AND FINANCIAL REVIEW AND PROSPECTS The information contained in this section should be read in conjunction with our audited consolidated financial statements and the related notes thereto contained in this annual report. Our financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis may contain forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report. 39 A. OPERATING RESULTS OVERVIEW We are a pure-play independent specialty foundry dedicated to providing wafers and engineering services based on the design specifications of our customers. As a pure-play foundry, we do not offer products of our own. We currently offer process technology geometries mainly consisting of 0.35, 0.18, and 0.13-micron on 200-mm wafers and 65 nanometer on 300-mm wafers. We also provide design support and complementary technical services. Our customers and/or our customers’ customers use our wafers in their end products, which are sold to and/or used in diverse markets, including consumer applications, personal computers, wireless and wired communication (including data centers), imaging, automotive, industrial, aerospace and medical devices. The technology platforms we offer are focused on the mega trends of seamless connectivity, green initiatives and interactive smart systems. For the year ended December 31, 2025, our revenues were derived from customers located around the globe, of which 42% were located in the United States, 13% in Japan, 39% in Asia (excluding Japan) and 6% in Europe, as compared to 42%, 16%, 33% and 9%, respectively, for the year ended December 31, 2024. For the year ended December 31, 2025, 11% of our revenues were derived from NTCJ, 39% of our revenues were derived from an additional seven customers, each comprising between 4% to 7% of our revenues, and the remaining 50% of our revenues were derived from many other smaller customers, as compared to 13% derived from NTCJ, 27% derived from an additional four customers, each comprising between 3% to 11% of our revenues, and the remaining 60% derived from many other smaller customers for the year ended December 31, 2024. In order to attract and retain our customers, in 2025 and 2024, we made gross investments of $444 million and $436 million, respectively, in property and equipment across the fabs in Israel, Italy, the United States and Japan. KEY FACTORS AFFECTING OUR RESULTS The following are key factors that impact our results of operations: Ability to attract and retain customers. We are a trusted, customer-oriented service provider that has built a solid reputation in the foundry industry for over thirty years. We have built strong relationships with our customers. Our consistent focus on providing high-quality, value-add services, including engineering and design support, has allowed us to attract customers seeking to work with a proven provider of foundry solutions. Our emphasis on close collaboration with customers, and on accelerating time-to-market and the performance of their next-generation products, has enabled us to maintain a high customer retention rate while increasing the number of new customers and products. We continuously aim to expand our capacity footprint and business by addressing the future needs of our existing customers and attracting new customers that will utilize our existing facilities, some of which have recently undergone additional capacity expansion projects. We seek to acquire external capacity through acquisitions of existing fabs or by establishing new fabs, as we have done in the past, independently or through third-party collaborations, utilizing existing resources or additional funding (which may include cash, equity or in-kind investment). We also offer a wide range of support services for the establishment of new facilities or the ramp-up of existing facilities owned by third parties, using our technological, operational and integration expertise. For these services, we receive payments based on the achievement of pre-defined milestones and may also be entitled to certain capacity allocation and other rights. 40 Design wins with new and existing customers. We work with our customers and potential customers to understand their product roadmaps and strategies. We consider design wins to be critical to our future success. We define a design win as the successful completion of the evaluation stage, where a customer has verified that our platform process meets its requirements and has qualified our libraries and IP for its products. The revenue generated from each design win can vary significantly. Our long-term sales expectations are based on forecasts from customers and internal estimates of customer demand, factoring in expected time to market for end-customer products incorporating our products and associated revenue potential, as well as internal estimates of overall demand based on historical trends. Selling prices and operating costs. Our gross and operating margin is influenced by various factors, including market demand for semiconductor wafers, pricing changes, shipment volumes, new product introductions, changes in product mix, changes in the purchase price of raw materials (including silicon starting material wafers), and