Financial Instruments

12 Months Ended

Dec. 31, 2025

Fair Value Measurements

Investments Measured at Fair Value on a Recurring Basis

Cash equivalents and marketable equity securities are measured at fair value and classified within Level 1 and Level 2 in the fair value hierarchy, because we use quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets.

Debt securities are measured at fair value and classified within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.

The following tables summarize our cash, cash equivalents, and marketable securities measured at fair value on a recurring basis (in millions):


	As of December 31, 2024
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total
Cash					$	12,407
Cash equivalents:
Money market funds	$	8,154	$	0	$	8,154
Time deposits	0		2,081		2,081
Government bonds	0		746		746
Corporate debt securities	0		78		78
Total cash and cash equivalents	8,154		2,905		23,466
Marketable securities:
Marketable equity securities(1)	4,708		105		4,813
Time deposits	0		136		136
Government bonds	0		28,709		28,709
Corporate debt securities	0		21,116		21,116
Mortgage-backed and asset-backed securities	0		17,417		17,417
Total marketable securities	4,708		67,483		72,191
Total	$	12,862	$	70,388	$	95,657

(1)The long-term portion of marketable equity securities (subject to long-term lock-up restrictions) of $266 million as of December 31, 2024 is included within other non-current assets.


	As of December 31, 2025
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total
Cash					$	15,305
Cash equivalents:
Money market funds	$	11,349	$	0	$	11,349
Time deposits	0		3,353		3,353
Government bonds	0		602		602
Corporate debt securities	0		99		99
Total cash and cash equivalents	11,349		4,054		30,708
Marketable securities:
Marketable equity securities	4,402		1,911		6,313
Time deposits	0		0		0
Government bonds	0		50,549		50,549
Corporate debt securities	0		21,565		21,565
Mortgage-backed and asset-backed securities	0		17,708		17,708
Total marketable securities	4,402		91,733		96,135
Total	$	15,751	$	95,787	$	126,843

Investments Measured at Fair Value on a Nonrecurring Basis

Non-marketable equity securities accounted for under the measurement alternative are investments in privately held companies without readily determinable market values. The carrying value of these non-marketable equity securities is adjusted upward or downward to fair value upon observable transactions for identical or similar investments of the same issuer or impairment. Non-marketable equity securities that have been remeasured during the period based on observable transactions are classified within Level 2 or Level 3 in the fair value hierarchy, and remeasurements due to impairment are classified within Level 3. Our valuation methods include option pricing models, market comparable approach, and common stock equivalent method, which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, expected time to exit, risk free rate, and the rights and obligations of the securities we hold. These inputs vary significantly based on investment type.

As of December 31, 2025, the carrying value of our non-marketable equity securities accounted for under the measurement alternative was $64.1 billion, of which $45.6 billion were remeasured at fair value during the year ended December 31, 2025, and were primarily classified within Level 2 of the fair value hierarchy at the time of measurement.

Debt and Equity Securities

Debt Securities

The following table summarizes the estimated fair value of investments in available-for-sale marketable debt securities by effective contractual maturity dates (in millions):


	As of December 31, 2025
Due in 1 year or less	$	26,735
Due in 1 year through 5 years	37,001
Due in 5 years through 10 years	12,769
Due after 10 years	13,317
Total	$	89,822

The following tables present fair values and gross unrealized gains and losses recorded to AOCI, less any expected credit losses, aggregated by investment category (in millions):


	As of December 31, 2024
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Time deposits	$	2,217	$	0	$	0	$	2,217
Government bonds	27,551		83		(214)		27,420
Corporate debt securities	18,300		79		(222)		18,157
Mortgage-backed and asset-backed securities	14,437		63		(385)		14,115
Total investments with fair value change reflected in other comprehensive income	$	62,505	$	225	$	(821)	$	61,909


	As of December 31, 2025
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Time deposits	$	3,353	$	0	$	0	$	3,353
Government bonds	49,087		443		(26)		49,504
Corporate debt securities	18,346		242		(32)		18,556
Mortgage-backed and asset-backed securities	14,337		174		(128)		14,383
Total investments with fair value change reflected in other comprehensive income	$	85,123	$	859	$	(186)	$	85,796

