PayPal Holdings, Inc.PYPL
PayPal Holdings, Inc. Stock Compensation Disclosure
STOCK-BASED AND EMPLOYEE SAVINGS PLANS
EQUITY INCENTIVE PLAN
Under the terms of the Amended and Restated PayPal Holdings, Inc. 2015 Equity Incentive Award Plan (the “Plan”), equity awards, including restricted stock units (“RSUs”), restricted stock awards, performance-based restricted stock units (“PBRSUs”), stock options, deferred stock units, and stock payments, may be granted to our directors, officers, and employees. In June 2025, our stockholders approved the authorization of an additional 15 million shares to the Plan. At December 31, 2025, approximately 75 million shares were authorized under the Plan and approximately 45 million shares were available for future grant. Shares issued as a result of stock option exercises and the release of stock awards were funded primarily with the issuance of new shares of common stock.
RSUs are granted to eligible employees under the Plan. RSUs issued on or after January 1, 2022 generally vest over three years at a rate of 33% after one year, then in equal quarterly installments thereafter. RSUs are subject to an employee’s continuing service to us, and do not have an expiration date. The cost of RSUs granted is determined using the fair market value of PayPal’s common stock on the date of grant.
Certain of our executives and non-executives are eligible to receive PBRSUs, which are equity awards that may be earned based upon the Company’s performance relative to pre-established market or performance targets over performance periods of to three years. We estimate the fair value of market-based PBRSU awards at the date of grant using a Monte Carlo valuation methodology that incorporates into the valuation the possibility that the market condition might not be satisfied. The total estimated fair value is amortized over each award’s performance period regardless of whether the condition is satisfied. The number of shares that vest at the end of each performance period will vary based on the performance against specified market conditions. PBRSUs that are subject to a performance condition may vest and settle depending on the Company’s performance against pre-established performance metrics over a predefined performance period. PBRSUs with only a performance condition generally are cliff vested following the completion of the performance period, subject to the Compensation Committee’s approval of the level of achievement against the pre-established performance targets. Over the performance period, the number of PBRSUs with only a performance condition that may be issued, and related stock-based compensation expense that is recognized, is adjusted upward or downward based upon the probability of achieving the approved performance targets. Depending on the probability of achieving the pre-established performance targets, the number of PBRSUs with only a performance condition issued could range from 0% to 200% of the target amount.
EMPLOYEE STOCK PURCHASE PLAN
Under the terms of the Employee Stock Purchase Plan (“ESPP”), shares of our common stock may be purchased over an offering period with a maximum duration of two years at 85% of the lower of the fair market value on the first day of the applicable offering period or on the last business day of each six-month purchase period within the offering period. Employees may contribute between 2% and 10% of their gross compensation during an offering period to purchase shares, but not more than the statutory limitation of $25,000 per year. All company stock purchased through the ESPP is considered outstanding and is included in the weighted-average outstanding shares for purposes of computing basic and diluted net income (loss) per share. For the years ended December 31, 2025, 2024, and 2023, our employees purchased 2.6 million, 2.1 million, and 2.3 million shares under the ESPP at an average per share price of $45.85, $44.16, and $55.34, respectively. As of December 31, 2025, approximately 39 million shares were reserved for future issuance under the ESPP.
RSU, PBRSU, AND RESTRICTED STOCK ACTIVITY
The following table summarizes RSU, PBRSU, and restricted stock activity under the Plan as of December 31, 2025 and changes during the year ended December 31, 2025:
| Units | Weighted Average Grant-Date Fair Value (per share) | ||||||||||
| (In thousands, except per share amounts) | |||||||||||
| Outstanding at January 1, 2025 | 31,288 | $ | 67.35 | ||||||||
Awarded | 22,329 | $ | 70.92 | ||||||||
Vested | (15,923) | $ | 67.55 | ||||||||
Forfeited | (5,937) | $ | 72.39 | ||||||||
| Outstanding at December 31, 2025 | 31,757 | $ | 68.84 | ||||||||
| Expected to vest | 27,499 | ||||||||||
The aggregate intrinsic value of RSUs and PBRSUs vested under the Plan was $1.1 billion for both December 31, 2025 and 2024 and $752 million for December 31, 2023.
In the year ended December 31, 2025, the Company granted 1.6 million PBRSUs with a three-year performance period. In the year ended December 31, 2024, the Company granted 1.9 million PBRSUs with a three-year performance period. In the year ended December 31, 2023, the Company granted 2.3 million PBRSUs with a one-year performance period (fiscal 2023), which became fully vested following the completion of the performance period in February 2024 (one year from the annual incentive award cycle grant date), and 1.8 million PBRSUs with a three-year performance period.
STOCK-BASED COMPENSATION EXPENSE
Stock-based compensation expense for the Plan is measured based on the estimated fair value of shares at the time of grant and recognized over the award’s vesting period.
The following table summarizes the impact of stock-based compensation expense under the Plan on our results of operations for the years ended December 31, 2025, 2024, and 2023:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Customer support and operations | $ | 204 | $ | 233 | $ | 305 | |||||||||||
| Sales and marketing | 125 | 143 | 179 | ||||||||||||||
| Technology and development | 489 | 478 | 612 | ||||||||||||||
| General and administrative | 266 | 339 | 434 | ||||||||||||||
Restructuring and other | — | 100 | — | ||||||||||||||
| Total stock-based compensation expense | $ | 1,084 | $ | 1,293 | $ | 1,530 | |||||||||||
| Capitalized as part of internal use software and website development costs | $ | 134 | $ | 109 | $ | 52 | |||||||||||
| Income tax benefit on total stock-based compensation expense | $ | 227 | $ | 238 | $ | 260 | |||||||||||
| Income tax benefit realized related to awards vested or exercised | $ | 237 | $ | 205 | $ | 136 | |||||||||||
As of December 31, 2025, there was approximately $1.4 billion of unearned stock-based compensation that is expected to be recognized over a weighted average period of 1.87 years. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase, or cancel all or a portion of the remaining unearned stock-based compensation expense. Future unearned stock-based compensation will increase to the extent we grant additional equity awards, change the mix of equity awards we grant, or assume unvested equity awards in connection with acquisitions.
EMPLOYEE SAVINGS PLANS
Under the terms of the PayPal Holdings, Inc. Deferred Compensation Plan, which also qualifies under Section 401(k) of the Code, participating U.S. employees may contribute up to 50% of their eligible compensation, but not more than statutory limits. Under the PayPal plan, eligible employees received one dollar for each dollar contributed, up to 4% of each employee’s eligible salary, subject to a maximum employer contribution per employee of $14,000 in 2025, $13,800 in 2024, and $13,200 in 2023. Our non-U.S. employees are covered by other savings plans. For the years ended December 31, 2025, 2024, and 2023, the matching contribution expense for our U.S. and international savings plans was approximately $83 million, $74 million, and $80 million, respectively.
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.