Income Taxes

3 Months Ended

Mar. 31, 2026

The Company's income tax benefit recognized for the three months ended March 31, 2026 and 2025 is as follows (in thousands, except percentages):


	Three Months Ended March 31,
	2026			2025
Income tax benefit	$	(6,896)		$	(10,102)
Effective tax rate	(9.4)		%	(46.5)		%

On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was signed into law. The legislation includes a broad range of tax reform provisions affecting businesses including, but not limited to, the reinstatement of 100% bonus depreciation, immediate expensing of domestic research and development costs, and revisions to the U.S. taxation of profits derived from international operations. The legislation has multiple effective dates, with certain provisions were effective in 2025 and others becoming effective through 2027. The Company has assessed the effects of the new tax legislation, including immediate expensing of domestic research and development expenditures and revisions to foreign-derived intangible income provision for the calendar year, and the results have been reflected in its condensed consolidated financial statements for the three months ended March 31, 2026.

The Company accrues for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate for the three months ended March 31, 2026 is different than the statutory federal tax rate primarily due to the valuation allowance in the United States and the excess tax benefits related to equity compensation, foreign derived intangible income deduction and U.S. research and development credits, which results in current tax benefits. The determination of the realizability of deferred tax assets requires significant judgment in assessing if there is sufficient positive evidence to support a conclusion that it is more likely than not the deferred tax assets will be realized. If the Company continues to achieve positive operating results, it may release the valuation allowance associated with its U.S. deferred tax assets in future periods. A release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and may result in a material decrease to income tax expense for the period the release is recorded.

The effective tax rate for the three months ended March 31, 2025 is different than the statutory federal tax rate primarily due to the valuation allowance in the United States and the excess tax benefits related to equity compensation, foreign derived intangible income deduction and U.S. research and development credits, which results in current tax benefit. This is offset by the current tax expense from the capitalization of research and development expenditures under Section 174 of the Internal Revenue Code.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

Astera Labs, Inc. 10-Q