Dow sells plastics, silicones and industrial chemicals to manufacturers and distributors. In the third quarter of 2026, sales increased 13% even though the volume sold fell 1%, as higher prices and cost reductions strengthened profitability. The recovery gives Dow more room to rebuild its operations, but part of its stronger cash generation came from litigation receipts that remain subject to dispute.
Analysis period: quarter and nine months ended September 30, 2026. Research cutoff: October 24, 2026, New York date; the latest results and filing examined are dated October 22 and October 23, respectively.
1. Higher prices widened margins, while shipment growth remained uneven
Dow earned more from the products it sold, despite a small decline in total volume. Sales rose faster than production costs. That widened the amount left to pay for research, administration, financing and taxes.
The distinction matters because a price recovery can have a different life span from growth in customer orders. Dow’s third-quarter sales benefited from a 14% contribution from local prices and product mix, with no overall currency contribution. Volume contributed negative 1%. These are the company’s rounded sales-change measures, rather than changes in a single product’s price.
| Dow Inc. consolidated results | Third quarter 2025 | Third quarter 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Net sales, US$ million | 9,973 | 11,267 | 30,508 | 33,153 |
| Gross profit, calculated, US$ million | 731 | 1,378 | 1,985 | 4,185 |
| Profit after reported operating expenses, calculated, US$ million | 131 | 741 | -654 | 1,592 |
| Income before income taxes, US$ million | 70 | 642 | -963 | 1,123 |
| Consolidated net income, US$ million | 124 | 525 | -967 | 882 |
| Net income available to Dow common stockholders, US$ million | 62 | 458 | -1,080 | 646 |
| Reported diluted earnings per share, US$ | 0.08 | 0.62 | -1.53 | 0.88 |
Calculation notes: Gross profit is sales less cost of sales. The calculated operating subtotal also subtracts research, selling and administrative expenses, the scheduled cost of using acquired intangible assets, and restructuring charges. Dow does not present that subtotal as a separate GAAP line. It excludes results from partly owned businesses, miscellaneous income and interest; it differs from management’s adjusted Operating EBIT.
Source: Dow third-quarter 2026 Form 10-Q, Dow Inc. consolidated income statements, p. 5; sales and cost discussion, pp. 44–47.
Gross profit rose to 12.2 cents per dollar of sales from 7.3 cents a year earlier. Higher raw-material, energy, shipping and planned-maintenance costs absorbed some of the price benefit. Cost reductions helped offset those increases. The improvement therefore reflects better selling margins and company actions, rather than cheaper inputs alone.
All three main businesses improved, but they did so in different ways. The table uses Dow’s Operating EBIT: profit before interest and tax, with selected significant items removed. The detailed reconciliation appears in the calculation notes.
| Third-quarter business results, US$ million unless stated | Sales 2025 | Sales 2026 | Operating EBIT 2025 | Operating EBIT 2026 | Volume effect, 2026 versus 2025 |
|---|---|---|---|---|---|
| Packaging & Specialty Plastics | 4,891 | 5,778 | 199 | 585 | 1% |
| Industrial Intermediates & Infrastructure | 2,834 | 3,058 | -47 | 176 | -7% |
| Performance Materials & Coatings | 2,082 | 2,250 | 80 | 154 | 3% |
| Corporate | 166 | 181 | -52 | -28 | Not disclosed |
| Consolidated total | 9,973 | 11,267 | 180 | 887 | -1% |
Source: Dow third-quarter 2026 Form 10-Q, Note 21 and segment discussion, pp. 48–51. Corporate is included so the segment totals reconcile to the consolidated company.
Packaging & Specialty Plastics supplied $386 million of the $707 million increase in adjusted Operating EBIT. Higher polyethylene prices were the main commercial support. Its 1% volume increase needs care: the segment also sells hydrocarbons and energy. Those volumes rose, helped by restarting a European ethylene cracker idled in mid-2025, while volume in the packaging-plastics business itself declined because of Middle East supply disruption. The segment total does not establish that Dow shipped more packaging plastic.
Industrial Intermediates & Infrastructure returned to profit despite a 7% volume decline. Higher prices, cost actions and a change in Sadara loss accounting outweighed higher input costs. Within Industrial Solutions, demand for materials used in artificial-intelligence infrastructure and energy applications, plus catalyst sales, supported North American growth. Polyurethanes and construction chemicals suffered volume declines, particularly in Asia Pacific and Europe, the Middle East, Africa and India.
