation incorporates significant unobservable inputs. The Company uses a scenario-based probability weighted discounted cash flow model that includes significant assumptions, including the discount rate and probability weighting of the various redemption scenarios that impact the settlement of the notes. The decrease in fair value of approximately $8.8 million during the three and nine months ended September 30, 2026 reflects updated inputs.

In September 2025, the Company invested $6.3 million in cash to purchase convertible notes with an aggregate principal amount of $7.0 million issued by SunPower Inc. (“SunPower”) (formerly named “Complete Solaria, Inc.”). The SunPower notes are classified as debt securities, and the Company has elected the fair value option, with changes in fair value recognized in Other income (expense), net, in the condensed consolidated statements of operations. The notes bear an interest rate of 7% per annum and mature on July 1, 2029. The initial conversion rate is 467.8363 shares of SunPower common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $2.14 per share). The notes are categorized as Level 2 within the fair value hierarchy, as the valuation incorporates significant inputs that are observable, either directly or indirectly. During the three and nine months ended September 30, 2026, the Company recognized decreases in the fair value of the SunPower convertible notes of approximately $2.9 million and $4.0 million, respectively, in Other income (expense), net in the condensed consolidated statements of operations. The estimated fair value of the notes was approximately $2.3 million and $6.3 million as of September 30, 2026 and December 31, 2025, respectively, based on a scenario-based probability weighted discounted cash flow model that includes significant assumptions, including the discount rate and probability weighting of the various redemption scenarios that impact the settlement of the notes.

Investments in equity securities

On June 23, 2026, the Company entered into an Equity for Interest Exchange and Consent Agreement (the "Exchange Agreement") with SunPower, pursuant to which the Company agreed to exchange the cash interest payments due on July 1, 2026 and January 1, 2027 under the SunPower notes, totaling approximately $0.5 million, for shares of SunPower common stock (“Exchange Shares”). Under the Exchange Agreement, the number of Exchange Shares was determined by dividing the cash interest payments due by 80% of the 10-day volume-weighted average price of SunPower common stock as of the close of trading on June 29, 2026. The closing of this transaction occurred on July 1, 2026, at which time the Company received 874,064 restricted shares of SunPower common stock. The Exchange Shares are accounted for as equity securities with a readily determinable fair value, measured at fair value using the NASDAQ closing price (Level 1), with changes in fair value recognized in Other income (expense), net. The restriction on the shares terminates on January 1, 2027. As of September 30, 2026, the fair value of Exchange Shares amounted to approximately $0.3 million included in Marketable Securities on the condensed consolidated balance sheet. The Company recognized a loss of approximately $0.2 million in Other income (expense), net during the three months ended September 30, 2026.

Loan receivables

The loan receivables represent financing arrangements provided to certain customers. These loan receivables have contractual maturities ranging fromone tothree years and are recorded on an amortized cost basis. Interest income is accrued and recognized based on the stated coupon rate, included in Other income (expense), net on the condensed consolidated statements of operations. The principal outstanding under the loan receivables were as follows:

There wasno activity in the allowance for credit losses related to loan receivables during the three and nine months ended September 30, 2026.

Variable Interest Entities

The Company holds a 19.99% non-controlling equity investment in a residential solar and storage finance entity and has extended loan receivables, a revolving credit facility and standby letters of credit to that entity and its wholly owned special-purpose subsidiaries (together, the "Investee"). The Company elected the fair value option for the equity investment, loan receivables and revolving credit facility to avoid measurement inconsistencies across its interests in the Investee. These instruments are classified as Level 3 within the fair value hierarchy, with fair values estimated using a discounted cash flow methodology incorporating market yield, projected cash flows, and estimated timing of distributions. Changes in fair value and interest income are recognized in Other income (expense), net in the condensed consolidated statements of operations.

The Company has determined that the Investee is a variable interest entity (“VIE”). The Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the Investee’s economic performance, and accordingly does not consolidate the Investee.

