CNH Industrial N.V. (CNH)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with our unaudited Consolidated Financial Statements and the notes to our unaudited Consolidated Financial Statements in this report, as well as our annual report on Form 10-K for the year ended December 31, 2025 ("2025 Annual Report") filed with the U.S. Securities and Exchange Commission ("SEC"). Results for the interim periods presented are not necessarily indicative of the results expected for the full fiscal year due to seasonal and other factors.

This discussion includes forward-looking statements, which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those expressed or implied by the forward-looking statements. This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the Company's business under "Item 1A. Risk Factors" of our 2025 Annual Report.

Global Business Conditions

Global agriculture market conditions remained challenging during the first half of 2026. Farm income and capital spending remained under pressure from elevated input costs, higher financing costs, and continued uncertainty related to trade and agricultural policy, resulting in subdued demand for agricultural equipment. While farmer sentiment remained cautious, commodity markets demonstrated signs of improvement, with pricing strengthening in certain crop markets. The Company continues to view the current environment as a cyclical market downturn and remains focused on disciplined production and inventory management, operational efficiency, strategic cost actions, and investment in Precision Technology and innovation.

Tariff Impacts and Supply Chain Considerations

Changes in U.S. trade policies and certain retaliatory measures adopted by other jurisdictions increased the cost of certain imported products, components and raw materials and continue to create uncertainty across the agriculture and construction equipment industries.

CNH operates a global supply chain with regional manufacturing, global sourcing, and significant intercompany product and component flows. As a result, the ultimate financial impact of tariffs is often subject to timing differences, customs reconciliations, duty recovery mechanisms and other subsequent adjustments before the final economic effect can be fully determined.

While this complexity can affect the assessment of the tariff impacts, it also provides significant benefits through purchasing scale, manufacturing flexibility, logistics optimization and supply chain resilience, helping to reduce overall product and supply chain costs and support our ability to serve customers across multiple markets.

IEEPA Tariff Refund Claims

On February 20, 2026, the Supreme Court of the United States issued a decision invalidating certain tariffs imposed pursuant to the International Emergency Economic Powers Act ("IEEPA"). Subsequently, U.S. Customs and Border Protection ("CBP") established a process for eligible refund claims.

CNH has submitted claims where appropriate and continues to evaluate recovery opportunities.

Consistent with the accounting guidance for gain contingencies, tariff refunds are recognized only when the gain is realized or when it is realizable. The Company considers this threshold to be met upon receipt of cash. Upon recognition, the refund is recorded as a reduction of the related costs. During the six months ended June 30, 2026, CNH recognized a tariff recovery of $5 million as a reduction of cost of sales. The Company expects to recover approximately $150 million of IEEPA tariffs in future periods as the applicable recognition criteria are met.

For a discussion of the Company's risks and uncertainties, see Part 1, Item 1A: Risk Factors in the Company's Form 10-K for the year ended December 31, 2025 and Part II, Item 1A: Risk Factors within this Form 10-Q.

Operating Results

The operations, key financial measures and financial analysis differ significantly for manufacturing and distribution businesses ("Industrial Activities") and financial businesses ("Financial Services"). Accordingly, management believes that certain supplemental disclosures are important to understanding our consolidated operations and financial results. For further information, see "Supplemental Information" within this section for supplemental consolidating data presented

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separately for Industrial Activities and Financial Services. Transactions between Industrial Activities and Financial Services have been eliminated to arrive at the consolidated data.

Three and Six Months Ended June 30, 2026 compared to Three and Six Months Ended June 30, 2025

Consolidated Results of Operations

Revenues

We recorded revenues of $4,803 million and $8,629 million for the three and six months ended June 30, 2026, respectively, reflecting a year-over year increase compared with the same periods prior year. The increase is primarily generated by the Construction segment.

Cost of Goods Sold

Cost of goods sold was $3,396 million and $6,001 million for the three and six months ended June 30, 2026, respectively, compared with $3,192 million and $5,761 million in the three and six months ended June 30, 2025. As a percentage of net sales, cost of goods sold increased to 82.0% and 82.1%, respectively, from 79.4% and 80.1% in the prior-year periods, impacted by tariff costs and lower production volumes.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") were $494 million and $959 million for the three and six months ended June 30, 2026, respectively, compared with $478 million and $864 million in the three and six months ended June 30, 2025. As a percentage of total revenues, SG&A increased to 10.3% and 11.1%, respectively, from 10.1% in both prior-year periods. The increase primarily reflects higher credit risk provisions in the Financial Services segment and higher labor costs, substantially driven by the first quarter of 2026.

