Annual report [Section 13 and 15(d), not S-K Item 405]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

v3.26.1
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 12 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The authoritative guidance requires companies to recognize all derivative instruments, including foreign exchange contracts, rate lock agreements and interest rate swaps (collectively “derivatives”), as either assets or liabilities at fair value on the Consolidated Balance Sheets. In accordance with the accounting guidance, we designate foreign currency forward transactions and options contracts and interest rate forward transactions as cash flow hedges. In accordance with the accounting guidance, we also designate certain foreign currency exchange contracts as net investment hedge transactions intended to mitigate the variability of the value of certain investments in foreign subsidiaries.
Since fiscal 2015, we have entered into five sets of Rate Lock Agreements to hedge the benchmark interest rate on portions of our Senior Notes prior to issuance. Upon issuance of the associated debt, the Rate Lock Agreements were settled and their fair values were recorded within AOCI. The resulting gains and losses from these transactions are amortized to interest expense over the lives of the associated debt. As of June 30, 2026, the aggregate unamortized portion of the fair value of the forward contracts for the Rate Lock Agreements was a $41.3 million net gain.
We utilize fixed-to-floating interest rate swaps designated as fair value hedges to minimize certain exposures to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. The interest rate swaps effectively convert the fixed interest rates on a portion of our 2022 Senior Notes to floating interest rates based on the SOFR swap rate. Under the terms of the swaps, we pay semi-annual interest at the daily compounded SOFR swap rate plus a fixed number of basis points on the $2.00 billion notional amount of Senior Notes hedged, and in exchange, we receive fixed-rate interest on the Senior Notes hedged from the swap counterparties on a semi-annual basis. If a financial counterparty to any of our hedging arrangements experiences financial difficulties or is otherwise unable to honor the terms of the interest rate swap, we may experience material losses. We apply the shortcut method to these fair value hedges as they are assumed to be perfectly effective in hedging the change in interest rates related to a portion of our 2022 Senior Notes. The resulting gains and losses from these transactions are recognized in interest expense each period.
Derivatives in Hedging Relationships: Foreign Exchange Contracts and Rate Lock Agreements
The gains (losses) on derivatives in cash flow and net investment hedging relationships recognized in OCI for the indicated periods were as follows:
Year Ended June 30,
(In thousands) 2026 2025 2024
Derivatives Designated as Cash Flow Hedging Instruments:
Rate lock agreements:
Amounts included in the assessment of effectiveness $ —  $ —  $ 415 
Foreign exchange contracts:
Amounts included in the assessment of effectiveness $ 34,281  $ 36,747  $ 9,176 
Amounts excluded from the assessment of effectiveness $ 102  $ (21) $ 146 
Derivatives Designated as Net Investment Hedging Instruments:
Foreign exchange contracts(1)
$ 19,053  $ (23,630) $ 3,459 
________________
(1)No amounts were reclassified from AOCI into earnings related to the sale of a subsidiary, as there were no such sales during the periods presented.
The locations and amounts of designated and non-designated derivatives’ gains and losses reported in the Consolidated Statements of Operations for the indicated periods were as follows:
(In thousands) Revenues Costs of Revenues and Operating Expense Interest Expense Other Expense (Income), Net
For the year ended June 30, 2024
Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 9,812,247  $ 6,466,037  $ 311,253  $ (155,075)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings $ —  $ —  $ 3,764  $ — 
Foreign exchange contracts:
Amount of gains reclassified from AOCI to earnings $ 19,246  $ 3,766  $ —  $ — 
Amount excluded from the assessment of effectiveness recognized in earnings $ (872) $ —  $ —  $ 2,328 
Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains recognized in earnings $ —  $ —  $ —  $ 10,597 
For the year ended June 30, 2025
Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 12,156,162  $ 7,381,035  $ 302,166  $ (171,487)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings $ —  $ —  $ 3,285  $ — 
