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 one 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, |
| | 2023 | | 2024 | | 2025 |
| Lease cost | | | | | | |
| Finance lease cost: | | | | | | |
| Amortization of assets | | $ | 188 | | | $ | 168 | | | $ | 153 | |
| Interest of lease liabilities | | 31 | | | 25 | | | 17 | |
Operating lease cost | | 321 | | | 294 | | | 288 | |
| Short-term lease cost | | 10 | | | 2 | | | 4 | |
| Variable lease cost | | 129 | | | 115 | | | 117 | |
| Sublease income | | (22) | | | (22) | | | (19) | |
| Total lease cost | | $ | 657 | | | $ | 582 | | | $ | 560 | |
Supplemental cash flow information related to leases was as follows (in millions): | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2023 | | 2024 | | 2025 |
| Other information | | | | | | |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | | |
| Operating cash flows from financing leases | | $ | 32 | | | $ | 26 | | | $ | 16 | |
| Operating cash flows from operating leases | | 335 | | | 332 | | | 303 | |
| Financing cash flows from financing leases | | 171 | | | 172 | | | 157 | |
| | | | | | | | | | | | | | | | | | | | |
| Right-of-use assets obtained in exchange for lease obligations: | | | | | | |
| Operating lease liabilities | | $ | 84 | | | $ | 132 | | | $ | 126 | |
| Finance lease liabilities | | 216 | | | 4 | | | 71 | |
Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate): | | | | | | | | | | | | | | |
| | As of December 31, |
| | 2024 | | 2025 |
| Operating Leases | | | | |
| Operating lease right-of-use assets | | $ | 1,158 | | | $ | 1,114 | |
| Operating lease liability, current | | $ | 175 | | | $ | 169 | |
| Operating lease liabilities, non-current | | 1,454 | | | 1,390 | |
| Total operating lease liabilities | | $ | 1,629 | | | $ | 1,559 | |
| | | | | | | | | | | | | | |
| | As of December 31, |
| | 2024 | | 2025 |
| Finance Leases | | | | |
| Property and equipment, at cost | | $ | 641 | | | $ | 625 | |
| Accumulated depreciation | | (372) | | | (439) | |
| Property and equipment, net | | $ | 269 | | | $ | 186 | |
| Other current liabilities | | $ | 136 | | | $ | 138 | |
| Other long-term liabilities | | 174 | | | 84 | |
| Total finance leases liabilities | | $ | 310 | | | $ | 222 | |
| | | | | | | | | | | | | | |
| | As of December 31, |
| | 2024 | | 2025 |
| Weighted-average remaining lease term | | | | |
| Operating leases | | 15 years | | 15 years |
| Finance leases | | 2 years | | 2 years |
| Weighted-average discount rate | | | | |
| Operating leases | | 6.7 | % | | 6.6 | % |
| Finance leases | | 6.6 | % | | 6.0 | % |
Maturities of lease liabilities were as follows (in millions): | | | | | | | | | | | | | | |
| | As of December 31, 2025 |
| | Operating Leases | | Finance Leases |
| 2026 | | $ | 265 | | | $ | 167 | |
| 2027 | | 262 | | | 50 | |
| 2028 | | 232 | | | 14 | |
| 2029 | | 226 | | | 1 | |
| 2030 | | 194 | | | 1 | |
| Thereafter | | 1,592 | | | — | |
| Total undiscounted lease payments | | 2,771 | | | 233 | |
| Less: imputed interest | | (1,212) | | | (11) | |
| Total lease liabilities | | $ | 1,559 | | | $ | 222 | |
As of December 31, 2025, additional operating leases and finance leases that have been executed but not yet commenced were immaterial.
Mission Bay 1 & 2
We own two adjacent office buildings, Mission Bay 1 & 2, which are located on land for which we have two 76-year land lease agreements (“Land Leases”) ending in 2092. We have a 49% indirect interest in the land (“Indirect Interest”) which are accounted for as a financing arrangement due to our 49% previous ownership in the land and continuing involvement through a purchase option on the land in the Land Leases. As of December 31, 2025, our Indirect Interest is included in property and equipment, net, with the corresponding financing obligation included in other long-term liabilities. The remaining 51% of the Land Leases are accounted for as operating leases. The annual rent amounts under the Land Leases are fixed through 2032, after which, the annual rent amounts will adjust annually based on the prevailing consumer price index.
Future lease payments on the Land Leases as of December 31, 2025 are $1.7 billion, of which 51% is included in our operating lease commitments and the remaining 49%, or $820 million, is allocated to the financing obligation of the Indirect Interest through 2092.
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.