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Business Environment Since early 2025, the United States has made various changes to its trade policy resulting in new or higher tariffs on goods imported from numerous countries. We are principally a North American manufacturer and 69% of our 2025 revenues were generated in the U.S. Many of our aircraft materials and components qualify under the rules of the United States-Mexico-Canada Agreement for preferential treatment on tariffs imposed by the U.S. on imports from Canada and Mexico. In addition, our operations outside of North America primarily source materials and components from outside of North America and manufacture products for non-U.S. customers. Many of our businesses with operations in North America also source materials and components from outside of North America. These businesses have been and will continue to be impacted by these imposed U.S. tariffs. In order to mitigate these impacts our businesses have been managing, and will continue to manage, pricing and supply chain optimization strategies. To date, we have not experienced a material adverse impact from these tariffs. The U.S. tariffs were imposed under various legal authorities, including the International Emergency Economic Powers Act (IEEPA). On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the IEEPA were not authorized by the statute. During the second quarter of 2026, we submitted refund requests for the IEEPA tariffs and have begun to receive refunds for previously paid tariffs. We will continue to evaluate the ongoing impact of tariffs and any further developments or changes in global tariff policies on our business and financial position. Consolidated Results of Operations Three Months Ended Six Months Ended (Dollars in millions) July 4, 2026 June 28, 2025 % Change July 4, 2026 June 28, 2025 % Change Revenues $ 3,827 $ 3,716 3% $ 7,522 $ 7,022 7% Cost of sales 3,133 3,007 4% 6,156 5,679 8% Gross margin as a % of Manufacturing revenues 17.8% 18.8% 17.8% 18.8% Research and development costs $ 116 $ 137 (15)% $ 236 $ 269 (12)% Selling and administrative expense 311 303 3% 632 601 5% Interest expense, net 33 31 6% 67 60 12% Special charges — 4 (100)% — 4 (100)% Non-service components of pension and postretirement income, net 70 67 4% 140 133 5% An analysis of our consolidated operating results is set forth below. A more detailed analysis of our segments’ operating results is provided in the Segment Analysis section on pages 23 to 26. Revenues Revenues increased $111 million, 3%, in the second quarter of 2026, compared with the second quarter of 2025. The revenue increase primarily included the following factors: •Higher Bell revenues of $58 million due to higher military aircraft and support programs revenues of $47 million and higher commercial revenues of $11 million. •Higher Textron Systems revenues of $23 million, largely due to higher volume. •Higher Textron Aviation revenues of $22 million, reflecting higher aircraft revenues of $17 million and higher aftermarket parts and services revenues of $5 million. •Higher Industrial revenues of $9 million, reflecting higher revenues of $17 million at Kautex, partially offset by lower revenues of $8 million at Textron Specialized Vehicles. Revenues increased $500 million, 7%, in the first half of 2026, compared with the first half of 2025. The revenue increase primarily included the following factors: •Higher Textron Aviation revenues of $291 million, reflecting higher aircraft revenues of $238 million, largely due to higher volume and mix, and higher aftermarket parts and services revenues of $53 million. •Higher Bell revenues of $145 million, due to higher military aircraft and support programs revenues of $208 million, largely from the MV-75 program, partially offset by lower commercial revenues of $63 million. •Higher Textron Systems revenues of $62 million, largely due to higher volume. •Higher Industrial revenues of $3 million, reflecting higher revenues of $53 million at Kautex, primarily due to a favorable impact from foreign exchange rate fluctuations, higher pricing and higher volume and mix, largely offset by lower 21 Table of Contents revenues of $50 million at Textron Specialized Vehicles, mostly due to the impact from the disposition of the Powersports business in April 2025, partially offset by higher pricing. Cost of Sales Cost of sales includes cost of products and services sold for the Manufacturing group. Cost of sales increased $126 million, 4%, in the second quarter of 2026, compared with the second quarter of 2025, primarily due to a $67 million impact from inflation and higher net volume and mix of $44 million. Gross margin as a percentage of Manufacturing revenues decreased 100 basis points in the second quarter of 2026, primarily due to lower margin at the Bell segment. Cost of sales increased $477 million, 8%, in