NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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NOTE 1 - BASIS OF PRESENTATION
Organization and Description of Business
Qnity Electronics, Inc. ("Qnity" or the "Company") is one of the largest global leaders in materials and solutions for the semiconductor and electronics industries. The Company empowers its customers’ technology roadmaps to enable advancements in megatrends such as artificial intelligence, high-performance computing and advanced connectivity. Qnity partners with leading semiconductor and advanced device manufacturers to address complex challenges and develop solutions that facilitate next-generation technological innovations.
Prior to November 1, 2025, the Company was wholly owned by DuPont de Nemours, Inc. (“DuPont” or "Parent"). On November 1, 2025 (the "Separation and Distribution Date"), Qnity was separated from DuPont into an independent publicly traded company (the "Separation") through a pro-rata distribution of one share of Qnity common stock for every two shares of DuPont common stock held at the close of business on the record date of October 22, 2025 (the "Distribution"). As a result of the Distribution, as of the Separation and Distribution Date, Qnity became an independent, publicly traded company, and Qnity common stock commenced trading on the New York Stock Exchange under the symbol "Q" at the start of trading on November 3, 2025.
Basis of Presentation
Prior to the Separation on November 1, 2025, Qnity had operated as a part of DuPont; consequently, stand-alone interim financial statements were not historically prepared for Qnity. For the period subsequent to November 1, 2025, the financial statements are presented on a consolidated basis as the Company became a standalone public company. In the opinion of management, the accompanying unaudited interim Consolidated Financial Statements reflect all adjustments (including normal recurring adjustments) which are considered necessary for the fair statement of the results for the periods presented. The unaudited interim Consolidated Financial Statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained. Results from interim periods should not be considered indicative of results for the full year. These unaudited interim Consolidated Financial Statements should also be read in conjunction with the audited annual Consolidated Financial Statements and notes thereto for the year ended December 31, 2025, collectively referred to as the “2025 Annual Financial Statements” as contained in the Company’s Annual Report on Form 10-K (the "Annual Report") filed on February 26, 2026 with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the Securities Exchange Act of 1934, as amended.
Beginning in fiscal 2026, the Company presents costs incurred in connection with a multi‑year transformation plan, designed to strengthen operational productivity, enhance commercial and innovation excellence, and optimize the Company’s presence in key markets, within a single operating expense line titled “Transformation, integration and other charges” in the Consolidated Statements of Operations. The transformation plan does not represent a company‑wide restructuring event; rather, it consists of a series of discrete initiatives, including IT independence and other separation‑related activities, integration efforts, and productivity programs.
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.
NOTE 2 - RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09") to improve transparency and disclosure requirements for the rate reconciliation, income taxes paid and other tax disclosures. The amendments in ASU 2023-09 are effective for annual fiscal years beginning after December 15, 2024, on a prospective basis. The disclosures were implemented as required for the year-ended December 31, 2025 in the Company's Annual Report.
In December 2025, the FASB issued Accounting Standards Update No. 2025-12, "Codification Improvements", which addresses stakeholders' feedback on the Accounting Standards Codification and makes other incremental improvements to generally accepted accounting principles. Specifically, Issue 10 of ASU 2025-12 added a clarification within ASC 505-30 to provide a policy election to permit the excess of repurchase price over par value in a stock repurchase transaction to be accounted for entirely as a reduction in additional paid-in capital when the repurchased shares are retired. The Company adopted Issue 10 of ASU 2025-12 during the quarter ended March 31, 2026.
Accounting Guidance Issued But Not Adopted at March 31, 2026
In November 2024, the FASB issued Accounting Standards Update No. 2024-03, "Income Statement: Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures" ("ASU 2024-03") to improve disclosures about the nature of expenses within line items on the statements of operations. The amendments in ASU 2024-03 are effective for the Company's 2027 annual report and subsequent interim periods; however, early adoption is permitted. The amendments can be applied prospectively or retrospectively to all periods presented. The Company is currently evaluating the impact of adopting this guidance.
In September 2025, the FASB issued Accounting Standards Update No. 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”) to modernize the accounting for internal-use software costs and improve operability of the guidance across different software development project stages. The amendments in ASU 2025-06 are effective for the Company’s 2028 annual and quarterly reports; however, early adoption is permitted. The amendments can be applied prospectively, retrospectively, or using a modified transition approach. The Company is currently evaluating the impact of adopting this guidance.
NOTE 3 - REVENUE
Revenue Recognition
Products
Substantially all of Qnity’s revenue is derived from product sales. Product sales consist of sales of Qnity’s products to supply manufacturers and distributors. Qnity considers purchase orders, which in some cases are governed by master supply agreements, to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year.
Net sales to Samsung Electronics Co., Ltd accounted for 11% and 10% of total net sales for each of the three months ended March 31, 2026 and 2025, respectively. Additionally, net sales to Taiwan Semiconductor Manufacturing Company Limited (TSMC) accounted for 8% of total net sales for the three months ended March 31, 2026 and 2025. The majority of revenues for both customers relate to the Semiconductor Technologies segment.
Disaggregation of Revenue
The Company disaggregates its revenue from contracts with customers by segment and geographic region, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.
