Dell Technologies Inc.DELL
Dell Technologies Inc. Stock Compensation Disclosure
STOCK-BASED COMPENSATION
The following table presents stock-based compensation expense recognized in the Consolidated Statements of Income for the periods indicated:
| Fiscal Year Ended | |||||||||||||||||
| January 31, 2025 | February 2, 2024 | February 3, 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Stock-based compensation expense: | |||||||||||||||||
| Cost of net revenue | $ | 152 | $ | 149 | $ | 152 | |||||||||||
| Operating expenses | 633 | 729 | 779 | ||||||||||||||
| Total stock-based compensation expense before taxes | 785 | 878 | 931 | ||||||||||||||
| Income tax benefit | (143) | (157) | (163) | ||||||||||||||
| Total stock-based compensation expense, net of income taxes | $ | 642 | $ | 721 | $ | 768 | |||||||||||
Dell Technologies Inc. Stock-Based Compensation Plan
Dell Technologies Inc. 2023 Stock Incentive Plan — Employees, consultants, non-employee directors, and other service providers of the Company or its affiliates are eligible to participate in the Dell Technologies Inc. 2023 Stock Incentive Plan, which became effective on June 20, 2023 upon its approval by stockholders (the “2023 Plan”). The 2023 Plan authorizes the Company to grant stock options, restricted stock units (“RSUs”), stock appreciation rights (“SARs”), restricted stock awards, deferred stock units, and dividend equivalents. The 2023 Plan replaced the Dell Technologies Inc. 2013 Stock Incentive Plan (as amended and restated, the “2013 Plan”). Upon effectiveness of the 2023 Plan, no further awards were authorized for grant under the 2013 Plan.
The 2023 Plan authorizes the issuance of an aggregate of up to approximately 103.3 million shares of the Class C Common Stock, including (a) 50.0 million shares of Class C Common Stock that were authorized for offering and issuance under the 2023 Plan, (b) approximately 7.0 million shares of Class C Common Stock that remained available for issuance under the 2013 Plan as of the effective date of the 2023 Plan, and (c) up to approximately 46.3 million shares of Class C Common Stock subject to awards outstanding under the 2013 Plan as of the effective date of the 2023 Plan that subsequently expire or terminate prior to exercise or settlement. As of January 31, 2025, there were approximately 54 million shares of Class C Common Stock available for future grants under the 2023 Plan.
Restricted Stock — The Company’s awards primarily consist of RSUs granted to employees. During the fiscal years ended January 31, 2025, February 2, 2024, and February 3, 2023, the Company granted long-term incentive awards in the form of service-based RSUs and performance-based RSUs (“PSUs”) in order to align critical talent retention programs with the interests of holders of the Class C Common Stock.
Service-based RSUs have a fair value based on the closing price of the Class C Common Stock price as reported on the NYSE on the grant date or the trade day immediately preceding the grant date, if the grant date falls on a non-trading day. The majority of such RSUs vest ratably over a three-year period. Each service-based RSU represents the right to acquire one share of Class C Common Stock upon vesting.
The PSUs granted during the periods presented are reflected as target units for performance periods not yet complete. The actual number of units that ultimately vest will range from 0% to 200% of target, based on the level of achievement of the performance goals and continued employment with the Company over a three-year performance period. Approximately half of the PSUs granted are subject to achievement of market-based performance goals based on relative total shareholder return and were valued utilizing a Monte Carlo valuation model to simulate the probabilities of achievement. The remaining PSUs are subject to internal financial measures and have fair values based on the closing price of the Class C Common Stock as reported on the NYSE on the accounting grant date.
Beginning with grants made during the fiscal year ended February 3, 2023, dividend equivalents accrue on outstanding RSUs and PSUs when a dividend is paid to the Company’s common stockholders. Accrued dividend equivalents will be paid when the underlying RSUs and PSUs vest.
