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We are exposed to interest rate risk relating to our investment portfolio, from interest-rate sensitive assets underlying the customer balances we hold on our condensed consolidated balance sheets as customer accounts, and a portion of our debt.
−Removed: As of September 30, 2025 and December 31, 2024, approximately 70% and 48%, respectively, of our total cash, cash equivalents, and investment portfolio (excluding restricted cash and strategic investments) was held in cash and cash equivalents.
+Added: As of March 31, 2026 and December 31, 2025, approximately 60% and 63%, respectively, of our total cash, cash equivalents, and investment portfolio (excluding strategic investments) was held in cash and cash equivalents.
The remaining portfolio and assets underlying the customer balances that we hold on our condensed consolidated balance sheets as customer accounts are maintained in interest and non-interest bearing bank deposits, time deposits, and available-for-sale debt securities.
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Interest rate movements affect the interest income we earn on cash and cash equivalents, time deposits, and available-for-sale debt securities and the fair value of those securities.
−Removed: A hypothetical 100 basis points increase in interest rates would have resulted in a decrease in the fair value of our cash equivalents and available-for-sale debt securities investment by approximately $139 million and $101 million at September 30, 2025 and December 31, 2024, respectively.
+Added: In the first quarter of 2026, we refined the methodology of the sensitivity analysis of our cash equivalents and available-for-sale debt securities investment with respect to floating rate securities, particularly the duration estimation methodology.
+Added: A hypothetical 100 basis points increase in interest rates would have resulted in a decrease in the fair value of our cash equivalents and available-for-sale debt securities investment by approximately $8 million and $11 million at March 31, 2026 and December 31, 2025, respectively.
+Added: Based on the prior methodology, the decrease in the fair value of our cash equivalents and available-for-sale debt securities investment at December 31, 2025 was approximately $171 million.
+Added: The decline in duration sensitivity due to the methodology change does not reflect a change in portfolio composition.
Changes in the fair value of our available-for-sale debt securities resulting from such interest rate changes are reported as a component of accumulated other comprehensive income (“AOCI”) and are realized only if we sell the securities prior to their scheduled maturities or the declines in fair values are due to expected credit losses.
−Removed: As of September 30, 2025 and December 31, 2024, we had an aggregate principal amount of $10.5 billion and $10.6 billion, respectively, in fixed rate debt with varying maturity dates.
+Added: As of both March 31, 2026 and December 31, 2025, we had an aggregate principal amount of $10.4 billion in fixed rate debt with varying maturity dates.
Since these notes bear interest at fixed rates, they do not result in any financial statement risk associated with changes in interest rates.
−Removed: However, the fair value of these notes fluctuates when interest rates change, increasing in periods of declining interest rates and declining in periods of increasing interest rates.
−Removed: As of September 30, 2025, we had an aggregate principal amount of $450 million in floating rate debt with a maturity date of March 6, 2028.
−Removed: A hypothetical 100 basis points increase in market interest rates would not have resulted in a material impact to interest expense recorded in the three and nine months ended September 30, 2025.
−Removed: As of September 30, 2025 and December 31, 2024, we also had revolving credit facilities of approximately $5.6 billion available to us.
+Added: However, the fair value of these notes fluctuates when interest rates change, increasing in periods of declining interest rates and decreasing in periods of increasing interest rates.
+Added: As of March 31, 2026 and December 31, 2025, we had an aggregate principal amount of $450 million in floating rate debt with a maturity date of March 6, 2028.
+Added: A hypothetical 100 basis points increase in market interest rates would not have resulted in a material impact to interest expense recorded in the three months ended March 31, 2026.
+Added: As of both March 31, 2026 and December 31, 2025, we also had revolving credit facilities of approximately $5.6 billion available to us.
We are obligated to pay interest on borrowings under these facilities as well as other customary fees, including an upfront fee and an unused commitment fee based on our debt rating.
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As a result, we are exposed to the risk related to fluctuations in interest rates to the extent of our borrowings.
−Removed: As of September 30, 2025 and December 31, 2024, ¥90.0 billion (approximately $606 million) and ¥90.0 billion (approximately $574 million), respectively, was outstanding under these facilities.
−Removed: A 100 basis points hypothetical adverse change in applicable market interest rates would not have resulted in a material impact to interest expense recorded in the three and nine months ended September 30, 2025.
−Removed: For additional information, see “Note 12—Debt” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
+Added: As of March 31, 2026 and December 31, 2025, ¥90.0 billion (approximately $563 million) and ¥90.0 billion (approximately $575 million), respectively, was outstanding under these facilities.
+Added: A 100 basis points hypothetical adverse change in applicable market interest rates would not have resulted in a material impact to interest expense recorded in the three months ended March 31, 2026.
+Added: For additional information, see “Note 12—Debt” in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
Interest rates may also adversely impact our customers’ spending levels and ability and willingness to pay outstanding amounts owed to us.
