Liquidity & capital resources (MD&A): disclosure examples

Material cash requirements from operating activities primarily consist of inventory purchases, employee related costs, taxes, interest and other general operating expenses, which we expect to be primarily satisfied by our cash from operations. Other material cash requirements from known contractual and other obligations include short-term borrowings, long-term debt and related interest payments, leases and purchase obligations. See Note 4 , Note 5 and Note 6 to our Consolidated Financial Statements for information regarding accrued liabilities, outstanding short-term borrowings and long-term debt, and leases, respectively.

As of January 31, 2026, the Company has $41.4 billion of unrecorded purchase obligations outstanding, of which $18.3 billion is due within one year. Purchase obligations include legally binding contracts, such as firm commitments for inventory and utility purchases, as well as commitments to make capital expenditures, software acquisition and license commitments and legally binding service contracts. Contractual obligations for the purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Contracts that specify the Company will purchase all or a portion of its requirements of a specific product or service from a supplier, but do not include a fixed or minimum quantity, are excluded from the obligations quantified above. Accordingly, purchase orders for inventory are also excluded as purchase orders represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current inventory needs and are fulfilled by our suppliers within short time periods. We also enter into contracts for outsourced services; however, the obligations under these contracts are not significant and the contracts generally contain clauses allowing for cancellation without significant penalty. Timing of payments and actual amounts paid may be different depending on the timing of receipt of goods or services or changes to agreed-upon amounts for some obligations.

Capital Resources

We believe our cash flows from operations, current cash position, short-term borrowings and access to capital markets will continue to be sufficient to meet our anticipated cash requirements and contractual obligations, which includes funding seasonal buildups in merchandise inventories and funding our capital expenditures, acquisitions, dividend payments and share repurchases.

Our primary uses of cash include the acquisition, licensing and production of content, marketing programs, streaming delivery, and personnel-related costs. Cash payment terms for non-original content have historically been in line with the amortization period. Investments in original content, and in particular content that we produce and own, require more cash upfront relative to licensed content. For example, production costs are paid as the content is created, well in advance of when the content is available on the service and amortized. We expect to continue to significantly invest in global content, particularly in original content, which will impact our liquidity. Our other uses of cash include strategic acquisitions and investments, as well as share repurchases. See the “ Material Cash Requirements ” section below for further detail on our expected use of cash in connection with the WBD transaction.

Financing Arrangements

On April 12, 2024, we entered into a five-year, $3 billion unsecured revolving credit facility that matures on April 12, 2029 (the “Revolving Credit Agreement”). In May 2025, we established a $3 billion commercial paper program (the “Commercial Paper Program”) under which we may issue short-term unsecured commercial paper notes. On December 4, 2025, we entered into a bridge commitment letter pursuant to which the commitment parties agreed to provide, subject to customary conditions, a $59 billion senior unsecured bridge term loan facility to finance the purchase price for the WBD transaction, to pay fees, costs and expenses incurred in connection with the WBD transaction and, at our option, to refinance certain indebtedness (the “Bridge Facility Commitments”). On December 19, 2025, we replaced a portion of the Bridge Facility Commitments with a $5 billion unsecured revolving credit facility and a $20 billion unsecured delayed draw term loan facility (collectively, the “Transaction Credit Facilities”), which reduced the outstanding Bridge Facility Commitments to $34 billion.

As of December 31, 2025, no amounts have been borrowed under the Revolving Credit Agreement, Commercial Paper Program, Bridge Facility Commitments, or the Transaction Credit Facilities.

We regularly analyze our ability to generate and obtain adequate amounts of cash to meet our short-term and long-term requirements and plans. Our capital priorities include: (i) investing in our business and R&D pipeline, (ii) continuing select partnerships and business development transactions, (iii) growing our dividend over time, and (iv) repurchasing shares to offset dilution and opportunistically reduce share count. Based on our evaluation of our current position of liquidity, available capital resources and our material cash requirements, we believe that we can satisfy our capital needs for the next 12 months and the foreseeable future.

