Derivative Financial Instruments

3 Months Ended

Mar. 31, 2026

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions, and we principally manage our exposures to these risks through management of our core business activities. Certain of our foreign operations expose us to fluctuations of foreign interest rates and exchange rates that may impact revenue, expenses, cash receipts, cash payments, and the value of our stockholders' equity. We enter into derivative financial instruments to protect the value or fix the amount of certain cash flows in terms of the functional currency of the business unit with that exposure and also reduce the volatility in stockholders' equity.

Cash Flow Hedges of Foreign Exchange Risk

We are exposed to fluctuations in various foreign currencies against our functional currencies. We use foreign currency derivatives, including currency forward agreements, to manage our exposure to fluctuations in the various exchange rates. Currency forward agreements involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date.

Certain business units with exposure to foreign currency exchange risks have designated certain currency forward agreements as cash flow hedges of forecasted intercompany inventory purchases and sales. Our principal currency exposures for which we enter into cash flow hedges relate to the Euro, Swedish Krona, British Pound, Canadian Dollar, Polish Zloty, and Australian Dollar. We had foreign exchange contracts with purchased notional amounts totaling $563 million and $759 million as of March 31, 2026 and December 31, 2025, respectively. The most significant foreign currency derivatives are as follows:


(in millions)		Notional Value
Sell Currency	Buy Currency	March 31, 2026		December 31, 2025
USD	EUR	$	213	$	275
SEK	EUR	164		226
GBP	EUR	83		119
CAD	EUR	34		44
CAD	USD	27		37
PLN	EUR	22		33
AUD	EUR	20		25
		$	563	$	759

Hedges of Net Investments in Foreign Operations

We are exposed to changes in foreign currencies impacting our net investments held in foreign subsidiaries.

Cross-Currency Swaps

We have foreign currency exposure in the Euro-U.S. Dollar and Chinese Yuan (CNY) -U.S. Dollar exchange rates, due to our net investment in foreign operations. We use cross-currency swaps to partially mitigate the impact of the foreign currency rate changes on the Company’s net investments denominated in such foreign currencies. The Company’s cross-currency swaps are designated as net investment hedges.

As of March 31, 2026, the total notional amount of derivative instruments designated as net investment hedges was $4,359 million and $3,171 million as of March 31, 2026 and December 31, 2025, respectively.

The table below presents the effect of our derivative financial instruments on the Condensed Consolidated Income Statements and Statements of Comprehensive Income. Items in the table below reflect changes in "Other comprehensive income (loss)" ("OCI/L") within the Statements of Comprehensive Income:


	Three Months Ended
	March 31,
(in millions)	2026		2025
Derivatives in Cash Flow Hedges
Foreign Exchange Contracts
Amount of (loss)/gain recognized in OCI/L	$	(8)	$	15
Amount of (gain)/loss reclassified from OCI/L into Revenue	(3)		3
Amount of gain reclassified from OCI/L into Cost of revenue	(2)		(1)

Derivatives Net Investment Hedges
Cross-Currency Swaps
Amount of gain/(loss) recognized in OCI/L	$	70	$	(84)
Amount of income recognized in Interest expense	13		11

As of March 31, 2026, $3 million of net gains on cash flow hedges are expected to be reclassified into earnings in the next 12 months.

As of March 31, 2026, no gains or losses on the net investment hedges are expected to be reclassified into earnings over their duration.

The fair values of our derivative assets and liabilities are measured on a recurring basis using Level 2 inputs and are determined through the use of models that consider various assumptions including yield curves, time value and other measurements.

The fair values of our derivative contracts currently included in our hedging program were as follows:


(in millions)	March 31, 2026		December 31, 2025
Derivatives designated as hedging instruments
Assets
Cash Flow Hedges
Prepaid and other current assets	$	3	$	7
Net Investment Hedges
Other non-current assets	$	2	$	—
Liabilities
Cash Flow Hedges
Accrued and other current liabilities	$	(7)	$	(2)
Net Investment Hedges
Other non-current accrued liabilities	$	(246)	$	(317)

- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

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+ Details

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