Higher interest rates often lead to larger payment obligations by customers of our credit products to us, or to lenders under mortgage, credit card, and other consumer and merchant loans, which may reduce our customers’ ability to remain current on their obligations to us and therefore lead to increased delinquencies, charge-offs, and allowances for loans and interest receivable, which could have an adverse effect on our net income (loss).
+Added: 1Q 2026 FORM 10-Q
FOREIGN EXCHANGE RISK
−Removed: We have significant operations internationally that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, and Canadian dollar, which subject us to foreign exchange risk and may adversely impact our financial results.
+Added: We have significant operations internationally that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, Canadian dollar, and Indian rupee, which subject us to foreign exchange risk and may adversely impact our financial results.
We transact in various foreign currencies and have significant international revenues and expenses.
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These foreign exchange contracts are accounted for as derivative instruments;
−Removed: for additional details related to our foreign exchange contracts, please see “Note 10—Derivative Instruments” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
+Added: for additional details related to our foreign exchange contracts, please see “Note 10—Derivative Instruments” in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
We use foreign exchange contracts to protect our forecasted U.S.
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The accumulated gains and losses associated with net investment hedges will remain in AOCI until the foreign subsidiaries are sold or substantially liquidated, at which point they will be reclassified into earnings.
−Removed: dollar weakened by a hypothetical 10% at September 30, 2025 and December 31, 2024, the amount recorded in AOCI related to our foreign exchange contracts, before taxes, would have been approximately $462 million and $380 million lower, respectively, before considering the offsetting impact of the underlying hedged item.
+Added: dollar weakened by a hypothetical 10% at March 31, 2026 and December 31, 2025, the amounts recorded in AOCI related to our foreign exchange contracts, before taxes, would have been approximately $435 million and $456 million lower, respectively, before considering the offsetting impact of the underlying hedged item.
We have an additional balance sheet foreign exchange management program in which we use foreign exchange contracts to help offset the foreign exchange risk on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries.
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The foreign exchange gains and losses on our assets and liabilities are recorded in other income (expense), net, and are offset by the gains and losses on the foreign exchange contracts.
−Removed: Adverse changes in exchange rates of a hypothetical 10% for all foreign currencies would have resulted in a negative impact on income before income taxes of approximately $490 million and $470 million at September 30, 2025 and December 31, 2024, respectively, without considering the offsetting effect of foreign exchange contracts.
−Removed: Foreign exchange contracts in place as of September 30, 2025 would have positively impacted income before income taxes by approximately $472 million, resulting in a net negative impact of approximately $18 million.
+Added: A hypothetical adverse change of 10% in exchange rates for all foreign currencies would have resulted in a negative impact on income before income taxes of approximately $490 million and $547 million at March 31, 2026 and December 31, 2025, respectively, without considering the offsetting effect of foreign exchange contracts.
+Added: Foreign exchange contracts in place as of March 31, 2026 would have positively impacted income before income taxes by approximately $441 million, resulting in a net negative impact of approximately $49 million.
Foreign exchange contracts in place as of December 31, 2025 would have positively impacted income before income taxes by approximately $476 million, resulting in a net negative impact of approximately $71 million.
These reasonably possible adverse changes in exchange rates of 10% were applied to monetary assets, monetary liabilities, and available-for-sale debt securities denominated in currencies other than the functional currencies of our subsidiaries at the balance sheet dates to compute the adverse impact these changes would have had on our income before income taxes in the near term.
+Added: 1Q 2026 FORM 10-Q
EQUITY INVESTMENT RISK
Our strategic investments are subject to a variety of market-related risks that could substantially reduce or increase the carrying value of the portfolio.
−Removed: As of both September 30, 2025 and December 31, 2024, our strategic investments totaled $1.6 billion and represented approximately 11% and 10% of our total cash, cash equivalents, and short-term and long-term investment portfolio at those respective dates.
+Added: As of March 31, 2026 and December 31, 2025, our strategic investments totaled $1.8 billion and $1.9 billion respectively, and represented approximately 13% of our total cash, cash equivalents, and short-term and long-term investment portfolio at those respective dates.
Our strategic investments include marketable equity securities, which are publicly traded, and non-marketable equity securities, which are primarily investments in privately held companies.
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Additionally, the financial success of our investments in privately held companies is typically dependent on a liquidity event, such as a public offering, acquisition, private sale, or other favorable market event providing the ability to realize appreciation in the value of the investment.
−Removed: A hypothetical adverse change of 10% in the carrying value of our strategic investments as of September 30, 2025, which could be experienced in the near term, would have resulted in a decrease of approximately $160 million to the carrying value of the portfolio.
+Added: A hypothetical adverse change of 10% in the carrying value of our strategic investments as of March 31, 2026, which could be experienced in the near term, would have resulted in a decrease of approximately $181 million to the carrying value of the portfolio.
We review our non-marketable equity securities accounted for under the Measurement Alternative for impairment when events and circumstances indicate a decline in fair value of such assets below carrying value.
1 unchanged sentence
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.