Liquidity

Cash and cash equivalents were $7.6 billion and marketable debt securities were $3.0 billion as of December 31, 2025. The table below summarizes our cash flow activities, followed by our analysis of changes and trends:

Year Ended December 31,
(in millions, except percentages)	2025	2024	Change
Net cash provided by (used in):
Operating activities	10,019	10,828	(7)
Investing activities	(4,793)	(3,449)	39
Financing activities	(7,745)	(3,433)	NM
Effect of exchange rate changes on cash and cash equivalents	92	(40)	NM
Net change in cash and cash equivalents	(2,428)	3,906	NM

Operating Activities

Net cash provided by operating activities is our primary source of funds, driven mainly by collections on product sales, partially offset by operating spend. Changes in working capital balances, generally associated with the timing of collections and payments, as well as unanticipated payments related to litigation, taxes or other matters, may create some variation in any given year. Net cash provided by operating activities decreased in 2025, compared to 2024, primarily due to higher inventory build-up and higher income tax payments, as well as unfavorable timing of accounts receivable collections. In 2025, we paid the final $1.3 billion federal income tax payment for transition tax on the mandatory deemed repatriation of foreign earnings related to the Tax Cuts and Jobs Act, compared to $1.2 billion paid in 2024.

Investing Activities

• Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows and discussion of our financial condition, including potential sources of liquidity, material cash requirements and their general purpose.

• Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

For an overview of our business, see “Part I, Item 1. Business”.

Overview of Fiscal Year 2026

During fiscal year 2026, we shipped 789 exabytes of HDD storage capacity. We generated revenue of approximately $12.2 billion with a gross margin of 46% and net income of $3.2 billion. Our operating cash flow was $3.7 billion and we paid $634 million in dividends and repurchased $176 million of our ordinary shares.

We reduced our outstanding debt by $1.4 billion through exchanges of our 2028 Notes for total consideration of $1.3 billion cash and approximately 12.6 million of our ordinary shares as well as repurchases of Senior Notes.

Recent Developments, Economic Conditions and Challenges

During fiscal year 2026, demand for our data storage solutions strengthened. Growth was led by data center end markets in which we experienced sustained demand for our high capacity nearline drives across global cloud customers, as well as increasing sales for enterprise edge deployments. Customers continue to invest in data center infrastructure to serve both traditional data intensive workloads along with growing AI related applications. The ongoing adoption of these applications increases the volume of data being generated, retained and reused, which we believe supports demand growth for scalable, cost-efficient and reliable storage solutions.

At the same time, the macroeconomic environment remains dynamic, marked by heightened geopolitical uncertainty and evolving trade policies. These factors may impact our business and results of operations. We will continue to monitor the situation and assess plans to mitigate future risk to the business. However, we believe the structural changes that we have made to the business, including executing our pricing strategy and maintaining supply discipline, together with the long-term customer engagements we have in place provide greater visibility into future demand trends. We believe our hard drive storage business will continue to benefit from growing demand for data creation, retention and utilization supported by the increasing value organizations derive from their data.

Our material cash requirements as of December 31, 2025 primarily consisted of working capital requirements, capital investments, contractual obligations, and other matters, as described below. Our operations have historically generated positive cash flows to fulfill our working capital requirements and other uses of cash as discussed below.

Capital Investments

Capital investments consist of our capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in nonconsolidated joint ventures, as reflected in our statements of cash flows as shown on page 78 . Capital investments exclude acquisitions, if any.

We also identify our capital investments by the nature of the project with which the expenditure is associated as follows:

• Sustaining capital investments are generally associated with projects that are expected to extend the lives of our property assets, sustain their operating capabilities and safety (including deferred turnaround and catalyst cost expenditures), or comply with regulatory requirements. Regulatory compliance capital investments are generally associated with projects that are incurred to comply with government regulatory requirements, such as requirements to reduce emissions and prohibited elements from our products.

• Growth capital investments , including low-carbon growth capital investments that support the development and growth of our low-carbon fuels businesses, are generally associated with projects for the construction of new property assets that are expected to enhance our profitability and cash-generating capabilities, including investments in nonconsolidated joint ventures.

We have developed an extensive multi-year capital investment program, which we update and revise based on changing internal and external factors. Our capital investment program aims to manage our capital investments on average over a multi-year period given the year-to-year variability with respect to timing, costs, and other aspects of capital projects, particularly growth capital projects. Capital projects may be accelerated, deferred, or canceled based on costs, market and economic conditions, regulatory approvals, project execution, competing uses of capital, and other variables, and capital investments and costs may particularly increase or decrease at the beginning and ending of a project. The variability in our year-to-year growth capital investments primarily reflects shifts in expected timing and costs of capital projects rather than a change in our capital allocation strategy. See also “ITEM 1A. RISK FACTORS—BUSINESS, INDUSTRY, AND OPERATIONS RISKS— Our pursuit of capital and other strategic projects and actions exposes us to various risks ” regarding other considerations with respect to our capital investments.

