Thermo Fisher Scientific Inc.

02/26/2026 | Press release | Distributed by Public on 02/26/2026 11:12

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Reference is made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations to Notes to the Consolidated Financial Statements, which begin on page 29 of this report. Management's Discussion and Analysis of Financial Condition and Results of Operations for 2023 is included in Item 7 of the company's 2024 Annual Report on Form 10-Kfiled with the Securities and Exchange Commission.
The company refers to various amounts or measures not prepared in accordance with generally accepted accounting principles (non-GAAP measures). These non-GAAP measures are further described and reconciled to their most directly comparable amount or measure under the section "Non-GAAP Measures" later in this "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Amounts and percentages reported within this Annual Report on Form 10-K are presented and calculated based on underlying unrounded amounts. As a result, the sum of components may not equal corresponding totals due to rounding.
Overview
Thermo Fisher Scientific Inc. enables customers to make the world healthier, cleaner and safer by helping them accelerate life sciences research, solve complex analytical challenges, increase laboratory productivity, and improve patient health through diagnostics and the development and manufacture of life-changing therapies. Markets served include pharmaceutical and biotech, academic and government, industrial and applied, as well as healthcare and diagnostics. The company's operations fall into four segments (Note 11): Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Biopharma Services.
THERMO FISHER SCIENTIFIC INC.
Consolidated Results
(Dollars in millions except per share amounts) 2025 2024 Change
Revenues
$ 44,556 $ 42,879 4 %
GAAP operating income $ 7,746 $ 7,337 6 %
GAAP operating income margin 17.4 % 17.1 % 0.3 pt
Adjusted operating income (non-GAAP measure)
$ 10,109 $ 9,707 4 %
Adjusted operating income margin (non-GAAP measure)
22.7 % 22.6 % 0.1 pt
GAAP diluted earnings per share (EPS) attributable to Thermo Fisher Scientific Inc. $ 17.74 $ 16.53 7 %
Adjusted earnings per share (non-GAAP measure)
$ 22.87 $ 21.86 5 %
Organic Revenue Growth
Revenue growth 4 %
Impact of acquisitions 1 %
Impact of currency translation 1 %
Organic revenue growth (non-GAAP measure)
2 %
During 2025, revenues grew in the pharma and biotech market due to increased demand from customers, partially offset by reduced demand for COVID-19 vaccine and therapy related products and services. Revenues in the academic and government market declined, driven by customer hesitancy in a more uncertain environment in the U.S. and macro conditions in China. Revenue to customers in the industrial and applied market grew. Revenues to customers in the diagnostics and healthcare market were flat. During 2025, sales grew in North America, Europe and Asia-Pacific, but declined in China. Contributions to organic revenue during 2025 were led by the Laboratory Products and Biopharma Services and Life Sciences Solutions segments.
The company continues to execute its proven growth strategy which consists of three pillars:
•High-impact innovation;
•Our trusted partner status with customers; and
•Our unparalleled commercial engine.
GAAP operating income margin and adjusted operating income margin increased in 2025 due primarily to very strong productivity improvements, partially offset by unfavorable business mix and strategic investments. GAAP operating income margin in 2025 also benefited from lower amortization expense when compared to 2024; however, this was partially offset by higher transaction-related costs. We estimate that charges for restructuring and related actions incurred for headcount reductions and facility consolidations, which were approximately $0.3 billion in 2025 and $0.3 billion in 2024, will realize annual cost savings of approximately $0.5 billion and $0.2 billion, respectively, primarily due to reduced employee and facility expenses.
The company's references to strategic investments generally refer to targeted spending for enhancing commercial capabilities, including expansion of geographic sales reach and e-commerce platforms, marketing initiatives, expanded service and operational infrastructure, research and development projects and other expenditures to enhance the customer experience, as well as incentive compensation and recognition for employees. The company's references throughout this discussion to productivity improvements generally refer to the impact of its Practical Process Improvement (PPI) Business System to address inflation, drive cost efficiencies and improve profitability. The benefits of PPI include optimized price realization, reduced costs resulting from implementing continuous improvement methodologies, global sourcing initiatives, a lower cost structure following restructuring actions including headcount reductions and consolidation of facilities, and low cost region manufacturing.