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| Net Sales by Segment | Three Months Ended
March 31, |
| In millions | 2026 | 2025 |
| Semiconductor Technologies | $ | 722 | | $ | 644 | |
| Interconnect Solutions | 593 | | 474 | |
| Total | $ | 1,315 | | $ | 1,118 | |
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| Net Sales by Segment by Geographic Region | Three Months Ended
March 31, |
| 2026 | 2025 |
| Semiconductor Technologies | Interconnect Solutions | Total | Semiconductor Technologies | Interconnect Solutions | Total |
| In millions |
| Americas: | $ | 78 | | $ | 93 | | $ | 171 | | $ | 66 | | $ | 78 | | $ | 144 | |
| United States | 77 | | 84 | | 161 | | 65 | | 71 | | 136 | |
Other Americas 1 | 1 | | 9 | | 10 | | 1 | | 7 | | 8 | |
EMEA 2 | 51 | | 51 | | 102 | | 49 | | 43 | | 92 | |
| Asia Pacific: | 593 | | 449 | | 1,042 | | 529 | | 353 | | 882 | |
| China | 205 | | 230 | | 435 | | 205 | | 191 | | 396 | |
| Rest of Asia Pacific: | 388 | | 219 | | 607 | | 324 | | 162 | | 486 | |
| South Korea | 164 | | 30 | | 194 | | 140 | | 23 | | 163 | |
| Taiwan | 151 | | 53 | | 204 | | 121 | | 36 | | 157 | |
| Other | 73 | | 136 | | 209 | | 63 | | 103 | | 166 | |
| Total | $ | 722 | | $ | 593 | | $ | 1,315 | | $ | 644 | | $ | 474 | | $ | 1,118 | |
1.Includes Canada and Latin America.
2.Europe, Middle East and Africa.
Contract Balances
From time to time, the Company enters into arrangements in which it receives payments from customers based upon contractual billing schedules. The Company records accounts receivables when the right to consideration becomes unconditional. Contract liabilities primarily reflect deferred revenue from advance payment for product that the Company has received from customers. The Company classifies deferred revenue as current or noncurrent based on the timing of when the Company expects to recognize revenue.
Revenue recognized from amounts included in contract liabilities at the beginning of the period were insignificant for the three months ended March 31, 2026 and 2025. The Company did not recognize any asset impairment charges related to contract assets during the periods. The Company will begin recognizing its deferred revenue when the project associated with the revenue that was deferred is completed and commercial production begins, currently expected in 2027.
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| Contract Balances | March 31, 2026 | December 31, 2025 |
| In millions |
Accounts receivable - trade 1 | $ | 702 | | $ | 656 | |
Deferred revenue - current 2 | $ | 2 | | $ | 1 | |
Deferred revenue - noncurrent 3 | $ | 46 | | $ | 46 | |
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1.Included in "Accounts and notes receivable - net" in the interim Condensed Consolidated Balance Sheets.
2.Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
3.Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets.
NOTE 4 - TRANSFORMATION, INTEGRATION AND OTHER CHARGES
In February 2026, Qnity launched a multi‑year transformation plan, designed to strengthen operational productivity, enhance commercial and innovation excellence and optimize the Company’s presence in key markets. Costs incurred under this plan primarily comprise external consulting and separation services, severance, asset‑related charges, and program‑related operating costs.
As further discussed in Note 1, beginning in the first quarter of 2026, the Company combined its historical “Restructuring and asset‑related charges – net” financial‑statement line item with its historical “Acquisition, integration and separation costs” into a single operating expense caption titled “Transformation, integration and other charges.” This change represents a presentation change only, and does not represent a change in accounting principle. Consistent with SEC interim reporting requirements, prior‑period amounts presented herein have been recast to conform to the current‑period presentation. Although restructuring is no longer presented as a separate financial‑statement line item, the Company continues to monitor these charges as a discrete component of the new combined operating expense caption.
The following table represents reclassification of prior-period amounts to Transformation, integration and other charges:
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Reclassification of Prior-Period Amounts | Three Months Ended
March 31, 2025 |
| In millions |
| Restructuring and asset related charges – net | $ | 17 | |
| Acquisition, integration and separation costs | — | |
| Transformation, integration and other charges (recast) | $ | 17 | |
The following table presents the components of Transformation, integration and other charges by major cost category. Amounts include costs recognized under ASC 420 (exit and disposal activities), ASC 712 (compensation – nonretirement postemployment benefits), ASC 360 (asset impairments), and other transformation and integration costs.
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Transformation, Integration and Other Charges by Cost Category | Three Months Ended
March 31, |
| In millions | 2026 | 2025 |
Pre-Separation restructuring programs1 | | |
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| Severance | $ | (1) | | $ | 17 | |
| Asset related charges | — | | — | |
| Total Pre-Separation restructuring programs | $ | (1) | | $ | 17 | |
| Qnity Transformation Plan | | |
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IT independence 2 | $ | 24 | | $ | — | |
Integration and other 2 | 3 | | — | |
Transformation initiative charges2 | 2 | | — | |
| Total Qnity Transformation Plan | $ | 29 | | $ | — | |
| Total transformation, integration and other charges (recast) | $ | 28 | | $ | 17 | |
1. This activity represents charges and credits related to DuPont-approved restructuring programs initiated prior to the Separation. 2. Charges primarily consist of external advisory services, professional fees, program management costs, internal program labor, and other operating expenses that are incremental and directly attributable to the Company’s transformation and separation activities. Internal program labor represents payroll costs for employees predominantly dedicated to the transformation and separation initiatives and reflects costs that are incremental to the Company’s normal operating activities.