Material Cash Requirements
Total	Less than 1 Year	1 - 3 Years	3 - 5 Years	More than 5 Years
Operating lease obligations (1)	12,389.2	1,940.6	3,305.7	2,550.7	4,592.2
Debt obligations
Principal payments	16,200.0	1,500.0	2,850.0	3,000.0	8,850.0
Interest payments	6,264.1	603.4	1,033.4	816.2	3,811.1
Purchase obligations (2)	1,350.8	1,185.4	165.4	—	—
Other obligations (3)	308.3	117.0	49.0	40.1	102.2
Total	36,512.4	5,346.4	7,403.5	6,407.0	17,355.5

(1) Amounts include direct lease obligations, excluding any taxes, insurance, and other related expenses.

(2) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on Starbucks and that specify all significant terms. Green coffee purchase commitments comprise 88% of total purchase obligations.

(3) Other obligations include other long-term liabilities primarily consisting of long-term asset retirement obligations, income taxes payable, equity investment capital commitments, and finance lease obligations.

Cash Flows

Cash provided by operating activities was $4.7 billion for fiscal 2025, compared to $6.1 billion for fiscal 2024. The change was primarily due to the decrease in net earnings of $1.9 billion and a net increase of $451.2 million in inventories, which was primarily driven by green and roasted coffee, largely due to elevated coffee prices. These impacts were partially offset by a net increase of $713.2 million in loss on disposal, impairment, and accelerated amortization of assets primarily driven by restructuring costs as part of the “Back to Starbucks” strategy and a net increase in accounts payable, primarily due to payment timing.

Cash used in investing activities was $2.5 billion for fiscal 2025, compared to $2.7 billion for fiscal 2024. The change was primarily due to a net decrease in capital expenditures of $472.0 million driven by a reduction in retail store investments and renovations in North America. These increases were partially offset by the acquisition of 23.5 Degrees Topco Limited.

Cash used in financing activities was $2.3 billion for fiscal 2025, compared to $3.7 billion for fiscal 2024. The change was primarily due to no current year share repurchases of our common stock compared to the prior year.

COMMODITY PRICES, AVAILABILITY, AND GENERAL RISK CONDITIONS

The Company’s material cash requirements from known contractual obligations and commitments to make future payments primarily consist of long-term debt and related interest, capital commitments, operating goods and services commitments, leases, and other long term liabilities. Outstanding obligations related to debt and leases can be found in Item 8. Financial Statements and Supplementary Data, Note 17 Debt and Note 20 Leases. Interest obligations related to debt and finance leases amount to $889 million within the next 12 months, with the remaining amount committed thereafter of $16,818 million.

Commitments for capital and operating goods and services and other long-term liabilities due in the next 12 months are $1,758 million and $73 million, respectively. The remaining amounts committed thereafter are $2,639 million and $627 million, respectively. Other long-term liabilities include expected cash payments for environmental remediation, post-retirement benefits, worker’s compensation benefits, long-term disability benefits, pension benefit payments for the Company’s non-registered supplemental pension plan, and certain other long-term liabilities.

Concession Duty

The Mexican government granted the Company's subsidiary, Kansas City Southern de México, S.A. de C.V. ("CPKCM"), a concession until June 2047, which is renewable under certain conditions, for additional periods, each up to 50 years (the "Concession"). Under the Concession, CPKCM pays annual Concession duties equal to 1.25% of CPKCM's gross revenues. Capital commitments under the Concession are included in the amounts disclosed above.

Guarantees

Refer to Item 8. Financial Statements and Supplementary Data, Note 27 Guarantees for details.

Operating Activities

Net cash provided by operating activities increased $40 million in 2025 compared to 2024. The increase was primarily due to higher cash generating operating income, partially offset by unfavourable changes in working capital and other operating activities.

Investing Activities

Net cash used in investing activities decreased $131 million in 2025 compared to 2024. The decrease was primarily due to proceeds received from the sale of an equity investment of $493 million, partially offset by higher capital additions and transaction costs paid on the sale of an equity investment.

