Ouster, Inc.OUST
Ouster, Inc. Income Taxes Disclosure
Income Taxes
Loss before income taxes for the years ended December 31, 2025, and 2024 are as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Domestic | $ | (64,550) | $ | (98,413) | |||||||
| Foreign | 1,238 | 1,905 | |||||||||
| Total | $ | (63,312) | $ | (96,508) | |||||||
The components of income tax expense are as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Current: | |||||||||||
| Federal | $ | (3,457) | $ | — | |||||||
| State | 70 | 34 | |||||||||
| Foreign | 187 | 314 | |||||||||
| Total current (benefit) expense | (3,200) | 348 | |||||||||
| Deferred: | |||||||||||
| Federal | — | 135 | |||||||||
| State | — | — | |||||||||
| Foreign | 265 | 54 | |||||||||
| Total deferred expense | 265 | 189 | |||||||||
Total income tax (benefit) expense | $ | (2,935) | $ | 537 | |||||||
A reconciliation between the U.S. federal statutory rate and the Company’s effective tax rate for tax year 2025 after the adoption of ASU 2023-09 is as follows (in thousands, except percentages):
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| Tax at U.S. federal statutory tax rate | $ | (13,296) | 21.0 | % | |||||||
| State and local income taxes, net of federal income tax effect* | 57 | (0.1) | % | ||||||||
| Foreign tax effects | 455 | (0.7) | % | ||||||||
| Effects of cross-border tax laws | |||||||||||
| Global intangible low-taxed income | 195 | (0.3) | % | ||||||||
| Subpart F income | 2 | — | % | ||||||||
| Tax credits | |||||||||||
| Research and development credits | 4,069 | (6.4) | % | ||||||||
| Changes in Valuation Allowances | 8,932 | (14.1) | % | ||||||||
| Nontaxable or deductible items | |||||||||||
| Stock-based and non-deductible employee compensation | (1,221) | 1.9 | % | ||||||||
| Other | 258 | (0.4) | % | ||||||||
| Changes in unrecognized tax benefits | (1,359) | 2.1 | % | ||||||||
| Other | |||||||||||
| 2017 and 2018 IRS examination resolution | (3,720) | 5.9 | % | ||||||||
| Return-to-provision adjustment | 2,695 | (4.3) | % | ||||||||
| Other | (2) | — | % | ||||||||
| Total tax provision (benefit) | $ | (2,935) | 4.6 | % | |||||||
*State taxes in Massachusetts for 2025 made up the majority (greater than 50%) of the tax effect in this category.
A reconciliation between the U.S. federal statutory rate and the Company’s effective tax rate for the tax year 2024 prior to the adoption of ASU 2023-09 is as follows:
| Year Ended December 31, | |||||||||||
| 2024 | |||||||||||
| Tax at U.S. federal statutory rate | $ | (20,267) | 21.0 | % | |||||||
| State income taxes, net of federal benefit | 23 | — | % | ||||||||
| Stock-based compensation | 7,213 | (7.5) | % | ||||||||
| Foreign rate differential | 10 | — | % | ||||||||
| Fair value changes - warrants | (22) | — | % | ||||||||
| Valuation allowance | 13,174 | (13.7) | % | ||||||||
| Non-deductible expenses | 39 | — | % | ||||||||
| Other | 367 | (0.4) | % | ||||||||
| Total tax provision | $ | 537 | (0.6) | % | |||||||
Significant components of the Company’s deferred tax assets and liabilities for federal, state and foreign income taxes are as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 242,635 | $ | 200,050 | |||||||
| Credits | 7,637 | 9,863 | |||||||||
| Stock-based compensation | 601 | 2,118 | |||||||||
| Accruals and reserves | 4,121 | 4,296 | |||||||||
| Deferred revenue | 4,284 | 5,163 | |||||||||
| Fixed assets | — | 1,689 | |||||||||
| Operating lease liability | 3,947 | 5,086 | |||||||||
| Capitalized research and development expenditures | 8,092 | 37,291 | |||||||||
| Gross deferred tax assets | 271,317 | 265,556 | |||||||||
| Valuation allowance | (266,186) | (259,698) | |||||||||
| Net deferred tax assets | 5,131 | 5,858 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Fixed assets | (227) | — | |||||||||
| Intangible property | (1,823) | (3,022) | |||||||||
| Operating lease, right of use assets | (3,081) | (2,571) | |||||||||
| Gross deferred tax liabilities | (5,131) | (5,593) | |||||||||
| Net deferred tax assets | $ | — | $ | 265 | |||||||
Deferred income taxes have not been provided for undistributed earnings of the Company’s consolidated foreign subsidiaries because of the Company’s intent to reinvest such earnings indefinitely in active foreign operations. The Company believes that future domestic cash generation will be sufficient to meet future domestic cash needs. The Company has not recorded a deferred tax liability on the undistributed earnings of non-U.S. subsidiaries.