As of September 30, 2026, the fair value of the loan receivables and the revolving credit facility approximated their respective outstanding balances, including accrued and capitalized interest. The following table presents the carrying amounts of the Company’s variable interests and its maximum exposure to loss as of September 30, 2026:

The Company’s maximum exposure to loss as of September 30, 2026 was approximately $72.9 million, comprising the aggregate carrying amounts of the equity investment, loan receivables, and revolving credit facility, the undrawn commitment on the revolving credit facility, and the aggregate stated amount of the irrevocable standby letters of credit. It will increase as paid-in-kind (“PIK”) interest is capitalized. The excess of maximum exposure over carrying amounts primarily reflects the undrawn commitment on the revolving credit facility and the letters of credit, neither of which is recorded on the condensed consolidated balance sheet.

Loan 1 and Loan 2 bears interest at 15% payable in cash and mature in December 2027 and December 2026, respectively. The revolving credit facility bears interest at 9.0% PIK capitalized quarterly, restricts advances to permitted expenditures, and matures April 30, 2027.

In connection with the Investee's new credit facility and a separate tax credit transfer agreement, the Company issued three irrevocable standby letters of credit with an aggregate stated amount of $35.0 million, which expires between March 2027 and January 2034, including annual auto-renewal. The letters of credit may be drawn upon specified events including tax credit deficiencies, events of default, or issuing bank events. The Company recognized a stand-ready guarantee liability of approximately $0.8 million at inception, which is amortized over the respective terms of the letters of credit. The probability of a draw is assessed as remote as of September 30, 2026; accordingly, no contingent loss accrual has been recorded. A separate reimbursement agreement with the Investee provides for repayment of any amounts drawn under the letters of credit. In connection with the Investee’s new credit facility, the Company entered into an intercreditor agreement under which the Company’s security interest in the shared collateral is subordinated to the obligations of the Investee under the new credit facility.

Warranty Obligations

Fair Value Option for Warranty Obligations Related to Products Sold Since January 1, 2014

The Company made an irrevocable election to account for all eligible warranty obligations associated with products sold since January 1, 2014 at fair value. This election was made to reflect the underlying economics of the time value of money for an obligation that will be settled over an extended period of up to 25 years. The Company estimates the fair value of warranty obligations by calculating the warranty obligations in the same manner as for sales prior to January 1, 2014 and applying an expected present value technique to that result. The expected present value technique, an income approach, converts future amounts into a single current discounted amount. In addition to the key estimates of return rates and replacement costs, the Company used certain Level 3 inputs, which are unobservable and significant to the overall fair value measurement. Such additional assumptions are based on the Company’s credit-adjusted risk-free rate (“discount rate”) and compensation comprised of a profit element and risk premium required of a market participant to assume the obligation.

The following table provides information regarding changes in non-financial liabilities related to the Company’s warranty obligations measured at fair value on a recurring basis using significant unobservable inputs designated as Level 3 for the periods indicated:

Quantitative and Qualitative Information about Level 3 Fair Value Measurements

As of September 30, 2026 and December 31, 2025, the significant unobservable inputs used in the fair value measurement of the Company’s liabilities designated as Level 3 were as follows:

Sensitivity of Level 3 Inputs - Warranty Obligations

Each of the significant unobservable inputs is independent of the other. The profit element and risk premium are estimated based on the requirements of a third-party participant willing to assume the Company’s warranty obligations, which decreased in the nine months ended September 30, 2026, contributing to an approximately $3.5 million change in warranty benefit captured in “Change in profit element and risk premium” in the table above. The discount rate is determined by reference to the Company’s own credit standing at the fair value measurement date, which increased in the nine months ended September 30, 2026 and 2025 due to the increase in the risk free rate and market spreads, contributing to the approximately $3.3 million and approximately $5.7 million, respectively, change in warranty benefit captured in “Change in discount rate” in the table above. Under the expected present value technique, increasing the profit element and risk premium input by 100 basis points would result in a approximately $1.4 million increase to the liability. Decreasing the profit element and risk premium by 100 basis points would result in an approximately $1.4 million reduction to the liability. Increasing the discount rate by 100 basis points would result in approximately $12.7 million decrease to the liability. Decreasing the discount rate by 100 basis points would result in an approximately $14.3 million increase to the liability.

10. RESTRUCTURING AND ASSET IMPAIRMENT

2026 Restructuring Plan

In January 2026, the Company implemented a restructuring plan (the “2026 Restructuring Plan”) designed to better align its workforce and cost structure with its business needs, strategic priorities and ongoing commitment to profitable growth.