Notable Recent Acquisitions
On July 10, 2024, the company acquired, within the Life Sciences Solutions segment, Olink Holding AB (publ), a Swedish-based provider of next-generation proteomics solutions. The acquisition enhances the segment's capabilities in the high-growth proteomics market with the addition of highly differentiated solutions. It also complements the existing life sciences and mass spectrometry offerings, accelerating protein biomarker discovery and providing strong synergy opportunities.
On September 1, 2025, the company acquired, within the Life Sciences Solutions segment, our filtration and separation business, a leading provider of purification and filtration technologies used in the production of biologics as well as in medical technologies and industrial applications, from Solventum Corporation. The business strengthens the segment's bioproduction offerings with advanced filtration technologies that improve quality and efficiency across upstream and downstream workflows. In addition, its industrial filtration and membrane solutions will expand our reach into industries including battery, semiconductor and medical device manufacturing.
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Segment Results
The company's management evaluates segment operating performance using operating income before certain charges/credits as defined in Note 11. Accordingly, the following segment data are reported on this basis.
(Dollars in millions) 2025 2024
Revenues
Life Sciences Solutions
$ 10,374 $ 9,631
Analytical Instruments
7,554 7,463
Specialty Diagnostics
4,676 4,512
Laboratory Products and Biopharma Services
23,984 23,157
Eliminations
(2,033) (1,885)
Consolidated revenues
$ 44,556 $ 42,879
Life Sciences Solutions
Organic (non-GAAP measure)
(Dollars in millions) 2025 2024 Total
Change 		Acquisitions/ Divestitures Currency
Translation
Revenues $ 10,374 $ 9,631 8 % 3 % 1 % 3 %
Segment income 3,768 3,503 8 %
Segment income margin 36.3 % 36.4 % (0.1) pt
The increase in organic revenues in 2025 was driven by the bioproduction business. On a reported basis, the bioproduction business grew $548 million, driven by higher demand from pharma and biotech customers, as well as the impact from the 2025 acquisition of the filtration and separation business. Genetic sciences grew $82 million, driven by the 2024 acquisition of Olink. The decrease in segment income margin resulted primarily from the impact from acquisitions, unfavorable business mix, and strategic investments, partially offset by very strong productivity improvements.
Analytical Instruments
Organic (non-GAAP measure)
(Dollars in millions) 2025 2024 Total
Change 		Acquisitions/ Divestitures Currency
Translation
Revenues $ 7,554 $ 7,463 1 % 0 % 1 % 0 %
Segment income 1,736 1,955 (11) %
Segment income margin 23.0 % 26.2 % (3.2) pt
Organic revenues were flat in 2025 primarily due to growth in the electron microscopy and chromatography and mass spectrometry businesses, largely offset by declines in the chemical analysis business. On a reported basis, the electron microscopy business and chromatography and mass spectrometry business grew $87 million and $83 million, respectively, partially offset by a decline of $78 million in the chemical analysis business. The decrease in segment income margin resulted primarily from the impacts of tariffs and related foreign exchange, strategic investments, and unfavorable business mix, partially offset by strong productivity improvements.
Specialty Diagnostics
Organic (non-GAAP measure)
(Dollars in millions) 2025 2024 Total
Change 		Acquisitions/ Divestitures Currency
Translation
Revenues $ 4,676 $ 4,512 4 % 0 % 1 % 2 %
Segment income 1,256 1,159 8 %
Segment income margin 26.9 % 25.7 % 1.2 pt
The increase in organic revenues in 2025 was led by growth in the healthcare market channel and the transplant diagnostics business. On a reported basis, the clinical diagnostic business grew $52 million, the immunodiagnostics business grew $48 million, and the transplant diagnostics business grew $37 million, which were the principal drivers of reported revenue growth in the segment. The increase in segment income margin was due to strong productivity improvements.
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Laboratory Products and Biopharma Services
Organic (non-GAAP measure)
(Dollars in millions) 2025 2024 Total
Change 		Acquisitions/ Divestitures Currency
Translation
Revenues $ 23,984 $ 23,157 4 % 0 % 1 % 3 %
Segment income 3,350 3,090 8 %
Segment income margin 14.0 % 13.3 % 0.7 pt
The increase in organic revenues in 2025 primarily due to growth in the research and safety market channel and the pharma services business, partially offset by moderation in COVID-19 vaccines and therapies-related activity. On a reported basis, the pharma services business and research and safety market channel grew $457 million and $422 million, respectively. The increase in segment income margin was primarily due to exceptionally strong productivity improvements, partially offset by unfavorable business mix and strategic investments.