yields. In general, newly introduced products and products with higher performance and more features tend to be priced higher than older, more mature products. Average selling prices in the semiconductor industry typically decline as products mature. Consistent with this historical trend, we expect that the average selling prices of our products will decline as they mature. In the normal course of business, we will seek to offset the effect of declining average selling prices on existing products by reducing operating costs and introducing new and higher value-add products. Newly introduced fabs increase our operating costs, while selling prices and manufacturing volumes may not be sufficient to cover them entirely. If we are unable to maintain overall average selling prices or offset any declines in average selling prices with realized savings in our operating costs, our gross margin will decline. Investment in capacity growth. We have invested, and intend to continue to invest, in expanding our capacity, developing products to support our growth, and expanding our infrastructure. Such investment includes the following: (i) in 2021, we entered into an agreement with ST to share 300mm cleanroom space in Italy, for which we purchased, and are committed to purchase, a significant amount of equipment and tools; (ii) during the last two years, we have initiated plans to invest an aggregate of $920 million in capital expenditures (mainly machinery and facilities), primarily to expand our SiPho and SiGe capacity at Fabs 2, 3, 7 and 9, as well as to enhance our power next-generation and other capacity; and (iii) contingent upon subsidy approval from METI following the formal application, and subject to other considerations such as funding, permits and the engagement of contractors and equipment vendors, Tower’s Japanese affiliate may purchase the land adjacent to Fab 7 Uozu E on pre-agreed terms between Tower and NTCJ and invest in a new fab shell build-out in order to significantly expand its 300mm capacity and capabilities, through the purchase of machinery and cleanroom facilities and related investments, with the necessary capital to be partially funded by us, METI and other cash sources, which may be equity investments and/or debt vehicles, or a combination thereof. We continue to explore additional capacity opportunities and investments, which may require us to use a significant portion of our cash. We may want and/or need to raise additional funds for these investments by way of debt and/or equity offerings, which funds may not be available on reasonable terms due to unfavorable capital market conditions, if at all, and may require consents that we may not be able to obtain. We plan to continue investing in our capacity expansion initiatives and existing and new operational capabilities throughout the world through significant capital expenditures. However, the return on these investments may be lower than we expect, and these investments may significantly reduce our net profit and cash balance and require us to raise additional funds by way of debt or equity offerings. In addition, as we invest in expanding our operations into new areas globally, our business and results will become further subject to the risks and challenges of operating in those locations, including potentially higher fixed costs and operating expenses, the potential impact of legal and regulatory developments, and high depreciation of fixed assets, all of which may reduce our profitability. 41 New Accounting Pronouncements For recently adopted and issued accounting pronouncements, see Note 2W and Note 2X to our annual financial statements included herein. RESULTS OF OPERATIONS For a discussion of our results of operations for the year ended December 31, 2023, including a year-to-year comparison between 2024 and 2023, refer to Item 5. “Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the fiscal year ended December 31, 2024, filed with the SEC on April 30, 2025. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes thereto included in this annual report. The following table sets forth certain statement of operations data as a percentage of total revenues for the years indicated. Year ended December 31, 2025 2024 Statement of Operations Data: Revenues 100 % 100 % Cost of revenues 76.8 76.4 Gross profit 23.2 23.6 Research and development expense 5.5 5.5 Marketing, general and administrative expense 5.3 5.2 Restructuring income, net -- (0.4 ) Operating profit 12.4 13.3 Financing income, net 3.6 3.5 Other expense, net (0.7 ) (1.7 ) Profit before income tax 15.3 15.1 Income tax expense, net (1.3 ) (0.7 ) Net profit 14.0 14.4 Net loss attributable to non-controlling interest 0.1 0.1 Net profit attributable to the Company 14.1 % 14.5 % 42 Year ended December 31, 2025 compared to year ended December 31, 2024 Revenue for the year ended December 31, 2025 amounted to $1,566.1 million, as compared to $1,436.1 million for the year ended December 31, 2024, reflecting a $130.0 million, or 9%, year-over-year revenue increase. The increase was primarily due to higher wafer shipments, including revenue and shipments from the 300mm facility in Agrate, Italy, which commenced