Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Measurements

11. Fair Value Measurements

Assets and liabilities measured at fair value are classified into the following categories:

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Level 1: Quoted market prices in active markets for identical assets or liabilities.

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Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

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Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

We classify our cash equivalents and marketable securities within Level 1 or Level 2 because we use quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value.

The following tables set forth our financial assets as of June 30, 2022 and December 31, 2021 that are measured at fair value on a recurring basis during the period:

	June 30, 2022
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Estimated Fair Value
	(in thousands)
Cash	$	2,159,196	$	—	$	—		$	2,159,196
Level 1 securities:
U.S. government securities		1,669,624		—		(11,465	)		1,658,159
U.S. government agency securities		112,858		—		(202	)		112,656
Publicly traded equity securities (1)		113,392		—		(34,081	)		79,311
Level 2 securities:
Corporate debt securities		343,025		3		(2,025	)		341,003
Commercial paper		361,369		—		—			361,369
Certificates of deposit		160,785		—		(3	)		160,782
Total	$	4,920,249	$	3	$	(47,776	)	$	4,872,476

(1) In the second quarter of 2022, we reclassified a strategic investment from Level 3 to Level 1 at its fair value using the

beginning-of-period approach, following the commencement of public market trading of the investment during the

period (which was subject to short-term lock-up restrictions as of June 30, 2022). See Note 10 for further information.

	December 31, 2021
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Estimated Fair Value
	(in thousands)
Cash	$	1,966,966	$	—	$	—		$	1,966,966
Level 1 securities:
U.S. government securities		811,092		1		(1,454	)		809,639
U.S. government agency securities		77,409		1		(8	)		77,402
Publicly traded equity securities		71,139		122,064		—			193,203
Level 2 securities:
Corporate debt securities		143,124		—		(207	)		142,917
Commercial paper		422,328		—		(1	)		422,327
Certificates of deposit		80,431		—		—			80,431
Total	$	3,572,489	$	122,066	$	(1,670	)	$	3,692,885

We held investments in publicly traded companies with an aggregate carrying value of $79.3 million and $193.2 million as of June 30, 2022 and December 31, 2021, respectively, recorded as marketable securities. We recorded $63.9 million and $156.0 million in unrealized losses related to these investments for the three and six months ended June 30, 2022 within other income (expense), net on the consolidated statements of operations. These investments were reclassified from strategic investments to marketable securities in the fourth quarter of 2021 and second quarter of 2022, following commencement of public market trading.

Gross unrealized losses on marketable debt securities were not material for the three months and six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, we considered any decreases in fair value on our marketable debt securities to be driven by factors other than credit risk, including market risk. As of June 30, 2022, $233.5 million of our total $2.5 billion in marketable debt securities have contractual maturities between one and five years. All other marketable debt securities have contractual maturities less than one year.

We carry the Convertible Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets and present the fair value for disclosure purposes only. As of June 30, 2022, the fair value of the 2025 Notes, the 2026 Notes, the 2027 Notes, and the 2028 Notes was $283.4 million, $805.6 million, $816.3 million, and $1.0 billion, respectively. As of December 31, 2021, the fair value of the 2025 Notes, the 2026 Notes, and the 2027 Notes was $650.1 million, $1.9 billion, and $1.1 billion, respectively. The estimated fair value of the Convertible Notes, which are classified as Level 2 financial instruments, was determined based on the estimated or actual bid prices of the Convertible Notes in an over-the-counter market on the last business day of the period.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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