Non-operating Items
(Dollars in millions) 2025 2024
Net interest expense
$ 426 $ 312
GAAP other income/(expense) (12) 12
Adjusted other income/(expense) (non-GAAP measure)
(19) (6)
GAAP tax rate 7.5 % 9.3 %
Adjusted tax rate (non-GAAP measure)
10.4 % 10.5 %
Weighted average diluted shares 378 383
Net interest expense (interest expense less interest income) increased due primarily to lower cash, and cash equivalents and short-term investments balances, as well as lower interest rates on these balances when compared to 2024. See additional discussion under the caption "Liquidity and Capital Resources" below. In 2025 and 2024, the company's net interest expense was reduced by approximately $283 million and $264 million, respectively, as a result of its interest rate swap and cross-currency interest rate swap arrangements (Note 10).
GAAP other income/(expense) and adjusted other income/(expense) includes currency transaction gains/losses on non-operating monetary assets and liabilities, and net periodic pension benefit cost/(income), excluding the service cost component. GAAP other income/(expense) in 2025 and 2024 also includes $14 million and $20 million, respectively, of net gains/(losses) on investments. GAAP other income/(expense) in 2025 also includes $8 million of settlement charges for pension plans.
The company's GAAP and adjusted tax rates in 2025 were impacted by a $269 million deferred tax benefit resulting from the recognition of tax attributes related to domestication transactions, a deferred tax benefit of $153 million related to capital losses generated as part of intra-entity transactions, a $158 million benefit in jurisdictions where the deferred tax assets are now expected to be realized due to forecasted income, and a $93 million tax benefit from tax return reassessments. The company's GAAP rate was also impacted by $51 million of tax expense related to tax legislation enacted during the third quarter of 2025 (Note 7).
The company's 2024 GAAP and adjusted tax rates were impacted by tax benefits of $459 million, primarily in jurisdictions where the deferred tax assets are now expected to be realized due to forecasted income. The company's GAAP tax rate in 2024 was also impacted by $176 million of expense, net, for a provision associated with a tax audit.
The effective tax rates in both 2025 and 2024 were also affected by relatively significant earnings in lower tax jurisdictions. Due primarily to the non-deductibility of intangible asset amortization for tax purposes, the company's cash payments for income taxes were higher than its income tax expense for financial reporting purposes. See additional discussion under the caption "Liquidity and Capital Resources" below.
The company expects its GAAP effective tax rate in 2026 will be between 7% and 9% based on currently forecasted rates of profitability in the countries in which the company conducts business and expected generation of foreign tax credits. The effective tax rate can vary significantly from period to period as a result of discrete income tax factors and events. The company expects its adjusted tax rate will be approximately 11.5% in 2026.
The company has operations and a taxable presence in approximately 70 countries outside the U.S. Some of these countries have lower tax rates than the U.S. The company's ability to obtain a benefit from lower tax rates outside the U.S. is dependent on its relative levels of income in countries outside the U.S. and on the statutory tax rates in those countries. Based on the dispersion of the company's non-U.S. income tax provision among many countries, the company believes that a change in the statutory tax rate in any individual country is not likely to materially affect the company's income tax provision or net income.
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Equity in earnings/losses of unconsolidated entities was impacted by an $88 million impairment of an equity method investment in 2024.
Weighted average diluted shares decreased in 2025 compared to 2024 due to share repurchases.
Liquidity and Capital Resources
The company's proven growth strategy has enabled it to generate free cash flow as well as access the capital markets. The company deploys its capital primarily via mergers and acquisitions and secondarily via share buybacks and dividends.