volume production and operations in the fourth quarter of 2024, and therefore its revenue was included in our statement of operations for the entire 2025 calendar year, as compared to only a limited portion of 2024. Cost of revenue for the year ended December 31, 2025 amounted to $1,202.3 million, as compared to $1,096.7 million for the year ended December 31, 2024. The $105.6 million increase in cost of revenue was mainly due to higher depreciation and other manufacturing costs associated with the increased number of wafers shipped in the year ended December 31, 2025, including higher depreciation and other manufacturing costs associated with the 300mm facility in Agrate, Italy, which commenced volume production and operations in the fourth quarter of 2024, and therefore its costs were included in our statement of operations for the entire 2025 calendar year, as compared to only a limited portion of 2024. Gross profit for the year ended December 31, 2025 amounted to $363.9 million, as compared to $339.4 million for the year ended December 31, 2024. The $24.5 million increase in gross profit resulted from the $130.0 million, or 9.6%, increase in revenue, net of the $105.6 million increase in cost of revenue, as described above. Research and development expenses for the year ended December 31, 2025 amounted to $86.5 million, representing 5.5% of revenue, as compared to $79.4 million for the year ended December 31, 2024, also representing 5.5% of revenue. Marketing, general and administrative expenses for the year ended December 31, 2025 amounted to $83.2 million, representing 5.3% of revenue, as compared to $75.0 million for the year ended December 31, 2024, representing a similar percentage of 5.2% of revenue. Restructuring income, net, for the year ended December 31, 2024 amounted to $6.3 million, resulting from the reorganization and restructuring of our Japan operations executed during 2022 and recorded in 2024 in accordance with U.S. GAAP, as described in Note 12B(ii) to our financial statements for the year ended December 31, 2025. Operating profit for the year ended December 31, 2025 amounted to $194.2 million, as compared to $191.3 million for the year ended December 31, 2024. The $2.9 million increase in operating profit resulted mainly from the $24.5 million increase in gross profit, as described above, offset by the $7.1 million increase in research and development expenses, the $8.2 million increase in marketing, general and administrative expenses for the year ended December 31, 2025, and the $6.3 million restructuring income in 2024, as described above. Financing income, net, for the year ended December 31, 2025 amounted to $56.7 million, as compared to $50.8 million for the year ended December 31, 2024. The $5.9 million increase in financing income, net, was mainly due to hedging transaction gains recorded in the year ended December 31, 2025. Other expense, net, for the year ended December 31, 2025 amounted to $10.5 million, as compared to $24.7 million for the year ended December 31, 2024. Other expense, net included mainly non-recurring, non-operational items. Income tax expense, net, for the year ended December 31, 2025 amounted to $21.6 million, as compared to $10.2 million for the year ended December 31, 2024. The $21.6 million tax expense for the year ended December 31, 2025 reflects 9% of income before tax, mostly due to the 7.5% preferred income tax rate applied to eligible income from Israeli operations through December 31, 2025, with other jurisdictions subject to higher tax rates. See also Note 17 to the financial statements included herein. 43 Net profit for the year ended December 31, 2025 amounted to $218.8 million, as compared to $207.2 million for the year ended December 31, 2024. The $11.6 million increase in net profit was mainly due to the increase in operating profit and financing income, net, and the decrease in other expense, net, as described above, offset by the increase in income tax expense, net, described above. Net loss attributable to non-controlling interest for the year ended December 31, 2025 amounted to $1.7 million, as compared to $0.6 million for the year ended December 31, 2024. The $1.1 million increase resulted from the $2.2 million increase in the net loss of TPSCo, the Company’s 51% owned subsidiary. Net profit attributable to the Company for the year ended December 31, 2025 amounted to $220.5 million, as compared to $207.9 million for the year ended December 31, 2024. The $12.6 million increase in net profit attributable to the Company was mainly due to the $11.6 million increase in net profit, as described above, and the $1.1 million increase in net loss attributable to non-controlling interest, as described above. Impact of Currency Fluctuations We currently operate in four different regions: the United States, Japan, Israel and Italy. The functional currency of our entities in the United States, Israel and Italy is the U.S. dollar (“USD”). The functional currency of our operations in Japan is the Japanese Yen (“JPY”). Our expenses and costs are denominated mainly in USD, JPY and New Israeli Shekels (“NIS”) and Euro; revenue is denominated mainly in USD and JPY; and cash