The Company uses derivative instruments to manage foreign exchange risk related to its ongoing business operations with the primary objective of reducing earnings and cash flow volatility associated with fluctuations in foreign exchange rates.

The net notional amounts of the Company’s outstanding derivative instruments were as follows:


	As of
	March 31, 2024		December 31, 2023
	(in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts
Cash flow hedges	$	9,734,421	$	8,783,273
Derivatives not designated as hedging instruments:
Foreign exchange contracts	526,681		—
Total	$	10,261,102	$	8,783,273


	As of March 31, 2024
	Derivative Assets				Derivative Liabilities
	Other current assets		Other non-current assets		Accrued expenses and other liabilities		Other non-current liabilities
	(in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	102,960	$	27,812	$	41,788	$	7,548
Derivatives not designated as hedging instruments:
Foreign exchange contracts	2,975		—		628		—
Total	$	105,935	$	27,812	$	42,416	$	7,548


	As of December 31, 2023
	Derivative Assets				Derivative Liabilities
	Other current assets		Other non-current assets		Accrued expenses and other liabilities		Other non-current liabilities
	(in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	26,416	$	4,518	$	140,089	$	46,575
Derivatives not designated as hedging instruments:
Foreign exchange contracts	—		—		—		—
Total	$	26,416	$	4,518	$	140,089	$	46,575

The Company classifies derivative instruments in the Level 2 category within the fair value hierarchy. These instruments are valued using industry standard valuation models that use observable inputs such as interest rate yield curves, and forward and spot prices for currencies.

As of March 31, 2024, the pre-tax net accumulated gain on our foreign currency cash flow hedges included in AOCI on the Consolidated Balance Sheets expected to be recognized in earnings within the next 12 months is $60 million.

In order to mitigate counterparty credit risk, the Company enters into master netting agreements with its counterparties for its foreign currency exchange contracts which permit the parties to settle amounts on a net basis under certain conditions. The Company has elected to present its derivative assets and liabilities on a gross basis on its Consolidated Balance Sheets.

The Company also enters into collateral security arrangements with its counterparties that require the parties to post cash collateral when certain contractual thresholds are met. No cash collateral was received or posted by the Company as of March 31, 2024 and December 31, 2023.

The potential offsetting effect to the Company’s derivative assets and liabilities under its master netting agreements and collateral security agreements were as follows:


	As of March 31, 2024
							Gross Amount Not Offset in the Consolidated Balance Sheets
	Gross Amount Recognized in the Consolidated Balance Sheets		Gross Amount Offset in the Consolidated Balance Sheets		Net Amount Presented in the Consolidated Balance Sheets		Financial Instruments		Collateral Received and Posted		Net Amount
	(in thousands)
Derivative assets	$	133,747	$	—	$	133,747	$	(29,781)	$	—	$	103,966
Derivative liabilities	49,964		—		49,964		(29,781)		—		20,183


	As of December 31, 2023
							Gross Amount Not Offset in the Consolidated Balance Sheets
	Gross Amount Recognized in the Consolidated Balance Sheets		Gross Amount Offset in the Consolidated Balance Sheets		Net Amount Presented in the Consolidated Balance Sheets		Financial Instruments		Collateral Received and Posted		Net Amount
	(in thousands)
Derivative assets	$	30,934	$	—	$	30,934	$	(27,246)	$	—	$	3,688
Derivative liabilities	186,664		—		186,664		(27,246)		—		159,418

The pre-tax gains (losses) on the Company’s cash flow hedges recognized in AOCI were as follows:


	Three Months Ended
	March 31, 2024		March 31, 2023
	(in thousands)
Cash flow hedges:
Foreign exchange contracts (1)
Amount included in the assessment of effectiveness	$	229,144	$	—
Total	$	229,144	$	—

The gains (losses) on derivative instruments recognized in the Consolidated Statement of Operations were as follows:


	Three Months Ended
	March 31, 2024
	Revenues		Cost of Revenues		Interest and other income (expense)
	(in thousands)
Total amounts presented in the Consolidated Statements of Operations	$	9,370,440	$	4,977,073	$	155,359

Gains (losses) on derivatives in cash flow hedging relationship
Foreign exchange contracts
Amount of gains (losses) reclassified from AOCI	(11,241)		194		—
Gains (losses) on derivatives not designated as hedging instruments
Foreign exchange contracts	—		—		4,266

No gains or losses on derivative instruments were recognized in the Consolidated Statements of Operations in the three months ended March 31, 2023.