Performance Materials & Coatings provided the clearest evidence of broader product growth. Both prices and volumes increased. Customers bought more materials for architectural coatings, home care, consumer products and electronics. Downstream silicones grew even as the closure of the Barry, United Kingdom, plant reduced upstream siloxane volume. Selling more finished specialty formulations while reducing higher-cost basic production is consistent with management’s intended shift in the business.
Source: Dow third-quarter 2026 Form 10-Q, Note 3 and segment explanations, pp. 48–50.
Geography reinforces the uneven picture. Third-quarter volumes rose 2% in both the United States and Canada region and the Europe-led region, and 3% in Latin America. Asia Pacific volumes fell 12%. Dow attributes disruption to the Middle East conflict, including restricted shipping, higher logistics costs and effects on regional joint ventures. Its North American and Latin American production and its ability to use different feedstocks in Europe helped it respond.
There is independent evidence that tighter supply helped chemical producers’ margins. LyondellBasell’s second-quarter 2026 filing described higher prices and wider margins resulting from Middle East supply constraints. That earlier-quarter evidence supports an industry explanation for part of Dow’s recovery; it does not measure Dow’s third-quarter performance or imply that demand improved everywhere.
Sources: Dow third-quarter 2026 Form 10-Q, Middle East statement and sales analysis, pp. 42–44; LyondellBasell second-quarter 2026 Form 10-Q, MD&A, Overview and Results of Operations.
The rebound also exceeds the weak 2025 comparison. In the third quarters of 2023 and 2024, Dow reported sales of $10.730 billion and $10.879 billion, and adjusted Operating EBIT of $626 million and $641 million. The latest quarter’s $887 million is above both, although pricing conditions and business scope have changed. Dow has recovered earning power; the remaining test is how much it can preserve when disrupted supply routes normalize.
Sources: Dow third-quarter 2024 Form 10-Q, segment-reporting footnote, results and Operating EBIT reconciliation, p. 38; Dow third-quarter 2026 Form 10-Q, Note 21 and Risk Factors, pp. 60–61.
2. Better reported profit includes an accounting benefit from Sadara
Improved affiliate earnings partly reflect a limit on recording losses. Dow normally records its share of profit or loss from partly owned ventures such as Sadara. In the first quarter of 2026, it stopped recording further Sadara losses because the liabilities already recognized had reached its relevant obligations and commitments. That accounting limit does not establish that Sadara’s business recovered.
Dow owns 35% of Sadara. Its negative investment balance was $758 million at September 30, recorded as a liability. Separately, it recorded a $500 million liability for guaranteeing Sadara debt. Dow guarantees approximately $1.2 billion of project-financing principal and related interest, so the recorded guarantee liability is an estimate of exposure, not the full contractual amount.
The obligation has already required cash. Dow paid $80 million in the second quarter to satisfy a guarantee on Sadara’s expired revolving facility, and issued an $86 million letter of credit that expires in the fourth quarter. Thus, stronger reported affiliate earnings can coexist with cash support for the venture.
Source: Dow third-quarter 2026 Form 10-Q, Notes 9, 12 and 19, pp. 23, 27 and 35–36.
Across all nonconsolidated affiliates, third-quarter results improved from a $72 million loss to $12 million of earnings. Dow identifies the suspension of Sadara losses as the principal reason. That $84 million improvement accounts for part of the $572 million rise in consolidated pretax profit. A larger contribution—$610 million—came from the improvement in the calculated operating subtotal; lower miscellaneous income offset some of those gains. The full bridge is in the calculation notes.
Management’s adjustments do not remove every unusual influence. In the latest quarter, Dow excluded transformation and implementation costs, a debt-retirement loss, and $69 million of a Nova litigation gain. However, the filing describes a total $74 million Nova gain: another $5 million reduced administrative expenses and remained in adjusted results. The benefit from ceasing Sadara loss recognition also remains. Adjusted profit is useful for comparing selected costs, but it is not a clean measure of repeatable cash earnings.