from operating, investing and financing activities is denominated mainly in USD, JPY and NIS. Since our exposure to costs denominated in Euros in Italy (or elsewhere) is relatively small, we are mainly exposed to the risk of currency exchange rate fluctuations of the JPY to USD and NIS to USD. The majority of TPSCo’s revenue is denominated in JPY, and the majority of TPSCo’s expenses and costs are denominated in JPY, which limits exposure to fluctuations in the USD-to-JPY exchange rate on TPSCo’s results of operations. In order to mitigate a portion of the net exposure to the USD-to-JPY exchange rate, we have engaged in cylinder hedging transactions to contain the currency’s fluctuation within a pre-defined fixed range. During the year ended December 31, 2025, the USD appreciated against the JPY by 0.01%, as compared to 10.7% appreciation during the year ended December 31, 2024. The net effect of USD appreciation against the JPY on TPSCo’s assets and liabilities denominated in JPY is presented in the Cumulative Translation Adjustment as part of Other Comprehensive Income on the balance sheet. The USD cost of our operations in Israel is influenced by changes in the USD-to-NIS exchange rate with respect to expenses and costs that are denominated in NIS. During the year ended December 31, 2025, the USD depreciated against the NIS by 12.5%, as compared to 0.6% appreciation during the year ended December 31, 2024. Fluctuations in the USD against the NIS may affect our results of operations as they relate to the entity in Israel. Appreciation of the NIS may increase costs, in USD terms, of the Israeli facility, such as utilities, taxes and labor costs that are denominated in NIS, which may lead to erosion of profit margins. We use foreign currency cylinder and forward transactions to hedge a portion of this currency exposure, to be contained within a pre-defined fixed range. The USD cost of our operations in Italy is influenced to a relatively small degree by changes in the USD-to-Euro exchange rate with respect to expenses and costs that are denominated in Euro; however, the amount of costs denominated in Euro is immaterial, and therefore our exposure to Euro fluctuations is limited. During the year ended December 31, 2025, the USD appreciated against the Euro by 12.8%, compared to a 5.9% depreciation during the year ended December 31, 2024. 44 B. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2025, we had an aggregate of $235.4 million in cash and cash equivalents, as compared to $271.9 million as of December 31, 2024. The principal cash flow items for the year ended December 31, 2025 were as follows: $395.5 million of net cash provided by operating activities; $436.5 million invested in property and equipment, net; comprised of $444.4 million total investments and $7.9 million of proceeds related to sale and disposal of property and equipment $38.5 million received from sales of short-term deposits, net; and $33.4 million of net cash used in financing activities. Short-term and long-term debt, as presented in the balance sheet as of December 31, 2025 amounted to $28.1 million and $133.4 million, respectively, and included loans, operating leases and capital leases. Based on our current operations and expected short-term growth, cash generated from operations, and our existing balance of cash and deposits, we believe we have sufficient resources to meet our cash needs for operating activities and capital expenditures, including for payments expected under the $920 million SiGe and SiPho capital expenditures plan described above, equipping the facility in Agrate, Italy, and the repayment of our debt in the short term and long term. Contingent upon subsidy approval from METI following the formal application, and subject to other considerations such as funding, permits and the engagement of contractors and equipment vendors, Tower’s Japanese affiliate may purchase the adjacent land on pre-agreed terms between Tower and NTCJ, which would be used for a new fab shell build-out to significantly expand its 300mm capacity and capabilities, through the purchase of machinery and cleanroom facilities, and related investments. The necessary capital shall be funded in part by us, by METI and other cash sources, which may include equity investments and/ or debt vehicles or a combination thereof. To execute this Japan build-out plan, and if we pursue any additional acquisition transaction(s), joint partnership, or other large transaction to expand our capacity (including acquiring leased assets and/or acquiring or establishing additional fabs or capacity through other capacity acquisition-related transactions), we may utilize all of our current cash balance and deposits and/or may be required to secure additional financing, including through public or private offerings of equity and/or debt and/or refinancing or other financing alternatives. The timing, terms, size, and pricing of any future fundraising, if any, would be subject to the then-prevailing capital market conditions and our business and financial situation, as well as the need to obtain certain regulatory and other consents. There is no assurance that we would be able to obtain