There were no actions by the Company resulting in new exit or disposal cost obligations during the three months ended March 31, 2026.
Exit and disposal operations were a credit of $1 million and charges of $17 million for the three months ended March 31, 2026 and 2025, respectively. The entirety of these charges related to DuPont-approved restructuring programs that were initiated prior to the Separation. The total liability related to these programs was $3 million as of March 31, 2026, recorded in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
Refer to Note 19 for the disaggregation of Transformation, integration and other charges incurred by segment. The Company expects the majority of the remaining cash outflows of the program to be incurred in the next two years.
NOTE 5 - RELATIONSHIP WITH DUPONT
Prior to the Separation, Qnity had been managed and operated in the normal course with other businesses of DuPont. Accordingly, certain shared costs had been allocated to Qnity and reflected as expenses in the stand-alone Consolidated Financial Statements. Management considers the allocation methodologies used to be reasonable and appropriate reflections of the pre-Separation expenses attributable to Qnity for purposes of the stand-alone financial statements. The expenses reflected in the Consolidated Financial Statements may not be indicative of expenses that will be incurred by Qnity in the future. All transactions with DuPont prior to the Separation approximate prices at cost.
Corporate Expense Allocations
Qnity’s Consolidated Statements of Operations for periods prior to the Separation included general corporate expenses of DuPont for services provided by DuPont for certain support functions that were provided on a centralized basis prior to the Separation. These costs were allocated using relevant allocation methods, primarily based on sales metrics.
Corporate expense allocations during the three months ended March 31, 2025 were recorded in the unaudited interim Consolidated Statements of Operations within the following captions:
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| In millions | Three months ended March 31, 2025 |
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| Selling, general and administrative expenses | $ | 53 | |
| Cost of sales | 8 | |
| Research and development expenses | 10 | |
Transformation, integration and other charges1 | 11 | |
| Total corporate expense allocations | $ | 82 | |
1. Refer to Note 4 for additional information.
Parent Company Equity
Net transfers to Parent are included within Parent company net investment on the unaudited interim Consolidated Statements of Changes in Equity. The components of the net transfers to Parent are as follows:
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| In millions | Three Months Ended
March 31, 2025 | |
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| Cash pooling and general financing activities | $ | 33 | | | |
| Less: Corporate cost allocations | 82 | | |
| Less: Taxes deemed settled with Parent | 56 | | |
| Total net transfers to Parent per unaudited interim Consolidated Statements of Changes in Equity | $ | (105) | | | |
| Stock-based compensation and other noncash transfers (to) from Parent | 1 | | |
| Net transfers to Parent per unaudited interim Consolidated Statements of Cash Flows | $ | (104) | | | |
NOTE 6 - SUPPLEMENTARY INFORMATION
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| Other Income (Expense) - Net | Three Months Ended
March 31, | |
| In millions | 2026 | 2025 | | |
| | | | |
| Non-operating pension credits | $ | 1 | | $ | — | | | |
| Interest income | 3 | | 2 | | | |
Foreign exchange (losses) gains - net | (7) | | — | | | |
| Indirect legacy (costs) benefits - net | (3) | | — | | | |
| Miscellaneous income (expense) - net | 1 | | — | | | |
| Other (expense) income - net | $ | (5) | | $ | 2 | | | |
Accrued and Other Current Liabilities
| | | | | | | | |
| In millions | March 31, 2026 | December 31, 2025 |
| Accrued payroll | $ | 105 | | $ | 162 | |
Current indemnification liabilities1 | 168 | | 183 | |
Other 2 | 106 | | 157 | |
| Total accrued and other current liabilities | $ | 379 | | $ | 502 | |
1. Related to current portion of indemnification liabilities, primarily to DuPont. For additional information on these matters, refer to Note 5.
2. No other component of “Accrued and other current liabilities” was more than 5% of total current liabilities at March 31, 2026 and December 31, 2025.
Operating Leases
Supplemental balance sheet information related to leases was as follows:
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| In millions | March 31, 2026 | December 31, 2025 |
Operating Leases | | |
Operating lease right-of-use assets 1 | $ | 502 | | $ | 493 | |
Current operating lease liabilities 2 | 44 | | 43 | |
Noncurrent operating lease liabilities 3 | 466 | | 455 | |
Total operating lease liabilities | $ | 510 | | $ | 498 | |
1.Included in "Deferred charges and other assets" in the interim Condensed Consolidated Balance Sheets.
2.Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
3.Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets.
NOTE 7 - INCOME TAXES
During the periods presented in the unaudited interim Consolidated Financial Statements prior to the Separation, Qnity did not file separate tax returns in the U.S. for federal, certain state and local tax purposes, nor in foreign tax jurisdictions, as Qnity was included in the tax grouping of DuPont and its affiliate entities within the respective jurisdictions. The provision for income taxes included in these unaudited interim Consolidated Financial Statements has been calculated using the separate return basis, as if Qnity filed separate tax returns. The Company will file a separate tax return in these jurisdictions for the period ended March 31, 2026.
Each year, the Company files hundreds of tax returns in the various national, state, and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. The Company has ongoing federal, state, and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may be challenged by local tax authorities. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The ultimate resolution of such uncertainties is not expected to have a material impact on the Company's interim results of operations.
