NXP Semiconductors N.V. (NXPI)

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis (MD&A) should be read in conjunction with our Consolidated Financial Statements and Notes and the MD&A in our Annual Report on Form 10-K for the year ended December 31, 2025, and the Financial Statements and the related Notes that appear elsewhere in this document.

20

Overview

Quarterly Financial Highlights

•Revenue was $3,496 million, up 19.5% year-on-year;

•GAAP gross margin was 57.3%, and GAAP operating margin was 30.6%;

•Non-GAAP gross margin was 58.0%, and non-GAAP operating margin was 35.1%;

•Cash flow from operations was $860 million, with net capital expenditures on property, plant and equipment of $69 million, resulting in non-GAAP free cash flow of $791 million;

•During the second quarter of 2026, NXP returned capital to shareholders with the payment of $256 million in cash dividends and the repurchase of $104 million of its common shares, for a total capital return of $360 million.

21

Sequential Results

Q2 2026 compared to Q1 2026

Revenue for the three months ended June 28, 2026, was $3,496 million compared to $3,181 million for the three months ended March 29, 2026, an increase of $315 million or 9.9% quarter-on-quarter, in line with management's expectations. Within our end markets, the Automotive end market increased $156 million or 8.8%, the Industrial & IoT end market increased $127 million or 20.2%, the Communication Infrastructure & Other end market increased $72 million or 18.9%, and the Mobile end market decreased $40 million or 10.2%.

When aggregating all end markets together and reviewing sales channel performance, revenue from distributors was $2,072 million, an increase of $210 million or 11.3% compared to the previous period. Revenue from direct customers was $1,375 million, an increase of $93 million or 7.3% versus the previous period.

From a geographic perspective, revenue increased quarter-on-quarter in the China region by 31.5%, in the Asia Pacific region by 11.2%, in the EMEA region by 4.0%, and in the Americas region by 3.2%.

Our gross profit percentage for the three months ended June 28, 2026, of 57.3% increased compared to 56.2% for the three months ended March 29, 2026, driven mainly by higher sales volumes and favorable product mix.

Operating income for the three months ended June 28, 2026, was $1,071 million compared to $1,505 million for the three months ended March 29, 2026, a decrease of $434 million or 28.8%. The decrease was mainly driven by the gain on sale of the MEMS Sensors business in the first quarter of 2026.

22

Results of operations

The following table presents operating results for each of the three- and six-month periods ended June 28, 2026, and June 29, 2025, respectively:

23

Revenue

Q2 2026 Overview

Q2 2026 compared to Q2 2025

Revenue for the three months ended June 28, 2026, was $3,496 million compared to $2,926 million for the three months ended June 29, 2025, an increase of $570 million or 19.5%, in line with management’s expectations.

YTD 2026 Overview

YTD 2026 compared to YTD 2026

Revenue for the six months ended June 28, 2026, was $6,677 million compared to $5,761 million for the six months ended June 29, 2025, an increase of $916 million or 15.9%.

24

Revenue by end market was as follows:

Revenue by sales channel was as follows:

Revenue by geographic region, which is based on the location where the sale originated and where critical commercial decisions are made, was as follows:

Q2 2026 compared to Q2 2025

From an end market perspective, NXP experienced growth across all end markets versus the year-ago quarter.

Revenue in the Automotive end market was $1,938 million, an increase of $209 million or 12.1% versus the year-ago quarter. The increase was predominantly due to growth in processors, with mixed-signal products also growing.

Revenue in the Industrial & IoT end market was $755 million, an increase of $209 million or 38.3% versus the year-ago quarter. The increase was due to strong growth in processors and mixed-signal products.

Revenue in the Communication Infrastructure & Other end market was $452 million, an increase of $132 million or 41.3% versus the year-ago quarter. The increase was predominantly due to growth in processors.

Revenue in the Mobile end market was $351 million, an increase of $20 million or 6.0% versus the year-ago quarter. The increase was due to growth in mixed-signal products, partially offset by declines in processors.

When aggregating all end markets together and reviewing sales channel performance, revenue from distributors was $2,072 million, an increase of $436 million or 26.7% versus the year-ago quarter. Revenue from direct customers was $1,375 million, an increase of $118 million or 9.4% versus the year-ago quarter.

From a geographic perspective, revenue increased year-on-year in the Americas region by 34.0%, in the China region by 25.5%, in the Asia Pacific region by 13.6%, and in the EMEA region by 8.9%.

YTD 2026 compared to YTD 2025

From an end market perspective, NXP experienced growth across all end markets versus the year-ago period.

