XML 22 R10.htm IDEA: XBRL DOCUMENT v3.25.2
INVESTMENTS AND FAIR VALUE MEASUREMENTS
 6 Months Ended
Jun. 29, 2025
Fair Value Disclosures [Abstract]  
INVESTMENTS AND FAIR VALUE MEASUREMENTS
4. INVESTMENTS AND FAIR VALUE MEASUREMENTS
Strategic Investments
Marketable Equity Securities
Our short-term investments consist of marketable equity securities. As of June 29, 2025 and December 29, 2024, the fair value of our marketable equity securities totaled $221 million and $93 million, respectively.
Gains (losses) recognized in other income (expense), net on marketable equity securities were as follows:
In millionsQ2 2025Q2 2024YTD 2025YTD 2024
Net gains (losses) recognized during the period (1)
$97 $(330)$128 $(329)
Less: Net gains (losses) recognized during the period on securities sold during the period
— — — — 
Net unrealized gains (losses) recognized during the period on securities still held at the reporting date$97 $(330)$128 $(329)
_____________
(1)Subsequent to the Spin-Off of GRAIL, we recognized a loss of $328 million in Q2 2024 and YTD 2024 on our retained investment.
Non-Marketable Equity Securities
As of June 29, 2025 and December 29, 2024, non-marketable equity securities, without readily determinable fair values, included in other assets, were $46 million and $26 million, respectively.
Venture Funds
We invest in three venture capital investment funds (the Funds), which are accounted for as equity-method investments. The aggregate carrying amount of the Funds, included in other assets, was $224 million and $201 million as of June 29, 2025 and December 29, 2024, respectively. Gains and losses are recorded in other income (expense), net. We recorded net gains of $6 million and $8 million in Q2 2025 and YTD 2025, respectively. We recorded a net loss of $2 million and a net gain of $3 million in Q2 2024 and YTD 2024, respectively.
Our commitments to the Funds are as follows:
Dollars in millions
Capital commitments
Callable through date
Remaining callable as of June 29, 2025 (1)
Fund I
$100 April 2026$3 
Fund II
$150 July 2029$39 
Fund III
$60 December 2034$35 
_____________
(1)Fund I also had recallable distributions of approximately $10 million.
Revenue recognized from transactions with our strategic investees was $8 million and $15 million for Q2 2025 and YTD 2025, respectively, and $4 million and $7 million for Q2 2024 and YTD 2024, respectively.
Fair Value Measurements
The following table presents the hierarchy for assets and liabilities measured at fair value on a recurring basis:
June 29, 2025December 29, 2024
In millionsLevel 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:
Money market funds (cash equivalents)$735 $— $— $735 $931 $— $— $931 
Marketable equity securities221 — — 221 93 — — 93 
Other investments
— — 23 23 — — 17 17 
Deferred compensation plan assets— 72 — 72 — 70 — 70 
Total assets measured at fair value$956 $72 $23 $1,051 $1,024 $70 $17 $1,111 
Liabilities:
Contingent consideration liabilities$— $— $40 $40 $— $— $73 $73 
Deferred compensation plan liability— 66 — 66 — 65 — 65 
Total liabilities measured at fair value$— $66 $40 $106 $— $65 $73 $138 
Marketable equity securities are measured at fair value based on quoted trade prices in active markets. We elected the fair value option for other investments, which are included in other assets, and consist primarily of convertible notes. Fair value for the convertible notes is derived using a probability-weighted scenario approach with changes in fair value recognized in other income (expense), net. Deferred compensation plan assets consist primarily of investments in life insurance contracts carried at cash surrender value, which reflects the net asset value of the underlying publicly traded mutual funds. We corroborate the fair value of our holdings, comparing valuations obtained from our investment service provider to valuations reported by our asset custodians, validating pricing sources and models, and reviewing key model inputs.
Contingent Consideration Liabilities
We reassess the fair value of contingent consideration related to acquisitions on a quarterly basis, with changes in the fair value, subsequent to the acquisition date, recognized in selling, general and administrative expense.
Changes in the estimated fair value of our contingent consideration liabilities during YTD 2025 were as follows:
In millions
Balance as of December 29, 2024$73 
Change in estimated fair value(32)
Cash payments
(1)
Balance as of June 29, 2025$40 
The fair value of our contingent consideration liability related to GRAIL was $40 million and $71 million as of June 29, 2025 and December 29, 2024, respectively, of which $39 million and $70 million, respectively, was included in other long-term liabilities, with the remaining balances included in accrued liabilities. The contingent value rights issued as part of the GRAIL acquisition entitle the holders to receive future cash payments on a quarterly basis (Covered Revenue Payments) representing a pro rata portion of certain GRAIL-related revenues (Covered Revenues) each year for a 12-year period (through August 2033). As defined in the Contingent Value Rights Agreement, this will reflect a 2.5% payment right to the first $1 billion of revenue each year for 12 years. Revenue above $1 billion each year will be subject to a 9% contingent payment right during this same period. Covered Revenues for the periods Q4 2024 through Q1 2025 and Q4 2023 through Q1 2024 were $70 million and $57 million, respectively, driven primarily by sales of GRAIL’s Galleri test. Covered Revenue Payments relating to such periods were $660,000 and $535,000, respectively, which were paid in YTD 2025 and YTD 2024, respectively.
We use a Monte Carlo simulation to estimate the fair value of our GRAIL contingent consideration. Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues for GRAIL, a revenue risk premium, a revenue volatility estimate, an operational leverage ratio and a counterparty credit spread. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Subsequent to the GRAIL Spin-Off, we no longer have access to GRAIL management’s forecasts. Therefore, we rely on information made public by GRAIL and information published in analyst reports to estimate forecasted revenues through August 2033. To estimate the liability as of June 29, 2025, we selected a revenue risk premium of 4%. Given the continued volatility in GRAIL’s market capitalization, since the beginning of Q1 2025, the revenue risk premium selected in Q2 2025 was derived using the Capital Asset Pricing Model and comparable company betas. In prior periods, the revenue risk premium was derived from reconciling our forecasted revenues for GRAIL to GRAIL’s market capitalization, primarily using a 60-day trailing average.
The assumptions used in estimating the fair value of our contingent consideration liability related to GRAIL are inherently subject to uncertainty and we note that small changes in these assumptions could have a significant impact on the concluded value. For example, an increase or decrease of 20%, in each year, to the forecasted revenues would have resulted in an increase of $12 million and a decrease of $10 million, respectively, in the liability as of June 29, 2025. Additionally, an increase or decrease of 250 basis points to the selected revenue risk premium would have resulted in a decrease of $7 million and an increase of $9 million, respectively. We expect certain levels of volatility in the GRAIL contingent consideration liability are possible in future periods.