Financial Analysis

NOTE 14. COMMITMENTS AND CONTINGENCIES Legal Proceedings We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; product recalls; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; environmental and regulatory matters, including the enforcement of environmental and emissions standards; and asbestos claims. We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. We do not believe that these lawsuits are material individually or in the aggregate. While we believe we have also established adequate accruals fo …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

"NOTE 12. DEBT Loans Payable Loans payable at December 31, 2025 and 2024 were $313 million and $356 million, respectively, and consisted primarily of loans payable to financial institutions. The weighted-average interest rate of loans payable at December 31 was as follows: 2025 2024 Weighted-average interest rate 2.55 % 2.85 % Commercial Paper Our committed credit facilities provide access up to $4.0 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board authorized commercial paper programs. These programs facilitate the private placement of unsecured short-term debt through third-party brokers. We intend to use the net proceeds from the commercial paper borrowings for general corporate purposes. We had $353 million and $1.3 billion in outstanding borrowings under our commercial paper programs at December 31, 2025 and 2024, respectively. The weighted-average interest rate for commercial paper at December 31 was as follows: 2025 2024 Weighted-average interest rate 3.20 % 4.49 % Revolving Credit Facilities On June 2, 2025, we entered into an amended and restated 5-year credit agreement that allows us to borrow up to $2.0 billion of unsecured funds at any time prior to June 2, 2030. The credit agreement amended and restated the prior $2.0 billion 5-year credit agreement that would have matured on June 3, 2029. We also entered into a new 3-year credit agreement that allows us to borrow up to $2.0 billion of unsecured funds at any time prior to …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 18. STOCK INCENTIVE AND STOCK OPTION PLANS Our stock incentive plan (the Plan) allows for granting of up to 8.5 million total shares of equity awards to executives, employees and non-employee directors. Awards available for grant under the Plan include, but are not limited to, stock options, stock appreciation rights, performance shares and other stock awards. Shares issued under the Plan may be newly issued shares or reissued treasury shares. Stock options are generally granted with a strike price equal to the fair market value of the stock on the date of grant and a life of 10 years. Stock options granted have a three -year vesting period. The strike price may be higher than the fair value of the stock on the date of the grant, but cannot be lower. Compensation expense is recorded on a straight-line basis over the vesting period beginning on the grant date. The compensation expense is based on the fair value of each option grant using the Black-Scholes option pricing model. Options granted to employees eligible for retirement under our retirement plan are fully expensed at the grant date. Stock options are also awarded through the Key Employee Stock Investment Plan (KESIP) which allows certain employees, other than officers, to purchase shares of common stock on an installment basis up to an established credit limit. For every block of 100 KESIP shares purchased by the employee 50 stock options are granted. The options granted through the KESIP program are considered a …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

NOTE 9. GOODWILL AND OTHER INTANGIBLE ASSETS The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024: In millions Components Accelera Distribution Power Systems Engine Total Balance at December 31, 2023 $ 1,884 $ 496 $ 83 $ 11 $ 25 $ 2,499 Acquisitions 2 33 35 Foreign currency translation and other (48) (2) (50) Divestiture (1) (114) (114) Balance at December 31, 2024 1,724 494 83 44 25 2,370 Acquisitions 9 9 Foreign currency translation and other 50 4 1 55 Impairment (2) (210) (210) Balance at December 31, 2025 $ 1,774 $ 288 $ 83 $ 45 $ 34 $ 2,224 (1) See NOTE 21, ATMUS DIVESTITURE, for additional information. (2) See NOTE 22, ACCELERA ACTIONS, for additional information. Intangible assets that have finite useful lives are amortized over their estimated useful lives. The following table summarizes our other intangible assets: December 31, In millions 2025 2024 Amortizable intangible assets Software $ 924 $ 793 Less: Accumulated amortization (469) (372) Software, net 455 421 Trademarks, patents, customer relationships and other 2,718 2,685 Less: Accumulated amortization (1,028) (819) Trademarks, patents, customer relationships and other, net 1,690 1,866 Unamortizable other intangible assets 22 64 Other intangible assets, net $ 2,167 $ 2,351 Amortization expense for software and other intangibles totaled $323 million, $324 million and $324 million for the years ended December 31, 2025, 2024 and 2023, respecti …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

