Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Marketable Securities

We have made investments in marketable securities of companies of varying size, style, industry and geography and changes in investment allocations may affect the price volatility of our investments.

Equity Price Risk. At September 25, 2022, the recorded value of our marketable equity securities was $164 million. A 10% decrease in the market price of our marketable equity securities at September 25, 2022 would have caused a decrease in the carrying amounts of these securities of $16 million. A 10% decrease in the market price of our marketable equity securities at September 26, 2021 would have caused a decrease in the carrying amounts of these securities of $68 million. Certain of our marketable equity investments are in early or growth stage companies, and the fair values of these investments have been and may continue to be subject to increased volatility.

Interest Rate Risk. We invest a portion of our cash in a number of diversified fixed- and floating-rate securities consisting of cash equivalents, marketable debt securities and time and demand deposits that are subject to interest rate risk. At September 25, 2022 and September 26, 2021, a hypothetical increase in interest rates of 100 basis points across the entire yield curve on our holdings would have resulted in a decrease of $36 million and $50 million, respectively, in the fair value of our holdings.

Other Investments

Equity Price Risk. We hold investments in non-marketable equity instruments in privately held companies that may be impacted by equity price risks. Volatility in the equity markets and the current macroeconomic environment could negatively affect our investees' ability to raise additional capital as well as our ability to realize value from our investments through initial public offerings, mergers or private sales. Consequently, we could incur impairment losses or realized losses on all or part of the values of our non-marketable equity investments. At September 25, 2022, the aggregate carrying value of our non-marketable equity investments (including those accounted for under the equity method) was included in other assets and was $1.3 billion.

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Debt and Interest Rate Swap Agreements

Interest Rate Risk. As substantially all of our debt is comprised of unsecured fixed-rate notes, we are not subject to significant interest rate risk. At September 25, 2022, we had an aggregate principal amount of $500 million in unsecured floating-rate notes due January 30, 2023. The interest rates on our floating-rate notes are based on LIBOR. At September 25, 2022 and September 26, 2021, a hypothetical increase in LIBOR-based interest rates of 100 basis points would cause a negligible increase to interest expense on an annualized basis as it relates to our floating-rate notes. At September 25, 2022, we also had $499 million in commercial paper outstanding, for which our exposure to interest rate risk was negligible based on the original maturities of approximately three months or less.

From time to time, we manage our exposure to certain interest rate risks related to our long-term debt through the use of interest rate swaps. During fiscal 2022, we entered into interest rate swaps that are designated as fair value hedges with an aggregate notional amount of $2.1 billion to effectively convert certain fixed-rate interest payments into floating-rate payments on our outstanding debt. We entered into these agreements, in part, to manage interest rate risk associated with our cash equivalents and marketable securities, in addition to changes in the fair value of our outstanding debt. At September 25, 2022, a hypothetical increase in interest rates of 100 basis points would not cause a loss as an increase in interest expense related to these interest rate swaps agreements would be offset by an increase in interest income from our cash equivalents and marketable securities portfolio.

At September 25, 2022 and September 26, 2021, we had outstanding forward-starting interest rate swaps with an aggregate notional amount of $1.6 billion and $2.6 billion, respectively, to hedge the variability of forecasted interest payments on anticipated debt issuances. The interest rates on our interest rate swaps are based on LIBOR. At September 25, 2022 and September 26, 2021, a hypothetical decrease in interest rates of 100 basis points would cause a negligible and $23 million increase, respectively, to interest expense on an annualized basis resulting from the changes in fair values of the interest rate swaps related to our anticipated debt issuances.

Foreign Exchange Risk

We manage our exposure to foreign exchange market risks, when deemed appropriate, through the use of derivative and non-derivative financial instruments, including foreign currency forward and option contracts with financial counterparties and net investment hedges. We utilize such derivative financial instruments for hedging or risk management purposes rather than for speculative purposes. Counterparties to these derivative contracts are all major banking institutions. In the event of the financial insolvency or distress of a counterparty to our derivative financial instruments, we may be unable to settle transactions if the counterparty does not provide us with sufficient collateral to secure its net settlement obligations to us, which could have a negative impact on our results.

Foreign Currency Options. At September 25, 2022, our net asset related to foreign currency options designated as hedges of foreign currency risk on royalties earned from certain licensees was $19 million. At September 25, 2022 and September 26, 2021, if our forecasted royalty revenues for currencies in which we hedge were to decline by 10% and foreign exchange rates were to change unfavorably by 10% in our hedged foreign currency, we would not incur a loss as our hedge positions would continue to be fully effective.

Foreign Currency Forwards. At September 25, 2022, our net liability related to foreign currency forward contracts designated as hedges of foreign currency risk on certain operating expenditure transactions was $133 million. If our forecasted operating expenditures for currencies in which we hedge were to decline by 10% and foreign exchange rates were to change unfavorably by 10% in our hedged foreign currency, we would incur a negligible loss. Based on forecasts at September 26, 2021, assuming the same hypothetical market conditions, we would have incurred a negligible loss.

At September 25, 2022, our net liability related to foreign currency forward contracts not designated as hedging instruments used to manage foreign currency risk on certain receivables and payables was negligible. At September 25, 2022 and September 26, 2021, if the foreign exchange rates were to change unfavorably by 10% in our hedged foreign currency, we would not incur a loss as the change in the fair value of the foreign currency forward contracts would be offset by the change in fair value of the related receivables and/or payables being economically hedged.

Net Investment Hedges. In the third quarter of fiscal 2022, as a result of the reversal of the 2018 EC fine, we discontinued the associated net investment hedge. At September 25, 2022, we have designated $235 million of a certain foreign currency-denominated liability, excluding accrued interest, as a hedge of our net investment in a foreign subsidiary. At September 25, 2022 and September 26, 2021, if foreign exchange rates were to change unfavorably by 10% in our hedged foreign currency, there would be an increase of $23 million and $145 million, respectively, in the accumulated other comprehensive loss attributable to the cumulative foreign currency translation adjustment related to our net investment hedge. The change in value recorded in cumulative foreign currency translation adjustment would be expected to offset a corresponding foreign currency translation gain or loss from our investment in the foreign subsidiary.

Functional Currency. Financial assets and liabilities held by consolidated subsidiaries that are not denominated in the functional currency of those entities are subject to the effects of currency fluctuations and may affect reported earnings. As a global company, we face exposure to adverse movements in foreign currency exchange rates. We may hedge currency exposures associated with certain assets and liabilities denominated in nonfunctional currencies and certain anticipated nonfunctional currency transactions. As a result, we could experience unanticipated gains or losses on anticipated foreign currency cash flows, as well as economic loss with respect to the recoverability of investments. While we may hedge certain

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transactions with non-U.S. customers, declines in currency values in certain regions may, if not reversed, adversely affect future product sales because our products may become more expensive to purchase in the countries of the affected currencies.

Our analysis methods used to assess and mitigate the risks discussed above should not be considered projections of future risks. Additional information regarding the financial instruments mentioned above is provided in this Annual Report in "Notes to Consolidated Financial Statements, Note 1. Significant Accounting Policies," "Notes to Consolidated Financial Statements, Note 2. Composition of Certain Financial Statement Items," "Notes to Consolidated Financial Statements, Note 6. Debt," "Notes to Consolidated Financial Statements, Note 10. Fair Value Measurements" and "Notes to Consolidated Financial Statements, Note 11. Marketable Securities."