the first half of 2026, compared with the first half of 2025, largely due to higher net volume and mix of $332 million and a $148 million impact from inflation and higher LIFO inventory provision, partially offset by the impact from the Powersports disposition. Gross margin as a percentage of Manufacturing revenues decreased 100 basis points in the first half of 2026, primarily due to lower margin at the Bell segment. Research and Development Costs Research and development costs decreased $21 million, 15%, in the second quarter of 2026, compared with the second quarter of 2025, largely due to a decrease of $11 million at the Bell segment, reflecting a reduction in costs on several programs, and a decrease of $6 million at the Textron Systems segment, due to a reduction in costs on certain U.S. Government development programs. Research and development costs decreased $33 million, 12%, in the first half of 2026, compared with the first half of 2025, largely reflecting lower costs of $13 million and $7 million at the Bell and Textron Systems segments, respectively, as described above, along with $9 million in lower costs related to certain development projects reported within corporate expenses as discussed in the Segment Analysis section below. Selling and Administrative Expense Selling and administrative expense increased $8 million, 3%, and $31 million, 5%, in the second quarter and first half of 2026, respectively, compared with the corresponding periods of 2025. The increase in selling and administrative expense in the first half of 2026 was primarily due to higher share-based and other compensation expense. Interest Expense, Net Interest expense, net includes interest expense for both the Finance and Manufacturing borrowing groups, with interest on intercompany borrowings eliminated, and interest income earned on cash and equivalents for the Manufacturing borrowing group. In the second quarter and first half of 2026, interest expense, net increased $2 million, 6%, and $7 million, 12%, respectively, compared with the corresponding periods of 2025, primarily due to higher average debt outstanding. Gross interest expense totaled $40 million and $39 million in the second quarter of 2026 and 2025, respectively, and $83 million and $77 million in the first half of 2026 and 2025, respectively. Income Taxes Our effective tax rate was 18.4% and 18.0% for the second quarter and first half of 2026, respectively. The effective tax rate was lower than the U.S. federal statutory rate of 21%, primarily due to the favorable impact of research and development credits and tax deductions for foreign-derived deduction eligible income, which replaced foreign-derived intangible income beginning in 2026. Our effective tax rate for the second quarter and first half of 2025 was 18.6% and 16.6%, respectively. The effective tax rate was lower than the U.S. federal statutory rate of 21%, primarily due to the favorable impact of research and development credits and tax deductions for foreign-derived intangible income. Backlog Our backlog is summarized below: (In millions) July 4, 2026 January 3, 2026 Textron Aviation $ 8,028 $ 7,724 Bell 7,538 7,795 Textron Systems 3,348 3,304 Total backlog $ 18,914 $ 18,823 22 Table of Contents Segment Analysis We operate in, and report financial information for, the following five operating segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance. Effective January 4, 2026, the beginning of our 2026 fiscal year, the business activities of the Textron eAviation segment were realigned within Textron's other operating segments resulting in the elimination of the Textron eAviation segment as a separate reporting segment. Under the segment realignment, a significant part of Textron eAviation, including Pipistrel, became part of the Textron Aviation segment to enable the business to more effectively leverage the development, manufacturing and sales expertise at Textron Aviation. In addition, Textron eAviation’s manned and unmanned products for military applications and related research and development activities are included in the results of the Textron Systems segment, which is best suited to provide more direct access to the targeted customer base for these products. Lastly, certain Textron eAviation research and development activities encompassing digital flight control and air vehicle management systems, which we expect will benefit several of our segments, are reported within corporate expenses. The prior period has been recast to reflect the segment realignment. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes the non-service components of pension and postretirement income, net; LIFO inventory provision; intangible asset amortization; interest expense, net for Manufacturing group; certain corporate expenses; gains/losses on major business dispositions; and special charges. The operating costs used to derive segment profit for our manufacturing segments includes cost of sales, research and development costs and selling and administrative expense. The cost of sales discussed in this Segment Analysis section excludes the LIFO inventory provision and intangible asset amortization discussed above that are reported within Cost of products sold or Cost of services sold on the Consolidated Statements of Operations. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense. In our discussion of comparative results for the Manufacturing group, material changes in revenues and segment profit for our commercial businesses typically are expressed in terms of product line revenues, including volume and mix and pricing; foreign exchange; acquisitions and dispositions; inflation; manufacturing efficiency; and changes in research and development costs and selling and administrative expense. For revenues, volume and mix represents changes in revenues from increases or decreases in the number of units delivered or services provided and the composition of products and/or services sold. For segment profit, volume and mix represents a change due to the number of units delivered or services provided and the composition of products and/or services sold at different profit margins. Pricing represents changes in unit pricing. Foreign exchange is the change resulting from translating foreign-denominated amounts into U.S. dollars at exchange rates that are different from the prior period. Revenues generated by acquired businesses are reflected in Acquisitions for a twelve-month period, while reductions in revenues and segment profit from the sale of businesses are reflected as Dispositions. Inflation represents higher material, wages, benefits, pension service cost or other costs. Manufacturing efficiency includes changes in material, labor and overhead variances to standards, typically due to scrap rates, labor efficiency or inefficiencies, facility usage and other manufacturing productivity inputs. Approximately 27% of our 2025 revenues were derived from contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program. For our segments that contract with the U.S. Government, material changes in revenues related to these contracts are expressed in terms of volume. Changes in segment profit for these contracts are typically expressed in terms of volume and mix and contract performance, which includes cumulative catch-up adjustments associated with a) revisions to the transaction price that may reflect contract modifications or changes in assumptions related to award fees and other variable consideration or b) changes in the total estimated costs at completion due to improved or deteriorated operating performance among other factors. See the Critical Accounting Estimates - Revenue Recognition section in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2025 Annual Report on Form 10-K for a discussion of the factors that impact our estimated costs. Textron Aviation Three Months Ended Six Months Ended (Dollars in millions) July 4, 2026 June 28, 2025 % Change July 4, 2026 June 28, 2025 % Change Revenues: Aircraft $ 1,032 $ 1,015 2% $ 1,986 $ 1,748 14% Aftermarket parts and services 512 507 1% 1,043 990 5% Total revenues 1,544 1,522 1% 3,029 2,738 11% Cost of sales 1,204 1,178 2% 2,357 2,111 12% Research and development costs 58 59 (2)% 114 119 (4)% Selling and administrative expense 117 115 2% 239 216 11% Segment profit $ 165 $ 170 (3)% $ 319 $ 292 9% Profit margin 10.7% 11.2% 10.5% 10.7% 23 Table of Contents Textron Aviation’s revenues increased $22 million, 1%, in the second quarter of 2026, compared with the second quarter of 2025, reflecting higher aircraft revenues of $17 million and higher aftermarket parts and services revenues of $5 million. The increase in aircraft revenues was due to higher pricing, partially offset by lower volume and mix. The decrease in volume and mix largely reflected lower Citation jet and defense volume, partially offset by higher commercial turboprop volume. We delivered 40 Citation jets and 44 commercial turboprops in the second quarter of 2026, compared with 49 Citation jets and 34 commercial turboprops in the second quarter of 2025. Textron Aviation’s revenues increased $291 million, 11%, in the first half of 2026, compared with the first half of 2025, reflecting higher aircraft revenues of $238 million and higher aftermarket parts and services revenues of $53 million. The increase in aircraft revenues was primarily due to higher volume and mix, largely reflecting higher commercial turboprop volume and the mix of Citation jets sold in the period, partially offset by lower defense volume. We delivered 77 Citation jets and 79 commercial turboprops in the first half of 2026, compared with 80 Citation jets and 64 commercial turboprops in the first half of 2025. The increase in aftermarket parts and services revenues