The following tables present fair values and gross unrealized losses recorded to AOCI, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in millions):


	As of December 31, 2024
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Government bonds	$	11,119	$	(126)	$	2,576	$	(88)	$	13,695	$	(214)
Corporate debt securities	4,228		(17)		6,838		(168)		11,066		(185)
Mortgage-backed and asset-backed securities	5,222		(106)		3,813		(279)		9,035		(385)
Total	$	20,569	$	(249)	$	13,227	$	(535)	$	33,796	$	(784)


	As of December 31, 2025
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Government bonds	$	4,230	$	(9)	$	1,174	$	(17)	$	5,404	$	(26)
Corporate debt securities	915		0		2,429		(24)		3,344		(24)
Mortgage-backed and asset-backed securities	1,377		(4)		3,035		(124)		4,412		(128)
Total	$	6,522	$	(13)	$	6,638	$	(165)	$	13,160	$	(178)

We determine realized gains or losses on the sale or extinguishment of debt securities on a specific identification method. For certain marketable debt securities, we have elected the fair value option for which changes in fair value are recorded in OI&E. The fair value option was elected for these securities to align with the unrealized gains and losses from related derivative contracts.

The following table summarizes gains and losses for debt securities, reflected as a component of OI&E (in millions):


	Year Ended December 31,
	2023		2024		2025
Unrealized gain (loss) on fair value option debt securities	$	386	$	30	$	254
Gross realized gain on debt securities	182		482		572
Gross realized loss on debt securities	(1,833)		(1,553)		(316)
(Increase) decrease in allowance for credit losses	50		(2)		30
Total gain (loss) on debt securities recognized in other income (expense), net	$	(1,215)	$	(1,043)	$	540

Non-marketable Securities

Our non-marketable securities primarily consist of non-marketable equity securities accounted for under the measurement alternative. The carrying value is measured at the total initial cost plus the cumulative net upward and downward adjustments (including impairments). We account for non-marketable equity securities through which we exercise significant influence but do not have control over the investee under the equity method. Certain of our non-marketable securities include our investments in VIEs where we are not the primary beneficiary. See Note 5 for further details on VIEs.

Realized net gain (loss) on equity securities sold during the period reflects the difference between the sale proceeds and the carrying value of the equity securities at the beginning of the period or the purchase date, if later.

All gains and losses, including impairments, are included as components of OI&E.

The carrying values for non-marketable securities are summarized below (in millions):


	As of December 31,
	2024		2025
Non-marketable securities:
Total initial cost of non-marketable equity securities accounted for under the measurement alternative	$	20,940	$	28,429
Cumulative upward adjustments	22,709		44,485
Cumulative downward adjustments (including impairments)	(8,431)		(8,820)
Carrying value of non-marketable equity securities accounted for under the measurement alternative	35,218		64,094
Equity method investments and other	2,764		4,593
Total non-marketable securities	$	37,982	$	68,687

Gains and Losses on Equity Securities

Gains and losses (including impairments), net, for equity securities included in OI&E are summarized below (in millions):


	Year Ended December 31,
	2023		2024		2025
Gross unrealized gain on non-marketable equity securities accounted for under the measurement alternative	$	1,806	$	5,582	$	22,666
Gross unrealized loss (including impairments) on non-marketable equity securities accounted for under the measurement alternative	(2,894)		(2,210)		(1,271)
Unrealized net gain (loss) on non-marketable equity securities accounted for under the measurement alternative	(1,088)		3,372		21,395
Unrealized net gain (loss) on marketable and other equity securities	790		156		1,907
Realized net gain (loss) on marketable and non-marketable equity securities sold during the period	690		186		778
Total gain (loss) on equity securities in other income (expense), net (1)	$	392	$	3,714	$	24,080

(1) Excludes income (loss) and impairment from equity method investments. Refer to Note 7 for further details.

Cumulative net gains (losses), calculated as the difference between the sales price and purchase price, represent the total net gains (losses) recognized after the initial purchase date. This represents the total economic impact of the investment, regardless of when the gains or losses were previously recognized. Cumulative net gains on equity securities sold were $748 million and $387 million for the years ended December 31, 2024 and 2025, respectively.