The previous-year comparison was helped by different items: a $110 million divestiture gain and $120 million of identified tax benefits. After Dow’s adjustments, third-quarter common-stockholder income changes from a $132 million loss in 2025 to $521 million of profit in 2026. Reported income also improved sharply, so the recovery does not depend on choosing the adjusted measure.
Sources: Dow third-quarter 2026 Form 10-Q, Notes 6, 12 and 21, and MD&A, pp. 46–47; October 22, 2026 earnings release, significant-items reconciliation, p. 11.
3. Cash covered investment and distributions, helped by a disputed legal payment
Dow’s reported cash funding improved sharply, but litigation receipts explain a material part of the improvement. Cash from continuing operations reached $4.287 billion in the first nine months, compared with $764 million a year earlier. After capital expenditures, it had $2.446 billion left under Dow’s definition of free cash flow.
| Cash generation and allocation, US$ million | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Cash from continuing operations | 764 | 4,287 |
| Capital expenditures, cash spent | 1,911 | 1,841 |
| Free cash flow, company-defined non-GAAP measure | -1,147 | 2,446 |
| Cash dividends paid to Dow stockholders | 1,239 | 758 |
| Cash distributions to minority owners of subsidiaries | 93 | 232 |
| Remainder after these distributions, calculated | -2,479 | 1,456 |
Calculation notes: Free cash flow equals continuing operating cash less gross capital expenditures. It does not deduct every investing outflow. The final row is free cash flow less both cash-distribution rows; it is not the change in the cash balance. There were no common-share repurchases in either nine-month period.
Source: Dow third-quarter 2026 Form 10-Q, cash-flow statement, p. 8; free-cash-flow reconciliation and capital allocation, pp. 52–56.
Nova paid approximately $1.0 billion directly to Dow in March following an Alberta court judgment. In July, Dow also received a $318 million refund of tax that Nova had withheld and paid to the Canadian tax authority. These receipts strengthened operating cash, but Dow had recognized only $114 million of pretax gains from the matter during the first nine months. Most of the payment was still disputed: $1.220 billion related to the newer judgment remained in noncurrent liabilities, alongside $201 million from the earlier judgment.
The cash and profit treatments are therefore different for a reason. Dow has received the money, while the appeal leaves uncertainty about how much it can ultimately retain. The July refund is part of the same legal-payment story; adding it again as a separate recurring tax benefit would overstate the improvement.
Source: Dow third-quarter 2026 Form 10-Q, Note 12, Nova ethylene asset matter, p. 26; operating cash discussion, pp. 51–52.
Ordinary payment timing also mattered. During the first nine months, receivables used $1.214 billion of cash and inventories used $429 million. Put simply, more money was tied up in recorded sales awaiting collection and in products or materials awaiting sale. Higher accounts payable supplied $1.014 billion because Dow had not yet paid all the corresponding bills. Together, those three movements used $629 million, versus $1.024 billion a year earlier.
This nine-month cash use can coexist with a release of cash in the third quarter. The company’s latest-quarter collection measure was 50 days of sales outstanding, compared with 48 a year earlier and 44 in the second quarter. Inventory days were 66, versus 67 a year earlier, while supplier-payment days were 65, versus 64. The recovery did not bring a broad improvement in customer collection speed.
Customer advances also contributed to cash, but their outstanding balance was almost unchanged: current and noncurrent contract liabilities totaled $1.943 billion, compared with $1.948 billion at year-end. These payments relate to future deliveries, with some remaining contracts extending up to 18 years. They help finance operations now while committing Dow to supply products later; the filing does not separately quantify the current-year cash receipts.
Source: Dow third-quarter 2026 Form 10-Q, Note 3, p. 18; cash-flow statement, p. 8; working-capital measures, p. 52.
The quarter itself generated $1.839 billion of operating cash and $1.133 billion after $706 million of capital expenditure. Those figures include the Canadian refund. For the nine months, Dow also spent cash outside its free-cash-flow definition: investing included a net $415 million of investment purchases and sales, $133 million of investments and loans to affiliates, and $69 million on gas-field development. The investment purchases included repayment of a $197 million borrowing against company-owned life-insurance policies.
The funding model is nevertheless stronger than a year earlier. In the first nine months of 2025, Dow raised $2.943 billion by selling minority interests and issued $2.652 billion of long-term debt. In 2026, there were no minority-interest sale proceeds, and long-term issuance was only $100 million. Improved operating cash and smaller dividends allowed debt repayment without repeating those large funding transactions.