December 31, December 31,
(In millions) 2025 2024
Cash and cash equivalents $ 9,852 $ 4,009
Short-term investments 253 1,561
Total debt 39,384 31,275
Approximately half of the company's cash balances and cash flows from operations are generated outside the U.S. The company uses its non-U.S. cash for needs outside of the U.S., including acquisitions, capacity expansion, and repayment of third-party foreign debt by foreign subsidiaries. In addition, the company also transfers cash to the U.S. using non-taxable intercompany transactions, including loans and returns of capital, as well as dividends where the related U.S. dividend received deduction or foreign tax credit equals any tax cost arising from the dividends. As a result of using such means of transferring cash to the U.S., the company does not expect any material adverse liquidity effects from its significant non-U.S. cash balances for the foreseeable future.
The company believes that its existing cash and cash equivalents and its future cash flow from operations together with available borrowing capacity under its revolving credit agreement will be sufficient to meet the cash requirements of its existing businesses for the foreseeable future, including at least the next 24 months.
As of December 31, 2025, the company's short-term obligations and current maturities of long-term obligations totaled $3.53 billion. The company has a revolving credit facility with a bank group that provides up to $5.00 billion of unsecured multi-currency revolving credit (Note 3). If the company borrows under this facility, it intends to leave undrawn an amount equivalent to outstanding commercial paper to provide a source of funds in the event that commercial paper markets are not available. As of December 31, 2025, no borrowings were outstanding under the company's revolving credit facility, although available capacity was reduced by immaterial outstanding letters of credit.
(In millions) 2025 2024
Net cash provided by operating activities
$ 7,818 $ 8,667
Net cash used in investing activities
(4,047) (5,841)
Net cash provided by (used in) financing activities
1,801 (6,792)
Free cash flow (non-GAAP measure)
6,337 7,324
Operating Activities
During 2025, cash provided by income was offset in part by investments in working capital. Increases in accounts receivable used cash of $0.43 billion and changes in contract assets/liabilities used cash of $0.38 billion. An increase in accounts payable provided cash of $0.42 billion. Changes in other assets and liabilities used cash of $1.31 billion primarily due to the timing of payments for income taxes. Cash payments for income taxes were $1.78 billion during 2025.
During 2024, net income provided substantially all cash from operating activities. Changes in working capital were not significant. Cash payments for income taxes were $1.83 billion during 2024.
Investing Activities
During 2025, acquisitions used cash of $4.04 billion. The company's investing activities also included $1.52 billion for the purchase of property, plant and equipment for capacity and capability investments, as well as $1.18 billion of proceeds from net sales of investments.
During 2024, acquisitions used cash of $3.13 billion. The company's investing activities also included net purchases of investments of $1.63 billion, primarily to provide additional interest income, as well as $1.40 billion for the purchase of property, plant and equipment for capacity and capability investments.
The company expects that for all of 2026, expenditures for property, plant and equipment, net of disposals, will be between $1.8 billion and $2.0 billion.
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Financing Activities
During 2025, issuance of debt provided $7.76 billion of cash. Repayment of debt used cash of $2.41 billion. The company's financing activities also included the repurchase of $3.00 billion of the company's common stock (5.8 million shares) and the payment of $0.64 billion in cash dividends. On November 6, 2025, the Board of Directors authorized the repurchase of up to $5.00 billion of the company's common stock. Early in the first quarter of 2026, the company repurchased $3.00 billion (4.9 million shares) of the company's common stock. At February 26, 2026, $2.00 billion was available for future repurchases of the company's common stock under this authorization.
In the first quarter of 2026, the company issued $3.80 billion of senior notes (Note 3).
During 2024, issuance of debt provided $1.20 billion of cash. Repayment of debt used cash of $3.61 billion. The company's financing activities also included the repurchase of $4.00 billion of the company's common stock (7.4 million shares) and the payment of $0.58 billion in cash dividends.
The company is contingently liable with respect to certain legal proceedings and related matters. An unfavorable outcome that differs materially from current accrual estimates, if any, for one or more of the matters described under the heading "Product Liability, Workers Compensation and Other Personal Injury Matters" in Note 5 could have a material adverse effect on the company's financial position as well as its results of operations and cash flows.
In addition to the obligations on the balance sheet at December 31, 2025, which include, but are not limited to the agreement to acquire Clario Holdings, Inc. (Note 12), pension obligations (Note 14), unrecognized tax benefits (Note 7), debt (Note 3), operating leases (Note 13), and contingent consideration (Note 4), the company also has unconditional purchase obligations in the ordinary course of business that include agreements to purchase goods, services or fixed assets, pay royalties, and fund capital commitments pursuant to investments held by the company (Note 5).