CPKC 2025 ANNUAL REPORT / 45

Capital Programs

Our long-term business strategy requires capital to maintain and enhance our existing stores, invest to open new stores, fund strategic acquisitions, expand distribution infrastructure, develop enhanced information technology systems and tools, and may include the opportunistic repurchase of shares of our common stock through our Board-approved share repurchase program. Our material cash requirements necessary to maintain the current operations of our long-term business strategy include, but are not limited to, inventory purchases; human capital obligations, including payroll and benefits; contractual obligations, including debt and interest obligations; capital expenditures; payment of income taxes; and other operational priorities. We expect to fund our short- and long-term cash and capital requirements with our primary sources of liquidity, which include funds generated from the normal course of our business operations, borrowings under our unsecured revolving credit facility and our commercial paper program, and senior note offerings. However, there can be no assurance that we will continue to generate cash flows or maintain liquidity at or above recent levels, as we are unable to predict decreased demand for our products or changes in customer buying patterns. Additionally, these factors could also impact our ability to meet the debt covenants of our credit agreement and, therefore, negatively impact the funds available under our unsecured revolving credit facility.

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Our material contractual cash obligations as of December 31, 2025, included commitments for short and long-term debt arrangements and interest payments related to long-term debt, future minimum payments under non-cancelable lease arrangements, self-insurance reserves, projected obligations related to future payments under the Company’s nonqualified deferred compensation plan, purchase obligations for construction contract commitments, uncertain tax positions and associated estimated interest and penalties, payments for certain deferred income taxes, the obligation to purchase renewable energy tax credits, and payments for the purchase of inventory.

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We expect to fund these various commitments and obligations primarily with operating cash flows expected to be generated in the normal course of business or through borrowings under our unsecured revolving credit facility and commercial paper program. See Note 6 “Leases,” Note 14 “Share-Based Compensation and Benefit Plans,” Note 15 “Commitments,” and Note 17 “Income Taxes” to the Consolidated Financial Statements for further information on our leasing arrangements, share-based compensation payments, commitments, and uncertain tax positions, respectively, which are not reflected in the table below.

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Our material cash requirements for known contractual obligations include capital expenditures, debt, and lease obligations, each of which are discussed in more detail earlier in this section. We believe that net cash provided by operating activities will be adequate to meet our liquidity and capital needs for these items in the short-term over the next 12 months and also in the long-term beyond the next 12 months. We also have cash requirements for purchase orders and contracts for the purchase of inventory and other goods and services, which are based on current distribution needs and are fulfilled by our suppliers within short time horizons. We do not have significant agreements for the purchase of inventory or other goods or services specifying minimum order quantities. In addition, we may have liabilities for uncertain tax positions but we do not believe any of these liabilities will be material. A disc ussion of income taxes is contained in Note 7 of the Notes to Consolidated Financial Statements.

Unremitted Foreign Income

Approximately $177.5 of cash and cash equivalents were held by non-U.S. subsidiaries on December 31, 2025. These funds may create foreign currency translation gains or losses depending on the functional currency of the entity holding the cash. We have considered the financial requirements of each foreign subsidiary and our parent company and will continue to reinvest these funds to support our expansion activities outside the U.S., even after taking into consideration the deemed repatriation and transition tax under the Tax Cuts and Jobs Act. The income tax impact of repatriating cash associated with investments in foreign subsidiaries is discussed in Note 7 of the Notes to Consolidated Financial Statements.

Effects of Inflation

We observed inflationary conditions in 2025, primarily related to the implementation of incremental tariffs on imported products. Steel and aluminum products and derivatives had the highest increases. We implemented pricing actions to address the incremental tariffs beginning in the second quarter of 2025. T he combined net effect on our gross profit percentage of these trends in cost and price inflatio n was immaterial in 2025.

Critical Accounting Estimates

The Company believes that its balance of cash and cash equivalents and cash generated by operations will be sufficient to satisfy both its short-term and long-term cash requirements and plans for cash, including material cash requirements from known contractual obligations and returning capital to shareholders through share repurchases and dividends.

In addition to cash and cash equivalents, the Company also maintains credit facilities, both intercompany and with external partners, and a number of other available tools to support liquidity needs on a global basis. In September 2024, the Parent Company filed a shelf registration statement with the SEC that allows the Company to issue an indefinite amount of debt securities, in one or more series, from time to time until September 2027. The Company believes outside sources for additional debt and equity capital, if needed, will continue to be available. The Company was in compliance with all of the covenants of its notes payable and lines of credit at December 31, 2025.

In August 2025, the Parent Company expanded its sources of liquidity by entering into two separate facility agreements, as follows:

1. A 10-year facility agreement with a Delaware trust (2035 Trust) that provides the Parent Company with the right to issue and sell to the 2035 Trust from time to time up to $1.0 billion of senior notes due August 2035.