The Company's 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 three months ended March 31, 2026 resulted in an effective tax rate on operations of 25.7% on pre-tax income of $218 million, compared with an effective tax rate of 19.1%, on pre-tax income of $246 million for the three months ended March 31, 2025. The increase in effective tax rate in 2026 relates to 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.
On July 4, 2025, the One Big Beautiful Bill Act (“the Act”) was enacted. The Act includes a broad range of tax reform provisions, including modifications and enhancements to the domestic and international provisions of the Tax Cuts and Jobs Act. Among other changes, the Act allows for immediate expensing of domestic research and development expenditures, revises provisions around foreign-sourced earnings and revises the corporate interest limitation rules. The legislation has multiple effective dates, with certain provisions having become effective in fiscal 2025 and the majority becoming effective in fiscal 2026. The Company has considered the impact of the enacted provisions in its consolidated tax provision as of March 31, 2026. The legislation did not have a material impact on our income tax expense or effective tax rate for this quarter. The Company continues to evaluate the broader effects of the legislation as further guidance is issued.
NOTE 8 - EARNINGS PER SHARE CALCULATIONS
On the Separation and Distribution Date, approximately 209 million shares of the Company's common stock, par value $0.01 per share, were distributed to DuPont shareholders of record as of October 22, 2025. This share amount was utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Separation as all common stock was owned by DuPont prior to the Separation. For all periods presented prior to the Separation, it is assumed that there are no dilutive equity instruments as there were no equity awards of Qnity outstanding prior to the Separation. Therefore, the calculation of basic and diluted earnings per share is the same. Subsequent to the Separation, actual basic and diluted share counts were utilized for the calculation.
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| Net Income for Earnings Per Share Calculations - Basic & Diluted | Three Months Ended
March 31, | |
| In millions, except per share amounts | 2026 | 2025 | | |
| Net income | $ | 162 | | $ | 199 | | | |
| Net income attributable to noncontrolling interests | 11 | | 6 | | | |
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| Net income attributable to common stockholders | $ | 151 | | $ | 193 | | | |
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| Earnings attributable to common stockholders - basic | $ | 0.72 | | $ | 0.92 | | | |
| Earnings attributable to common stockholders - diluted | $ | 0.72 | | $ | 0.92 | | | |
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| Share Count Information | Three Months Ended
March 31, | |
| In millions, except per share amounts | 2026 | 2025 | | |
| Weighted-average shares of common stock - basic | 209.7 | | 209.4 | | | |
| Plus dilutive effect of equity compensation plans | 0.6 | | — | | | |
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| Weighted-average shares of common stock - diluted | 210.3 | | 209.4 | | | |
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| Stock options, restricted stock units, and performance-based restricted stock units excluded from EPS calculations | 0.7 | — | | | |
NOTE 9 - INVENTORIES - NET
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| In millions | March 31, 2026 | December 31, 2025 |
| Finished goods | $ | 302 | | $ | 292 | |
Work in process | 238 | | 221 | |
| Raw materials | 157 | | 145 | |
| Supplies | 27 | | 27 | |
| Less: Inventory reserves | 28 | | 24 | |
| Total inventories - net | $ | 696 | | $ | 661 | |
NOTE 10 - NONCONSOLIDATED AFFILIATES
Qnity’s investments in companies accounted for using the equity method (“nonconsolidated affiliates”) are recorded in “Investments and noncurrent receivables” in the interim Condensed Consolidated Balance Sheets. Investments in nonconsolidated affiliates were $399 million and $386 million at March 31, 2026 and December 31, 2025, respectively.
At March 31, 2026 and December 31, 2025, Qnity had a note payable to Hitachi Chem DuP Microsystems LLC, a nonconsolidated affiliate, (the “Related Party Note Payable”) of $63 million and $53 million, respectively. This Related Party Note Payable arises from an arrangement in which Qnity manages the daily domestic cash position resulting from the normal cash operations of Hitachi Chem DuP Microsystems LLC. Under this arrangement, both parties may loan funds to one another based on the cash position of Hitachi Chem DuP Microsystems LLC.
The Related Party Note Payable is short-term in nature and bears an interest rate equal to the average daily rate during the preceding month, plus any applicable commission and fee percentage payable to Qnity for its support of the cash management program. The balance of this Related Party Note Payable and the related interest payable is included within “Accounts Payable” in the interim Condensed Consolidated Balance Sheets.
Sales to nonconsolidated affiliates represented less than 1% of total net sales for each of the three months ended March 31, 2026 and 2025. Purchases from nonconsolidated affiliates represented less than 2% and 1% of "Cost of sales" for the three months ended March 31, 2026 and 2025, respectively. The Company maintained an ownership interest in three nonconsolidated affiliates at March 31, 2026.
NOTE 11 - GOODWILL AND OTHER INTANGIBLE ASSETS
The following table summarizes changes in the carrying amount of goodwill during the three months ended March 31, 2026.