The Company has established a full valuation allowance of $266.2 million and $259.7 million for the years ended December 31, 2025 and 2024, respectively, against its U.S. Federal, state and foreign deferred tax assets. The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain whether it is more likely than not that deferred tax assets will be realized. Due to the history of losses the Company has generated in the past, the Company believes that it is not more likely than not that all of its U.S. Federal, state, and foreign deferred tax assets can be realized as of December 31, 2025. Accordingly, the Company has recorded a full valuation allowance on its deferred tax assets.
The valuation allowance on the Company’s net deferred taxes increased by $6.5 million during the year ended December 31, 2025 as compared to a decrease of $45.3 million during the year ended December 31, 2024. The current year increase in valuation allowance is primarily attributable to the generation of net operating losses. The prior year decrease in valuation allowance is primarily attributable to the generation of net operating losses and capitalization of research and development expenditures.
As of December 31, 2025, the Company had federal net operating loss carryforwards and state net operating loss carryforwards of approximately $1.1 billion and $458.2 million, respectively. As of December 31, 2025, federal net operating loss carryforwards generated after December 31, 2017 will be carried forward indefinitely and the state net operating loss carryforward begins expiring in 2028 through 2045. As of December 31, 2025, the amount of federal net operating loss that does not expire is $1.1 billion.
As of December 31, 2025, the Company had federal and state research and development credit carryforwards of approximately $0.9 million and $12.8 million, respectively. As of December 31, 2025 the federal credits will expire starting in 2035, if not utilized and state credits carryforward indefinitely.
The Tax Reform Act of 1986 and similar state legislation impose substantial restrictions on the utilization of the net operating losses and tax credit carryforwards in the event there is a change in ownership as provided by Section 382 and Section 383 of the Internal Revenue Code and similar state provisions. We have completed an analysis of Section 382 ownership changes in our stock through February 10, 2023 and have concluded that we have experienced ownership changes that will result in limitations in our ability to use certain of our tax credit carryforwards. The Company may experience ownership changes in the future as a result of future transactions in our stock. If it is determined that we undergo one or more ownership changes in the future, then our ability to utilize our U.S. Federal and state net operating loss carryforwards or other tax attributes may be limited or eliminated.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted. The OBBBA provides for significant U.S. tax law changes and modifications including making permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. The enactment of OBBBA resulted in an immaterial impact on the income tax provision due to the Company’s valuation allowance and the Company does not expect that portions of OBBBA with future effective dates will have a material impact.
Net cash paid (refunds received) for income taxes consisted of the following (in thousands):
| Year Ended December 31, | |||||
| 2025 | |||||
| U.S. Federal | $ | (857) | |||
| U.S. state and local jurisdictions | 22 | ||||
| Foreign | |||||
| United Kingdom | (282) | ||||
| China | 263 | ||||
| Netherlands | 180 | ||||
| Canada | (61) | ||||
| Other | 50 | ||||
| Net cash paid (refunds received) for income taxes | $ | (685) | |||
The amount of cash income taxes paid by the Company during the year ended December 31, 2024 was $0.4 million.
The balance of gross unrecognized tax benefits as of December 31, 2025, and 2024 was $23.4 million and $24.8 million, respectively. Out of the total unrecognized tax benefits, $0.5 million at December 31, 2025, if recognized, would impact our effective tax rate in the period of recognition. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2025 and 2024, the Company has accrued immaterial interest and penalties related to uncertain tax positions. The following table sets forth the change in the uncertain tax positions for the years ended December 31, 2025 and 2024 (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance at the beginning of the year | $ | 24,755 | $ | 24,755 | |||||||
| Decreases: | |||||||||||
| For prior years’ tax positions | (1,355) | — | |||||||||
| Balance at the end of the year | $ | 23,400 | $ | 24,755 | |||||||
The Company files income tax returns in the U.S. for Federal, California, and other U.S. states, as well as miscellaneous foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. The earliest year open for examination is the 2016 tax year. During the year ended December 31, 2025, the Company reached a resolution of its IRS examination for the 2017 and 2018 tax years and the Company recorded a refund receivable of $3.0 million. The Company does not believe it is reasonably possible that the Company’s unrecognized tax benefits will materially change in the next 12 months. All of the net operating losses and research and development credit carry-forwards that may be used in future years are still subject to inquiry given that the statute of limitation for these items would begin in the year of the utilization.
Deferred income taxes have not been provided for undistributed earnings of the Company’s consolidated foreign subsidiaries because of the Company’s intent to reinvest such earnings indefinitely in active foreign operations. The Company believes that future domestic cash generation will be sufficient to meet future domestic cash needs. The Company has not recorded a deferred tax liability on the undistributed earnings of non-U.S. subsidiaries.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 21, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 24, 2023 | |
| 2021 | Feb 28, 2022 | |
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.