Non-GAAP Measures
In addition to the financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures such as organic revenue growth, which is reported revenue growth, excluding the impacts of revenues from acquired/divested businesses and the effects of currency translation. We report organic revenue growth because Thermo Fisher management believes that in order to understand the company's short-term and long-term financial trends, investors may wish to consider the impact of acquisitions/divestitures and foreign currency translation on revenues. Thermo Fisher management uses organic revenue growth to forecast and evaluate the operational performance of the company as well as to compare revenues of current periods to prior periods.
We report adjusted operating income, adjusted operating income margin, adjusted other income/(expense), adjusted tax rate, and adjusted EPS. We believe that the use of these non-GAAP financial measures, in addition to GAAP financial measures, helps investors to gain a better understanding of our core operating results and future prospects, consistent with how management measures and forecasts the company's core operating performance, especially when comparing such results to previous periods, forecasts, and to the performance of our competitors. Such measures are also used by management in their financial and operating decision-making and for compensation purposes. To calculate these measures we exclude, as applicable:
•Certain transaction-related costs, including charges for the sale of inventories revalued at the date of acquisition, significant transaction-related third-party costs, changes in estimates of contingent acquisition-related consideration, and other costs associated with obtaining short-term financing commitments for pending/recent acquisitions. We exclude these costs because we do not believe they are indicative of our normal operating costs.
•Costs/income associated with restructuring activities and large-scale abandonments of product lines, such as reducing overhead and consolidating facilities. We exclude these costs because we believe that the costs related to restructuring activities and large-scale abandonment of product lines are not indicative of our normal operating costs.
•Equity in earnings/losses of unconsolidated entities; impairments of long-lived assets; and certain other gains and losses that are either isolated or cannot be expected to occur again with any predictability, including gains/losses on investments, the sale of businesses, product lines, and real estate, significant litigation-related matters, curtailments/settlements of pension plans, and the early retirement of debt. We exclude these items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods.
•The expense associated with the amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives of up to 20 years. Exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.
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•The noncontrolling interest and tax impacts of the above items and the impact of significant tax audits or events (such as changes in deferred taxes from enacted tax rate/law changes), the latter of which we exclude because they are outside of our normal operations and difficult to forecast accurately for future periods.
We report free cash flow, which is operating cash flow less net capital expenditures, to provide a view of the continuing operations' ability to generate cash for use in acquisitions and other investing and financing activities. The company also uses this measure as an indication of the strength of the company. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt service that are not deducted from the measure.
The non-GAAP financial measures of the company's results of operations and cash flows included in this Form 10-K are not meant to be considered superior to or a substitute for the company's results of operations prepared in accordance with GAAP. Reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth within the "Consolidated Results" and "Segment Results" sections and below.
(Dollars in millions except per share amounts) 2025 2024
Reconciliation of adjusted operating income and adjusted operating income margin
GAAP operating income $ 7,746 17.4 % $ 7,337 17.1 %
Cost of revenues adjustments (a)
64 0.1 % 47 0.1 %
Selling, general and administrative expenses adjustments (b)
207 0.5 % (8) 0.0 %
Restructuring and other costs (c)
362 0.8 % 379 0.9 %
Amortization of acquisition-related intangible assets 1,730 3.9 % 1,952 4.6 %
Adjusted operating income (non-GAAP measure)
$ 10,109 22.7 % $ 9,707 22.6 %
Reconciliation of adjusted other income/(expense)
GAAP other income/(expense) $ (12) $ 12
Adjustments (d) (6) (19)
Adjusted other income/(expense) (non-GAAP measure)
$ (19) $ (6)
Reconciliation of adjusted tax rate
GAAP tax rate 7.5 % 9.3 %
Adjustments (e) 2.9 % 1.2 %
Adjusted tax rate (non-GAAP measure)
10.4 % 10.5 %
Reconciliation of adjusted earnings per share
GAAP diluted earnings per share (EPS) attributable to Thermo Fisher Scientific Inc. $ 17.74 $ 16.53
Cost of revenues adjustments (a) 0.17 0.12
Selling, general and administrative expenses adjustments (b) 0.55 (0.02)
Restructuring and other costs (c) 0.96 0.99
Amortization of acquisition-related intangible assets 4.58 5.09
Other income/expense adjustments (d) (0.02) (0.05)
Income taxes adjustments (e) (1.21) (0.86)
Equity in earnings/losses of unconsolidated entities 0.11 0.11
Noncontrolling interests adjustments (f) 0.00 (0.05)
Adjusted EPS (non-GAAP measure)
$ 22.87 $ 21.86
Reconciliation of free cash flow
GAAP net cash provided by operating activities $ 7,818 $ 8,667
Purchases of property, plant and equipment (1,525) (1,400)
Proceeds from sale of property, plant and equipment 44 57
Free cash flow(non-GAAP measure)
$ 6,337 $ 7,324
(a)Adjusted results exclude accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations and charges for the sale of inventory revalued at the date of acquisition. Adjusted results in 2025 exclude $4 million of transaction-related costs. Adjusted results in 2024 also exclude $13 million of charges for inventory write-downs associated with large-scale abandonment of product lines.