Source: Dow third-quarter 2026 Form 10-Q, cash-flow statement, p. 8; Note 5, pp. 20–21; MD&A, pp. 43 and 52–54.
4. Dow is cutting costly capacity while keeping its larger growth project
Dow’s strategy combines near-term cost reductions with investment whose larger benefits arrive later. Management wants a simpler organization and a more competitive production network, while directing growth toward specialty applications such as electronics, home care and advanced packaging. The current results show progress, but completing the changes still requires substantial cash.
Transform to Outperform aims to improve Operating EBITDA through productivity and growth. This adjusted profit measure excludes interest, taxes and the annual accounting charges for using equipment and acquired assets. Dow reported approximately $450 million of improvement from the program in the first nine months. In its October 22 update, management targeted $700 million for 2026 and approximately $2 billion of total uplift by the end of 2027. Those are management’s program targets, not forecasts for the company’s total earnings or cash flow.
Sources: Dow third-quarter 2026 Form 10-Q, strategy and outlook, p. 42; October 22, 2026 earnings release, CEO commentary.
The transformation is additional to the $1 billion structural cost reduction program announced in 2025. It includes approximately 4,500 job reductions. Through September, Dow recorded $481 million of severance and benefit charges and $194 million of implementation expenses. The $675 million total is an accounting cost, not the amount of cash already paid: severance payments were $214 million, leaving a $267 million severance reserve. Dow expects approximately $800 million of additional program cash spending over the next two years.
The separate 2025 restructuring program requires approximately $370 million of additional cash, mainly over the next three years. That includes roughly $160 million of implementation spending; the two figures should not be added together. Closing plants can lower future operating costs, but decommissioning, demolition, contract exits and employee payments continue after production stops. Dow expects the asset shutdown actions to be substantially complete by the end of 2027, with some severance payments continuing into early 2030.
Source: Dow third-quarter 2026 Form 10-Q, Note 4, pp. 18–19; expected restructuring cash requirements, p. 57.
Capital spending remains concentrated in the largest business. Packaging & Specialty Plastics accounted for $1.586 billion, or 86%, of nine-month capital expenditure. Dow expects approximately $2.5 billion of company-wide capital spending in 2026, including the Alberta project. The filing does not divide total spending between maintaining existing operations and expanding them.
Path2Zero is intended to supply plastics for pipe, wire and cable, and food packaging while reducing production emissions. Dow’s 2025 annual report, filed in February 2026, set phase-one startup for the end of 2029 and phase two for the end of 2030. It projected average project spending of approximately $1.5 billion annually through 2030. The delayed schedule stretches the funding burden and postpones production benefits; the September filing retains the project within its current capital plan.
Sources: Dow third-quarter 2026 Form 10-Q, Note 21, capital expenditures, and MD&A, p. 52; Dow 2025 Form 10-K, MD&A, strategic actions and Cash Flows from Investing Activities, pp. 34 and 46.
Commercial work is progressing alongside construction. Dow and distributor Univar Solutions announced a June 1 agreement to distribute Decarbia products with certified carbon-footprint information in personal care, home care, food, pharmaceuticals and industrial markets. This expands a route to customers seeking lower-emission materials. The announcement does not disclose contracted volume, price premiums or profit, so it supports the distribution strategy rather than a quantified earnings forecast.
Source: Dow and Univar Solutions distribution agreement, June 1, 2026.
The immediate operating test is whether the Barry closure and organizational changes preserve savings while Dow continues supplying customers. The longer-term test is whether specialty demand and the Alberta plant generate enough additional cash to support the larger asset base. Current growth in specialty silicones and industrial applications supports that direction. Lower total shipments show that the improvement has not yet spread far enough to lift company-wide volume.