the necessary consents and/or funding in a timely manner, in sufficient amount, or on favorable terms. See “Item 3. Key Information—D. Risk Factors—Risks Affecting Our Business—“Reliance on acquisitions, establishing new fabs and/or gaining additional capacity for growth involves risks and uncertainties that may adversely affect our future revenues, business and operating results and may require raising funds in such amounts that we cannot assure you we will be able to obtain, or may be on unfavorable terms as far as dilution and/or other financing cost or covenants, which could adversely affect our financial position business and operations” Financing Transactions Capital Leases Certain of our subsidiaries enter into capital lease agreements, from time to time, for machinery and equipment, usually for a period of four years, with an option to buy the machinery and equipment after a period of three to four years from the start of the lease term. These lease agreements are denominated in JPY and contain annual interest rates of approximately 2%, and the assets under the lease agreements are pledged to the lender until the respective subsidiary acquires the assets. The obligations under the capital lease agreements are guaranteed by Tower, except for TPSCo’s obligations under its capital lease agreements. 45 In addition, TPSCo leases its facility’s buildings in Japan from NTCJ under a long-term capital lease, with a term through March 2032, and we hold an option to extend the Uozu E building and land lease up to 2057 or acquire it at a pre-agreed cost. As of December 31, 2025 and 2024, the total outstanding capital lease liabilities for fixed assets were $52.9 million and $73.5 million, respectively, of which $25.0 million and $24.8 million, respectively, were included under current maturities of long-term debt. There was no available lease line as of December 31, 2025. The available lease line as of December 31, 2024 was approximately $10 million. Loans from Japanese Financial Institutions In December 2021, TPSCo refinanced its then-existing loan with an 11 billion JPY (approximately $70 million as of December 31, 2025) asset-based loan with a consortium of financial institutions consisting of (i) JA Mitsui Leasing, Ltd., (ii) Mitsubishi HC Capital Inc., (iii) Taishin International Bank Co., Ltd. Tokyo Branch, and (iv) BOT Lease Co. Ltd. (“2021 JPY Loan”). The 2021 JPY Loan carried a fixed interest rate of 1.95% per annum, with principal payable in seven semiannual payments from December 2024 until December 2027. The 2021 JPY Loan was secured mainly by a lien over the machinery and equipment of TPSCo located in the Uozu and Tonami facilities. In September 2023, TPSCo entered into a term loan agreement with JA Mitsui Leasing Ltd. for an additional 3.5 billion JPY (approximately $22 million as of December 31, 2025) term loan (“2023 JPY Loan”). The 2023 JPY Loan carried a fixed interest rate of approximately 2% per annum, with principal payable in seven semiannual payments from September 2024 until September 2027. The 2023 JPY Loan was secured by a second lien over the machinery and equipment of TPSCo located in the Uozu and Tonami facilities. In December 2024, TPSCo signed an agreement with its lenders to refinance its 2021 JPY Loan and 2023 JPY Loan with a new 14.5 billion JPY (approximately $92 million as of December 31, 2025) asset-based loan (“2024 JPY Loan”). 12.5 billion JPY was drawn in 2024 and used to repay 11.5 billion JPY of the 2021 JPY Loan and 2023 JPY Loan, resulting in outstanding JPY Loans of 15.5 billion JPY (approximately $100 million) as of December 31, 2024. In accordance with the 2024 JPY Loan agreement, during the first half of 2025, 3 billion JPY was used to repay the remaining 2021 JPY Loan and 2023 JPY Loan, and an additional 2 billion JPY was withdrawn, resulting in 14.5 billion JPY (approximately $92 million) outstanding under the 2024 JPY Loan as of December 31, 2025. The lenders under the 2024 JPY Loan are a consortium of financial institutions consisting of (i) JA Mitsui Leasing, Ltd., (ii) Mitsubishi HC Capital Inc., and (iii) BOT Lease Co. Ltd. The 2024 JPY Loan carries a fixed interest rate of 2% per annum, with principal payable in seven semiannual payments from December 2027 to December 2030. The 2024 JPY Loan is secured mainly by a lien over the machinery and equipment of TPSCo located in the Uozu and Tonami facilities. The 2024 JPY Loan contains certain financial ratios and covenants, as well as customary definitions of events of default and acceleration of the repayment schedule. TPSCo’s obligations pursuant to the 2024 JPY Loan are not guaranteed by Tower, NTCJ, or any of their affiliates. As of December 31, 2025, TPSCo was in compliance with the financial covenants under the 2024 JPY Loan. 46 C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC. Our research and development activities relate primarily to improvements, upgrades, and development of our foundry processes. These activities have been sponsored and funded by us, with some participation by the Israeli government through the Israel Innovation Authority (“IIA”) pursuant to the Israeli Encouragement of Research, Development and