Guardant Health, Inc.GH
Guardant Health, Inc. Income Taxes Disclosure
Income Taxes
The components of (loss) income before (benefit from) provision for income taxes are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
(in thousands) | |||||||||||||||||
| United States | $ | (413,482) | $ | (437,179) | $ | (481,405) | |||||||||||
| Foreign | (4,058) | 2,090 | 2,641 | ||||||||||||||
| Total | $ | (417,540) | $ | (435,089) | $ | (478,764) | |||||||||||
The components of the (benefit from) provision for income taxes are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
(in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| State | $ | 90 | $ | 126 | $ | 35 | |||||||||||
| Foreign | 352 | 871 | 1,191 | ||||||||||||||
Total current tax expense | 442 | 997 | 1,226 | ||||||||||||||
Deferred: | |||||||||||||||||
| Foreign | (1,705) | 287 | (541) | ||||||||||||||
Total deferred tax expense | (1,705) | 287 | (541) | ||||||||||||||
Total (benefit from) provision for income taxes | $ | (1,263) | $ | 1,284 | $ | 685 | |||||||||||
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and deferred tax liabilities are as follows:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
Net operating losses carryforwards | $ | 491,136 | $ | 422,990 | |||||||
Net operating losses - foreign | 3,842 | — | |||||||||
| Capitalized research and development costs | 134,447 | 118,340 | |||||||||
| Property, equipment and intangible assets | 18,175 | 14,429 | |||||||||
Accruals and reserves | 47,906 | 42,043 | |||||||||
Research and development credits | 80,954 | 71,330 | |||||||||
Stock-based compensation | 4,642 | 12,923 | |||||||||
Lease liabilities | 51,852 | 49,538 | |||||||||
Other | 7,010 | 2,379 | |||||||||
Total deferred tax assets | 839,964 | 733,972 | |||||||||
| Deferred tax liabilities: | |||||||||||
IPR&D | (4,791) | — | |||||||||
| Right-of-use asset | (39,964) | (36,426) | |||||||||
| Other | (225) | (313) | |||||||||
Total deferred tax liabilities | (44,980) | (36,739) | |||||||||
| Less: valuation allowance | (788,795) | (696,473) | |||||||||
| Net deferred tax assets | $ | 6,189 | $ | 760 | |||||||
The following table presents a reconciliation of the income tax expense computed at the statutory federal rate and the Company's income tax expense for the year ended December 31, 2025 in accordance with the new guidance in ASU No. 2023-09:
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| (in thousands) | |||||||||||
| Tax at the statutory federal rate | $ | (87,683) | 21.0 | % | |||||||
State and local income taxes, net of federal benefit* | 60 | — | % | ||||||||
| Foreign tax effects | (500) | 0.1 | % | ||||||||
Tax credits: | |||||||||||
| Research and development credits | (6,900) | 1.6 | % | ||||||||
Changes in valuation allowance | 81,080 | (19.4) | % | ||||||||
Nontaxable or nondeductible items: | |||||||||||
Stock-based compensation | (6,520) | 1.5 | % | ||||||||
Nondeductible executive compensation | 11,797 | (2.8) | % | ||||||||
| Other | 4,268 | (1.0) | % | ||||||||
Changes in unrecognized tax benefits | 3,057 | (0.7) | % | ||||||||
Other adjustments: | |||||||||||
Other | 78 | — | % | ||||||||
Total benefit from income taxes | $ | (1,263) | 0.3 | % | |||||||
*State taxes in California made up the majority (greater than 50%) of the tax effect in this category.
The following table presents a reconciliation of the income tax expense computed at the statutory federal rate and the Company’s income tax expense for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU No. 2023-09:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in thousands) | |||||||||||
| Taxes at the statutory federal rate | $ | (91,369) | $ | (100,553) | |||||||
| Change in valuation allowance | 92,726 | 114,707 | |||||||||
| Stock-based compensation | 12,012 | 8,077 | |||||||||
| Research and development credits | (11,000) | (14,549) | |||||||||
State taxes, net of federal benefits | (15,918) | (19,117) | |||||||||
| Prior period true-up | 7,962 | 8,212 | |||||||||
Other | 6,871 | 3,908 | |||||||||
Total provision for income taxes | $ | 1,284 | $ | 685 | |||||||
The Company’s actual tax expense differed from the statutory federal income tax expense using a tax rate of 21% for the years ended December 31, 2025, 2024 and 2023, primarily due to the change in valuation allowance, nondeductible expenses, research and development tax credits, state and foreign income taxes, and withholding taxes.