5. Lower debt creates room, but cash and credit have different limits
Dow reduced debt while maintaining investment, although its usable resources are smaller than headline liquidity alone suggests. Gross financing debt, including finance leases, fell $622 million to $17.539 billion. Cash increased, and management’s net-debt measure declined to $12.839 billion from $13.960 billion.
| Financial position, US$ million | December 31, 2025 | September 30, 2026 |
|---|---|---|
| Cash and cash equivalents | 3,816 | 4,142 |
| Trade receivables, after allowances | 4,762 | 5,890 |
| Inventories | 6,595 | 7,024 |
| Net property | 22,250 | 22,398 |
| Goodwill and other intangible assets | 9,464 | 9,263 |
| Total assets | 58,538 | 60,953 |
| Trade accounts payable | 4,151 | 5,300 |
| Gross financing debt | 18,161 | 17,539 |
| Operating lease liabilities | 1,437 | 1,369 |
| Other noncurrent obligations | 7,201 | 8,772 |
| Total liabilities, calculated | 41,016 | 43,321 |
| Total equity, including minority owners | 17,522 | 17,632 |
Calculation notes: Selected asset and liability rows do not sum to the totals because smaller accounts are omitted. Gross financing debt excludes trade payables and operating leases. Management’s net debt subtracts cash and current marketable securities; it does not subtract every investment account.
Source: Dow third-quarter 2026 Form 10-Q, balance sheet, p. 7; debt reconciliation, p. 55.
Trade receivables increased $1.128 billion, consistent with more dollars tied up in customer payments as sales recovered. Inventory increased $429 million. Within inventory, unfinished production rose $375 million before the accounting adjustment for last-in, first-out costs, making it the largest category increase. Under last-in, first-out accounting, the newest purchase costs are assigned to goods sold first. A larger adjustment to that cost basis reduced the inventory total by an additional $115 million. The balance therefore reflects both products held and the costs assigned to them.
Net property rose only $148 million despite $1.841 billion of capital expenditure, because depreciation and other asset movements offset much of the spending. Other intangible assets fell $168 million; $126 million of amortization—the scheduled recognition of their cost—explains much of that decline. Goodwill—the acquisition cost not assigned to separately identified net assets—changed little. The balance sheet’s largest funding change was in obligations rather than equity: the disputed Nova receipt and higher Sadara guarantee liability contributed to the increase in other noncurrent obligations.
Source: Dow third-quarter 2026 Form 10-Q, statements, pp. 5–8; Notes 8, 12 and 19.
At September 30, all $8.2 billion of committed credit facilities were undrawn. The largest was a $5 billion facility expiring in June 2031. However, $725 million of smaller facilities had October or November 2026 maturities. The reported $13.7 billion of cash and committed available liquidity is therefore a September 30 snapshot that includes borrowing capacity, not a cash balance available indefinitely.
| Scheduled debt principal payments, US$ million | Amount |
|---|---|
| Remainder of 2026 | 48 |
| 2027 | 782 |
| 2028 | 765 |
| 2029 | 996 |
| 2030 | 1,046 |
| 2031 | 878 |
Source: Dow third-quarter 2026 Form 10-Q, Note 11, pp. 24–25; liquidity discussion, pp. 53–55. These are scheduled principal maturities, not interest payments.
The maturity schedule limits immediate refinancing pressure, but interest remains a substantial cash commitment. Dow disclosed expected interest payments of $1.659 billion during 2027–2028, based on September rates, compared with $1.547 billion of principal scheduled in those years. Nine-month interest expense was $640 million, only slightly below $646 million a year earlier. In the third quarter, Dow retired $300 million of notes carrying annual interest rates from 6.90% to 9.40%, accepting a $53 million pretax loss to remove those obligations.
Operating leases add $1.659 billion of undiscounted payments across all future years, including $680 million in 2027–2028. Their balance-sheet liability is lower, at $1.369 billion, because accounting assigns a lower present value to payments due further in the future. Finance leases of $1.044 billion are already included in debt and must not be added again.
Source: Dow third-quarter 2026 Form 10-Q, Notes 11 and 13; contractual obligations, p. 57.
The main financial restriction in the loan agreement applies to The Dow Chemical Company (TDCC), Dow Inc.’s operating subsidiary. When borrowings under the $5 billion facility reach at least $500 million, debt may not exceed 70% of capital as defined in that agreement. The September measure was 47%, and management reported compliance. Credit access still deserves attention: Moody’s had a negative outlook on its Baa3 rating, while S&P’s BBB- outlook had improved to stable in July.