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(b)Adjusted results exclude certain third-party expenses, principally transaction/integration costs, charges/credits for changes in estimates of contingent acquisition consideration, charges associated with product liability litigation, and accelerated depreciation on fixed assets to be abandoned due to facility consolidations.
(c)Adjusted results exclude restructuring and other costs consisting principally of severance, impairments of long-lived assets, net charges/credits for pre-acquisition litigation and other matters, net gains/losses on the sale of real estate, charges for environmental-related matters, and abandoned facility and other expenses of headcount reductions and real estate consolidations. Adjusted results in 2025 also exclude $51 million of charges for disposition of a consolidated joint venture.
(d)Adjusted results exclude net gains/losses on investments. Adjusted results in 2025 also exclude $8 million of settlement charges for pension plans.
(e)Adjusted results exclude incremental tax impacts for the reconciling items between GAAP and adjusted net income, incremental tax impacts as a result of tax rate/law changes, and the tax impacts from audit settlements.
(f)Adjusted results exclude the incremental impacts for the reconciling items between GAAP and adjusted net income attributable to noncontrolling interests.
Critical Accounting Policies and Estimates
The company's discussion and analysis of its financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent liabilities. On an on-going basis, management evaluates its estimates, including those related to acquisition-related measurements and income taxes. Management believes the most complex and sensitive judgments, because of their significance to the consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management bases its estimates on historical experience, current market and economic conditions and other assumptions that management believes are reasonable. The results of these estimates form the basis for judgments about the carrying value of assets and liabilities where the values are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The company believes the following represent its critical accounting policies and estimates used in the preparation of its financial statements:
Acquisition-related Measurements
Business Combinations
The company uses assumptions and estimates in determining the fair value of assets acquired and liabilities assumed in business combinations. The determinations of the fair value of intangible assets, which represent a significant portion of the purchase price in many of the company's acquisitions, require the use of significant judgment with regard to (i) the fair value and (ii) whether such intangibles are amortizable or non-amortizable and, if the former, the period and the method by which the intangible asset will be amortized. The company estimates the fair value of acquisition-related intangible assets principally based on projections of cash flows that will arise from identifiable intangible assets of acquired businesses, which include estimates of customer attrition and technology obsolescence rates, among others. The projected cash flows are discounted to determine the present value of the assets at the dates of acquisition. See Note 12 for additional information about our recent business combinations.
Goodwill
The company evaluates goodwill for impairment annually and when events occur or circumstances change that would more likely than not reduce the fair value of an asset below its carrying amount. Events or circumstances that might require an interim evaluation include unexpected adverse business conditions, economic factors, unanticipated technological changes or competitive activities, loss of key personnel and acts by governments and courts, among others. Goodwill totaled $49.36 billion at December 31, 2025 (Note 2). Estimates of discounted future cash flows require assumptions related to revenue and operating income margin growth rates, discount rates and other factors. The company also considers (i) peer revenues and earnings trading multiples from companies that have operational and financial characteristics that are similar to the respective reporting units and (ii) estimated weighted average costs of capital. Different assumptions from those made in the company's analysis could materially affect projected cash flows and the company's evaluation of goodwill for impairment.