As of December 31, 2025 and 2024, the Company had net operating loss carryforwards of $1.9 billion and $1.6 billion for federal purposes, and $1.6 billion and $1.4 billion for state and local purposes, respectively, which may be subject to limitations as described below. If not utilized, $1.8 billion of these carryforwards could be carried forward indefinitely and the remaining will begin to expire in 2031 for federal purposes, and these carryforwards will begin to expire in 2026 for state and local purposes. Federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses could be limited. Some but not all states conform to the federal treatment of net operating losses. As of December 31, 2025, the Company had foreign net operating loss carryforwards of $15.3 million, the majority of which are indefinite lived. As of December 31, 2024, the Company had zero foreign net operating loss carryforwards.
As of December 31, 2025, the Company had federal and state research and development tax credit carryforwards of $53.7 million, net of reserve of $28.9 million, and $34.5 million, net of reserve of $18.6 million, respectively. As of December 31, 2024, the Company had federal and state research and development tax credit carryforwards of $47.9 million, net of reserve of $25.8 million, and $29.7 million, net of reserve of $16.0 million, respectively. The federal research and development tax credit carryforwards will expire at various dates beginning in the year 2032. The Company’s state research and development tax credit carryforwards do not expire.
Utilization of the net operating loss, or NOL, carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of NOL carryforwards and credits before utilization. Current laws impose substantial restrictions on the utilization of NOL carryforwards and credits in the event of an “ownership change” within a three-year period as defined by the Internal Revenue Code Section 382, or Section 382. If there should be an ownership change, the Company’s ability to utilize its NOL carryforwards and credits could be limited. The Company has not performed a Section 382 analysis.
Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Due to the Company’s history of U.S. operating losses, the Company believes that the recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not more likely than not to be realized and, accordingly, have provided a full valuation allowance against net U.S. deferred tax assets. The net change in total valuation allowance was an increase of $92.3 million, an increase of $92.7 million and an increase of $114.7 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company considers the earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. The Company has not recorded a provision for deferred U.S. federal and state income tax expense and foreign withholding taxes on approximately $1.9 million of undistributed earnings of foreign subsidiaries indefinitely reinvested outside the United States. If the foreign earnings are repatriated, the income tax provision would be adjusted in the period the earnings are determined to be no longer indefinitely reinvested outside the United States.
The Company has made an accounting policy election to treat Global Intangible Low-Taxed Income, or GILTI, taxes as a current period expense rather than including these amounts in the measurement of deferred taxes.
The following table presents the Company's income taxes paid (net of refunds received) for the year ended December 31, 2025 in accordance with the new guidance in ASU No. 2023-09:
| Year Ended December 31, | |||||
| 2025 | |||||
| (in thousands) | |||||
Domestic: | |||||
Texas | $ | 65 | |||
Other* | 82 | ||||
Foreign: | |||||
Japan | 280 | ||||
Singapore | 55 | ||||
India | 357 | ||||
Other | 30 | ||||
| Total | $ | 869 | |||
*Including amounts paid to 13 jurisdictions that do not meet the 5% disaggregation threshold, primarily related to extension payments, estimate taxes and tax return payments.
Uncertain Tax Positions
The Company records unrecognized tax benefits, where appropriate, for all uncertain income tax positions. The Company recorded unrecognized tax benefits for uncertain tax positions of $47.8 million and $42.1 million as of December 31, 2025 and 2024, respectively, which, if recognized, would not affect the effective income tax rate due to the valuation allowance that currently offsets the deferred tax assets.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Unrecognized tax benefits - Beginning of period | $ | 42,086 | $ | 36,946 | $ | 29,634 | |||||||||||
| Increases related to current year’s tax positions | 232 | 6,414 | 8,465 | ||||||||||||||
Increases (decreases) related to prior years’ tax positions | 5,501 | (1,274) | (1,153) | ||||||||||||||
| Unrecognized tax benefits - End of period | $ | 47,819 | $ | 42,086 | $ | 36,946 | |||||||||||
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2025, 2024 and 2023, the Company recognized no interest and penalties associated with unrecognized tax benefits. There are no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.
Due to the net operating loss carryforwards, all years remain open for income tax examination by tax authorities in the United States, various states and foreign tax jurisdictions in which the Company files tax returns.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 19, 2019 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.