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| In millions | Semiconductor Technologies | Interconnect Solutions | | Total |
| Balance at December 31, 2025 | $ | 4,542 | | $ | 2,980 | | | $ | 7,522 | |
| Currency translation adjustment | (2) | | (6) | | | (8) | |
Balance at March 31, 2026 | $ | 4,540 | | $ | 2,974 | | | $ | 7,514 | |
Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets with finite lives, by major class are as follows:
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| March 31, 2026 | December 31, 2025 |
| In millions | Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net |
| Other intangible assets: | | | | | | |
| Developed technology | $ | 544 | | $ | (363) | | $ | 181 | | $ | 544 | | $ | (349) | | $ | 195 | |
| Trademarks/tradenames | 55 | | (39) | | 16 | | 55 | | (38) | | 17 | |
| Customer-related | 2,122 | | (1,258) | | 864 | | 2,125 | | (1,226) | | 899 | |
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| Total other intangible assets | $ | 2,721 | | $ | (1,660) | | $ | 1,061 | | $ | 2,724 | | $ | (1,613) | | $ | 1,111 | |
The following table provides the net carrying value of other intangible assets by segment:
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| Net Other Intangibles | March 31, 2026 | December 31, 2025 |
| In millions |
| Semiconductor Technologies | $ | 250 | | $ | 264 | |
| Interconnect Solutions | 811 | | 847 | |
| | |
| Total | $ | 1,061 | | $ | 1,111 | |
Total estimated amortization expense for the remainder of 2026 and the five succeeding fiscal years is as follows:
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| Estimated Amortization Expense | |
| In millions | |
| Remainder of 2026 | $ | 149 | |
| 2027 | $ | 169 | |
| 2028 | $ | 144 | |
| 2029 | $ | 109 | |
| 2030 | $ | 89 | |
| 2031 | $ | 89 | |
NOTE 12 - SHORT-TERM BORROWINGS, LONG-TERM DEBT, AND AVAILABLE CREDIT FACILITIES
A summary of Qnity's short-term borrowings, long-term debt and available credit facilities can be found in Note 14 to the Consolidated Financial Statements included in the Company's Annual Report. If applicable, updates have been included in the respective section below.
Short-term Borrowings
Long-term debt due within one year was $23 million and $24 million at March 31, 2026 and December 31, 2025, respectively. These balances are presented net of current portion of unamortized debt issuance cost and are recorded in "Short-term borrowings" in the interim Condensed Consolidated Balance Sheets.
Long-Term Debt
Long-term debt at March 31, 2026 and December 31, 2025 was $4,000 million and $4,003 million, respectively. The estimated fair value of the Company's long-term borrowings was determined using Level 2 inputs within the fair value hierarchy. Based on quoted market prices for the same or similar issues, or on current rates offered to the Company for debt of the same remaining maturities, the fair value of the Company's long-term borrowings, including long-term debt due within one year, was $4,099 million and $4,154 million at March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026, the Company was in compliance with all applicable covenants included in the terms of its debt arrangements.
Committed Credit Facilities and Outstanding Letters of Credit
The Company's $1,250 million Senior Secured Revolving Facility matures October 2030. As of March 31, 2026, there were no drawings on the facility, and outstanding letters of credit under the facility were approximately $12 million.
Uncommitted Credit Facilities and Outstanding Letters of Credit
Unused bank credit lines on uncommitted credit facilities were approximately $134 million at March 31, 2026. These lines are available to support short-term liquidity needs and general corporate purposes including letters of credit. Outstanding letters of credit and credit lines under these uncommitted credit facilities were approximately $24 million at March 31, 2026. These letters of credit support commitments made in the ordinary course of business.
NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES
Litigation Matters
In the normal course of business, the Company is involved from time to time in various arbitrations, lawsuits, claims and other actions with respect to patent infringement claims, employment claims, including alleged wage and hour violations, and commercial claims.
The Company accrues for such matters where losses are deemed probable and reasonably estimable. There are other matters involving the Company for which a loss is deemed remote or reasonably possible, and, as a result, associated accruals have not been established. It is reasonably possible that some of these matters could result in future payments or costs in excess of the amounts accrued at March 31, 2026, but such excess amounts cannot be reasonably estimated. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company.
Certain Indemnification Obligations to DuPont
A summary of indemnification obligations to DuPont can be found in Note 15 to the Consolidated Financial Statements included in the Company's Annual Report. If applicable, updates have been included in the respective section below.
As of March 31, 2026, the Company maintains indemnification liabilities related to the legacy liabilities detailed above of $87 million within “Accrued and other current liabilities” and $109 million within “Other noncurrent obligations” within the Condensed Consolidated Balance Sheets. As of December 31, 2025, the Company maintained indemnification liabilities related to these legacy liabilities of $80 million within “Accrued and other current liabilities” and $110 million within “Other noncurrent obligations” within the Condensed Consolidated Balance Sheets. It is reasonably possible that the potential exposure of these indemnifications could range up to $84 million above the amount accrued at March 31, 2026. It is also possible that the Company could incur additional costs or losses that may be material to its financial condition and its cash flows beyond those amounts accrued for or believed to be reasonably possible at this time. Such excess amounts cannot be reasonably estimated.
Liabilities under the MOU
As of March 31, 2026, DuPont has borne Qualified Spend of approximately $730 million and has recorded an indemnification liability for probable and reasonably estimable future Qualified Spend under the Memorandum of Understanding ("MOU") of $162 million. Qnity maintains an indemnification liability for such probable and reasonably estimable future Qualified Spend of $77 million which represents Applicable Qnity Percentage (the portion for which we have been contractually allocated, and directly pay or indemnify DuPont) of 44% of DuPont's after-tax liability.