The following table presents the details of the Company’s restructuring under the 2026 Restructuring Plan:

The following table provides information regarding changes in the Company’s accrued restructuring balances under the 2026 Restructuring Plan for the periods indicated:

11. DEBT

The following table provides information regarding the Company’s debt:

The following table presents the total amount of interest cost recognized in the condensed consolidated statements of operations relating to the Company’s notes:

Convertible Senior Notes due 2028

On March 1, 2021, the Company issued $575.0 million aggregate principal amount of its 0.0% convertible senior notes due 2028 (the “Notes due 2028”). The Notes due 2028 will not bear regular interest, and the principal amount of the Notes due 2028 will not accrete. The Notes due 2028 are general unsecured obligations and are governed by an indenture between the Company and U.S. Bank National Association, as trustee. The Notes due 2028 will mature on March 1, 2028, unless earlier repurchased by the Company or converted at the option of the holders. The Company received approximately $566.4 million in net proceeds, after deducting the initial purchasers’ discount, from the issuance of the Notes due 2028.

The initial conversion rate for the Notes due 2028 is 3.5104 shares of common stock per $1,000 principal amount of the Notes due 2028 (which represents an initial conversion price of approximately $284.87 per share). Upon conversion, the Company will settle conversions of the Notes due 2028 through payment or delivery, as the case may be, of cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

The Company may redeem for cash all or any portion of the Notes due 2028, at the Company’s election, on or after September 6, 2024, if the last reported sale price of the Company’s common stock has been greater than or equal to 130% of the conversion price then in effect for the Notes due 2028 (i.e., $370.33, which is 130% of the current conversion price for the Notes due 2028) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will equal 100% of the principal amount of the Notes due 2028 to be redeemed, plus accrued and unpaid special interest, if any to, but excluding, the relevant redemption date. No sinking fund is provided for the Notes due 2028.

The Notes due 2028 may be converted on any day prior to the close of business on the business day immediately preceding September 1, 2027, in multiples of $1,000 principal amount, at the option of the holder only under any of the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the Notes due 2028 on each applicable trading day; (2) during thefive business day period after anyfive consecutive trading day period (the “Measurement Period”) in which the “trading price” (as defined in the relevant indenture) per $1,000 principal amount of notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Notes due 2028 on each such trading day; (3) if the Company calls any or all of the Notes due 2028 for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On and after September 1, 2027 until the close of business on the second scheduled trading day immediately preceding the maturity date of March 1, 2028, holders of the Notes due 2028 may convert their notes at any time, regardless of the foregoing circumstances. Upon the occurrence of a fundamental change (as defined in the relevant indenture), holders may require the Company to repurchase all or a portion of their Notes due 2028 for cash at a price equal to 100% of the principal amount of the notes to be repurchased plus any accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date.

As of September 30, 2026, the sales price of the Company’s common stock was not greater than or equal to $370.33 (130% of the notes conversion price) for at least 20 trading days (whether consecutive or not) during a period of 30 consecutive trading days preceding the quarter-ended September 30, 2026. As a result, the Notes due 2028 are not convertible at the holders’ option. Accordingly, the Company classified the net carrying amount of the Notes due 2028 of approximately $573.2 million as Debt, non-current on the condensed consolidated balance sheet as of September 30, 2026. As of September 30, 2026, the unamortized deferred issuance cost for the Notes due 2028 was approximately $1.8 million on the condensed consolidated balance sheet.

Notes due 2028 Hedge and Warrant Transactions

In connection with the offering of the Notes due 2028, the Company entered into privately-negotiated convertible note hedge transactions (“Notes due 2028 Hedge”) pursuant to which the Company has the option to purchase a total of approximately 2.0 million shares of its common stock (subject to anti-dilution adjustments), which is the same number of shares initially issuable upon conversion of the Notes due 2028, at a price of $284.87 per share. The total cost of the convertible note hedge transactions was approximately $161.6 million. The convertible note hedge transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the Notes due 2028 and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be.

