Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations, and changes in the market values of our investments. Information relating to quantitative and qualitative disclosures about market risk is set forth below and in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and our debt. Our long-term debt is carried at amortized cost and fluctuations in interest rates do not impact our consolidated financial statements. However, the fair value of our long-term debt, which pays interest at a fixed rate, will generally fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest.
We generally invest our excess cash in investment grade short- to intermediate-term marketable debt securities and AAA-rated money market funds. Marketable debt securities with fixed interest rates may have their fair market value adversely affected due to a rise in interest rates, and we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates. The following table provides information about our cash equivalents and marketable debt securities, including principal cash flows by expected maturity and the related weighted-average interest rates as of December 31, 2024 (in millions, except percentages):
2025 2026 2027 2028 2029 Thereafter Total Estimated Fair Value as of December 31, 2024
Money market funds $ 28,282 $ — $ — $ — $ — $ — $ 28,282 $ 28,282
Weighted average interest rate 4.42 % — % — % — % — % — % 4.42 %
Corporate debt securities 47,908 1,779 1,086 311 55 — 51,139 50,912
Weighted average interest rate 4.65 % 3.48 % 4.49 % 4.65 % 4.83 % — % 4.60 %
U.S. government and agency securities 1,986 928 215 65 50 213 3,457 3,401
Weighted average interest rate 3.95 % 2.92 % 3.83 % 2.72 % 2.57 % 2.04 % 3.51 %
Asset-backed securities 450 262 195 226 188 220 1,541 1,523
Weighted average interest rate 3.19 % 4.74 % 4.59 % 4.84 % 3.29 % 3.40 % 3.92 %
Foreign government and agency securities 151 2 27 — — — 180 177
Weighted average interest rate 4.50 % 4.60 % 4.31 % — % — % — % 4.48 %
Other debt securities 44 8 8 8 — — 68 67
Weighted average interest rate 0.99 % 4.49 % 4.11 % 4.29 % — % — % 2.13 %
$ 78,821 $ 2,979 $ 1,531 $ 610 $ 293 $ 433 $ 84,667
Cash equivalents and marketable debt securities $ 84,362
As of December 31, 2024, we had long-term debt with a face value of $58.0 billion, including the current portion, primarily consisting of fixed rate unsecured senior notes. See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 6 — Debt” for additional information.
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Foreign Exchange Risk
During 2024, net sales from our International segment accounted for 22% of our consolidated revenues. Net sales and related expenses generated from our internationally-focused stores, including within Canada and Mexico (which are included in our North America segment), are primarily denominated in the functional currencies of the corresponding stores and primarily include Euros, British Pounds, and Japanese Yen. The results of operations of, and certain of our intercompany balances associated with, our internationally-focused stores and AWS are exposed to foreign exchange rate fluctuations. Upon consolidation, as foreign exchange rates vary, net sales and other operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. For example, as a result of fluctuations in foreign exchange rates throughout the year compared to rates in effect the prior year, International segment net sales decreased by $1.8 billion in comparison with the prior year.
We have foreign exchange risk related to foreign-denominated cash, cash equivalents, and marketable securities (“foreign funds”). Based on the balance of foreign funds as of December 31, 2024, of $25.5 billion, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in declines of $1.3 billion, $2.6 billion, and $5.1 billion.
We also have foreign exchange risk related to our intercompany balances denominated in various currencies. Based on the intercompany balances as of December 31, 2024, an assumed 5%, 10%, and 20% adverse change to foreign exchange rates would result in losses of $305 million, $605 million, and $1.2 billion, recorded to “Other income (expense), net.”
See Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Effect of Foreign Exchange Rates” for additional information on the effect on reported results of changes in foreign exchange rates.
Equity Investment Risk
As of December 31, 2024, our recorded value in equity, equity warrant, and convertible debt investments in public and private companies was $22.1 billion. Our equity and equity warrant investments in publicly traded companies, which include our equity investment in Rivian, represent $4.6 billion of our investments as of December 31, 2024, and are recorded at fair value, which is subject to market price volatility. We record our equity warrant investments in private companies at fair value and adjust our equity investments in private companies for observable price changes or impairments. We record our available-for-sale convertible debt investments in private companies at fair value, which primarily relate to Anthropic, PBC. Valuations of private companies are inherently more complex due to the lack of readily available market data. The current global economic conditions provide additional uncertainty. As such, we believe that market sensitivities are not practicable. See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 1 — Description of Business, Accounting Policies, and Supplemental Disclosures” for additional information.
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