Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leases

Note 6 - Leases    

Our leases primarily include corporate offices, data centers, and servers. The lease term of operating and finance leases vary from less than a year to 76 years. We have leases that include one or more options to extend the lease term for up to 14 years as well as options to terminate the lease within one year. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Our lease agreements generally do not contain any residual value guarantees or restrictive covenants.

The components of our lease expense were as follows (in millions):

	Year Ended December 31,
	2021		2022		2023
Lease cost
Finance lease cost:
Amortization of assets	$	217	$	186	$	188
Interest of lease liabilities	12		13		31
Operating lease cost	299		304		321
Short-term lease cost	7		7		10
Variable lease cost	96		142		129
Sublease income	(5)		(17)		(22)
Total lease cost	$	626	$	635	$	657

Supplemental cash flow information related to leases was as follows (in millions):

	Year Ended December 31,
	2021		2022		2023
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from financing leases	$	11	$	13	$	32
Operating cash flows from operating leases	297		339		335
Financing cash flows from financing leases	226		184		171
Right-of-use assets obtained in exchange for lease obligations:
Operating lease liabilities	$	273	$	329	$	84
Finance lease liabilities	184		349		216

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):

	As of December 31,
	2022		2023
Operating Leases
Operating lease right-of-use assets	$	1,449	$	1,241
Operating lease liability, current	$	201	$	190
Operating lease liabilities, non-current	1,673		1,550
Total operating lease liabilities	$	1,874	$	1,740

	As of December 31,
	2022		2023
Finance Leases
Property and equipment, at cost	$	712	$	683
Accumulated depreciation	(305)		(250)
Property and equipment, net	$	407	$	433
Other current liabilities	$	115	$	156
Other long-term liabilities	284		322
Total finance leases liabilities	$	399	$	478

	As of December 31,
	2022		2023
Weighted-average remaining lease term
Operating leases	15 years		15 years
Finance leases	3 years		3 years
Weighted-average discount rate
Operating leases	6.6	%	6.6	%
Finance leases	5.7	%	6.3	%

Maturities of lease liabilities were as follows (in millions):

	As of December 31, 2023
	Operating Leases		Finance Leases
2024	$	294	$	199
2025	272		171
2026	236		131
2027	218		22
2028	196		—
Thereafter	1,899		1
Total undiscounted lease payments	3,115		524
Less: imputed interest	(1,375)		(46)
Total lease liabilities	$	1,740	$	478

As of December 31, 2023, additional operating leases and finance leases that have not yet commenced are immaterial.

Mission Bay 1 & 2

In 2015, we entered into a joint venture (“JV”) agreement with a real estate developer (“JV Partner”) to develop land (“the Land”) in San Francisco to construct our new headquarters (the “Headquarters”). The Headquarters consists of two adjacent office buildings totaling approximately 423,000 rentable square feet. In connection with the JV arrangement, we acquired a 49% interest in the JV, the principal asset of which was the Land.

In 2016, we and the JV Partner agreed to dissolve the JV and terminate our commitment to the lease of the Headquarters (together “the real estate transaction”) and we retained a 49% indirect interest in the Land (“Indirect Interest”). Under the terms of the real estate transaction, we obtained the rights and title to the partially constructed building, completed the development of the two office buildings and retained a 100% ownership in the buildings. In connection with the real estate transaction, we also executed two 75-year land lease agreements (“Land Leases”). As of December 31, 2023, commitments under the Land Leases total $116 million until February 2032. After 2032, the annual rent amount will adjust annually based on the prevailing consumer price index.

The real estate transaction is accounted for as a financing transaction of our 49% Indirect Interest due to our continuing involvement through a purchase option on the Indirect Interest. As a financing transaction, the cash and deferred sales proceeds received from the real estate transaction are recorded as a financing obligation. As of December 31, 2023, our Indirect Interest of $65 million is included in property and equipment, net and a corresponding financing obligation of $76 million is included in other long-term liabilities. Future land lease payments of $1.7 billion are allocated 49% to the financing obligation of the Indirect Interest and 51% to the operating lease of land.