Revenue in the Automotive end market was $3,720 million, an increase of $317 million or 9.3% versus the year-ago period. The increase was predominantly due to growth in processors, with mixed-signal products also growing.

Revenue in the Industrial & IoT end market was $1,383 million, an increase of $329 million or 31.2% versus the year-ago period. The increase was due to strong growth in processors and mixed-signal products.

Revenue in the Communication Infrastructure & Other end market was $832 million, an increase of $197 million or 31.0% versus the year-ago period. The increase was due to growth in processors, partially offset by declines in mixed-signal products.

25

Revenue in the Mobile end market was $742 million, an increase of $73 million or 10.9% versus the year-ago period. The increase was due to growth in mixed-signal products, partially offset by declines in processors.

When aggregating all end markets together, and reviewing sales channel performance, revenue from distributors was $3,934 million, an increase of $774 million or 24.5% versus the year-ago period. Revenue through direct customers was $2,657 million, an increase of $116 million or 4.6% versus the year-ago period.

From a geographic perspective, revenue increased year-on-year in the Americas region by 30.9%, in the China region by 14.6%, in the Asia Pacific region by 10.3%, and in the EMEA region by 8.7%.

Gross profit

Q2 2026 compared to Q2 2025

Gross profit for the three months ended June 28, 2026, was $2,002 million, or 57.3% of revenue, compared to $1,562 million, or 53.4% of revenue for the three months ended June 29, 2025. The increase in gross profit is primarily driven by higher sales volumes and lower manufacturing costs resulting from improved factory utilization and manufacturing cost-efficiency initiatives.

YTD 2026 compared to YTD 2025

Gross profit for the six months ended June 28, 2026, was $3,790 million, or 56.8% of revenue, compared to $3,122 million, or 54.2% of revenue for the six months ended June 29, 2025. The increase in gross profit was primarily driven by higher sales volumes and lower manufacturing costs resulting from improved factory utilization, manufacturing cost-efficiency initiatives and sourcing savings.

Operating expenses

Q2 2026 compared to Q2 2025

Operating expenses for the three months ended June 28, 2026, totaled $926 million, or 26.5% of revenue, compared to $876 million, or 29.9% of revenue for the three months ended June 29, 2025.

YTD 2026 compared to YTD 2025

Operating expenses for the six months ended June 28, 2026, totaled $1,830 million, or 27.4% of revenue, compared to $1,731 million, or 30

[Excerpt truncated for page length; source filing is linked above.]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with the financial statements and the related notes that appear elsewhere in this document. This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the SEC on February 20, 2025.

Our MD&A is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. MD&A is organized as follows:

•Overview - Overall analysis of financial and other highlights to provide context for the MD&A

•Results of Operations - An analysis of our financial results

•Financial Condition, Liquidity and Capital Resources - An analysis of changes in our balance sheets and cash flows and a discussion of our financial condition and potential sources of liquidity

•Critical Accounting Estimates - Accounting estimates that management believes are the most important to understanding the assumptions and judgments incorporated in our financial results and forecasts

•Use of Certain Non-GAAP Financial Measures - A discussion of the presentation of non-GAAP financial measures

35

NXP has one reportable segment representing the entity as a whole. Our segment represents groups of similar products that are combined on the basis of similar design and development requirements, product characteristics, manufacturing processes and distribution channels, and how management allocates resources and measures results. See Note 1 to the consolidated financial statements for more information regarding our segment reporting.

Overview

Year in Focus

•Revenue was $12.3 billion, down 2.7% year-on-year;

•GAAP gross margin was 54.7%, and GAAP operating margin was 24.8%;

•Non-GAAP gross margin was 56.8%, and non-GAAP operating margin was 33.1%;

•Cash flow from operations was $2,820 million, with net capital expenditures on property, plant and equipment of $395 million, resulting in non-GAAP free cash flow of $2,425 million; and

•During 2025, NXP returned capital to shareholders with the payment of $1,025 million in cash dividends and the repurchase of $899 million of its common shares, for a total capital return of $1,924 million.

Kurt Sievers, our former CEO, voluntarily retired as CEO and executive director of the Company, effective October 28, 2025. The Company's Board of Directors unanimously appointed Rafael Sotomayor to succeed Mr. Sievers as President and CEO and temporary executive director of the Company, effective as of October 28, 2025.

On June 17, 2025, NXP announced the closing of the acquisition of 100% of TTTech Auto for $766 million in cash ($675 million net of cash acquired). TTTech Auto is a leader in innovating unique safety-critical systems and middleware for software-defined vehicles (SDVs). The TTTech Auto acquisition complements and expands NXP’s system and software offerings in the Automotive and Industrial & IoT end markets.