Additionally, the Company separately entered into privately-negotiated warrant transactions (the “2028 Warrants”) whereby the Company sold warrants to acquire approximately 2.0 million shares of the Company’s common stock (subject to anti-dilution adjustments) at an initial strike price of $397.91 per share. The Company received aggregate proceeds of approximately $123.4 million from the sale of the 2028 Warrants. If the market value per share of the Company’s common stock, as measured under the 2028 Warrants, exceeds the strike price of the 2028 Warrants, the 2028 Warrants will have a dilutive effect on the Company’s earnings per share, unless the Company elects, subject to certain conditions, to settle the 2028 Warrants in cash. Taken together, the purchase of the Notes due 2028 Hedge and the sale of the 2028 Warrants are intended to reduce potential dilution from the conversion of the Notes due 2028 and to effectively increase the overall conversion price from $284.87 to $397.91 per share. The 2028 Warrants are only exercisable on the applicable expiration dates in accordance with the Notes due 2028 Hedge. Subject to the other terms of the 2028 Warrants, the first expiration date applicable to the Notes due 2028 Hedge is June 1, 2028, and the final expiration date applicable to the Notes due 2028 Hedge is July 27, 2028.

Given that the transactions meet certain accounting criteria, the Notes due 2028 Hedge and the 2028 Warrants transactions were recorded in stockholders’ equity, and they were not accounted for as derivatives and are not remeasured each reporting period.

Convertible Senior Notes due 2026

On March 2, 2026, the Company settled all of its outstanding 0.0% convertible senior notes due 2026 (the “Notes due 2026”) for cash consideration of approximately $632.5 million, representing payment of the full principal amount. No shares of the Company’s common stock were issued in connection with the settlement, as the conversion value of the Notes due 2026 was less than the principal amount outstanding. As a result of the settlement, there wereno Notes due 2026 outstanding as of September 30, 2026.

Notes due 2026 Hedge and Warrant Transactions

In connection with the issuance of the Notes due 2026, the Company entered into privately negotiated convertible note hedge transactions (the “Notes due 2026 Hedge”). The Notes due 2026 Hedge was intended to reduce potential dilution to the Company’s common stock upon any conversion of the Notes due 2026 and/or to offset any cash payments the Company would have been required to make in excess of the principal amount upon conversion. The Notes due 2026 Hedge expired on March 2, 2026 in connection with the settlement of the Notes due 2026. No value was realized from the Notes due 2026 Hedge at expiration, as the applicable strike price exceeded the market price of the Company’s common stock.

Additionally, the Company separately entered into privately-negotiated warrant transactions, including in connection with the issuance of additional Notes due 2026 upon the initial purchasers’ exercise of their over-allotment option (the “2026 Warrants”), whereby the Company sold warrants to acquire approximately 2.1 million shares of the Company’s common stock (subject to anti-dilution adjustments) at an initial strike price of $397.91 per share. The first expiration date applicable to the 2026 Warrants was June 1, 2026, and the final expiration date was July 27, 2026. The 2026 Warrants expired on July 27, 2026, andno 2026 Warrants were outstanding as of September 30, 2026. No shares of the Company’s common stock were issued upon expiration of the 2026 Warrants, as the strike price of $397.91 per share exceeded the market price of the Company’s common stock.

Given that the transactions meet certain accounting criteria, the Notes due 2026 Hedge and the 2026 Warrants transactions were recorded in stockholders’ equity, and they were not accounted for as derivatives and are not remeasured each reporting period.

12. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office facilities under noncancellable operating leases that expire on various dates through 2036, some of which may include options to extend the leases for up to 12 years.

The components of lease expense were as follows:

The components of right of use assets and lease liabilities were as follows:

Supplemental cash flow and other information related to operating leases were as follows:

Undiscounted cash flows of operating lease liabilities as of September 30, 2026 were as follows:

Purchase Obligations

The Company has contractual obligations related to component inventory that it and its contract manufacturers procure on its behalf in accordance with its production forecast as well as other inventory related purchase commitments. As of September 30, 2026, these purchase obligations totaled approximately $262.4 million.

Litigation

The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not been fully resolved. An accrual for a loss contingency is recognized when it is probable and the amount of loss or recovery can be reasonably estimated. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s business, results of operations, financial position and cash flows for that reporting period could be materially adversely affected.

On August 19, 2026, Tigo Energy Innovations LLC filed a complaint in the United States District Court for the Western District of Texas against the Company, alleging infringement often patents by certain of the Company’s products. The complaint seeks unspecified damages and other relief. Given the uncertainty of litigation and the preliminary stage of the case, the Company cannot reasonably estimate the possible loss or range of loss, if any, associated with the matter. The Company disputes the allegations in this lawsuit and intends to defend the matter vigorously.