The company performed the quantitative goodwill impairment test for all of its reporting units, except as discussed below. Determinations of fair value based on projections of discounted cash flows, which generally increased from the prior year projections primarily due to lower discount rates, and based on peer revenues and earnings trading multiples, which were generally consistent with the prior year, were sufficient to conclude that no impairments of goodwill existed at the end of the tenth fiscal month of 2025, the date of the company's annual impairment testing. There were no interim impairments of goodwill in 2025. There can be no assurance, however, that adverse events or conditions will not cause the fair values of these
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assets to decline. Should the fair values of the company's reporting units decline because of reduced operating performance, market declines, or other indicators of impairment, or as a result of changes in the discount rates, charges for impairment may be necessary.
With the completion of the filtration and separation business acquisition in September 2025, the company established a new reporting unit that solely consists of the legacy business, the book carrying value of which equaled its fair value as of the acquisition date. During its annual 2025 goodwill impairment assessment, the company performed a qualitative assessment of this reporting unit and determined that no events had occurred and no circumstances had changed that would more-likely-than-not reduce the fair value of the reporting unit below its carrying amount. As a result, the company did not perform the quantitative goodwill impairment test for this reporting unit. Given that the fair value of the reporting unit was not substantially in excess of its carrying value as of the annual 2025 assessment date, relatively small decreases in future cash flows versus anticipated results, decreases in peer trading multiples and/or increases in the weighted average cost of capital could result in impairment of goodwill. The reporting unit consisting of the filtration and separation business had $2.10 billion of goodwill, and an overall carrying value of $4.01 billion as of December 31, 2025.
Definite-lived Intangible Assets
Definite-lived intangible assets totaled $14.60 billion at December 31, 2025 (Note 2). Certain definite-lived intangible assets have largely independent cash flows. The company reviews these definite-lived intangible assets for impairment individually when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. Actual cash flows arising from a particular intangible asset could vary from projected cash flows, which could imply different carrying values from those established at the dates of acquisition and which could result in impairment of such asset. Most of the company's definite-lived intangible assets are used in conjunction with other assets, such as property, plant and equipment and operating lease right-of-use assets. In these situations, the company considers the asset groups to be the units of account for impairment testing. The company recorded definite-lived intangible asset impairments of $0.01 billion in 2023.
Income Taxes
Unrecognized Tax Benefits
In the ordinary course of business there is inherent uncertainty in quantifying the company's income tax positions. The company assesses income tax positions and records tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the company has recorded the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Should tax return positions that the company expects are sustainable not be sustained upon audit, the company could be required to record an incremental tax provision for such taxes. The company's liability for these unrecognized tax benefits totaled $0.42 billion at December 31, 2025, compared to $0.52 billion at December 31, 2024, primarily as a result of audit settlements and reductions of prior year tax positions (Note 7).
The company operates in numerous countries under many legal forms and, as a result, is subject to the jurisdiction of numerous domestic and non-U.S. tax authorities, as well as to tax agreements and treaties among these governments. Determination of taxable income in any jurisdiction requires the company to interpret the related tax laws and regulations and the use of estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions, permissible revenue recognition methods under the tax law and the sources and character of income and tax credits. Changes in tax laws, regulations, agreements and treaties, currency exchange restrictions or the company's level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of current and deferred tax balances and hence the company's net income.
Valuation Allowances
The company estimates the degree to which tax assets will result in a benefit, after consideration of all positive and negative evidence, and provides a valuation allowance for tax assets that it believes will more likely than not go unused. In situations in which the company has been able to determine that its deferred tax assets will be realized, that determination generally relies on future reversals of taxable temporary differences and expected future taxable income. If it becomes more likely than not that a tax asset will be used, the company reverses the related valuation allowance. Any such reversals are recorded as a reduction of the company's tax provision. The company's tax valuation allowance totaled $3.56 billion and $1.04 billion at December 31, 2025 and December 31, 2024, respectively (Note 7). Should the company's actual future taxable income by tax jurisdiction vary from estimates, additional allowances or reversals thereof may be necessary.
THERMO FISHER SCIENTIFIC INC.
Recent Accounting Pronouncements
A description of recently issued accounting standards is included under the heading "Recent Accounting Pronouncements" in Note 1.
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