2. A 30-year facility agreement with a Delaware trust (2055 Trust) that provides the Parent Company the right to issue and sell to the 2055 Trust from time to time up to $1.0 billion of senior notes due August 2055.

As of December 31, 2025, the Parent Company had no senior note issuances under these facility agreements.

For additional information, see Note 9 of the Notes to the Consolidated Financial Statements.

As part of enterprise-wide capital management and optimization, the Company also utilizes the intercompany reinsurance platform to execute internal reinsurance transactions with Aflac Re. For additional information, see Note 8 of the Notes to the Consolidated Financial Statements.

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

The following table presents the estimated payments of the Company's material cash requirements from known contractual obligations as of December 31, 2025. The Company translated its Japanese yen-denominated obligations using the December 31, 2025 foreign exchange rate. Actual future payments as reported in U.S. dollars will fluctuate with changes in the yen/dollar exchange rate.

We are committed to make future cash payments for operations and capital expenditures pursuant to certain of our contracts. The following table summarizes our estimate of material cash requirements for operations and capital expenditures related to our core operations under executed contracts as of December 31, 2025 (in billions):

Estimated Payments Due Under Executed Contracts by Period (1)
2026	2027 - 2030	Thereafter	Total
Purchase obligations (2):
Natural gas supply agreements excluding IPM agreements (3) (4)	7.3	13.3	5.0	25.6
Natural gas transportation and storage service agreements (5)	0.6	2.2	4.4	7.2
Capital expenditures	1.5	0.9	—	2.4
Other Purchase Obligations	—	0.1	0.5	0.6
Leases (6)	0.9	3.2	4.7	8.8
Total	10.3	19.7	14.6	44.6

(1) Agreements in force as of December 31, 2025 that have terms dependent on project milestone dates are based on the estimated dates as of December 31, 2025.

(2) Purchase obligations consist of agreements to purchase goods or services that are enforceable and legally binding that specify fixed or minimum quantities to be purchased. We include contracts for which we have an early termination option if the option is not currently expected to be exercised. We include contracts with unsatisfied contractual conditions if the conditions are currently expected to be met.

(3) Natural gas supply agreements exclude IPM agreements, which are structured to generate a fixed margin when viewed in conjunction with the sale of LNG produced from the natural gas procured under the IPM agreements, as described under Liquidity from Executed IPM Agreements.

(4) Pricing of natural gas supply agreements is based on estimated forward prices and basis spreads as of December 31, 2025. Natural gas supply agreements are presented net of $0.2 billion in contracted sales of natural gas as of December 31, 2025.

(5) Natural gas transportation and storage services agreements include $1.3 billion in obligations to related parties. See Note 1 3 — Related Party Transactions for further information about our related parties.

Our material cash expenditures consist of normal operating expenditures, such as personnel costs, as well as the items noted in the following table. The table below summarizes current and long-term material cash requirements as of December 31, 2025, which we expect to fund primarily with operating cash flows (in thousands):

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Twelve Months Ending December 31,

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2026

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2027

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2028

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2029

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2030

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Thereafter

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Total

Revolving credit facility

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—

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—

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—

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—

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100,000

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—

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100,000

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Notes to former owners

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6,125

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24,200

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14,250

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—

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—

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—

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44,575

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Other debt

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38

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46

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22

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545

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—

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—

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651

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Interest payable

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6,969

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6,421

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5,227

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​

4,969

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3,725

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—

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27,311

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Operating lease obligations

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53,668

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49,622

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43,633

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37,828

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34,395

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266,684

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485,830

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Total

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66,800

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80,289

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63,132

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43,342

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138,120

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266,684

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658,367

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As of December 31, 2025, we have $79.0 million in letter of credit commitments, of which $60.7 million will expire in 2026 and $18.3 million will expire in 2027. The substantial majority of these letters of credit are posted with insurers who disburse funds on our behalf in connection with our workers’ compensation, auto liability and general liability insurance program. These letters of credit provide additional security to the insurers that sufficient financial resources will be available to fund claims on our behalf, many of which develop over long periods of time, should we ever encounter financial duress. Posting of letters of credit for this purpose is a common practice for entities that manage their self-insurance programs through third-party insurers as we do. While some of these letter of credit commitments expire in 2026, we expect nearly all of them, particularly those supporting our insurance programs, will be renewed annually.