"NOTE 4. INCOME TAXES The following table summarizes income before income taxes: Years ended December 31, In millions 2025 2024 2023 U.S. income (loss) $ 1,781 $ 2,857 $ (541) Foreign income 2,182 2,046 2,167 Income before income taxes $ 3,963 $ 4,903 $ 1,626 Effective December 31, 2025, we adopted ASU 2023-09 on a prospective basis. See NOTE 1, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, for additional details on the adoption of this standard. The tables below provide the prospective disclosures required by ASU 2023-09. Income tax expense (benefit) consisted of the following: Year ended December 31, In millions 2025 Current U.S. federal $ 130 U.S. state and local 18 Foreign 772 Total current income tax expense 920 Deferred U.S. federal 86 U.S. state and local 8 Foreign (8) Total deferred income tax expense 86 Income tax expense $ 1,006 On July 4, 2025, the One Big Beautiful Bill Act (The Act) was signed into law, enacting significant changes to U.S. federal income tax rules affecting corporations, such as the ability to immediately deduct domestic research and development costs, restoration of elective 100 percent bonus depreciation for qualified property and changes to the international tax provisions. Implementation of The Act resulted in an increase to tax expense of $39 million in 2025, primarily due to a reduction in the foreign income deduction and changes to the research and development tax credit. During 2025, we responded to rapidly deteriorating conditions in our e …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 8. LEASES Our lease portfolio consists primarily of real estate and equipment leases. Our real estate leases primarily consist of land, office, distribution, warehousing and manufacturing facilities. These leases typically range in term from 2 to 50 years and may contain renewal options for periods up to 10 years at our discretion. Our equipment lease portfolio consists primarily of vehicles (including service vehicles), fork trucks and IT equipment. These leases typically range in term from two to four years and may contain renewal options. Our leases generally do not contain variable lease payments other than (1) certain foreign real estate leases which have payments indexed to inflation and (2) certain real estate executory costs (such as taxes, insurance and maintenance), which are paid based on actual expenses incurred by the lessor during the year. Our leases generally do not include residual value guarantees other than our service vehicle fleet, which has a residual guarantee based on a percentage of the original cost declining over the lease term. The components of our lease cost were as follows: Years ended December 31, In millions 2025 2024 2023 Operating lease cost $ 184 $ 187 $ 165 Finance lease cost Amortization of right-of-use asset 29 26 20 Interest expense 8 7 4 Short-term lease cost 33 41 24 Variable lease cost 18 17 14 Total lease cost $ 272 $ 278 $ 227 Supplemental balance sheet information related to leases: December 31, In millions 2025 2024 Balance …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

NOTE 10. PENSIONS AND OTHER POSTRETIREMENT BENEFITS Pension Plans We sponsor several pension plans covering substantially all employees. Generally, pension benefits for salaried employees are determined as a function of employees compensation. Pension benefits for most hourly employees are determined similarly and as a function of employees compensation, with the exception of a small group of hourly employees whose pension benefits were grandfathered in accordance with agreements with their union representation and are based on their years of service and compensation during active employment. The level of benefits and terms of vesting may vary among plans and are offered in accordance with applicable laws. Pension plan assets are administered by trustees and are principally invested in fixed income securities and equity securities. It is our policy to make contributions to our various qualified plans in accordance with statutory and contractual funding requirements, and any additional contributions we determine are appropriate. Obligations, Assets and Funded Status Benefit obligation balances presented below reflect the projected benefit obligation (PBO) for our pension plans. The changes in the benefit obligations, the various plan assets, the funded status of the plans and the amounts recognized in our Consolidated Balance Sheets for our significant pension plans at December 31 were as follows: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans In millions 2025 …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

Related Party Transactions In accordance with the provisions of various joint venture agreements, we may purchase products and components from our joint ventures, sell products and components to our joint ventures and our joint ventures may sell products and components to unrelated parties. Joint venture transfer prices may differ from normal selling prices. Certain joint venture agreements transfer product at cost, some transfer product on a cost-plus basis, and others transfer product at market value. The following is a summary of sales to and purchases from nonconsolidated equity investees: Years ended December 31, In millions 2025 2024 2023 Sales to nonconsolidated equity investees $ 1,679 $ 1,392 $ 1,548 Purchases from nonconsolidated equity investees 2,168 2,463 2,628 The following is a summary of accounts receivable from and accounts payable to nonconsolidated equity investees: December 31, In millions 2025 2024 Balance Sheet Location Accounts receivable from nonconsolidated equity investees $ 523 $ 432 Accounts and notes receivable, net Accounts payable to nonconsolidated equity investees 263 281 Accounts payable (principally trade)