was primarily due to higher pricing. Textron Aviation’s cost of sales increased $26 million, 2%, in the second quarter of 2026, compared with the second quarter of 2025, primarily reflecting inflation of $47 million, partially offset by lower aircraft volume. Cost of sales increased $246 million, 12%, in the first half of 2026, compared with the first half of 2025, primarily reflecting higher aircraft volume and inflation of $92 million. Textron Aviation's selling and administrative expense increased $2 million, 2%, in the second quarter of 2026, and increased $23 million, 11%, in the first half of 2026, compared with the corresponding periods of 2025. The increase in the first half of 2026 was primarily due to higher compensation expense. Textron Aviation's segment profit decreased $5 million, 3%, in the second quarter of 2026, compared with the second quarter of 2025, primarily due to an unfavorable impact from manufacturing inefficiencies and lower aircraft volume and mix, partially offset by lower warranty costs. Textron Aviation's segment profit increased $27 million, 9%, in the first half of 2026, compared with the first half of 2025, primarily due to higher aircraft volume and mix, partially offset by an unfavorable impact from manufacturing inefficiencies and higher selling and administrative expense described above. Bell Three Months Ended Six Months Ended (Dollars in millions) July 4, 2026 June 28, 2025 % Change July 4, 2026 June 28, 2025 % Change Revenues: Military aircraft and support programs $ 695 $ 648 7% $ 1,490 $ 1,282 16% Commercial helicopters, parts and services 379 368 3% 654 717 (9)% Total revenues 1,074 1,016 6% 2,144 1,999 7% Cost of sales 917 841 9% 1,821 1,644 11% Research and development costs 27 38 (29)% 64 77 (17)% Selling and administrative expense 55 57 (4)% 112 108 4% Segment profit $ 75 $ 80 (6)% $ 147 $ 170 (14)% Profit margin 7.0% 7.9% 6.9% 8.5% Bell’s military aircraft and support programs revenues increased $47 million, 7%, in the second quarter of 2026, compared with the second quarter of 2025, largely due to higher volume on H-1 production and the MV-75 program. Commercial helicopters, parts and services revenues increased $11 million, 3%, in the second quarter of 2026, compared with the second quarter of 2025, primarily due to higher pricing. We delivered 36 commercial helicopters in the second quarter of 2026, compared with 32 commercial helicopters in the second quarter of 2025. Bell’s military aircraft and support programs revenues increased $208 million, 16%, in the first half of 2026, compared with the first half of 2025, reflecting higher volume on the MV-75 program and H-1 production, partially offset by lower volume on V-22 production and on military sustainment programs. Commercial helicopters, parts and services revenues decreased $63 million, 9%, in the first half of 2026, compared with the first half of 2025, primarily due to lower volume and mix. We delivered 56 commercial helicopters in the first half of 2026, compared with 61 commercial helicopters in the first half of 2025. Bell’s cost of sales increased $76 million, 9%, and $177 million, 11%, in the second quarter and first half of 2026, respectively, compared with the corresponding periods of 2025, largely due to higher net volume and mix described above. 24 Table of Contents Bell's research and development costs decreased $11 million, 29%, and $13 million, 17%, in the second quarter and first half of 2026, respectively, compared with the corresponding periods of 2025, reflecting a reduction in costs on several programs. Bell’s segment profit decreased $5 million, 6%, in the second quarter of 2026, compared with the second quarter of 2025, and its profit margin decreased 90 basis points, primarily due to an unfavorable impact from contract performance and from the mix of military programs described above, partially offset by lower research and development costs. Bell's segment profit decreased $23 million, 14%, in the first half of 2026, compared with the first half of 2025, and its profit margin decreased 160 basis points, largely reflecting an unfavorable impact from the mix of military programs described above, lower commercial volume and mix and contract performance, partially offset by lower research and development costs. The U.S. Government is pursuing an ATR request for $350 million in additional fiscal 2026 funding for the MV-75 program. The U.S. Government has advised that it is not obligated to reimburse Bell for costs incurred beyond currently obligated funding and performance beyond the allotted funds is at Bell’s own risk. If the additional funding is received, it will be used to offset the costs incurred on the program in the third quarter of 2026. Subsequent to the end of our second quarter, in mid-July 2026, Bell substantially exhausted all available fiscal 2026 program funding and has continued