Cash also has location and ownership limits. Of the $4.142 billion cash balance, $2.742 billion was held by foreign subsidiaries, including those in U.S. territories. Certain entities Dow controls and includes in its accounts held $266 million for their own operations. That amount is included in cash equivalents and is distinct from the $130 million of separately classified restricted cash. These distinctions matter when comparing group cash with the parent’s payment needs.
Source: Dow third-quarter 2026 Form 10-Q, balance sheet and cash-flow statement; Note 20; liquidity, covenants and ratings, pp. 51 and 55–56.
Dow’s stockholders’ equity rose just $145 million, to $16.153 billion. Nine-month common-stockholder profit of $646 million was less than the $758 million of dividends, reducing retained earnings after other adjustments. Share-based compensation and a small improvement in accumulated other comprehensive income supplied the offset. The equity reconciliation below distinguishes those noncash entries from cash raised.
With no buybacks to offset employee share deliveries, the share count increased. Issued shares increased, and shares previously held in treasury were delivered under compensation and benefit plans. Outstanding shares rose from 717.2 million at year-end to 723.9 million in September. The quarter’s diluted average share count increased about 2%, slightly reducing the earnings-per-share benefit of higher profit. A further 2.7 million shares were delivered under the employee purchase plan in October. Dow’s declared December dividend remains $0.35 per share, but it was not part of the nine-month cash payments.
Source: Dow third-quarter 2026 Form 10-Q, balance sheet and equity statement, pp. 7 and 9; Notes 7 and 17; dividends and repurchases, p. 56.
6. Legacy obligations continue to compete for cash
Stronger current earnings do not remove the cash claims inherited from older operations. Dow recorded $991 million for environmental cleanup and restoration, compared with $1.011 billion at year-end. Management says the ultimate cost for those accrued matters could reasonably reach approximately two and a half times the reserve. That implies a total near $2.48 billion, or approximately $1.49 billion above the amount recorded; this is a disclosed uncertainty range, not a prediction of additional losses.
Union Carbide’s asbestos liability was $645 million, down from $708 million. About 71% related to future claims. Management found no need to revise the estimate in the quarter. The remaining liability still mainly covers claims expected to arise in the future.
The filing also describes a Texas wastewater-permit case involving Seadrift and securities and related shareholder litigation concerning earlier dividend statements. It does not provide usable loss estimates for those cases. Their business significance is the possibility of further payments or operating requirements beyond the cash needs already scheduled.
Source: Dow third-quarter 2026 Form 10-Q, Note 12, pp. 25–27; Legal Proceedings, p. 60.
Retirement obligations are another continuing requirement. Noncurrent pension and other retirement-benefit liabilities fell to $4.318 billion from $4.694 billion, but the decline is not cash income. Dow contributed $138 million through September and expects approximately $220 million for the full year. Pension accounting generated a $25 million credit in nine-month earnings, illustrating why reported benefit expense and cash funding must be considered separately.
Source: Dow third-quarter 2026 Form 10-Q, balance sheet; Note 16; pension funding discussion, p. 57.
Long-term purchases also constrain flexibility. The 2025 annual report disclosed $27.309 billion of purchase obligations, including supply commitments for Path2Zero and extended contracts. The quarterly filing reports no material changes beyond its listed updates. These commitments pay for goods or services over time. At December 2025, Dow also reported $509 million of uncertain tax benefits—tax savings not recognized because their acceptance was uncertain—and $334 million of accrued interest and penalties. These are annual balances; the quarterly filing does not update that rollforward.
Sources: Dow 2025 Form 10-K, contractual obligations, p. 53, and the income-tax footnote, p. 101; Dow third-quarter 2026 Form 10-Q, contractual obligations, p. 57.
7. Dow has regained room to act; the next test is keeping the improvement
Dow is in a stronger operating and funding position than a year earlier, with recovery still dependent on pricing and execution. Higher product margins lifted reported profit, specialty businesses provided pockets of volume growth, and cash generation supported investment, dividends and debt reduction. Management is using that room to reduce costly capacity while retaining a large future production project.
The evidence supports an improving business, rather than a fully repaired demand cycle. Total volume remains below the prior year, Sadara’s reported improvement includes suspended losses, and litigation receipts lifted cash ahead of final resolution. The strongest confirmation of further progress would be savings that persist as supply disruptions ease, broader customer-volume growth, and cash generation that covers restructuring and Alberta spending without relying on another large legal receipt. Conversely, renewed margin pressure or additional Sadara funding would narrow the room Dow has gained.