RelatedPartyTransactionsDisclosureTextBlock

NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS Long-term Contracts We have certain arrangements, primarily long-term maintenance agreements, construction contracts, product sales with associated performance obligations extending beyond a year, product sales with lead times extending beyond one year that are non-cancellable or for which the customer incurs a penalty for cancellation and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for these contracts, excluding extended warranty coverage arrangements, at December 31, 2025, was $6.3 billion. We expect to recognize the related revenue of $3.6 billion over the next 12 months and $2.7 billion over periods up to 10 years. See NOTE 13, PRODUCT WARRANTY LIABILITY, for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of costs incurred when providing goods and services to our customers or represent sales-based royalties. Deferred and Unbilled Revenue The following is a summary of our unbilled and deferred revenue and related activity: December 31, In millions 2025 2024 Unbilled revenue $ 439 $ 403 Deferred revenue 2,660 2,412 We recognized revenue of $1.1 billion and $850 million in 2025 and 2024, respectively, that was included in the deferred revenue balance at the beginning of each year. Disaggregation of Revenue …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

NOTE 24. REPORTABLE SEGMENTS Reportable segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is the Chief Executive Officer. Our reportable segments consist of Engine, Components, Distribution, Power Systems and Accelera. This reporting structure is organized according to the products and markets each segment serves. The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Components segment sells axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, automated transmissions and electronics. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products, maintaining relationships with various OEMs throughout the world and providing selected sales and …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 15. CUMMINS INC. SHAREHOLDERS' EQUITY Preferred and Preference Stock We are authorized to issue one million shares of zero par value preferred and one million shares of preference stock with preferred shares being senior to preference shares. We can determine the number of shares of each series, and the rights, preferences and limitations of each series. At December 31, 2025 and 2024, there were no preferred or preference stock outstanding. Common Stock Changes in shares of common stock and treasury stock were as follows: In millions Common Stock Treasury Stock Balance at December 31, 2022 222.5 81.2 Shares issued (0.5) Balance at December 31, 2023 222.5 80.7 Shares issued (1.2) Atmus divestiture share exchange (1) 5.6 Balance at December 31, 2024 222.5 85.1 Shares issued (0.7) Balance at December 31, 2025 222.5 84.4 (1) On March 18, 2024, we completed the divestiture of our remaining 80.5 percent ownership of Atmus common stock through a tax-free split-off. The exchange resulted in a reduction of shares of our common stock outstanding by 5.6 million shares. See NOTE 21, ATMUS DIVESTITURE, for additional information. Treasury Stock Shares of common stock repurchased by us are recorded at cost as treasury stock and result in a reduction of shareholders' equity in our Consolidated Balance Sheets . Treasury shares may be reissued as part of our stock-based compensation programs. When shares are reissued, we use the weighted-average cost method for determining cost. The gain …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 11. COMMITMENTS AND CONTINGENCIES Legal Proceedings We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; product recalls; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; environmental and regulatory matters, including the enforcement of environmental and emissions standards; and asbestos claims. We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. We do not believe that these lawsuits are material individually or in the aggregate. While we believe we have also established adequate accruals fo …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

