The Company has a portion of its business denominated and transacted in foreign currencies, which subjects the Company to foreign exchange risk, and uses derivative instruments to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes.

The Company may elect to designate certain derivatives to partially offset its business exposure to foreign exchange risk. However, the Company may choose not to hedge certain exposures for a variety of reasons including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange rates.

To protect revenue from fluctuations in foreign currency exchange rates, the Company may enter into forward contracts, option contracts, or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue, typically for up to 18 months. In the first quarter of 2023, the Company initiated a foreign exchange cash flow hedging program to minimize the effects of foreign currency fluctuations on future revenue.

The Company may also enter into derivative instruments that are not designated as accounting hedges to offset a portion of the foreign currency exchange gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.

The following table summarizes the effect of derivative instruments on the Company’s consolidated balance sheets (in millions):


	Derivative Assets(1)
		Fair value as of December 31,
	Location	2022		2023
Derivatives designated as hedging instruments:
Foreign exchange contracts (current)	Prepaids and other current assets	$	—	$	4



Derivatives not designated as hedging instruments:
Foreign exchange contracts (current)	Prepaids and other current assets	$	14	$	23


	Derivative Liabilities(1)
		Fair value as of December 31,
	Location	2022		2023
Derivatives designated as hedging instruments:
Foreign exchange contracts (current)	Accrued expenses, accounts payable, and other current liabilities	$	—	$	25
Foreign exchange contracts (noncurrent)	Other liabilities, noncurrent	—		5
Total derivatives designated as hedging instruments		$	—	$	30

Derivatives not designated as hedging instruments:
Foreign exchange contracts (current)	Accrued expenses, accounts payable, and other current liabilities	$	31	$	30

To limit credit risk, the Company generally enters into master netting arrangements with the respective counterparties to the Company’s derivative contracts, under which the Company is allowed to settle transactions with a single net amount payable by one party to the other. As of December 31, 2023, the potential effect of these rights of off-set associated with the Company’s derivative contracts would be a reduction to both derivative assets and liabilities of $26 million, resulting in net derivative assets of $1 million and net derivative liabilities of $34 million.

The effect of derivative instruments designated as hedging instruments on the consolidated statements of operations was not material for the year ended December 31, 2023.

The following table summarizes the activity of derivative instruments designated as cash flow hedges before reclassifications from AOCI to revenue and the impact of these derivative contracts on AOCI, net of tax (in millions):

As of December 31, 2023, cumulative unrealized losses recorded in AOCI, net of tax, related to derivative instruments designated as hedging instruments were $31 million.

Effect of Derivative Instruments not Designated as Hedging Instruments on the Consolidated Statements of Operations

The following table presents the activity of derivative instruments not designated as hedging instruments and the impact of these derivative contracts on the consolidated statements of operations (in millions):


	Realized Gain (Loss) on Derivatives						Unrealized Gain (Loss) on Derivatives
	Year Ended December 31,						Year Ended December 31,
	2021		2022		2023		2021		2022		2023
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	19	$	92	$	(43)	$	35	$	(33)	$	10

The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was $2.0 billion as of December 31, 2023.

As of December 31, 2023, approximately $11 million of deferred net losses on both outstanding and matured derivatives in AOCI are expected to be reclassified to revenue during the next 12 months concurrent with the underlying hedged transactions which will be recorded in revenue. Actual amounts ultimately reclassified to revenue are dependent on the exchange rates in effect when derivative contracts currently outstanding mature.

As of both December 31, 2022 and December 31, 2023, the total notional amount of outstanding derivatives not designated as hedging instruments was $2.4 billion.