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Research and Development Expenses

Research and development expenses ("R&D") were $230 million and $462 million for the three and six months ended June 30, 2026, respectively, compared with $218 million and $402 million in the three and six months ended June 30, 2025. The increase was driven by higher variable compensation, new‑product investment and the timing of project spending.

Restructuring and Other Transformation Expenses

Restructuring and other transformation expenses were $27 million and $31 million for the three and six months ended June 30, 2026, respectively, compared with $5 million and $11 million in the three and six months ended June 30, 2025. The increase primarily reflects dealer network optimization initiatives, including contract termination costs, and other actions undertaken to improve operational efficiency.

Interest Expense

Interest expense was $372 million and $737 million for the three and six months ended June 30, 2026, respectively, compared with $360 million and $722 million in the three and six months ended June 30, 2025. Interest expense attributable to Industrial Activities, net of interest income and eliminations, for the three and six months ended June 30, 2026 was $41 million and $64 million, respectively, compared with $26 million and $51 million in the three and six months ended June 30, 2025. The higher expense was primarily attributable to increased interest rates, which more than offset the favorable impact of lower average debt balances.

Other, net

Other, net expenses were $112 million and $254 million for the three and six months ended June 30, 2026, respectively, compared with $183 million and $342 million in the three and six months ended June 30, 2025. The decrease was primarily attributable to lower costs associated with the disposition of equipment under operating leases following lease termination and lower amortization of leased assets, mainly within our Financial Services segment.

Income Taxes

Income tax expense for the three and six months ended June 30, 2026 was $43 million and $47 million, respectively, compared with $76 million and $123 million in the three and six months ended June 30, 2025. The effective tax rate for the three and six months ended June 30, 2026 was 25.0% and 25.4%, respectively, compared with 27.6% and 28.1% in the three and six months ended June 30, 2025. The decrease in the effective tax rate was primarily attributable to the Company's geographic income mix.

As of December 31, 2025, net deferred tax assets ("DTAs") related to temporary differences totaling $1,666 million, including $209 million of DTAs that were not recognized in the Consolidated Financial Statements. The recognized balance included approximately $170 million related to net operating loss carryforwards and other deferred tax assets and liabilities in the United Kingdom and approximately $130 million related to temporary differences in Brazil, primarily associated with the tax treatment of the allowance for credit losses. Both of these DTA positions may be utilized to offset future taxable income and reduce income taxes payable in future periods, provided the Company generates sufficient taxable income to realize these assets.

Based on available evidence, management believes it is more likely than not that sufficient future taxable income will be generated to realize these DTAs in the United Kingdom and Brazil. However, this assessment is subject to various assumptions and uncertainties, including changes in global economic conditions affecting the agricultural and construction equipment markets, economic and legislative developments in the United Kingdom and Brazil, portfolio performance and delinquency trends in Brazil, c

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Management's Discussion and Analysis

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to promote understanding of the Company's financial condition and results of operations. The MD&A is provided as a supplement to, and should be read in conjunction with, the Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements.

This discussion includes forward-looking statements, which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those expressed or implied by the forward-looking statements. This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the Company's business under "Item 1A. Risk Factors" of this Annual Report on Form 10-K.

Global Business Conditions

In 2025, we operated in a challenging environment characterized by lower industry demand in large agriculture, particularly in the Americas, elevated tariff and input‑cost pressures, and cautious farmer sentiment. We view 2025 as part of a cyclical downturn in agricultural equipment rather than a structural change in our end markets. Throughout the year, we prioritized price discipline, production and inventory management, cost‑reduction initiatives, and continued investment in Precision Technology and quality, with the aim of positioning CNH for improved performance as conditions normalize, particularly into 2026 and beyond.

For a discussion of the Company's risks and uncertainties, see Part 1, Item 1A: "Risk Factors".

Operating Results

The operations, key financial measures, and financial analysis, differ significantly for manufacturing and distribution businesses ("Industrial Activities") and financial businesses ("Financial Services"); therefore, management believes that certain supplemental disclosures are important in understanding our consolidated operations and financial results. For further information, see "Supplemental Information" within this section, where we present supplemental consolidating data split by Industrial Activities and Financial Services. Transactions between Industrial Activities and Financial Services have been eliminated to arrive at the consolidated data.

2025 Compared to 2024

Consolidated Results of Operations

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Revenues

We recorded revenues of $18,095 million in 2025, a decline of 8.8% compared to 2024. This decline was mainly due to lower shipments on decreased industry demand. See "Business Segment Performance."