performing work at its own risk. If additional funding is not approved and obligated, we could incur unreimbursed costs and recognize an unfavorable cumulative catch-up program adjustment of up to approximately $120 million, assuming $350 million in costs incurred in excess of available funding which would also negatively impact our cash flows by approximately $350 million. For additional information, see the MV-75 Program - Funding section in Note 12. Commitments and Contingencies. As the MV-75 program continues to progress, we expect that we will be awarded the long-lead Low-Rate Initial Production (LRIP) phase of the contract in late 2026 or early 2027. Upon award of the LRIP option, which is largely fixed price, we expect to record an unfavorable cumulative catch-up program adjustment, reflecting higher costs than originally anticipated from when the program was bid, in the range of $60 million to $110 million. We expect the overall MV-75 program to continue to generate a positive profit margin after the adjustment. Textron Systems Three Months Ended Six Months Ended (Dollars in millions) July 4, 2026 June 28, 2025 % Change July 4, 2026 June 28, 2025 % Change Revenues $ 347 $ 324 7% $ 685 $ 623 10% Cost of sales 267 244 9% 525 465 13% Research and development costs 10 16 (38)% 19 26 (27)% Selling and administrative expense 26 24 8% 55 54 2% Segment profit $ 44 $ 40 10% $ 86 $ 78 10% Profit margin 12.7% 12.3% 12.6% 12.5% Textron Systems’ revenues increased $23 million, 7%, in the second quarter of 2026, compared with the second quarter of 2025, primarily due to higher volume on armored land vehicles and military training and support services provided by Airborne Tactical Advantage Company (ATAC). Textron Systems’ revenues increased $62 million, 10%, in the first half of 2026, compared with the first half of 2025, primarily due to higher volume on military training and support services provided by ATAC and the Ship-to-Shore Connector program. Textron Systems’ cost of sales increased $23 million, 9%, and $60 million, 13%, in the second quarter and first half of 2026, respectively, compared with the corresponding periods of 2025, primarily due to higher net volume described above. Textron Systems’ research and development costs decreased $6 million, 38%, and $7 million, 27%, in the second quarter and first half of 2026, respectively, compared with the corresponding periods of 2025, primarily due to a reduction in costs on certain U.S. Government development programs. Textron Systems’ segment profit increased $4 million, 10%, in the second quarter of 2026 compared with the second quarter of 2025, primarily due to lower research and development costs. Segment profit increased $8 million, 10%, in the first half of 2026, compared with the first half of 2025, primarily due to higher volume described above and lower research and development costs. 25 Table of Contents Industrial Three Months Ended Six Months Ended (Dollars in millions) July 4, 2026 June 28, 2025 % Change July 4, 2026 June 28, 2025 % Change Revenues: Kautex $ 500 $ 483 4% $ 986 $ 933 6% Textron Specialized Vehicles 348 356 (2)% 648 698 (7)% Total revenues 848 839 1% 1,634 1,631 —% Cost of sales 697 698 —% 1,358 1,376 (1)% Research and development costs 19 20 (5)% 35 34 3% Selling and administrative expense 73 67 9% 142 137 4% Segment profit $ 59 $ 54 9% $ 99 $ 84 18% Profit margin 7.0% 6.4% 6.1% 5.2% Industrial segment revenues increased $9 million, 1%, in the second quarter of 2026, compared with the second quarter of 2025. Kautex revenues increased $17 million, 4%, largely due to a favorable impact from pricing and from foreign exchange rate fluctuations of $8 million. Textron Specialized Vehicles' revenues decreased $8 million, 2%, reflecting lower volume and mix and the impact from the disposition of the Powersports business in April 2025, partially offset by higher pricing. Industrial segment revenues increased $3 million in the first half of 2026, compared with the first half of 2025. Kautex revenues increased $53 million, 6%, due to a favorable impact of $28 million from foreign exchange rate fluctuations, higher pricing and higher volume and mix. Textron Specialized Vehicles' revenues decreased $50 million, 7%, largely reflecting a $61 million impact from the disposition of the Powersports business, partially offset by higher pricing. Industrial's cost of sales decreased $1 million and $18 million, 1%, in the second quarter and first half of 2026, respectively, compared with the corresponding periods of 2025. The decrease in the first half of 2026 primarily reflected the impact from the disposition, partially offset by an unfavorable impact from foreign exchange rate fluctuations and higher net volume and mix discussed above. Industrial's segment profit increased $5 million, 9%, in the second quarter of 2026, compared with the second quarter of 2025, primarily