New Jersey
On August 3, 2025, DuPont, together with Chemours and Corteva and its subsidiary, EIDP, agreed to a proposed Judicial Consent Order (the “Consent Order”) with the State of New Jersey to resolve outstanding claims by the state pending against the companies related to legacy use of a wide variety of substances of concern for an aggregate cash settlement payment to the state of $875 million, payable over a period of 25 years. As of March 31, 2026, DuPont maintains a pre-tax charge of $177 million related to the proposed Consent Order. The Company maintains an indemnification liability of $66 million for our contractually allocated portion of the recorded pre-tax charge. Additionally, DuPont recorded interest accretion of $9 million to date as of March 31, 2026, resulting in a liability of $186 million as of March 31, 2026. Qnity has recorded $3 million for its contractually allocated portion of this accreted interest. We will share in the ongoing costs of maintaining a reserve fund in the event the remedial funding source for a site has been exhausted and the party responsible is not otherwise performing the required remediation.
Other
DuPont has recorded liabilities related to business and operations, historical activities of DuPont, including environmental liabilities, and its present and former subsidiaries, for which the Company maintains an indemnification liability of $49 million and $46 million for its contractually allocated portion as of March 31, 2026 and December 31, 2025, respectively.
NOTE 14 - STOCKHOLDERS' EQUITY
Share Repurchase Authorization
On February 20, 2026, the Company's Board of Directors approved a share repurchase authorization of up to $500 million of common stock (the "$500M Authorization"). Under the $500M Authorization, repurchases of common stock may be effected from time to time, either on the open market (including pre-set trading plans) or other transactions in accordance with applicable securities laws. The $500M Authorization has no expiration date and will terminate once the authorized amount of shares have been repurchased and retired or when terminated by the Board of Directors. The timing and amount of repurchases under the program will depend on a variety of factors. During the three months ended March 31, 2026, the Company repurchased 219,581 shares under the $500M Authorization for $25 million at an average share price of $113.78 per share. The aggregate amount of common stock available for repurchase under the $500M Authorization as of March 31, 2026 was $475 million.
Accumulated Other Comprehensive Loss
The following tables summarize the activity related to each component of accumulated other comprehensive loss ("AOCL") for the three months ended March 31, 2026 and 2025:
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| Accumulated Other Comprehensive Loss | | Cumulative Translation Adj | Pension | | Total |
| In millions |
| 2025 | | | | | |
| Balance at January 1, 2025 | | $ | (435) | | $ | 21 | | | $ | (414) | |
| Other comprehensive income | | 53 | | (2) | | | 51 | |
Balance at March 31, 2025 | | $ | (382) | | $ | 19 | | | $ | (363) | |
| 2026 | | | | | |
| Balance at January 1, 2026 | | $ | (221) | | $ | 8 | | | $ | (213) | |
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| Other comprehensive loss | | (50) | | (1) | | | (51) | |
Balance at March 31, 2026 | | $ | (271) | | $ | 7 | | | $ | (264) | |
The tax effects on the net activity related to each component of other comprehensive loss were immaterial for each of the three months ended March 31, 2026 and 2025.
NOTE 15 - PENSION PLANS
A summary of the Company's pension plans and other post-employment benefits can be found in Note 18 to the Consolidated Financial Statements included in the Company's Annual Report.
The following sets forth the components of the Company's net periodic benefit costs for defined benefit pension plans:
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| Net Periodic Benefit Costs for All Significant Plans | Three Months Ended
March 31, | |
| In millions | 2026 | 2025 | | |
| Service cost | $ | 2 | | $ | 1 | | | |
| Interest cost | 4 | | 1 | | | |
| Expected return on plan assets | (4) | | (1) | | | |
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| Amortization of unrecognized net gain | (1) | | — | | | |
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| Net periodic benefit costs - total | $ | 1 | | $ | 1 | | | |
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The net periodic benefit costs, other than the service cost component, are included in "Other income (expense) - net" in the unaudited interim Consolidated Statements of Operations.
NOTE 16 - STOCK-BASED COMPENSATION
A summary of the Company's stock-based compensation plans can be found in Note 19 to the Consolidated Financial Statements included in the Company's Annual Report.
In connection with the Separation, the Company adopted the Qnity Electronics, Inc. Equity and Incentive Plan ("EIP"). Under the EIP, the Company may grant options, stock appreciation rights ("SARs"), restricted shares, restricted stock units ("RSUs"), share bonuses, other share-based awards, cash awards, conversion awards, each as defined in the EIP, or any combination of the foregoing. Under the EIP, a maximum of 16 million shares of common stock are available for award as of March 31, 2026.
Qnity recognized share-based compensation expense of $10 million and $4 million for the three months ended March 31, 2026 and 2025, respectively. The income tax benefits related to stock-based compensation arrangements were $2 million and $1 million for the three months ended March 31, 2026 and 2025, respectively.
In the first quarter of 2026, the Company granted 0.3 million RSUs and 0.1 million performance based stock units ("PSUs"). The weighted-average fair values per share associated with the grants were $126.70 per RSU and $191.69 per PSU.
