Outset Medical, Inc. Income Taxes Disclosure

10. Income Taxes

The provision for income taxes were $0.7 million, $0.5 million and $0.5 million for the years ended December 31, 2025, 2024 and 2023, respectively, which primarily related to foreign income taxes in Mexico. The Company has incurred net operating losses for all periods presented. The Company has not reflected any benefit of such net operating loss carryforwards in the financial statements. The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

Total income taxes paid during the year ended December 31, 2025 were $0.5 million, entirely attributable to foreign income taxes in Mexico.

Deferred tax assets and liabilities

Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts used for tax purposes. The major components of deferred tax assets and liabilities were as follows as of the dates indicated (in thousands):

Realization of the deferred tax assets is dependent upon future taxable income, if any, the amount and timing of which are uncertain. A valuation allowance is provided when it is not more likely than not that some portion of the deferred tax assets will be realized. Management believes that, based on a number of factors, it is more likely than not that the U.S. federal and state net deferred tax assets will not be fully realized, thus a full valuation allowance has been recorded as of December 31, 2025 and 2024. The change in the valuation allowance during the years ended December 31, 2025, 2024 and 2023 was an increase of $15.3 million, $22.1 million, and $37.8 million, respectively.

On July 4, 2025, the One Big Beautiful Bill Act (the OBBBA) was signed into law. The OBBBA contains significant tax law changes, including allowing for the deduction of domestic research and development costs, which were previously required to be capitalized and amortized from 2022 through 2024. Because of the Company’s valuation allowance on its deferred tax assets, the change did not impact its financial statements.

Net Operating Loss and Tax Credit Carryforwards

As of December 31, 2025, the Company had a net operating loss carryforward for U.S. federal income tax purposes of $815.1 million. Federal net operating losses of $687.4 million incurred after 2017 do not expire but usage is limited to 80% of taxable

income. The remaining $127.8 million of federal net operating loss carryforward will begin to expire in 2026 and continue to expire through 2037. The Company had a total U.S. state net operating loss carryforward of $453.9 million. State net operating losses of $140.7 million do not expire. The remaining state net operating loss carryforward of $313.2 million will begin to expire in 2026 and continue to expire through 2044.

As of December 31, 2025, the Company had federal research and development credits of $13.4 million, which will begin to expire in 2030 and state research and development credits of $9.2 million which are not currently subject to expiration. Utilization of the operating loss and tax credits may be subject to annual limitation due to the ownership change limitations provided by the Code and similar state provisions. Such an annual limitation could result in the expiration of net operating loss and tax credit carryforwards before utilization.

Federal and state laws impose substantial restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. As a result of such ownership changes, the Company’s ability to realize the potential future benefit of tax losses and tax credits that existed at the time of the ownership change may be significantly reduced. The Company’s deferred tax asset and related valuation allowance would be reduced, as a result. The Company has not performed a Section 382 study to determine the amount of reduction, if any. Unrecognized tax benefits as of December 31, 2025 have been recorded as an offset to federal and state research and development credit carryforwards.

Unrecognized Tax Benefits

The Company does not have any material accrued interest or penalties associated with unrecognized tax benefits.

The Company files income tax returns in the United States, various U.S. states and Mexico. The Company is not under examination by income tax authorities in federal, other states, or other jurisdictions. All tax returns remain open for examination by federal, state, and foreign authorities for three, four, and five years, respectively, from the date of utilization of any net operating loss or credits.