Derivative Financial Instruments

We primarily use derivative instruments to manage risks relating to our ongoing business operations, including foreign currencies, interest rates, commodity prices, credit exposures, and market prices of certain marketable equity securities. Additionally, we enter into derivatives to enhance investment returns. We also enter into derivatives as a result of agreements with third parties to backstop certain obligations related to data center leases. These backstop agreements are accounted for as credit derivatives.

We recognize derivative instruments in the Consolidated Balance Sheets at fair value and classify them primarily within Level 2 in the fair value hierarchy. We present our foreign currency collars (an option strategy comprised of a combination of purchased and written options) at net fair values and present all other derivatives at gross fair values. The accounting treatment for derivatives is based on the intended use and hedge designation.

Cash Flow Hedges

We designate foreign currency forwards and options (including collars) as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the US dollar. These contracts have maturities of 24 months or less.

Cash flow hedge amounts included in the assessment of hedge effectiveness are deferred in AOCI and reclassified to revenue when the hedged item is recognized in earnings. Hedge components excluded from our assessment of hedge effectiveness are amortized on a straight-line basis over the life of the hedging instrument in revenues. The difference between fair value changes of the excluded component and the amount amortized to revenues is recorded in AOCI.

As of December 31, 2025, the net accumulated loss on our foreign currency cash flow hedges before tax effect was $60 million, which is expected to be reclassified from AOCI into revenues within the next 12 months.

Additionally, we may designate interest rate derivatives as cash flow hedges to manage our exposure to certain interest rate risks. Changes in the fair value of these derivatives are deferred in AOCI and reclassified to OI&E when the hedged item is recognized in earnings.

Fair Value Hedges

We designate foreign currency forwards as fair value hedges to hedge foreign currency risks for our marketable debt securities denominated in currencies other than the US dollar. Fair value hedge amounts included and excluded from the assessment of hedge effectiveness are recognized in OI&E.

Net Investment Hedges

We designate foreign currency forwards, options (including collars), cross-currency swaps, and foreign currency-denominated debt as net investment hedges to hedge the foreign currency risks related to our investments in foreign

subsidiaries. Net investment hedge amounts included in the assessment of hedge effectiveness are recognized in AOCI.

Changes in the fair value of hedge components of forward and option contracts that are excluded from the assessment of hedge effectiveness are recognized in OI&E. Hedge components of cross-currency swaps that are excluded from the assessment of hedge effectiveness are amortized over the life of the hedging instrument and recognized in OI&E. The difference between fair value changes of the excluded component and the amount amortized to OI&E is recorded in AOCI.

We had no foreign currency-denominated debt as of December 31, 2024 and $15.4 billion carrying value of foreign currency-denominated debt designated as net investment hedges as of December 31, 2025.

Derivatives Not Designated as Hedging Instruments

We enter into derivatives not designated as hedging instruments to manage risks related to our ongoing business operations. The primary risk managed is foreign exchange risk related to the remeasurement of monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary. Gains and losses on these foreign exchange derivatives are recorded within the “foreign currency exchange gain (loss), net” component of OI&E.

We also enter into derivatives to manage other risks, to enhance investment returns, and as a result of agreements with certain third parties to backstop certain obligations relating to data center leases. Gains and losses arising from other derivatives are primarily reflected within the “other” component of OI&E. See Note 7 for further details.

The gross notional amounts of outstanding derivative instruments were as follows (in millions):


	As of December 31,
	2024		2025

Derivatives designated as hedging instruments:
Foreign exchange contracts
Cash flow hedges	$	20,315	$	23,852
Fair value hedges	$	1,562	$	0
Net investment hedges	$	6,986	$	14,203
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	44,227	$	56,085
Credit derivatives(1)	$	0	$	16,940
Other contracts	$	15,082	$	15,900

(1) Notional amounts for credit derivatives are the backstop obligations related to certain third-party data center leases and represent the maximum potential amount of future payments that could be required in the event of certain default scenarios over remaining agreement periods of up to 15 years. In the event we are required to make payments under certain backstop obligations, we may receive equity in or cash payments from certain counterparties, the amounts for which are not reflected in the notional amounts for credit derivatives. See Note 5 for further details.

The fair values of outstanding derivative instruments were as follows (in millions):


	As of December 31, 2024				As of December 31, 2025
	Assets(1)		Liabilities(2)		Assets(1)		Liabilities(2)
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	1,054	$	0	$	316	$	197

Derivatives not designated as hedging instruments:
Foreign exchange contracts	200		593		92		84
Other contracts	474		19		324		98
Total derivatives not designated as hedging instruments	674		612		416		182
Total	$	1,728	$	612	$	732	$	379

(1) Derivative assets are recorded as other current and non-current assets.

(2) Derivative liabilities are recorded as accrued expenses and other liabilities, current and non-current.

The gains (losses) on derivatives and non-derivative financial instruments in cash flow hedging and net investment hedging relationships recognized in other comprehensive income are summarized below (in millions):


	Year Ended December 31,
	2023		2024		2025
Cash flow hedging relationship:
Foreign exchange and other contracts
Amount included in the assessment of effectiveness	$	90	$	857	$	(978)
Amount excluded from the assessment of effectiveness	84		77		(45)
Net investment hedging relationship:
Amounts included in the assessment of effectiveness
Foreign exchange contracts	(287)		223		(765)
Foreign currency-denominated debt	0		0		(393)
Amounts excluded from the assessment of effectiveness
Foreign exchange contracts	0		0		11
Total	$	(113)	$	1,157	$	(2,170)

The table below presents the gains (losses) of derivatives included on the Consolidated Statements of Income: (in millions):


	Year Ended December 31,
	2023				2024				2025
	Revenues		Other income (expense), net		Revenues		Other income (expense), net		Revenues		Other income (expense), net
Total amounts included on the Consolidated Statements of Income	$	307,394	$	1,424	$	350,018	$	7,425	$	402,836	$	29,787

Effect of cash flow hedges:
Foreign exchange contracts
Amount included in the assessment of effectiveness	213		0		174		0		(233)		0
Amount excluded from the assessment of effectiveness	24		0		37		0		107		0
Effect of fair value hedges:
Foreign exchange contracts
Hedged items	0		59		0		(59)		0		(9)
Amount included in the assessment of effectiveness	0		(59)		0		58		0		9
Amount excluded from the assessment of effectiveness	0		15		0		13		0		1
Effect of net investment hedges:
Foreign exchange contracts
Amount excluded from the assessment of effectiveness	0		187		0		137		0		189
Effect of non-designated hedges:
Foreign exchange contracts	0		7		0		335		0		445
Other contracts	0		53		0		174		0		(148)
Total gains (losses)	$	237	$	262	$	211	$	658	$	(126)	$	487

Offsetting of Derivatives

We enter into master netting arrangements and collateral security arrangements to reduce credit risk. Cash collateral received related to derivative instruments under our collateral security arrangements are included in other current assets with a corresponding liability. Cash and non-cash collateral pledged related to derivative instruments under our collateral security arrangements are primarily included in other current assets.

The gross amounts of derivative instruments subject to master netting arrangements with various counterparties, and cash and non-cash collateral received and pledged under such agreements were as follows (in millions):


	As of December 31, 2024
							Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset
	Gross Amounts Recognized		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts Presented in the Consolidated Balance Sheets		Financial Instruments(1)		Cash and Non-Cash Collateral Received or Pledged		Net Amounts
Derivatives assets	$	1,776	$	(48)	$	1,728	$	(516)	$	(721)	$	491
Derivatives liabilities	$	660	$	(48)	$	612	$	(516)	$	(9)	$	87

	As of December 31, 2025
							Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Legal Rights to Offset
	Gross Amounts Recognized		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts Presented in the Consolidated Balance Sheets		Financial Instruments(1)		Cash and Non-Cash Collateral Received or Pledged		Net Amounts
Derivatives assets	$	842	$	(110)	$	732	$	(140)	$	(231)	$	361
Derivatives liabilities	$	489	$	(110)	$	379	$	(140)	$	(15)	$	224

(1) The balances as of December 31, 2024 and 2025 were related to derivatives allowed to be net settled in accordance with our master netting agreements.

Alphabet Inc. 10-K