Future minimum payments related to the financing obligations as of December 31, 2023 are summarized below (in millions):

	Future Minimum Payments
Fiscal Year Ending December 31,
2024	$	6
2025	6
2026	7
2027	7
2028	7
Thereafter	798
Total	$	831

Leases

Note 6 - Leases    

Our leases primarily include corporate offices, data centers, and servers. The lease term of operating and finance leases vary from less than a year to 76 years. We have leases that include one or more options to extend the lease term for up to 14 years as well as options to terminate the lease within one year. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Our lease agreements generally do not contain any residual value guarantees or restrictive covenants.

The components of our lease expense were as follows (in millions):

	Year Ended December 31,
	2021		2022		2023
Lease cost
Finance lease cost:
Amortization of assets	$	217	$	186	$	188
Interest of lease liabilities	12		13		31
Operating lease cost	299		304		321
Short-term lease cost	7		7		10
Variable lease cost	96		142		129
Sublease income	(5)		(17)		(22)
Total lease cost	$	626	$	635	$	657

Supplemental cash flow information related to leases was as follows (in millions):

	Year Ended December 31,
	2021		2022		2023
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from financing leases	$	11	$	13	$	32
Operating cash flows from operating leases	297		339		335
Financing cash flows from financing leases	226		184		171
Right-of-use assets obtained in exchange for lease obligations:
Operating lease liabilities	$	273	$	329	$	84
Finance lease liabilities	184		349		216

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):

	As of December 31,
	2022		2023
Operating Leases
Operating lease right-of-use assets	$	1,449	$	1,241
Operating lease liability, current	$	201	$	190
Operating lease liabilities, non-current	1,673		1,550
Total operating lease liabilities	$	1,874	$	1,740

	As of December 31,
	2022		2023
Finance Leases
Property and equipment, at cost	$	712	$	683
Accumulated depreciation	(305)		(250)
Property and equipment, net	$	407	$	433
Other current liabilities	$	115	$	156
Other long-term liabilities	284		322
Total finance leases liabilities	$	399	$	478

	As of December 31,
	2022		2023
Weighted-average remaining lease term
Operating leases	15 years		15 years
Finance leases	3 years		3 years
Weighted-average discount rate
Operating leases	6.6	%	6.6	%
Finance leases	5.7	%	6.3	%

Maturities of lease liabilities were as follows (in millions):

	As of December 31, 2023
	Operating Leases		Finance Leases
2024	$	294	$	199
2025	272		171
2026	236		131
2027	218		22
2028	196		—
Thereafter	1,899		1
Total undiscounted lease payments	3,115		524
Less: imputed interest	(1,375)		(46)
Total lease liabilities	$	1,740	$	478

As of December 31, 2023, additional operating leases and finance leases that have not yet commenced are immaterial.

Mission Bay 1 & 2

In 2015, we entered into a joint venture (“JV”) agreement with a real estate developer (“JV Partner”) to develop land (“the Land”) in San Francisco to construct our new headquarters (the “Headquarters”). The Headquarters consists of two adjacent office buildings totaling approximately 423,000 rentable square feet. In connection with the JV arrangement, we acquired a 49% interest in the JV, the principal asset of which was the Land.

In 2016, we and the JV Partner agreed to dissolve the JV and terminate our commitment to the lease of the Headquarters (together “the real estate transaction”) and we retained a 49% indirect interest in the Land (“Indirect Interest”). Under the terms of the real estate transaction, we obtained the rights and title to the partially constructed building, completed the development of the two office buildings and retained a 100% ownership in the buildings. In connection with the real estate transaction, we also executed two 75-year land lease agreements (“Land Leases”). As of December 31, 2023, commitments under the Land Leases total $116 million until February 2032. After 2032, the annual rent amount will adjust annually based on the prevailing consumer price index.

The real estate transaction is accounted for as a financing transaction of our 49% Indirect Interest due to our continuing involvement through a purchase option on the Indirect Interest. As a financing transaction, the cash and deferred sales proceeds received from the real estate transaction are recorded as a financing obligation. As of December 31, 2023, our Indirect Interest of $65 million is included in property and equipment, net and a corresponding financing obligation of $76 million is included in other long-term liabilities. Future land lease payments of $1.7 billion are allocated 49% to the financing obligation of the Indirect Interest and 51% to the operating lease of land.

Future minimum payments related to the financing obligations as of December 31, 2023 are summarized below (in millions):

	Future Minimum Payments
Fiscal Year Ending December 31,
2024	$	6
2025	6
2026	7
2027	7
2028	7
Thereafter	798
Total	$	831