Tariff Contingencies

On February 20, 2026, the United States Supreme Court issued a ruling in Learning Resources, Inc. v. Trump invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”). Following this ruling, the U.S. Court of International Trade directed U.S. Customs and Border Protection (“CBP”) to establish a process for the submission and review of refund claims related to the affected IEEPA tariffs.

On April 20, 2026, CBP launched an online portal through which companies may submit refund requests for eligible IEEPA tariffs.

The Company received refunds and associated interest of approximately $52.0 million during the nine months ended September 30, 2026, from CBP related to tariffs paid during fiscal 2025 and the first quarter of fiscal 2026, of which approximately $1.6 million and approximately $47.0 million was recognized as a reduction to cost of revenues during the three and nine months ended September 30, 2026, respectively; approximately $0.1 million and approximately $1.7 million was recognized as interest income in the three and nine months ended September 30, 2026, respectively; and approximately $3.3 million was capitalized as a cost of inventory as of September 30, 2026.

The Company has submitted additional refund claims for tariffs previously paid and continues to evaluate the recoverability of these amounts. As the approval and timing of such refunds remain uncertain and are contingent upon CBP’s review and validation process, the Company has not recognized a receivable as of September 30, 2026 and will not recognize such amounts until they are realized or realizable. The ultimate impact of any future approved refunds, if any, could be material.

Separately, on February 20, 2026, the same day the Supreme Court invalidated the IEEPA tariffs, the President issued a proclamation imposing a temporary import surcharge under Section 122 of the Trade Act of 1974 ("Section 122"). Unlike the IEEPA tariffs discussed above, which were imposed under emergency economic powers authority and applied at varying country-specific rates, the Section 122 surcharge was imposed pursuant to a statute that authorizes a temporary import surcharge of up to 15% ad valorem for a period not exceeding 150 days under specified balance-of-payments circumstances.

On May 7, 2026, the U.S. Court of International Trade held that the Section 122 proclamation was invalid and granted relief to certain named plaintiffs. The government appealed the ruling, and the Federal Circuit granted a stay of the judgment and injunction pending appeal. As of the date of this filing, the appeal remains pending. The Section 122 surcharge expired on July 24, 2026, upon reaching the applicable 150-day statutory limit.

If the Section 122 proclamation is ultimately held invalid and refund mechanisms applicable to the Company are established, the Company may be eligible to recover some or all of the Section 122 duties paid. However, the outcome of the appeal and the Company’s entitlement to, and the availability, timing and amount of any potential refunds remain uncertain and are subject to further judicial and administrative proceedings. Accordingly, no receivable for potential Section 122 tariff refunds has been recognized as of September 30, 2026.

On July 23, 2026, following Section 301 investigation initiated by the U.S. Trade Representative on March 12, 2026 and determinations announced on June 2, 2026, the Administration announced new tariffs of 10% or 12.5% on imports from 60 trading partners. The tariffs took effect on July 24, 2026, subject to specified product and other exemptions. It remains uncertain whether additional tariffs or other trade restrictions may be imposed under alternative statutory authorities, whether such measures would withstand legal challenge, and whether any refund process will be available with respect to duties previously paid.

13. STOCKHOLDERS' EQUITY

In July 2023, the board of directors authorized a share repurchase program (the “2023 Repurchase Program”) pursuant to which the Company was authorized to repurchase up to $1.0 billion of the Company’s common stock. The Company may repurchase shares of common stock from time to time through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b5-1 plan.

During the three months ended September 30, 2026 and 2025, there wereno repurchases of common stock.

During the nine months ended September 30, 2026, there wereno repurchases of common stock. During the nine months ended September 30, 2025, the Company repurchased and subsequently retired 2,297,053 shares of common stock from the open market at an average cost of $56.58 per share for a total of approximately $130.0 million.

As of September 30, 2026, approximately $268.7 million remained available for share repurchases under the 2023 Repurchase Program. In July 2026, the board of directors authorized an extension of the term of the 2023 Repurchase Program from July 26, 2026 to July 26, 2029, unless terminated earlier by the board of directors. All other terms of the 2023 Repurchase Program remain unchanged.

14. STOCK-BASED COMPENSATION

Stock-based Compensation Expense

Stock-based compensation expense for all stock-based awards, which includes shares purchased under the Company’s employee stock purchase plan (“ESPP”), restricted stock units (“RSUs”) and performance stock units (“PSUs”), expected to vest is measured at fair value on the date of grant and recognized ratably over the requisite service period.

The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations for the periods presented:

The following table summarizes the various types of stock-based compensation expense for the periods presented:

As of September 30, 2026, there was approximately $217.8 million of total unrecognized stock-based compensation expense related to unvested equity awards, which are expected to be recognized over a weighted-average period of 2.1 years.

Equity Awards Activity

Stock Options

No stock options were granted during the nine months ended September 30, 2026 and 2025. Stock option activity during the period, as well as stock options outstanding as of September 30, 2026, were immaterial.

Restricted Stock Units

The following table summarizes RSU activity:

(1) The intrinsic value of RSUs vested is based upon the value of the Company’s stock when vested. The intrinsic value of RSUs outstanding and expected to vest as of September 30, 2026 is based on the closing price of the last trading day during the period ended September 30, 2026. The Company’s stock fair value used in this computation was $32.99 per share.

Performance Stock Units

The following table summarizes PSU activity:

(1) The intrinsic value of PSUs vested is based upon the value of the Company’s stock when vested. The intrinsic value of PSUs outstanding and expected to vest as of September 30, 2026 is based on the closing price of the last trading day during the period ended September 30, 2026. The Company’s stock fair value used in this computation was $32.99 per share.

15. INCOME TAXES

For the three months ended September 30, 2026, the Company recognized an income tax benefit of approximately $27.0 million, on a loss before income taxes of approximately $3.6 million, compared to an income tax provision of approximately $10.4 million, on income before income taxes of approximately $77.0 million for the three months ended September 30, 2025. For the nine months ended September 30, 2026, the Company recognized an income tax benefit of approximately $7.6 million, on income before income taxes of approximately $44.5 million, compared to an income tax provision of approximately $32.7 million, on income before income taxes of approximately $166.1 million for the nine months ended September 30, 2025.

The income tax benefit for the three months ended September 30, 2026 was calculated using the annualized effective tax rate method and primarily includes the tax benefits attributable to the impact of AMPTC under Section 45X of the Internal Revenue Code of 1986, as amended (the “Code”), the cumulative rate catch-up that represents the tax effects resulting from remeasurement of annualized effective tax rate based on the lower forecasted annual pre-tax income, and tax benefit related to the impairment of multiple debt securities investment, partially offset by the tax expense from profitable foreign jurisdictions and tax expense related to equity-based compensation shortfalls. AMPTC is generated based on qualifying production and shipment activity and is therefore directly related to the Company’s pretax income; however, the AMPTC is treated as permanent items for income tax accounting purposes and is excluded from the calculation of the annualized effective tax rate.

For the nine months ended September 30, 2026, the income tax benefit was calculated using the annualized effective tax rate method and primarily reflects tax benefits attributable to the impact of AMPTC under Section 45X of the Code and tax benefit related to the impairment of multiple debt securities investment, offset by tax expense in profitable foreign jurisdictions and tax expense related to equity-based compensation shortfalls and the tax effects of the IEEPA tariff refund.

For the three and nine months ended September 30, 2025, the income tax provision was calculated using the annualized effective tax rate method and was primarily due to tax expense in U.S. and foreign jurisdictions that are profitable, tax expense from equity compensation shortfalls, and prior year true up adjustments.

In accordance with ASC 740‑270, the Company computed its provision for income taxes based on a projected annual effective tax rate, excluding the effects of permanent items and losses generated in jurisdictions for which realization of the related tax benefits is not considered more likely than not. As a result, the Company’s effective tax rate may differ significantly from the U.S. federal statutory rate and may not be indicative of the Company’s annual effective tax rate.

In March 2026, the Company revoked its direct pay election and made a transfer election on its timely filed 2025 federal income tax return to sell $235.0 million of AMPTC generated during 2025 to a third party. In 2026, the Company also agreed to sell $150.0 million of AMPTC generated during 2026. The transfer election did not have a material impact on the income tax provision for the three and nine months ended September 30, 2026. Refer to Note 7, “Government Grants” for additional information.

16. NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed in a similar manner, but it also includes the effect of potential common shares outstanding during the period, when dilutive.

The following table presents the computation of basic and diluted net income per share for the periods presented:

Diluted earnings per share for the three and nine months ended September 30, 2026 and 2025 included the dilutive effect of potentially dilutive common shares by application of the treasury stock method for RSUs, PSUs, ESPP, and includes potentially dilutive common shares by application of the if-converted method for the Notes due 2028. To the extent potential common shares are antidilutive, they are excluded from the calculation of diluted net income per share.

The Company under the relevant sections of the indenture, irrevocably may elect to settle principal in cash and any excess conversion value in cash or shares of the Company’s common stock for the Notes due 2028. If and when the Company makes such election, there would be no adjustment to net income and the Company would use the average share price to determine the potential number of shares issuable upon an assumed conversion to be included in the diluted share count.

The following outstanding shares of common stock equivalents were excluded from the calculation of diluted net income per share because their effect would have been antidilutive:

17. SEGMENT INFORMATION

The Company’s chief operating decision maker is the Chief Executive Officer (the “CEO”). The Company hasone business activity, which entails the design, development, manufacture and sale of solutions for the PV industry. There are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, management has determined that the Company has a single operating and reportable segment. The primary measure of segment profit or loss is consolidated net income as presented below and is used by the CEO for the purpose of evaluating segment performance and allocation of budget to support business expansion, new product development and operational efficiencies.

(1) Represents consolidated cost of revenue excluding stock-based compensation, acquisition related amortization, fair value of AMPTC generated, loss from sale of AMPTC generated during 2025 and IEEPA tariff refunds.

(2) Of the approximately $1.6 million and approximately $47.0 million refunds recognized as a reduction to cost of revenues in the three and nine months ended September 30, 2026, respectively, approximately, $43.3 million of the tariff costs incurred were previously recorded as a cost of revenues in prior periods.

(3) Represents costs incurred in connection with acquisition-related activities, which are not indicative of normal, recurring operating expenses, and acquisition related amortization.

(4) Represents consolidated restructuring and asset impairment excluding stock-based compensation.

(5) Represents consolidated research and development excluding stock-based compensation.

(6) Represents consolidated sales and marketing excluding stock-based compensation and acquisition related amortization.

(7) Represents consolidated general and administrative excluding stock-based compensation and acquisition related expenses.

Refer to Note 2, “Revenue Recognition” for the table presenting net revenues (based on the destination of shipments).

18. RELATED PARTY TRANSACTIONS

In September 2025, the Company invested $6.3 million in SunPower convertible notes. The CEO of SunPower also serves as a member of the Company’s Board of Directors, and therefore this transaction constitutes a related party transaction. The terms of the transaction were reviewed and approved by the Company’s Audit Committee and were determined to be on an arm’s-length basis. Refer to Note 9, “Fair Value Measurements” for additional information.

On March 1, 2026 and April 9, 2026, the Company, in its capacity as a holder of the SunPower notes, executed a consent that allowed SunPower to issue up to $50.0 million of senior secured notes that can be secured by a first‑priority lien on SunPower’s assets and can rank senior to the Company’s unsecured convertible notes. The consent was provided pursuant to the provisions of the existing indenture, which was not modified or amended, and such consent terminated after SunPower issued the $41.0 million of senior secured notes. The Company’s Audit Committee reviewed and approved the consent, and the Company believes the consent was provided on terms consistent with those offered to other note holders and on an arm’s‑length basis.

On June 23, 2026, the Company entered into the Exchange Agreement with SunPower, pursuant to which the Company agreed to exchange the cash interest payments due on July 1, 2026 and January 1, 2027 under the SunPower notes, totaling approximately $0.5 million for 874,064 restricted shares of SunPower common stock. The Company's Audit Committee reviewed and approved the Exchange Agreement, and the Company believes the terms are consistent with those offered to other note holders and continue to be on an arm's-length basis. Refer to Note 9, “Fair Value Measurements” for additional information.

The Company holds a non-controlling variable interest in the Investee and has determined that the Investee is a VIE. The Company is not the primary beneficiary of the Investee because it does not have the power to direct the activities that most significantly impact the Investee’s economic performance and accordingly does not consolidate the Investee. Refer to Note 9, “Fair Value Measurements” for additional information.