Technological Innovation in the Industry Law 5744-1984 (formerly known as the Encouragement of Industrial Research and Development Law 5744-1984) and related regulations and guidelines. Our research and development expenses for the years ended December 31, 2025, 2024 and 2023 were $86.5 million, $79.4 million and $79.8 million, respectively, net of government participation of $1.0 million, $0.3 million and $0.5 million, respectively. For a description of our research and development policies and our patents and licenses, see “Item 4. Information on the Company– B. Business Overview.” D. TREND INFORMATION We operate as a specialty foundry in the semiconductor industry. The semiconductor industry has historically been characterized as highly cyclical, both seasonally and over the long term. Over time, the market fluctuates, cycling through periods of weak demand, excess capacity, excess inventory, and price pressure, and periods of strong demand, full capacity utilization, and product shortages that command higher selling prices. There is a trend within the semiconductor industry toward ever-smaller features and growing wafer sizes. State-of-the-art digital fabs currently support process geometries down to 2 nanometers on 300mm wafers. As demand for smaller geometries increases, there is downward pressure on the pricing of larger-geometry products and potential underutilization of fabs that are limited to these larger-geometry products, which may result in reduced profitability for those associated fabs. However, our strategy to focus on differentiated specialty analog technologies, especially SiPho, along with our deep applications knowledge, design enablement tools, and customer technical support, enables a portion of our wafers to be sold at higher wafer selling prices as compared to “commoditized” standard CMOS products. We currently offer process geometries of (i) 0.18, 0.16, and 0.13-micron on 200-mm wafers; and (ii) 65 and 45 nanometer on 300-mm wafers. The optical components in SiPho (waveguides, modulators) do not need to scale down to more advanced lithography nodes, and our 0.18um geometry design rules on 200mm wafers and 65nm to 45nm geometry design rules on 300mm wafers match SiPho needs. We continue to invest in our portfolio of specialty process technologies and intellectual property (IP) to address the key product and system requirements of our customers, enabling them to compete in their respective markets. Another key element of our strategy is to target multiple large, growing, and diversified end markets. We target end markets characterized by high growth and high performance, for which we believe our specialty process technologies and design services offer a strong, compelling value proposition to our customers. Our target markets include data centers, artificial intelligence systems, communications, the Internet of Things (IoT), machine-to-machine communication devices, ultra-low power mobile applications, wireless and high-speed wireline communications (including 5G and 6G), consumer applications, automotive, medical and industrial markets. For example, we believe our SiGe and silicon photonic technology can provide speed, power, and cost advantages over alternative technologies for high-speed optical transceivers used for data communication in data centers, artificial intelligence clusters, and network infrastructure. We also believe that RF-SOI and SiGe process technologies can provide performance and cost advantages over GaAs solutions in the realization of switches, low-noise amplifiers, and power amplifiers for wireless handsets and smartphones. Our power management platforms enable the industry’s analog IC suppliers to differentiate their product offerings in the markets we serve. Our specialized CMOS image sensor platforms allow customers to fabricate ultra-high sensitivity/low-noise CIS products for operation in visible, near infrared, ultraviolet, and X-ray spectral ranges, and to develop both ultra-small cameras and large imagers occupying the whole surface of a 200mm or even a 300mm wafer.. In addition, we target the display markets utilizing micro OLED on silicon, using our well-established processes to create displays for the growing AR/VR market. 47 Our specialty products and target market strategy allow us to grow and diversify our business by attracting new customers, expanding our customer base, and broadening our business with existing customers. In recent years, we have accelerated our plans to expand our capacity and capabilities, and we are focused on increasing the utilization of our fabs, by attracting new customers and opportunities. During the last two years, we have initiated plans to invest an aggregate of $920 million in capital- expenditure (mainly machinery and facilities), primarily to expand our capacity mainly in SiPho and SiGe at Fabs 2, 3, 7 and 9 next-generation and other capacity. Specifically with respect to SiPho, during 2026, we have engaged with certain customers for committed capacity reservation through 2028 in exchange for prepayment received and to be received, which would be credited to them against their future purchases. Contingent upon subsidy approval from METI