due to higher pricing, net of inflation, partially offset by lower volume and mix. Pricing, net of inflation includes $21 million of tariffs recovered in the second quarter of 2026 that were previously imposed under the IEEPA as described in the Business Environment section on page 21. Industrial's segment profit increased $15 million, 18%, in the first half of 2026, compared with the first half of 2025, primarily due to manufacturing efficiencies, which included the benefit of cost reductions resulting from prior year restructuring activities, and higher pricing, net of inflation, partially offset by lower net volume and mix. Pricing, net of inflation includes $21 million of tariff recoveries as described above. Finance Three Months Ended Six Months Ended (In millions) July 4, 2026 June 28, 2025 July 4, 2026 June 28, 2025 Revenues $ 14 $ 15 $ 30 $ 31 Selling and administrative expense — 2 (1) 4 Interest expense, net 4 5 9 9 Segment profit $ 10 $ 8 $ 22 $ 18 Finance segment revenues decreased $1 million in both the second quarter and first half of 2026, compared with the corresponding periods of 2025. Segment profit increased $2 million and $4 million in the second quarter and first half of 2026, respectively, compared with the corresponding periods of 2025, primarily related to recovery of amounts that were previously written off. 26 Table of Contents Liquidity and Capital Resources Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems and Industrial segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated subsidiaries. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements. Key information that is utilized in assessing our liquidity is summarized below: (Dollars in millions) July 4, 2026 January 3, 2026 Manufacturing group Cash and equivalents $ 1,436 $ 1,940 Debt 3,466 3,539 Shareholders’ equity 8,054 7,875 Capital (debt plus shareholders’ equity) 11,520 11,414 Net debt (net of cash and equivalents) to capital 20% 17% Debt to capital 30% 31% Finance group Cash and equivalents $ 170 $ 85 Debt 339 339 We believe that our calculations of debt to capital and net debt to capital are useful measures as they provide a summary indication of the level of debt financing (i.e., leverage) that is in place to support our capital structure, as well as to provide an indication of the capacity to add further leverage. We expect to have sufficient cash to meet our needs based on our existing cash balances, the cash we expect to generate from our manufacturing operations and the availability of our existing credit facility. Credit Facilities and Other Sources of Capital Textron has a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which $100 million is available for the issuance of letters of credit. We may elect to increase the aggregate amount of commitments under the facility to up to $1.3 billion by designating an additional lender or by an existing lender agreeing to increase its commitment. The facility expires in October 2030 and provides for two one-year extensions at our option with the consent of lenders representing a majority of the commitments under the facility. At July 4, 2026 and January 3, 2026, there were no amounts borrowed against the facility and there were no letters of credit issued and outstanding under the facility. We also maintain an effective shelf registration statement filed with the Securities and Exchange Commission that allows us to issue an unlimited amount of public debt and other securities. Manufacturing Group Cash Flows Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statements of Cash Flows are summarized below: Six Months Ended (In millions) July 4, 2026 June 28, 2025 Operating activities $ 128 $ 281 Investing activities (219) (38) Financing activities (409) (299) In the first half of 2026, cash flows from operating activities decreased $153 million to $128 million, compared with $281 million in the first half of 2025, largely due to changes in working capital, partially offset by $62 million in lower net income tax payments. Cash flows used in investing activities included $228 million and $134 million of capital expenditures in the first half of 2026 and 2025, respectively. In the first half of 2025, cash flows used in investing activities also included $57 million of net proceeds from corporate-owned life insurance policies and $16 million of net proceeds from the disposition of the Powersports business. 