NOTE 17 - FINANCIAL INSTRUMENTS
The following table summarizes the fair value of financial instruments at March 31, 2026 and December 31, 2025:
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| Fair Value of Financial Instruments | March 31, 2026 | December 31, 2025 |
| In millions | Cost | Gain | Loss | Fair Value | Cost | Gain | Loss | Fair Value |
Cash equivalents | $ | 109 | | $ | — | | $ | — | | $ | 109 | | $ | 143 | | $ | — | | $ | — | | $ | 143 | |
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| Derivatives relating to: | | | | | | | | |
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Foreign currency 1, 2 | — | | 2 | | (15) | | (13) | | — | | 14 | | — | | 14 | |
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| Total derivatives | $ | — | | $ | 2 | | $ | (15) | | $ | (13) | | $ | — | | $ | 14 | | $ | — | | $ | 14 | |
1.Classified as "Prepaid and other current assets" and "Accrued and other current liabilities" in the Condensed Consolidated Balance Sheets.
2.Presented net of cash collateral where master netting arrangements allow.
Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, the Company may enter into contractual arrangements (derivatives) to reduce its exposure to foreign currency, interest rate and commodity price risks. Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the Company's financial risk management policies and guidelines. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk.
The Company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The Company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.
The notional amounts of the Company's derivative instruments were as follows:
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| Notional Amounts | March 31, 2026 | December 31, 2025 |
| In millions |
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| Derivatives not designated as hedging instruments: | | |
Foreign currency contracts 1 | $ | (1,172) | | $ | (1,046) | |
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1.Presented net of contracts bought and sold.
Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The Company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The Company also uses foreign currency exchange contracts to offset a portion of the Company's exposure to certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated revenues.
Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency-denominated assets and liabilities. The amount charged on a pre-tax basis related to foreign currency derivatives not designated as hedges, which was included in “Other income (expense) - net” in the interim Consolidated Statements of Operations, were gains of $26 million and zero for the three months ended March 31, 2026 and 2025, respectively.
NOTE 18 - FAIR VALUE MEASUREMENTS
Fair Value Measurements on a Recurring Basis
The following tables summarize the basis used to measure certain assets and liabilities at fair value on a recurring basis:
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Basis of Fair Value Measurements on a Recurring Basis of Significant Other Observable Inputs (Level 2) | March 31, 2026 | December 31, 2025 | | |
| In millions |
| Assets at fair value: | | | | |
Cash equivalents 1 | $ | 109 | | $ | 143 | | | |
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Derivatives relating to: 2 | | | | |
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Foreign currency contracts 3 | 4 | | 16 | | | |
| Total assets at fair value | $ | 113 | | $ | 159 | | | |
| Liabilities at fair value: | | | | |
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Derivatives relating to: 2 | | | | |
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Foreign currency contracts 3 | 17 | | 2 | | | |
| Total liabilities at fair value | $ | 17 | | $ | 2 | | | |
1. Time deposits included in "Cash and cash equivalents" in the interim Condensed Consolidated Balance Sheets are held at amortized cost, which approximates fair value.
2. See Note 17 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.
3. Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the interim Condensed Consolidated Balance Sheets. The offsetting counterparty and cash collateral netting amounts for foreign currency contracts were $2 million and zero respectively, for both assets and liabilities as of March 31, 2026. The offsetting counterparty and cash collateral netting amounts were $2 million and zero, respectively, for assets and liabilities as of December 31, 2025.
For assets and liabilities classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability, or by using observable market data points of similar, more liquid securities to imply the price. For time deposits classified as held-to-maturity investments and reported at amortized cost, fair value is based on an observable interest rate for similar securities. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks.
For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatility obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.
There were no transfers between Levels 1 and 2 during the three months ended March 31, 2026, and 2025.
NOTE 19 - SEGMENT INFORMATION
The Company's segments are aligned with the market verticals they serve, while maintaining integration and innovation strengths within strategic value chains. The Company's Chief Executive Officer is its Chief Operating Decision Maker ("CODM"). Effective in the first quarter of 2025, in anticipation of the Separation, DuPont and Qnity realigned their segment structure. As a result of this realignment, Qnity consists of two operating and reportable segments: Semiconductor Technologies (“Semi”) and Interconnect Solutions (“ICS”). All periods presented have been adjusted to conform to the current segment reporting structure. This realignment is consistent with how the CODM now assesses performance. Major products by segment include: Semi (which includes chemical mechanical planarization (“CMP”) pads and slurries, photoresists, functional sub-layers, advanced overcoats, post-CMP cleaners, post-Etch residue removers and emerging cleans) and ICS (which includes copper pillar plating, copper redistribution layer, solder bump plating, under bump metallization, photoresists, packaging dielectrics, gap fillers, phase change, specialty thermal interface materials, thermally conductive insulators, copper plating solutions, dry film photoresists, laminates and polyimide films). The Company operates globally in substantially all of its product lines. Transfers of products between operating segments are generally valued at cost, to the extent such transfers are applicable.
The Company's measure of profit/loss for segment reporting purposes is Adjusted Operating EBITDA as this is the manner in which the CODM assesses performance and allocates resources. The CODM utilizes Adjusted Operating EBITDA to assess financial performance and allocate resources by comparing actual results to historical and previously forecasted results. The Company defines Adjusted Operating EBITDA as earnings (i.e., “Income (loss) before income taxes”) before interest, depreciation, amortization, non-operating pension and other post-employment benefits / charges, and foreign exchange gains / losses, indirect legacy costs, and adjusted for significant items. Reconciliations of these measures are provided on the following pages.