following the formal application, and subject to other considerations including funding, permits and the engagement of contractors and equipment vendors, Tower’s Japanese affiliate may purchase the adjacent land on terms pre-agreed between Tower and NTCJ, which would be used for a new potential fab shell build-out to significantly expand its 300mm capacity and capabilities through the purchase of machinery and cleanroom facilities, and related investments. We seek to maintain capital efficiency by leveraging our operational model and ensuring cost-effectiveness. With a global capacity footprint, including six fabs in three continents, we are focused on sharing and applying best practices across the organization to provide our customers with high-quality solutions, along with the applications knowledge and technical support that allow them to benefit from a competitive edge in the market. Our geographical diversity allows us to perform internal benchmarking across global facilities to gain knowledge of work processes and methodologies, thereby ensuring that we maintain a high level of operations across all facilities at which we manufacture. Our global foothold also provides our customers with flexibility and business continuity by maximizing opportunities for capacity availability. Over the last several years, we have consistently sought to expand our presence in global markets, enter new geographical areas, increase the markets we serve, and expand our technology offering through business and development ventures. This may also be accomplished through (i) the establishment of new facilities with third-party collaboration and/or funding, (ii) mergers and acquisitions involving potential target facilities that may include a solid base of customer demand to fill the increase in capacity, and/or (iii) the development of technologies that may expand our serviceable and/or available market potential and increase our revenue, customer base, and margins. Such transactions are also beneficial because they provide our customers with capacity diversification and opportunities for additional growth through access to increased capacity. We continuously evaluate potential acquisition opportunities and seek to secure additional capacity. Our current cash balance and deposits may be used to enable us to pursue and execute such opportunities, and we may require additional financing through, among others, debt (including convertible debt, bonds, notes, or debentures) and/or equity issuances (including shares and warrants) in order to consummate such opportunities and/or fund our other operational and capital expenditure cash needs, as well as our strategy to expand our global footprint, capacity, and capabilities. 48 E. CRITICAL ACCOUNTING ESTIMATES Our financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosures. We evaluate our estimates, assumptions and judgments on an ongoing basis. Our estimates, assumptions and judgments are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our financial statements, which, in turn, could change the results from those reported. The critical accounting policies used in the preparation of our consolidated financial statements that we believe were most affected by significant management estimates and judgments are discussed below. See Note 2 to the consolidated financial statements included elsewhere in this annual report for further information on all significant accounting policies that we used to prepare our consolidated financial statements. Income Taxes Our provision for income taxes is affected by income taxes in a multinational tax environment. The income tax provision is an estimate determined based on currently enacted tax laws and tax rates in each of our geographic locations, using acceptable allocation methodologies based on our organizational structure, operations, and business model, resulting in applicable taxable income attributable to each of the locations in which we operate. For the year ended December 31, 2025, the consolidated provision for income taxes was $21.6 million, as detailed in Note 17 to our financial statements. In December 2021, the OECD issued the Pillar Two model rules, which introduce a 15% global minimum tax applicable on a jurisdiction-by-jurisdiction basis to multinational corporations with consolidated annual revenue exceeding €750 million. As of December 31, 2025, the rules had been partially enacted in certain jurisdictions in which we operate. The Pillar Two model rules include transitional safe harbor provisions that, if met, allow such corporations to defer the application of the rules for periods commencing after December 31, 2025. Through December 31, 2025 (inclusive), the Company qualified for the transitional safe harbor provisions in all jurisdictions in which we operate. As such, the Pillar Two model rules did not have an impact on our consolidated financial statements through December 31, 2025; however, we believe they would result in significant additional income tax expenses for the years 2026 and beyond, mainly with respect to our Israeli operations. For additional information, see “Item 10. Additional Information—E. Taxation—Israeli Taxation.” 49