Dow Inc. 2026 Q1 10-Q Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2026, for Dow Inc. and its wholly-owned subsidiary, The Dow Chemical Company (TDCC). The report reflects a combined filing due to the parent/subsidiary relationship. Dow operates globally in three primary segments: Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings. The quarter was marked by geopolitical tensions in the Middle East impacting supply chains and the initiation of the "Transform to Outperform" cost-reduction strategy.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Sales | $9,794 million | $10,431 million |
| Net Loss (GAAP) | $(445) million | $(290) million |
| Net Loss Available to Dow Inc. | $(533) million | $(307) million |
| Loss Per Share (Diluted) | $(0.74) | $(0.44) |
| Operating Cash Flow (Continuing Ops) | $1,124 million | $104 million |
| Free Cash Flow (Non-GAAP) | $621 million | $(581) million |
| Capital Expenditures | $503 million | $685 million |
| Cash and Cash Equivalents | $4,110 million | $1,465 million |
| Net Debt (Non-GAAP) | $13,615 million | $13,960 million |
| Operating EBITDA (Non-GAAP) | $873 million | $944 million |
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased 6% year-over-year, driven by a 7% decrease in local price and a 2% decrease in volume, partially offset by a 3% favorable currency impact. All segments saw price declines, with Packaging & Specialty Plastics down 9% and Industrial Intermediates & Infrastructure down 8%.
- Widened Net Loss: The net loss attributable to Dow Inc. increased from $307 million to $533 million. This was primarily driven by a $292 million loss related to the fair value adjustment of the guarantee liability for Sadara Chemical Company (a nonconsolidated affiliate) and lower equity earnings.
- Restructuring Charges: Restructuring and asset-related charges decreased significantly to $27 million in Q1 2026 compared to $208 million in Q1 2025. The current quarter included $27 million in severance costs for the new "Transform to Outperform" initiative, whereas the prior year included $207 million for the 2025 Restructuring Program.
- Operating Cash Flow Surge: Operating cash flow improved dramatically to $1.124 billion, up $1.02 billion from the prior year. This increase was largely due to a $1.0 billion cash receipt from Nova Chemicals Corporation related to a damages judgment on an ethylene asset matter.
- Segment Performance:
- Packaging & Specialty Plastics: Operating EBIT declined to $208 million from $342 million due to lower integrated margins and equity losses.
- Industrial Intermediates & Infrastructure: Operating EBIT loss narrowed to $(118) million from $(128) million, aided by lower raw material costs and suspended Sadara equity loss recognition.
- Performance Materials & Coatings: Operating EBIT increased to $117 million from $49 million, driven by cost reduction initiatives and lower maintenance costs.
Guidance, Outlook, and Risks
- Outlook: Management reports positive momentum from pricing actions across all businesses and regions. The "Transform to Outperform" strategy aims to simplify operations, reduce costs, and deliver faster growth. Full-year capital spending is expected to be approximately $2.5 billion.
- Geopolitical Risks: Ongoing conflicts in the Middle East (specifically the Strait of Hormuz) and Russia-Ukraine continue to impact global supply chains, logistics, and energy/feedstock costs. The Company notes that its joint ventures in the Middle East have been directly impacted.
- Legal Contingencies:
- Nova Chemicals: The Company received $1.0 billion in Q1 2026 related to a 2025 judgment. A dispute remains regarding the 2019 damages judgment, with $201 million recorded as a liability.
- Sadara Guarantee: The fair value of the guarantee liability for Sadara's project financing debt increased by $298 million in Q1 2026 due to adverse business conditions and Middle East conflicts. The Company suspended recognition of equity losses from Sadara as the negative investment balance reached the limit of obligations.
- Asbestos: Union Carbide's asbestos-related liability remains at $684 million, with no adjustment required in Q1 2026.
- Credit Ratings: Standard & Poor's and Moody's downgraded TDCC's long-term credit ratings to BBB- and Baa3, respectively, with negative outlooks. Fitch affirmed TDCC at BBB with a stable outlook.
- Leadership Change: Karen S. Carter was appointed CEO, effective July 1, 2026, succeeding Jim Fitterling who will become Executive Chair.
Investor Verification Checklist
- Sadara Exposure: Verify the sustainability of the $292 million loss related to the Sadara guarantee liability and the implications of the suspended equity loss recognition.
- Operating Cash Flow Quality: Confirm the one-time nature of the $1.0 billion Nova Chemicals cash receipt and its impact on the reported Free Cash Flow of $621 million.
- Restructuring Costs: Monitor the execution and cash outflow timeline for the "Transform to Outperform" initiative, which is expected to cost approximately $1.2 billion over two years.
- Geopolitical Impact: Assess the ongoing impact of Middle East conflicts on feedstock costs, logistics, and the operational status of joint ventures in the region.
- Dividend Sustainability: Review the Company's ability to maintain its dividend ($0.35/share) amidst the net loss and credit rating downgrades.