v3.26.1
Derivative Financial Instruments and Hedging
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Hedging

6. Derivative Financial Instruments and Hedging

The Company enters into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks, mainly the exposure to changes in the exchange rate of the New Israeli Shekel (“NIS”) against the U.S. dollar that are associated with forecasted future cash flows and certain existing assets and liabilities for up to eighteen months. The Company’s primary objective in entering into these contracts is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. The Company does not use derivative instruments for trading or speculative purposes.

Notional Amount of Foreign Currency Contracts

The notional amounts of outstanding foreign currency contracts in U.S. dollar as of the periods presented were as follows:

 

 

June 30, 2026

 

 

December 31, 2025

 

 

 

(in thousands)

 

Derivatives Designated as Hedging Instruments:

 

 

 

 

 

 

Foreign currency contracts

 

$

70,518

 

 

$

95,063

 

Derivatives Not Designated as Hedging Instruments:

 

 

 

 

 

 

Foreign currency contracts

 

 

20,484

 

 

 

19,041

 

Total derivative instruments

 

$

91,002

 

 

$

114,104

 

 

Effect of Foreign Currency Contracts on the Condensed Consolidated Statements of Operations

Derivative instruments that hedge the exposure to variability in expected future cash flows are designated as cash flow hedges. The Company records changes in the fair value of these derivatives in AOCI in the Condensed Consolidated Balance Sheets, until the forecasted transaction occurs. Upon occurrence, the Company reclassifies the related gains or losses on the derivative to the same financial statement line item in the Condensed Consolidated Statements of Operations to which the derivative relates. In case the Company discontinues cash flow hedges, it records the related amount in interest and other income, net, on the Condensed Consolidated Statements of Operations. Derivative instruments that hedge monetary assets and liabilities denominated in certain foreign currencies are not designated as hedges for financial reporting purposes. The Company records changes in the fair value of these derivatives in interest and other income, net in the Condensed Consolidated Statements of Operations.

The gains on foreign currency contracts were presented on the Condensed Consolidated Statements of Operations as follows:

 

 

Derivatives Designated as Hedging Instruments

 

 

Derivatives Not Designated as Hedging Instruments

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Condensed Statement of Operations Location:

 

(in thousands)

 

Cost of revenue: subscription–self-managed and SaaS

 

$

431

 

 

$

80

 

 

$

725

 

 

$

104

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Research and development

 

 

3,111

 

 

 

659

 

 

 

5,243

 

 

 

830

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Sales and marketing

 

 

755

 

 

 

132

 

 

 

1,280

 

 

 

172

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

General and administrative

 

 

595

 

 

 

177

 

 

 

1,008

 

 

 

225

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Interest and other income, net

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

988

 

 

 

1,275

 

 

 

1,241

 

 

 

1,019

 

Total gains recognized in earnings

 

$

4,892

 

 

$

1,048

 

 

$

8,256

 

 

$

1,331

 

 

$

988

 

 

$

1,275

 

 

$

1,241

 

 

$

1,019

 

Effect of Foreign Currency Contracts on Accumulated Other Comprehensive Income

Net unrealized gains (losses) of foreign currency contracts designated as hedging instruments, net of tax, are recorded in AOCI. See Note 12, Accumulated Other Comprehensive Income, for the effect on other comprehensive income (loss) and the reclassification out of AOCI during the periods presented. All of net deferred gains in AOCI as of June 30, 2026 are expected to be recognized as cost of revenue or operating expenses in the same financial statement line item in the Condensed Consolidated Statements of Operations to which the derivative relates over the next twelve months.