"NOTE 9. DEBT Loans Payable and Commercial Paper Loans payable, commercial paper and the related weighted-average interest rates were as follows: In millions September 30, 2025 December 31, 2024 Loans payable (1) $ 315 $ 356 Commercial paper (2) 353 1,259 (1) Loans payable consist primarily of loans payable to various international and domestic financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate. (2) The weighted-average interest rate, inclusive of all brokerage fees, was 3.49 percent and 4.49 percent at September 30, 2025 and December 31, 2024, respectively. We can issue up to $4.0 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board authorized commercial paper programs. These programs facilitate the private placement of unsecured short-term debt through third-party brokers. We intend to use the net proceeds from the commercial paper borrowings for general corporate purposes. Revolving Credit Facilities On June 2, 2025, we entered into an amended and restated 5-year credit agreement that allows us to borrow up to $2.0 billion of unsecured funds at any time prior to June 2, 2030. The credit agreement amended and restated the prior $2.0 billion 5-year credit agreement that would have matured on June 3, 2029. On June 2, 2025, we entered into a new 3-year credit agreement that allows us to borrow up to $2.0 billion of unsecured funds at any time prior to June 2, 2028 …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 5. INCOME TAXES On July 4, 2025, the One Big Beautiful Bill Act (The Act) was signed into law, enacting significant changes to U.S. federal income tax rules affecting corporations, such as the ability to immediately deduct domestic research and development costs, restoration of elective 100 percent bonus depreciation for qualified property and changes to the international tax provisions. Implementation of The Act resulted in an increase to tax expense of $36 million in the third quarter of 2025, primarily due to a reduction in the foreign income deduction and changes to the research and development tax credit. Our effective tax rates for the three and nine months ended September 30, 2025, were 32.7 percent and 26.3 percent, respectively. Our effective tax rates for the three and nine months ended September 30, 2024, were 19.2 percent and 14.6 percent, respectively. The three months ended September 30, 2025, contained net unfavorable discrete tax items of $4 million primarily due to $32 million of unfavorable return to provision adjustments and net $1 million of other unfavorable tax items, partially offset by $25 million of favorable adjustments for uncertain tax positions and $4 million of favorable adjustments for share-based compensation. The nine months ended September 30, 2025, contained net favorable discrete tax items of $6 million, primarily due to $30 million of favorable adjustments for uncertain tax positions and $12 million of favorable adjustments for share- …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 3. PENSIONS AND OTHER POSTRETIREMENT BENEFITS We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit (OPEB) plans. Contributions to these plans were as follows: Three months ended Nine months ended September 30, September 30, In millions 2025 2024 2025 2024 Defined benefit pension contributions $ 11 $ 9 $ 34 $ 56 OPEB payments, net 1 4 4 16 Defined contribution pension plans 24 27 100 101 We anticipate making additional defined benefit pension contributions during the remainder of 2025 of $10 million for our U.S. and U.K. qualified and non-qualified pension plans. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2025 annual net periodic pension cost to approximate $79 million. The components of net periodic pension and OPEB expense (income) under our plans were as follows: Pension U.S. Plans U.K. Plans OPEB Three months ended September 30, In millions 2025 2024 2025 2024 2025 2024 Service cost $ 34 $ 35 $ 4 $ 4 $ $ Interest cost 43 42 20 18 2 2 Expected return on plan assets (67) (72) (23) (26) Amortization of prior service cost 1 Recognized net actuarial loss (gain) 2 3 7 3 (1) (1) Net periodic benefit expense $ 12 $ 8 $ 8 $ $ 1 $ 1 Pension U.S. Plans U.K. Plans OPEB Nine months ended September 30, In millions 2025 2024 2025 2024 2025 2024 Service cost $ 100 $ 106 $ 11 $ 13 $ $ Interest cost 130 125 58 …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

"NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS Long-term Contracts We have certain arrangements, primarily long-term maintenance agreements, construction contracts, product sales with associated performance obligations extending beyond a year, product sales with lead times extending beyond one year that are non-cancellable or for which the customer incurs a penalty for cancellation and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for these contracts, excluding extended warranty coverage arrangements, at September 30, 2025, was $6.0 billion. We expect to recognize the related revenue of $3.1 billion over the next 12 months and $2.9 billion over periods up to 10 years. See NOTE 10, ""PRODUCT WARRANTY LIABILITY,"" for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of costs incurred when providing goods and services to our customers or represent sales-based royalties. Deferred and Unbilled Revenue The following is a summary of our unbilled and deferred revenue and related activity: In millions September 30, 2025 December 31, 2024 Unbilled revenue $ 444 $ 403 Deferred revenue 2,719 2,412 We recognized revenue of $222 million and $814 million for the three and nine months ended September 30, 2025, compared with $184 million and $682 million for the comparable …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"NOTE 16. REPORTABLE SEGMENTS Reportable segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is the Chief Executive Officer. Our reportable segments consist of Engine, Components, Distribution, Power Systems and Accelera. This reporting structure is organized according to the products and markets each segment serves. The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Components segment sells axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, automated transmissions and electronics. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products, maintaining relationships with various OEMs throughout the world and providing selected sales an …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing