v3.26.1
Derivatives and Hedging
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Derivatives and Hedging
The Company is exposed to market risks, including changes in foreign currency exchange rates and interest rates. To manage the risk related to these exposures, the Company enters into various derivative instruments that reduce these risks by creating offsetting exposures. The Company does not enter into derivative transactions for trading or speculative purposes.
Foreign Exchange Risk Management
The Company is exposed to foreign exchange risk when it earns revenues, pays expenses, enters into monetary intercompany transfers or other transactions denominated in a currency that differs from its functional currency.
The Company uses foreign exchange derivatives, typically forward contracts and options, to reduce its overall exposure to the effects of currency fluctuations on cash flows. These exposures are hedged, on average, for less than two years. These derivatives are accounted for as hedges, and changes in fair value are recorded each period in Other comprehensive income (loss) in the Condensed Consolidated Statements of Comprehensive Income.
In April 2026, the Company entered into three cross-currency interest rate swap transactions with an aggregate notional amount of $1.0 billion, including two $300 million swaps with 7-year and 10-year maturities and one $400 million swap with a 5-year maturity. The Company uses cross-currency interest rate swaps to hedge a designated portion of its net investments in certain euro-denominated foreign subsidiaries against foreign exchange risk and accounts for these instruments as net investment hedges. For a net investment hedge, the change in fair value of the hedging instrument due to changes in foreign currency exchange rates is recorded in Foreign currency translation adjustments, a component of Accumulated Other Comprehensive Income, to the extent it is effective as a hedge. The Company has elected to assess hedge effectiveness through the use of the spot method based on changes in fair value attributable only to changes in spot exchange rates. The cross-currency basis spread is excluded from the hedge effectiveness assessment. The Company assessed the hedges relationships and determined that they continued to qualify for hedge accounting as of June 30, 2026. The interest rate spread component is recognized using a systematic and rational method over the life of the hedging instruments in Interest expenses. The bi-annual interest settlements recognized are classified as operating activities in the Condensed Consolidated Statements of Cash Flows. Cash flows associated with the exchange of notional principal at the maturity of the swaps will be classified as investing activities in the Condensed Consolidated Statements of Cash Flows. If the net investments are sold or substantially liquidated, the balance of the Foreign currency translation adjustments accumulated in Other comprehensive income (loss) is recognized within Net income.
The Company also uses foreign exchange derivatives, typically forward contracts and options, to economically hedge the currency exposure of the Company’s global liquidity profile, including monetary assets or liabilities that are denominated in a non-functional currency of an entity, typically on a rolling 90-day basis, but may be for up to one year in the future. These derivatives are not accounted for as hedges, and changes in fair value are recorded each period in Other income (expense) in the Condensed Consolidated Statements of Income.
The notional and fair values of derivative instruments are as follows (in millions):
 Notional Amount
Net Amount of Derivative Assets
 Presented in the Statements of Financial Position (1)
Net Amount of Derivative Liabilities
 Presented in the Statements of Financial Position (2)
 June 30,
2026		December 31,
2025		June 30,
2026		December 31,
2025		June 30,
2026		December 31,
2025
Foreign exchange contracts      
Accounted for as hedges
Cash flow hedges$476 $452 $7 $19 $6 $4 
Net investment hedges1,000 — 5 — 3 — 
Not accounted for as hedges (3)
803 467 3 3 1 — 
Total$2,279 $919 $15 $22 $10 $4 
(1)Included within Other current assets ($10 million at June 30, 2026 and $21 million at December 31, 2025) or Other non-current assets ($5 million at June 30, 2026 and $1 million at December 31, 2025).
(2)Included within Other current liabilities ($5 million at June 30, 2026 and $3 million at December 31, 2025) or Other non-current liabilities ($5 million at June 30, 2026 and $1 million at December 31, 2025).
(3)These contracts typically are for 90-day durations and executed close to the last day of the most recent reporting month, thereby resulting in nominal fair values at the balance sheet date.
The amounts of derivative gains (losses) recognized in Other comprehensive income (loss) in the Condensed Consolidated Statements of Comprehensive Income are as follows (in millions):
 Three Months Ended June 30,Six Months Ended June 30,
 2026202520262025
Foreign exchange contracts
Cash flow hedges$(3)$20 $(8)$22 
Net investment hedges (1)
2 — 2 — 
Total$(1)$20 $(6)$22 
(1)Amounts represent gains recognized in Other comprehensive income (loss) during the period. As of June 30, 2026, the cumulative amount of gains after taxes recognized related to net investment hedges as Foreign currency translation adjustments in Accumulated other comprehensive income (loss) was $100 million. Refer to Note 11 “Shareholders’ Equity” for additional information regarding the Company’s Accumulated other comprehensive income (loss).
The amounts of derivative gains (losses) reclassified from Accumulated other comprehensive loss (income) (“AOCI”) to the Condensed Consolidated Statements of Income are as follows (in millions):
Classification of gains (losses) reclassified from AOCIThree Months Ended June 30,Six Months Ended June 30,
2026202520262025
Foreign exchange contracts
Cash flow hedgesTotal revenue$4 $7 $6 $5 
Compensation and benefits(1)— (2)— 
Interest expense1 1 1 1 
Total$4 $8 $5 $6 
The cross-currency basis spread that was excluded from the Company’s hedge effectiveness assessment of its net investment hedge was a gain of $2 million for both the three and six months ended June 30, 2026.
The Company estimates that approximately less than $1 million of pretax gains currently included within Accumulated other comprehensive loss will be reclassified into earnings in the next twelve months.
During the three and six months ended June 30, 2026, the Company recorded a loss of less than $1 million and $4 million, respectively, in Other income (expense) for foreign exchange derivatives not designated or qualifying as hedges. During the three and six months ended June 30, 2025, the Company recorded a gain of $24 million and $37 million, respectively, in Other income (expense) for foreign exchange derivatives not designated or qualifying as hedges.