The following table presents the assumptions utilized in the Monte Carlo valuation model for the periods indicated:
| Fiscal Year Ended | |||||||||||||||||
| January 31, 2025 | February 2, 2024 | February 3, 2023 | |||||||||||||||
| Weighted-average grant date fair value | $ | 172.99 | $ | 43.91 | $ | 73.26 | |||||||||||
| Term (in years) | 3 | 3 | 3 | ||||||||||||||
| Risk-free rate (U.S. Government Treasury Note) | 4.4 | % | 3.8 | % | 2.0 | % | |||||||||||
| Expected volatility | 39 | % | 35 | % | 39 | % | |||||||||||
| Expected dividend yield | — | % | — | % | — | % | |||||||||||
The following table presents RSU activity settled in Class C Common Stock for the periods indicated:
| Number of Units | Weighted-Average Grant Date Fair Value | Aggregate Intrinsic Value (a) | |||||||||||||||
| (in millions) | (per unit) | ||||||||||||||||
| Outstanding as of January 28, 2022 | 59 | $ | 31.67 | ||||||||||||||
| Granted | 23 | 48.11 | |||||||||||||||
| Vested | (27) | 29.96 | |||||||||||||||
| Forfeited | (5) | 39.26 | |||||||||||||||
| Outstanding as of February 3, 2023 | 50 | 39.44 | |||||||||||||||
| Granted | 23 | 39.62 | |||||||||||||||
| Vested | (31) | 32.02 | |||||||||||||||
| Forfeited | (3) | 46.99 | |||||||||||||||
| Outstanding as of February 2, 2024 | 39 | 44.68 | |||||||||||||||
| Granted | 9 | 102.35 | |||||||||||||||
| Vested | (18) | 43.33 | |||||||||||||||
| Forfeited | (4) | 56.93 | |||||||||||||||
| Outstanding as of January 31, 2025 (b) | 26 | $ | 60.51 | $ | 2,673 | ||||||||||||
| Vested and expected to vest, January 31, 2025 | 25 | $ | 59.82 | $ | 2,551 | ||||||||||||
____________________
(a)The aggregate intrinsic value represents the total pre-tax intrinsic values based on the closing price of $103.60 of the Class C Common Stock on January 31, 2025 as reported on the NYSE that would have been received by the RSU holders if the RSUs had been issued as of January 31, 2025.
(b)As of January 31, 2025, the 26 million units outstanding included 21 million RSUs and 5 million PSUs.
The total fair value of RSU awards that vested during the fiscal years ended January 31, 2025, February 2, 2024, and February 3, 2023 was $795 million, $973 million, and $827 million, respectively, with a pre-tax intrinsic value of $1,984 million, $1,230 million, and $1,371 million, respectively.
As of January 31, 2025, there was $772 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to these awards expected to be recognized over a weighted-average period of approximately 1.7 years.
Dell Technologies Shares Withheld for Taxes — Beginning in the fiscal year ended February 3, 2023, shares of Class C Common Stock are generally withheld from issuance to cover employee taxes for the vesting of restricted stock units. For the fiscal years ended January 31, 2025, February 2, 2024, and February 3, 2023, 5.0 million, 9.0 million, and 8.0 million shares, respectively, were withheld to cover $568 million, $366 million, and $388 million, respectively, of employees’ tax obligations. The value of the withheld shares was classified as a reduction to common stock and capital in excess of par value.
Stock Option Activity — In addition to RSU activity, the Company also had stock option activity which was not material during the fiscal years ended January 31, 2025, February 2, 2024, and February 3, 2023. Stock options are granted with option exercise prices equal to the fair market value of the Company’s Class C Common Stock and expire ten years after the grant date.
Other Plans
In addition to the 2023 Plan described above, the Company’s consolidated subsidiary, Secureworks, maintains its own equity plan and issues equity grants settling in its Class A common stock. The stock option and restricted stock unit activity under this plan was not material to the Company during the fiscal years ended January 31, 2025, February 2, 2024, and February 3, 2023.About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.