27 Table of Contents Cash flows used in financing activities in the first half of 2026 included $377 million of cash paid to repurchase an aggregate of 4.1 million shares of our common stock and $75 million of payments on long-term debt, partially offset by $61 million of proceeds from the exercise of stock options granted to employees. In the first half of 2025, cash flows used in financing activities included $429 million of cash paid to repurchase an aggregate of 5.8 million shares of our common stock and $353 million of payments on long-term debt, partially offset by $495 million of net proceeds from the issuance of long-term debt. Finance Group Cash Flows Cash flows for the Finance group as presented in our Consolidated Statements of Cash Flows are summarized below: Six Months Ended (In millions) July 4, 2026 June 28, 2025 Operating activities $ 13 $ 9 Investing activities 72 29 Financing activities — (11) The Finance group’s cash flows from investing activities included finance receivable originations of $71 million and $111 million in the first half of 2026 and 2025, respectively, and collections on finance receivables totaling $115 million and $81 million, respectively. In the first half of 2026 and 2025, investing cash flows also included $24 million and $59 million of proceeds from the disposition of non-captive assets, respectively. In the first half of 2025, financing activities included payments on long-term and nonrecourse debt of $11 million. Consolidated Cash Flows The consolidated cash flows from continuing operations after elimination of activity between the borrowing groups, are summarized below: Six Months Ended (In millions) July 4, 2026 June 28, 2025 Operating activities $ 187 $ 264 Investing activities (193) 17 Financing activities (409) (310) In the first half of 2026, cash flows from operating activities decreased $77 million to $187 million, compared with $264 million in the first half of 2025, largely due to changes in working capital, partially offset by a net cash inflow of $72 million from captive financing activities and $64 million in lower net income tax payments. Cash flows used in investing activities in the first half of 2026 included $228 million of capital expenditures, partially offset by $24 million of proceeds from the disposition of non-captive assets. In the first half of 2025, cash flows from investing activities included $59 million of proceeds from the disposition of non-captive assets, $57 million of net proceeds from corporate-owned life insurance policies and $16 million of net proceeds from the disposition of the Powersports business, offset by $134 million of capital expenditures. Cash flows used in financing activities in the first half of 2026 included $377 million of cash paid to repurchase shares of our outstanding common stock and $75 million of payments on long-term debt and nonrecourse debt, partially offset by $61 million of proceeds from the exercise of stock options granted to employees. In the first half of 2025, cash flows used in financing activities included $429 million of cash paid to repurchase shares of our outstanding common stock and $364 million of payments on long-term and nonrecourse debt, partially offset by $495 million of net proceeds from the issuance of long-term debt. Captive Financing and Other Intercompany Transactions The Finance group provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters manufactured by our Manufacturing group, otherwise known as captive financing. In the Consolidated Statements of Cash Flows, cash received from customers is reflected as operating activities when received from third parties. However, in the cash flow information provided for the separate borrowing groups, cash flows related to captive financing activities are reflected based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and is financed by the Finance group, the origination of the finance receivable is recorded within investing activities as a cash outflow in the Finance group’s statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received from the Finance group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is transferred between the two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of the original financing. These captive financing activities, along with all significant intercompany transactions, are reclassified or eliminated from the Consolidated Statements of Cash Flows. 28 Table of Contents Reclassification adjustments included in the Consolidated Statements of Cash Flows on page 6 are summarized below: Six Months Ended (In millions) July 4, 2026 June 28, 2025 Reclassification adjustments from investing activities to operating activities: Finance receivable originations for Manufacturing group inventory sales $ (56) $ (90) Cash received from customers 102 64 Total reclassification adjustments from investing activities to operating activities $ 46 $ (26) Critical Accounting Estimates Update Our Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements. The accounting estimates that we believe are most critical to the portrayal of our financial condition and results of operations are reported in Item 7 of our 2025 Annual Report on Form 10-K. The following section provides an update of the year-end disclosure. Revenue Recognition A substantial portion of our revenues is related to long-term contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program, for the design, development, manufacture or modification of aerospace and defense products as well as related services. We generally use the cost-to-cost method to measure progress for these contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred. Changes in our estimate of the total expected cost or in the transaction price for a contract typically impact our profit booking rate. We utilize the cumulative catch-up method of accounting to recognize the impact of these changes on our profit booking rate for a contract. Under this method, the inception-to-date impact of a profit adjustment on a contract is recognized in the period the adjustment is identified. The impact of our cumulative catch-up adjustments on segment profit recognized in prior periods is presented below: Three Months Ended Six Months Ended (In millions) July 4, 2026 June 28, 2025 July 4, 2026 June 28, 2025 Gross favorable $ 36 $ 34 $ 61 $ 61 Gross unfavorable (36) (26) (51) (36) Net adjustments $ — $ 8 $ 10 $ 25 29 Table of Contents Forward-Looking Information Certain statements in this Quarterly Report on Form 10-Q and other oral and written statements made by us from time to time are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “guidance,” “project,” “target,” “potential,” “will,” “should,” “could,” “likely” or “may” and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In addition to those factors described in our 2025 Annual Report on Form 10-K under “Risk Factors,” among the factors that could cause actual results to differ materially from past and projected future results are the following: •Interruptions in the U.S. Government’s ability to fund its activities, pay its obligations, and/or conduct government functions necessary for the certification of aircraft and aircraft parts and other activities of our businesses; •Changing priorities or reductions in the U.S. Government defense budget, including those related to military operations in foreign countries; •Our ability to perform as anticipated and to control costs under contracts with the U.S. Government; •The U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards; •Changes in foreign military funding priorities or budget constraints and determinations, or changes in government regulations or policies on the export and import of military and commercial products; •Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our products; •Volatility in interest rates or foreign exchange rates and inflationary pressures; •Risks related to our international business, including establishing and maintaining facilities in locations around the world and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners in connection with international business, including in emerging market countries; •Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables; •Performance issues with key suppliers or subcontractors; •Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products; •Our ability to control costs and successfully implement various cost-reduction activities; •The efficacy of research and development investments to develop new products or unanticipated expenses in connection with the launching of significant new products or programs; •The timing of our new product launches or certifications of our new aircraft products; •Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and technologies desired by our customers; •Pension plan assumptions and future contributions; •Demand softness or volatility in the markets in which we do business; •Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; •Difficulty or unanticipated expenses in connection with integrating acquired businesses; •The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenue and profit projections; •The impact of changes in tax legislation; •The risk of disruptions to our business and the business of our suppliers, customers and other business partners due to unexpected events, such as pandemics, natural disasters, acts of war, strikes, terrorism, social unrest or other societal, geopolitical or macroeconomic conditions; •Risks related to changing U.S. and foreign trade policies, including increased trade restrictions or tariffs; •The ability of our businesses to hire, train and retain the highly skilled personnel necessary for our businesses to succeed; •Uncertainty related to the Company's ability to satisfy the necessary conditions to consummate the separation of its Industrial segment; •Risks related to the Company’s ability to effect a successful separation and realize the anticipated benefits of the separation on a timely basis or at all; and •The risk that additional U.S. Government fiscal 2026 funding for the MV-75 program is not approved and obligated pursuant to a contract modification and we incur significant unreimbursed costs. 30 Table of Contents