Reporting basis and calculation notes
Reporting basis: This analysis uses Dow Inc. and subsidiaries, prepared under U.S. GAAP, from the combined Dow Inc./The Dow Chemical Company Form 10-Q for September 30, 2026, filed October 23, 2026, accession 0001751788-26-000160. It does not substitute the separately presented TDCC statements. Quarter comparisons cover July–September; nine-month comparisons cover January–September. Balance-sheet comparisons are September 30, 2026 versus December 31, 2025. Dollar amounts below are US$ million unless otherwise stated.
Sources: SEC filing; SEC submission history; SEC company XBRL facts. XBRL checks used this accession, the relevant dates and units, and were matched to the Dow Inc. statements. In particular, the net-income fact used for the parent is common-stockholder income; consolidated income also includes minority owners’ share.
Calculation notes: The following checks explain the arithmetic behind the findings. They do not turn management’s adjusted measures into GAAP results or forecasts.
A. Profit and operating margins. Third-quarter sales growth is (11,267 ÷ 9,973 − 1) × 100 = 13.0%; nine-month growth is (33,153 ÷ 30,508 − 1) × 100 = 8.7%. Gross margin rose from 731 ÷ 9,973 = 7.3% to 1,378 ÷ 11,267 = 12.2%, an increase of 4.9 percentage points.
The $572 million increase in quarterly pretax profit reconciles as follows: $610 million improvement in the calculated operating subtotal, plus $84 million improvement in affiliate results, minus $135 million lower miscellaneous income, plus $3 million higher interest income, plus $10 million lower interest expense. These amounts sum to $572 million.
Source: Dow third-quarter 2026 Form 10-Q, consolidated income statement, p. 5.
B. Management’s quarterly earnings adjustments. Positive entries below are added to reported profit; negative entries remove gains or benefits. The after-tax columns refer to income available to Dow common stockholders. Tax effects follow the jurisdictions of the underlying items.
| Third-quarter adjusted-profit bridge, US$ million | 2025 pretax | 2025 after tax | 2026 pretax | 2026 after tax |
|---|---|---|---|---|
| Reported profit | 70 | 62 | 642 | 458 |
| Add transformation costs | 0 | 0 | 69 | 54 |
| Add 2025 program restructuring charges | 23 | 18 | 0 | 0 |
| Add implementation costs | 5 | 4 | 31 | 24 |
| Remove divestiture gain | -110 | -110 | 0 | 0 |
| Remove identified litigation gain | 0 | 0 | -69 | -56 |
| Add debt-retirement loss | 18 | 14 | 53 | 41 |
| Remove identified tax benefits | 0 | -120 | 0 | 0 |
| Adjusted result | 6 | -132 | 726 | 521 |
Source: October 22, 2026 earnings release, significant-items tables and tax methodology, p. 11; pretax items also appear in Form 10-Q Note 21.
Operating EBIT then removes interest income and adds interest expense to adjusted pretax profit: 726 − 50 + 211 = 887 in 2026; 6 − 47 + 221 = 180 in 2025. For the first nine months of 2026, start with pretax profit of 1,123, add back net excluded charges of 1,056, subtract interest income of 130 and add interest expense of 640: the result is 2,689. The same calculation for 2025 starts with a pretax loss of 963, adds net excluded charges of 820, subtracts interest income of 114 and adds interest expense of 646, producing 389. The nine-month excluded net charges include multiple programs and gains, not just the income-statement restructuring line. In 2026 they comprise transformation costs of 675, asset and exit costs of 58, implementation costs of 80, the identified Sadara adjustment of 292 and a debt-retirement loss of 53, less litigation gains of 95 and transaction credits of 7.
Source: Dow third-quarter 2026 Form 10-Q, Notes 11, 19 and 21; Operating EBIT reconciliation, p. 53.