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| Segment Net Sales, Significant Segment Expenses and Segment Adjusted Operating EBITDA | Three Months Ended March 31, |
| 2026 | 2025 |
| Semiconductor Technologies | Interconnect Solutions | Semiconductor Technologies | Interconnect Solutions |
| (In millions) |
| Segment net sales | $ | 722 | | $ | 593 | | $ | 644 | | $ | 474 | |
Less 1: | | | | |
| Cost of sales | $ | 359 | | $ | 335 | | $ | 307 | | $ | 280 | |
| Selling, general and administrative expenses | 74 | | 80 | | 64 | | 66 | |
| Research and development expenses | 60 | | 33 | | 53 | | 31 | |
Amortization of intangibles & other segment items 2 | 13 | | 37 | | 13 | | 42 | |
| Add: | | | | |
| Equity in earnings of nonconsolidated affiliates | $ | 13 | | $ | — | | $ | 11 | | $ | (2) | |
Depreciation and amortization 3 | 34 | | 61 | | 29 | | 61 | |
| Segment Adjusted Operating EBITDA | $ | 263 | | $ | 169 | | $ | 247 | | $ | 114 | |
1.The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM.
2.Other segment items include immaterial other gains or losses and miscellaneous income and expenses.
3.Depreciation is a reconciling item to Segment Adjusted Operating EBITDA as it is included within "Cost of sales", "Selling, general and administrative expenses" and "Research and development expenses".
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| Reconciliation of Segment Adjusted Operating EBITDA to Income Before Income Taxes | Three Months Ended March 31, | |
| In millions | 2026 | 2025 | | |
| Semiconductor Technologies Segment Adjusted Operating EBITDA | $ | 263 | | $ | 247 | | | |
| Interconnect Solutions Segment Adjusted Operating EBITDA | 169 | | 114 | | | |
| Total Segment Adjusted Operating EBITDA | $ | 432 | | $ | 361 | | | |
| + | Corporate Adjusted Operating EBITDA 1 | $ | (21) | | $ | (6) | | | |
| - | Depreciation and amortization | 98 | | 94 | | | |
| + | Interest income | 3 | | — | | | |
| - | Interest expense | 61 | | — | | | |
| + | Non-operating pension credits 2 | 1 | | — | | | |
| + | Foreign exchange (losses) gains - net 2 | (7) | | — | | | |
| + | Indirect legacy (costs) benefits - net 2 | (3) | | — | | | |
| + | Significant items charge | (28) | | (15) | | | |
| Income before income taxes | $ | 218 | | $ | 246 | | | |
1.Corporate includes certain enterprise and governance activities including non-allocated corporate overhead costs and support functions, leveraged services, and other costs not absorbed by reportable segments.
2.Included in "Other income (expense) - net."
The following tables summarize the pre-tax impact of significant items by segment that are excluded from Adjusted Operating EBITDA above:
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Significant Items by Segment for the Three Months Ended March 31, 2026 | Semiconductor Technologies | Interconnect Solutions | Corporate | Total |
| In millions |
Transformation, integration, and other charges 1 | $ | — | | $ | 1 | | $ | (29) | | $ | (28) | |
| Total | $ | — | | $ | 1 | | $ | (29) | | $ | (28) | |
1. See Note 4 for additional information.
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Significant Items by Segment for the Three Months Ended March 31, 2025 | Semiconductor Technologies | Interconnect Solutions | Corporate | Total |
| In millions |
Transformation, integration, and other charges 1 | $ | (2) | | $ | (4) | | $ | (11) | | $ | (17) | |
Employee Retention Credit 2 | 1 | | — | | 1 | | 2 | |
| Total | $ | (1) | | $ | (4) | | $ | (10) | | $ | (15) | |
1. See Note 4 for additional information.
2. Reflects the accrued interest earned on employee retention credits and is recorded in “Interest income” within the “Other income (expense) - net” line item in the Company’s unaudited interim Consolidated Statements of Operations
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| Segment and Corporate Information | Semiconductor Technologies | Interconnect Solutions | Corporate | Total |
| In millions |
As of March 31, 2026 | | | | |
| Total Assets | $ | 7,401 | | $ | 5,613 | | $ | 1,049 | | $ | 14,063 | |
| Investment in nonconsolidated affiliates | $ | 388 | | $ | 11 | | $ | — | | $ | 399 | |
As of December 31, 2025 | | | | |
| Total Assets | $ | 7,022 | | $ | 5,594 | | $ | 1,454 | | $ | 14,070 | |
| Investment in nonconsolidated affiliates | $ | 375 | | $ | 11 | | $ | — | | $ | 386 | |
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| Capital Expenditure Reconciliation to Unaudited Interim Consolidated Financial Statements | Three Months Ended March 31, | |
| In millions | 2026 | 2025 | | |
| Semiconductor Technologies | $ | 49 | | $ | 24 | | | |
| Interconnect Solutions | 14 | | 20 | | | |
| Corporate | 11 | | 3 | | | |
| Segment and Corporate Totals | $ | 74 | | $ | 47 | | | |
Accrual to cash adjustment 1 | 48 | | 57 | | | |
| Total | $ | 122 | | $ | 104 | | | |
1.Reflects the incremental cash spent or unpaid on capital expenditures; total capital expenditures are presented on a cash basis.