Qnity Electronics, Inc.

RESULTS OF OPERATIONS

The following table summarizes sales variances by segment and geographic region from the prior year:

1. Includes United States, Canada, and Latin America

2. Europe, Middle East and Africa ("EMEA").

We reported net sales for the three months ended June 30, 2026 of $1.4 billion, up 22% from $1.2 billion for the three months ended June 30, 2025, primarily due to a 23% increase in volume. The volume increase was attributable to both Interconnect Solutions up 28% and Semiconductor Technologies up 18%.

Net sales for the six months ended June 30, 2026 were $2.7 billion, up 20% from $2.3 billion for the six months ended June 30, 2025, primarily due to a 20% increase in volume. The increase in volume was attributable to both Interconnect Solutions up 26% and Semiconductor Technologies up 15%.

Cost of Sales

Cost of sales were $763 million for the three months ended June 30, 2026, up 21% from $630 million for the three months ended June 30, 2025 primarily attributable to an 18% increase in volume in addition to a 3% increase in material costs.

Cost of sales as a percentage of net sales decreased slightly from 54% for the three months ended June 30, 2025 to 53% for the three months ended June 30, 2026.

Cost of sales were $1,460 million for the six months ended June 30, 2026, up 20% from $1,217 million for the six months ended June 30, 2025 primarily attributable to a 16% increase in volume in addition to 3% and 1% increases attributable to material costs and currency, respectively.

Cost of sales as a percentage of net sales was flat at 53% for both the six months ended June 30, 2026 and 2025.

Research and Development ("R&D") Expenses

R&D expense was $98 million for the three months ended June 30, 2026, up from $88 million for the three months ended June 30, 2025. R&D expense as a percentage of net sales decreased period over period from 8% for the three months ended June 30, 2025 to 7% for the three months ended June 30, 2026.

R&D expense was $192 million for the six months ended June 30, 2026, up from $172 million for the six months ended June 30, 2025. R&D expense as a percentage of net sales decreased period over period from 8% for the six months ended June 30, 2025 to 7% for the six months ended June 30, 2026.

Selling, General and Administrative ("SG&A") Expenses

SG&A expenses were $200 million in the second quarter of 2026, up from $154 million in the second quarter of 2025. SG&A expenses as a percentage of net sales increased to 14% for the three months ended June 30, 2026 as compared to 13% for the three months ended June 30, 2025.

For the first six months of 2026, SG&A expenses were $373 million, up from $294 million in the first six months of 2025. SG&A expenses as a percentage of net sales increased to 14% for the six months ended June 30, 2026 as compared to 13% for the six months ended June 30, 2025.

Amortization of Intangibles

Amortization of intangibles was $50 million for both the three months ended June 30, 2026 and 2025. In the first six months of 2026, amortization of intangibles was $102 million, down from $105 million in the same period of the prior year. The decrease for the six months ended June 30, 2026 as compared with the same period of the prior year was primarily due to assets becoming fully amortized.

Transformation, Integration and Other Charges

Beginning in fiscal 2026, we present costs incurred in connection with the multi‑year transformation plan described under “―Overview―Recent Developments―Transformation Plan,” designed to strengthen operational productivity, enhance commercial and innovation excellence and optimize our presence in key markets, within a single operating expense line titled “Transformation, integration and other charges” in the Consolidated Statements of Operations.

Consistent with the update above, we combined our historical “Restructuring and other asset related charges” and “Acquisition, integration and separation costs” into the expense caption, “Transformation, integration and other charges” to simplify our presentation and better reflect how management evaluates these activities. Prior period amounts presented in this Quarterly Report on Form 10-Q have been recast to conform to the current period presentation. This change in presentation did not affect total operating expenses, operating income, net income, earnings per share, or cash flows for any period presented.

Transformation, integration and other charges were $42 million in the second quarter of 2026, up from $2 million of charges in the second quarter of 2025. The activity for the three months ended June 30, 2026 primarily consisted of costs incurred to support our information technology independence initiatives of approximately $24 million, costs related to transformation initiatives of approximately $8 million, and other integration‑related costs of approximately $3 million. Additionally, for the three months ended June 30, 2026 we incurred $2 million and $4 million, respectively, of severance and asset-related charges associated with organizational redesign actions under our transformation plan. The activity for the three months ended June 30, 2025 consisted of charges for severance and related benefits, the entirety of which related to DuPont-approved restructuring programs that were initiated prior to our separation from DuPont into an independent publicly traded company.

For the first six months of 2026, transformation, integration and other charges were $70 million, up from $19 million for the same period in the prior year. The activity for the six months ended June 30, 2026 primarily consisted of costs incurred to support our information technology independence initiatives of approximately $48 million, costs related to transformation initiatives of approximately $10 million, and other integration‑related costs of approximately $6 million. Additionally, for the six months ended June 30, 2026 we incurred $2 million and $4 million, respectively, of severance and asset-related charges associated with organizational redesign actions under our transformation plan. The activity for the six months ended June 30, 2025 consisted of charges for severance and related benefits, the entirety of which related to DuPont-approved restructuring programs that were initiated prior to our separation from DuPont into an independent publicly traded company.

See Note 4 to the unaudited interim Consolidated Financial Statements for additional information.

Equity in Earnings of Nonconsolidated Affiliates

Our share of the earnings of nonconsolidated affiliates was $11 million in the second quarter of 2026, down from $13 million in the second quarter of 2025, reflecting lower earnings from the underlying nonconsolidated affiliates. For the first six months of 2026, our share of earnings of nonconsolidated affiliates was $24 million, up from $22 million in the first six months of 2025, reflecting higher earnings from the underlying nonconsolidated affiliates. See Note 10 to the unaudited interim Consolidated Financial Statements for additional information.

Interest Expense

Interest expense was $61 million and $122 million for the three and six months ended June 30, 2026, respectively. There was no interest expense for the three and six months ended June 30, 2025. Interest expense in 2026 was driven by interest associated with the Secured and Unsecured Notes and the Senior Secured Term Loan Facility (each as defined in Note 14 to the Consolidated Financial Statements in the Annual Report). See Note 12 to the unaudited interim Consolidated Financial Statements in this Quarterly Report for additional information.

Other Income (Expense) - Net

Other income (expense) - net includes a variety of income and expense items such as interest income, indirect legacy (costs) and benefits and foreign exchange gains or losses. Other income (expense) - net was $27 million of expense in the three months ended June 30, 2026, as compared to $4 million of expense for the three months ended June 30, 2025. In the first six months of 2026, Other income (expense) - net was $32 million of expense, as compared to $2 million of expense in the first six months of 2025.

See Note 6 to the unaudited interim Consolidated Financial Statements in this Quarterly Report for additional information.

Provision for Income Taxes

Our effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to attributes. The tax provision for the second quarter ended June 30, 2026 resulted in an effective tax rate of 31.7% on pretax income of $199 million, compared with an effective tax rate of 22.4% on pretax income of $255 million for the second quarter ended June 30, 2025. The increase in the effective tax rate in the second quarter of 2026 relates to taxes related to prior year uncertain tax positions for which we are indemnified, a non-deductible indemnification accrual recorded for the State of North Carolina litigation, a limitation on the deductibility of interest expense, and higher tax costs on the remittance of foreign earnings, partially offset by a reduction in foreign tax costs. The tax provision for the six months ended June 30, 2026 resulted in an effective tax rate of 28.5% on pre-tax income of $417 million, compared with an effective tax rate of 20.8%, on pre-tax income of $501 million for the six months ended June 30, 2025. The increase in the effective tax rate in 2026 relates to a limitation on the deductibility of interest expense, taxes related to prior year uncertain tax positions for which we are indemnified, higher tax costs on the remittance of foreign earnings, and a non-deductible indemnification accrual recorded for the State of North Carolina litigation, partially offset by a reduction in foreign tax costs.