Quarterly report [Sections 13 or 15(d)]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

v3.26.3
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 3 Months Ended
Sep. 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 Condensed 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 forward contracts, generally to hedge the benchmark interest rate on portions of our Senior Notes prior to issuance (collectively, “Rate Lock Agreements”). 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 September 30, 2026, the aggregate unamortized portion of the fair value of the forward contracts for the Rate Lock Agreements was a $40.6 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 2022 Senior Notes hedged, and in exchange, we receive fixed-rate interest on the 2022 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.
For additional details, refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026.
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 other comprehensive income for the indicated periods were as follows:
Three Months Ended September 30,
(In thousands) 2026 2025
Derivatives Designated as Cash Flow Hedging Instruments:
Foreign exchange contracts:
Amounts included in the assessment of effectiveness $ (12,984) $ 3,300 
Amounts excluded from the assessment of effectiveness $ (30) $ 64 
Derivatives Designated as Net Investment Hedging Instruments:
Foreign exchange contracts(1):
$ (4,044) $ 19,325 
__________________
(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 Condensed Consolidated Statements of Operations for the indicated periods were as follows:
Three Months Ended September 30, Three Months Ended September 30,
2026 2025
(In thousands) Revenues Costs of Revenues and Operating Expenses Interest Expense Other Expense (Income), Net Revenues Costs of Revenues and Operating Expenses Interest Expense Other Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 4,136,015  $ 2,274,345  $ 67,927  $ (30,339) $ 3,209,696  $ 1,872,519  $ 71,075  $ (43,374)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings $ —  $ —  $ 759  $ —  $ —  $ —  $ 758  $ — 
Foreign exchange contracts:
Amount of gains reclassified from AOCI to earnings $ 2,091  $ 3,473  $ —  $ —  $ 381  $ 11,244  $ —  $ — 
Amount excluded from the assessment of effectiveness recognized in earnings $ (175) $ —  $ —  $ 2,509  $ (171) $ —  $ —  $ 3,823 
Interest rate contracts:
Amount of gains recognized in earnings $ —  $ —  $ 2,188  $ —  $ —  $ —  $ —  $ — 
Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains (losses) recognized in earnings $ —  $ —  $ —  $ (10,806) $ —  $ —  $ —  $ 261 
The U.S. dollar equivalent of all outstanding notional amounts of foreign currency hedge contracts with maximum remaining maturities of approximately 22 months as of the dates indicated below, were as follows:
As of As of
(In thousands) September 30, 2026 June 30, 2026
Cash flow hedge contracts - foreign currency
Purchase $ 574,633  $ 533,193 
Sell $ 107,026  $ 61,209 
Net investment hedge contracts - foreign currency
Sell $ 341,625  $ 343,791 
Other foreign currency hedge contracts
Purchase $ 822,018  $ 978,174 
Sell $ 517,417  $ 608,933 
The locations and fair value of our derivatives reported in our Condensed Consolidated Balance Sheets as of the dates indicated below were as follows:
Asset Derivatives Liability Derivatives
Balance Sheet As of As of Balance Sheet As of As of
Location September 30, 2026 June 30, 2026 Location September 30, 2026 June 30, 2026
(In thousands) Fair Value Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts Other current assets $ 7,696  $ 28,423  Other current liabilities $ (12,860) $ (5,385)
Interest rate contracts Other current assets —  2,534  Other current liabilities (3,443) — 
Interest rate contracts Other non-current assets —  6,990  Other non-current liabilities (162,201) (10,107)
Total derivatives designated as hedging instruments 7,696  37,947  (178,504) (15,492)
Derivatives not designated as hedging instruments
Foreign exchange contracts Other current assets 3,854  13,398  Other current liabilities (12,338) (7,161)
Total derivatives not designated as hedging instruments 3,854  13,398  (12,338) (7,161)
Total derivatives $ 11,550  $ 51,345  $ (190,842) $ (22,653)
The changes in AOCI, before taxes, related to derivatives for the indicated periods were as follows:
Three Months Ended September 30,
(In thousands) 2026 2025
Beginning AOCI $ 67,182  $ 66,570 
Amount reclassified to earnings as net gains (6,148) (12,212)
Net change in unrealized gains (losses) (17,058) 22,689 
Ending AOCI $ 43,976  $ 77,047 
As of September 30, 2026, the net gain reported in AOCI that is expected to be reclassified into earnings within the next 12 months is $2.8 million.
Offsetting of Derivative Assets and Liabilities
We present derivatives at gross fair values in the Condensed 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 September 30, 2026 Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)
Gross Amounts of Derivatives
Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets
Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets
 Financial Instruments Cash Collateral Received Net Amount
Derivatives - assets $ 11,550  $ —  $ 11,550  $ (9,893) $ —  $ 1,657 
Derivatives - liabilities $ (190,842) $ —  $ (190,842) $ 9,893  $ —  $ (180,949)
As of June 30, 2026 Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)
Gross Amounts of Derivatives
Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets
Net Amount of Derivatives Presented in the Condensed 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)