Foreign exchange contracts:
Amount of gains reclassified from AOCI to earnings $ 8,950  $ 4,678  $ —  $ — 
Amount excluded from the assessment of effectiveness recognized in earnings $ (1,484) $ —  $ —  $ 2,984 
Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains recognized in earnings $ —  $ —  $ —  $ 37,588 
For the year ended June 30, 2026
Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow and fair value hedges are recorded $ 13,579,476  $ 7,918,696  $ 284,440  $ (229,585)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings $ —  $ —  $ 3,034  $ — 
Foreign exchange contracts:
Amount of gains reclassified from AOCI to earnings $ 7,577  $ 42,964  $ —  $ — 
Amount excluded from the assessment of effectiveness recognized in earnings $ (751) $ —  $ —  $ 18,944 
Interest rate contracts:
Amount of gains recognized in earnings $ —  $ —  $ 559  $ — 
Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains recognized in earnings $ —  $ —  $ —  $ 24,135 
The U.S. dollar equivalent of all outstanding notional amounts of foreign currency hedge contracts, with maximum remaining maturities of approximately 11 months as of June 30, 2026 and 14 months as of June 30, 2025, were as follows:
(In thousands) As of June 30, 2026 As of June 30, 2025
Cash flow hedge contracts - foreign currency
Purchase $ 533,193  $ 405,349 
Sell $ 61,209  $ 159,475 
Net Investment hedge contracts - foreign currency
Sell $ 343,791  $ 384,130 
Other foreign currency hedge contracts
Purchase $ 978,174  $ 618,844 
Sell $ 608,933  $ 429,643 
The locations and fair value of our derivatives reported in our Consolidated Balance Sheets as of the dates indicated below were as follows:
Asset Derivatives Liability Derivatives
Balance Sheet 
Location		 As of June 30, 2026 As of June 30, 2025 Balance Sheet 
Location		 As of June 30, 2026 As of June 30, 2025
(In thousands) Fair Value Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts Other current assets $ 28,423  $ 29,492  Other current liabilities $ (5,385) $ (24,331)
Interest rate contracts Other current assets 2,534  — 
Interest rate contracts Other non-current assets 6,990  —  Other non-current liabilities (10,107) — 
Total derivatives designated as hedging instruments 37,947  29,492  (15,492) (24,331)
Derivatives not designated as hedging instruments
Foreign exchange contracts Other current assets 13,398  30,011  Other current liabilities (7,161) (4,284)
Total derivatives not designated as hedging instruments 13,398  30,011  (7,161) (4,284)
Total derivatives $ 51,345  $ 59,503  $ (22,653) $ (28,615)
The changes in AOCI, before taxes, related to derivatives for the indicated periods were as follows:
Year Ended June 30,
(In thousands) 2026 2025 2024
Beginning balance $ 66,570  $ 68,903  $ 81,611 
Amount reclassified to earnings as net gains (52,824) (15,429) (25,904)
Net change in unrealized gains 53,436  13,096  13,196 
Ending balance $ 67,182  $ 66,570  $ 68,903 
As of June 30, 2026, the net gain reported in AOCI that is expected to be reclassified into earnings within the next 12 months is $16.7 million.
Offsetting of Derivative Assets and Liabilities
We present derivatives at gross fair values in the Consolidated Balance Sheets. We have entered into arrangements with each of our counterparties, which reduce credit risk by permitting net settlement of transactions with the same counterparty under certain conditions. The information related to the offsetting arrangements for the periods indicated was as follows:
As of June 30, 2026 Gross Amounts of Derivatives Not Offset in the Consolidated Balance Sheets
(In thousands)
Gross Amounts of Derivatives
Gross Amounts of Derivatives Offset in the Consolidated Balance Sheets
Net Amount of Derivatives Presented in the Consolidated Balance Sheets
 Financial Instruments Cash Collateral Received Net Amount
Derivatives - assets $ 51,345  $ —  $ 51,345  $ (17,605) $ —  $ 33,740 
Derivatives - liabilities $ (22,653) $ —  $ (22,653) $ 17,605  $ —  $ (5,048)
As of June 30, 2025 Gross Amounts of Derivatives Not Offset in the Consolidated Balance Sheets
(In thousands)
Gross Amounts of Derivatives
Gross Amounts of Derivatives Offset in the Consolidated Balance Sheets
Net Amount of Derivatives Presented in the Consolidated Balance Sheets
 Financial Instruments Cash Collateral Received Net Amount
Derivatives - assets $ 59,503  $ —  $ 59,503  $ (28,615) $ —  $ 30,888 
Derivatives - liabilities $ (28,615) $ —  $ (28,615) $ 28,615  $ —  $ —