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Income Taxes | 9 Months Ended
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Jun. 30, 2026
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes
(in thousands) |  | Three months ended |  |  | Nine months ended |
|  | June 30, 2026 |  |  | June 30, 2025 |  |  | June 30, 2026 |  |  | June 30, 2025 |
Income before income taxes |  | $ | 152,440 |  |  | $ | 193,676 |  |  | $ | 1,102,214 |  |  | $ | 492,079 |
Provision for income taxes |  | $ | 33,660 |  |  | $ | 52,348 |  |  | $ | 226,193 |  |  | $ | 105,875 |
Effective income tax rate |  |  | 22 | % |  |  | 27 | % |  |  | 21 | % |  |  | 22 | %
The effective tax rate for the three months ended June 30, 2026 was lower than the effective tax rate for the three months ended June 30, 2025, primarily due to changes in the geographic mix of income before taxes. For the three and nine months ended June 30, 2026, the provision for income taxes included $14.4 million of tax expense related to the Varian Medical Systems, Inc. v. Commissioner tax court ruling and a $7.2 million tax benefit related to a strategic solar energy investment. The nine months ended June 30, 2026 also included $95.6 million of tax expense related to the Kepware and ThingWorx divestiture and a $7.1 million income tax benefit related to the reversal of a prior-year tax charge associated with Internal Revenue Service (IRS) procedural guidance. The effective tax rate for the three and nine months ended June 30, 2025 reflected increased tax expense associated with the IRS procedural guidance described below. Additionally, t he nine months ended June 30, 2025 included a benefit of $10.4 million related to changes in tax reserves associated with prior years in foreign jurisdictions. In 2024, we recorded a $14.4 million tax benefit for additional foreign tax credits that became available as a result of a U.S. Tax Court ruling in Varian Medical Systems, Inc. v. Commissioner, issued on August 26, 2024. The ruling addressed the U.S. tax treatment of deemed foreign dividends recognized during the transition year of the Tax Cuts and Jobs Act (our fiscal 2018). On April 8, 2026, the U.S. Tax Court granted summary judgment in favor of the IRS, and as a result, we reversed the previously recognized tax benefit. During the nine months ended June 30, 2026, we recognized tax expense of $95.6 million related to the divestiture of the Kepware and ThingWorx businesses. This amount reflects a reduction from the $102.4 million tax expense recorded during the quarter ended March 31, 2026, resulting from updates to the estimated tax impact of the transaction. In 2024, we requested consent from the IRS to change our tax accounting method for the treatment of certain deductions. In the quarter ended December 31, 2025, upon receiving consent from the IRS, we released the reserve related to the procedural guidance. As a result, we recognized a $7.1 million income tax benefit for the nine months ended June 30, 2026, primarily related to the reversal of the accrued interest and the associated effects on GILTI and FDII. In the normal course of business, PTC and its subsidiaries are examined by various taxing authorities, including the IRS in the U.S. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. We are currently under audit by tax authorities in several jurisdictions. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, transfer pricing, limitations on net operating losses and tax credits. As of June 30, 2026 and September 30, 2025, income taxes payable and income tax accruals recorded on the accompanying Consolidated Balance Sheets were $130.5 million ($85.2 million in Accrued income taxes and $45.3 million recorded in Other Liabilities) and $179.1 million ($28.7 million in Accrued income taxes and $150.4 million in Other liabilities), respectively. As of June 30, 2026 and September 30, 2025, we had unrecognized tax benefits of $50.9 million and $157.7 million, respectively. This decrease predominantly relates to the release of the reserve established in 2025 related to the IRS procedural guidance, primarily resulting in corresponding decreases to Deferred tax assets and the reserve for unrecognized tax benefits within Other liabilities. Additionally, this resulted in a $7.1 million net income tax benefit as described above. If all our unrecognized tax benefits as of June 30, 2026 were to become recognizable in the future, we would record a benefit to the income tax provision of $50.9 million, which would be partially offset by an increase in the U.S. valuation allowance of $6.0 million. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates. We believe it is reasonably possible that within the next 12 months the amount of unrecognized tax benefits related to the resolution of multi-jurisdictional tax positions could be reduced by up to $1 million. On July 4, 2025, the “One Big Beautiful Bill Act” (the “Act”) was enacted into law. The Act includes changes to U.S. tax law that became applicable to us beginning in 2026. These changes include provisions allowing accelerated tax deductions for qualified property and research expenditures. Our financials reflect the impact of the provisions of the Act that are applicable beginning 2026. Tax Benefits of Strategic Solar Energy Equity Investment During the third quarter of 2026, we invested in a solar energy project as described in Note 7. Fair Value Measurements. We have elected to account for the investment using the proportional amortization method, under which the cost of the investment is amortized over the period that we expect to receive tax benefits from the project. Amortization of and tax benefits associated with the investment are presented within Provision for income taxes on the Consolidated Statement of Operations. The tax benefits associated with the investment reduce cash taxes paid and benefit operating cash flows. During the third quarter of 2026, we recognized $78.8 million of investment tax credits and other tax benefits, partially offset by $71.6 million of investment amortization.

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