Fair Value Measurements
We measure our cash equivalents and marketable securities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. We utilize the following three-tier value hierarchy which prioritizes the inputs used in measuring fair value:
Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Observable inputs other than quoted prices included in Level 1 for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-driven valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3 – Unobservable inputs to the valuation derived from fair valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The fair value hierarchy also requires us to maximize the use of observable inputs, when available, and to minimize the use of unobservable inputs when determining inputs and determining fair value.
The following tables sets forth our financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):
| | | | | | | | | | | | | | | | | |
| As of December 31, 2025 | Level 1 | | Level 2 | | Total |
| Money market funds | $ | 40,879 | | | $ | — | | | $ | 40,879 | |
| U.S. government securities | 40,510 | | | — | | | 40,510 | |
| Corporate debt securities | — | | | 177,127 | | | 177,127 | |
| Commercial paper | — | | | 84,753 | | | 84,753 | |
| U.S. government agency securities | — | | | 12,490 | | | 12,490 | |
| Certificates of deposit | — | | | 8,701 | | | 8,701 | |
| $ | 81,389 | | | $ | 283,071 | | | $ | 364,460 | |
| | | | | | | | | | | | | | | | | |
| As of December 31, 2024 | Level 1 | | Level 2 | | Total |
| Money market funds | $ | 4,890 | | | $ | — | | | $ | 4,890 | |
| U.S. government securities | 74,132 | | | — | | | 74,132 | |
| Corporate debt securities | — | | | 123,701 | | | 123,701 | |
| Commercial paper | — | | | 32,773 | | | 32,773 | |
| U.S. government agency securities | — | | | 24,411 | | | 24,411 | |
| Certificates of deposit | — | | | 16,520 | | | 16,520 | |
| $ | 79,022 | | | $ | 197,405 | | | $ | 276,427 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.