Cost of Goods Sold

Cost of goods sold were $12,389 million in 2025 compared to $13,350 million in 2024, a decrease of 7.2% year-over- year. As a percentage of net sales, cost of goods sold was 80.7% in 2025 (78.3% in 2024), the increase in the percentage from 2024 was due to lower production volumes and tariff costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") increased to $1,876 million in 2025 (10.4% of revenues) from $1,712 million in 2024 (8.6% of revenues). The year-over-year increase is primarily due to higher credit risk provisions in the Financial Services segment and higher labor costs.

Research and Development

In 2025, R&D expenses were $1,025 million compared to $924 million in 2024. R&D expenses were higher in 2025 primarily due to a $172 million non-cash impairment charge related to in-process research & development ("IPR&D") acquired as part of the Raven and Bennamann acquisitions.

Restructuring Expenses

The Company incurred restructuring costs of $22 million and $118 million in 2025 and 2024, respectively. These costs primarily relate to the restructuring program announced in November 2023 targeting labor and non-labor SG&A expenses. This program was substantially complete in 2024, with total costs of $131 million.

Interest Expense

Interest expense decreased to $1,482 million in 2025 from $1,611 million in 2024 primarily due to lower external borrowings. The interest expense attributable to Industrial Activities, net of interest income and eliminations, was $114 million in 2025 compared to $152 million in 2024.

Other, net

Other, net expenses were $681 million in 2025 and included a pre-tax gain of $21 million ($16 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification, and a $62 million impairment of investments in unconsolidated affiliates.

Other, net expenses were $664 million in 2024 and included a pre-tax gain of $24 million ($18 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification and a gain of $14 million for investment fair value adjustments, partially offset by a loss of $17 million on the sale of certain non-core product lines.

Income Taxes

In 2025, income taxes were an expense of $184 million, compared to a tax expense of $336 million in 2024. The effective tax rates for 2025 and 2024 were 29.7% and 23.1%, respectively. The tax expense in 2025 was reduced as compared to 2024 due to lower profit-before-tax. However, the 2025 effective tax rate increased due to the year-over year tax impact of Argentina's highly inflationary economy and the non-recognized tax benefits associated with the non-cash impairment charges related to Monarch Tractors and IPR&D acquired as part of the Raven acquisition. In 2025, we also recorded a valuation allowance against deferred tax assets generated by Bennamann.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into U.S. law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provision of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.The

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impacts of the OBBBA legislation did not have a material impact on the Company's financial results during 2025; further, the Company estimates the OBBBA legislation will not have a material impact on the Company’s financial results during 2026.

Equity in Income of Unconsolidated Affiliates

Equity in income of unconsolidated affiliates was $69 million in 2025 compared to $138 million in 2024 primarily due to lower sales in our joint venture TürkTraktör ve Ziraat Makineleri A.S.

Business Segment Performance

The following table includes total revenues by segment (in millions of dollars, except percentages):

The following table includes Adjusted EBIT of Industrial Activities by segment (in millions of dollars, except percentages):

(1)A reconciliation from the most closely related U.S. GAAP measure to this non-GAAP measure is included on page 56.

Agriculture

Net Sales

Net sales for Agriculture were $12,390 million in 2025, an 11.5% decline compared to 2024. This decline is mainly due to lower shipment volumes on decreased industry demand.

In North America, industry volume was down 33% year over year in 2025 for tractors over 140 hp and was down 7% for tractors under 140 hp; combines were down 26%. In EMEA, tractor and combine demand was down 13% and 3%, respectively. South America tractor demand was down 1% and combine demand was down 16%. Asia Pacific tractor demand was up 12% and combine demand was down 26%.

The following table includes Agriculture net sales by geographic region in 2025 compared to 2024 (in millions of dollars, except percentages):

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Adjusted EBIT

Adjusted EBIT was $772 million in 2025, compared to $1,470 million in 2024. The decline, driven by lower shipment volumes and the impact from tariffs, was partially offset by lower quality costs. R&D expenses accounted for 7.5% of sales (5.9% in 2024), including a $172 million non-cash impairment charge related to IPR&D acquired as part of the Raven and Bennamann acquisitions. Adjusted EBIT margin was 6.2% in 2025.

Construction

Net Sales

Net sales for Construction were $2,956 million in 2025, a decline of 3.2% compared to 2024, due to lower shipment volumes in North America and continued channel destocking.

Global industry volume for construction equipment increased 7% year over year in 2025 for Heavy construction equipment; Light construction equipment was up 1%. Aggregated demand increased 1% in North America and 4% in EMEA, respectively, and increased 5% in South America and 5% for Asia Pacific, particularly in China.

The following table includes Construction net sales by geographic region in 2025 compared to 2024 (in millions of dollars, except percentages):

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