On October 24, 2025, NXP closed the previously announced acquisition of 100% of Aviva Links for $222 million in cash ($202 million net of cash acquired) and $26 million through the settlement of previously held investments in Aviva Links. Aviva Links is a provider of Automotive SerDes Alliance (ASA) compliant in-vehicle connectivity solutions. The Aviva Links acquisition complements and expands NXP’s automotive networking solutions in the Automotive and Industrial & IoT end markets.

On October 27, 2025, NXP closed the previously announced acquisition of 100% of Kinara, Inc. for $284 million in cash ($283 million net of cash acquired). Kinara is an industry leader in high performance, energy-efficient and programmable discrete neural processing units (NPUs). The Kinara acquisition complements and expands NXP’s solutions for AI-powered edge systems in the Industrial & IoT and Automotive end markets.

See Note 3 to the consolidated financial statements for further information regarding NXP’s acquisition of TTTech Auto, Aviva Links, and Kinara, Inc.

On February 2, 2026, NXP completed the previously announced sale of our MEMS sensors business line for $900 million in cash before closing adjustments and up to an additional $50 million contingent upon the achievement of specified technical milestones.

36

Revenue for the year ended December 31, 2025, was $12,269 million compared to $12,614 million for the year ended December 31, 2024, a decrease of $345 million or 2.7% year-on-year.

Our gross profit percentage for 2025 of 54.7% decreased when compared to 2024 (56.4%), mainly driven by price and unfavorable product mix.

We continue to generate strong operating cash flows, with $2,820 million in cash flows from operations for 2025. We returned $1,924 million to our shareholders during the year in dividends and repurchases of common stock. Our cash position at the end of 2025 was $3,267 million.

Quarter in Focus

•Revenue for the fourth quarter of 2025 was $3.3 billion, up 7.2% year-on-year;

•GAAP gross margin was 54.2%, and GAAP operating margin was 22.3%;

•Non-GAAP gross margin was 57.4%, and non-GAAP operating margin was 34.6%;

•Cash flow from operations was $891 million, with net capital expenditures on property, plant and equipment of $98 million, resulting in non-GAAP free cash flow of $793 million;

•During the fourth quarter of 2025, NXP returned capital to shareholders with the payment of $254 million in cash dividends and the repurchase of $338 million of its common shares, for a total capital return of $592 million.

37

Sequential Results

Q4 2025 compared to Q3 2025

Revenue for the three months ended December 31, 2025, was $3,335 million compared to $3,173 million for the three months ended September 28, 2025, an increase of $162 million or 5.1% quarter-on-quarter, in line with management's expectations. Within our end markets, the Industrial & IoT end market increased $61 million or 10.5%, the Mobile end market increased $55 million or 12.8%, the Automotive end market increased $39 million or 2.1%, and the Communication Infrastructure & Other end market increased $7 million or 2.1%.

When aggregating all end markets together and reviewing sales channel performance, revenue from distributors was $2,025 million, an increase of $159 million or 8.5% compared to the previous period. Revenue from direct customers was $1,274 million, an increase of $5 million or 0.4% compared to the previous period.

From a geographic perspective, revenue increased across all regions.

The gross profit percentage for the fourth quarter of 2025 decreased to 54.2% from 56.3% in the third quarter of 2025, primarily due to impairments related to the scaling down of a non-strategic product line.

Operating income for the fourth quarter of 2025 was $744 million compared to $893 million for the third quarter of 2025, a decrease of $149 million or 16.7%. The sequential decrease was mainly due to higher restructuring costs for specific targeted actions under a new global restructuring program in the fourth quarter of 2025.

Operating cash flows for the fourth quarter of 2025 was $891 million compared to $585 million for the third quarter of 2025, an increase of $306 million or 52.3% quarter-on-quarter.

38

Results of Operations

The following table presents the operating results for the years ended December 31, 2025, and December 31, 2024.

Revenue

Revenue for the year ended December 31, 2025, was $12,269 million compared to $12,614 million for the year ended December 31, 2024, a decrease of $345 million or 2.7% year-on-year.

39

Revenue by end market was as follows:

Revenue by sales channel was as follows:

Revenue by geographic region, which is based on the location where the sale originated, was as follows: 1)

The year-to-date change in revenue was primarily driven by a lower selling mix of products, slightly offset by higher shipment volumes. The combination of these two effects resulted in a net decrease of $345 million revenue.

From an end market perspective, NXP experienced declines in the Communication

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]