C. From profit to operating cash. Depreciation and amortization reduce accounting income without being current-period cash payments. Affiliate dividends are cash received; affiliate earnings or losses are accounting amounts. The other rows capture payment timing and remaining adjustments.
| Nine-month cash reconciliation, US$ million | 2025 | 2026 |
|---|---|---|
| Consolidated net income | -967 | 882 |
| Add depreciation and amortization | 2,126 | 2,049 |
| Affiliate dividends less recorded affiliate earnings | 312 | 534 |
| Add restructuring charges before associated cash settlements | 822 | 539 |
| Receivables, inventory and payables changes combined | -1,024 | -629 |
| Other asset and liability changes | -31 | 1,108 |
| Reverse noncash deferred-tax benefit | -179 | -94 |
| Reverse noncash pension credit | -73 | -25 |
| Deduct cash contributions to pension plans | -145 | -138 |
| Remove gains on asset and investment sales | -211 | -48 |
| Add other net losses | 134 | 109 |
| Cash from continuing operations | 764 | 4,287 |
Calculation notes: Dow received affiliate dividends of 279 in 2026 while recording affiliate losses of 255. Reversing the recorded loss and adding the cash dividend produces the 534 adjustment. For 2025, dividends of 190 plus reversal of losses of 122 produce 312. The other-asset-and-liability line combines several payment-timing movements, including the effects discussed in the cash section; the filing does not provide a complete breakdown.
Total operating cash of 4,293 includes 6 from discontinued operations. Opening cash including restricted cash of 3,952 + operating cash of 4,293 − investing cash use of 2,292 − financing cash use of 1,605 − currency effects of 76 = closing cash including restricted cash of 4,272. Subtract separately classified restricted cash of 130 to reach balance-sheet cash of 4,142.
Source: Dow third-quarter 2026 Form 10-Q, cash-flow statement, p. 8, and affiliate cash dividends, p. 46.
D. Balance-sheet and equity checks. September assets of 60,953 equal liabilities of 43,321 plus total equity of 17,632. December assets of 58,538 equal liabilities of 41,016 plus equity of 17,522. Management’s September net debt is 17,539 − 4,142 cash − 558 marketable securities = 12,839; the December calculation is 18,161 − 3,816 − 385 = 13,960.
| Dow Inc. stockholders’ equity, US$ million | December 31, 2025 | Nine-month movement | September 30, 2026 |
|---|---|---|---|
| Common stock | 8 | 0 | 8 |
| Additional paid-in capital | 11,112 | -52 | 11,060 |
| Retained earnings | 16,781 | -122 | 16,659 |
| Accumulated other comprehensive loss | -7,660 | 6 | -7,654 |
| Treasury stock at cost | -4,233 | 313 | -3,920 |
| Dow Inc. stockholders’ equity | 16,008 | 145 | 16,153 |
Calculation notes: Retained earnings means accumulated profit after distributions. Treasury stock records previously repurchased shares still held by the company. Other comprehensive income records changes, such as currency and pension movements, outside current net income.
Paid-in capital adds 261 of share-based compensation and subtracts 313 associated with treasury-share deliveries. Retained earnings adds 646 of income, then subtracts 758 of dividends and 10 of other adjustments. The 6 improvement in other comprehensive income combines investment losses of 37 and currency-translation losses of 88 with pension-related gains of 106 and derivative gains of 25. These are accounting movements, not cash raised from shareholders.
Minority owners’ equity moved from 1,514 to 1,479: add 236 of earnings, subtract 265 of distributions recorded in equity and 6 of translation losses. Equity distributions differ from the 232 paid in cash: some declared dividends remained unpaid, and payments to another joint venture receive different treatment in the income and equity statements. Diamond Infrastructure Solutions remains consolidated because Dow controls it; the 49% minority interest sold in 2025 is not treated as a second company whose profit can be added to Dow’s total.
Some unvested employee awards receive dividend equivalents, so Dow allocates a share of profit to them before calculating earnings per share. For quarterly diluted EPS, deduct 4 of earnings allocated to these awards from common-stockholder income of 458, then divide by 727.4 million diluted average shares: 454 ÷ 727.4 = $0.62 after rounding. The comparable 2025 calculation is (62 − 2) ÷ 713.2 = $0.08. The share movements reflect new issuance and delivery of treasury shares, with no repurchases in the nine-month periods.
Source: Dow third-quarter 2026 Form 10-Q, statements, pp. 5–9; Notes 7, 14, 15 and 20; net-debt table, p. 55.
This analysis is for information and education and is not investment advice. Management plans and estimates may differ from future results.