Solventum CorpSOLV
Solventum Corp Stock Compensation Disclosure
Stock-Based Compensation
Prior to the Spin-Off, certain eligible employees were awarded incentive stock options, non-qualified stock options, stock appreciation rights, RSUs, and PSUs under 3M's Amended and Restated 2016 Long-Term Incentive Plan ("3M Company Plan"). Stock-based compensation granted pursuant to the 3M Company Plan was based on 3M’s common stock.
In March 2024, 3M's Board of Directors approved the 2024 Long-Term Incentive Plan ("Solventum 2024 Plan") providing for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, RSUs, PSUs, and other stock or cash-based awards to eligible employees and non-employee directors. Stock-based compensation granted pursuant to the Solventum 2024 Plan is based on Solventum's common stock. The maximum shares that can be issued under the Solventum 2024 Plan is 18.4 million shares, which represents the sum of 13.0 million shares plus 5.4 million shares related to awards granted under the 3M Company Plan for Solventum employees as described below. As of December 31, 2025, the remaining shares available for future grants under the Solventum 2024 Plan was approximately 8.0 million shares.
In connection with the Spin-Off, all awards granted under the 3M Company Plan for Solventum employees were converted into equivalent awards under the Solventum 2024 Plan. The stock award modification at Spin-Off resulted in incremental compensation cost of $22 million, of which $20 million was recognized during the year ended December 31, 2024, and $2 million was recognized during the year ended December 31, 2025.
Solventum grants annual stock-based compensation awards to certain employees and non-employee directors. In 2025, the annual grant occurred in March and included grants of RSUs and PSUs. The Company makes other minor grants of RSUs during the year. In 2024, the annual grant occurred in May after the Spin-Off and included grants of RSUs and PSUs. Additionally, in 2024, the Company awarded one-time founders' RSUs and inducement PSUs to certain employees and non-employee directors.
Compensation expense related to stock-based awards is recorded over the requisite service period of the awards. The Company estimates forfeitures based on experience and adjusts expense to reflect actual forfeitures. RSU awards granted as part of the annual grant contain a retirement provision whereby employees who have reached age 55 and completed ten years of service with the Company continue to vest in their award after they retire. Expense for the RSU awards granted to retirement eligible recipients is immediately recognized on the grant date as the award contains a non-substantive vesting condition. Annual PSU awards contain a similar retirement provision, but include a one-year service condition to fully vest in the award. Expense for PSU awards to retirement eligible recipients is recognized over the one-year service period.Stock-Based Compensation Expense
Amounts recognized in the consolidated financial statements related to stock-based compensation awards, including stock options, RSUs, and PSUs, are provided in the following table. Total stock-based compensation expense recognized in cost of product and cost of software and rentals has been combined in the table below within Cost of sales. Capitalized stock-based compensation amounts were not material.
| Year ended December 31, | ||||||||||||||||||||
| (Millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Cost of sales | $ | 12 | $ | 14 | $ | 8 | ||||||||||||||
| Selling, general and administrative expenses | 133 | 82 | 23 | |||||||||||||||||
| Research and development expenses | 16 | 16 | 8 | |||||||||||||||||
| Stock-based compensation expenses | 161 | 112 | 39 | |||||||||||||||||
| Income tax benefits (expense) | (22) | (18) | (9) | |||||||||||||||||
Stock-based compensation expenses, net of tax | $ | 139 | $ | 94 | $ | 30 | ||||||||||||||
Restricted Stock Units
RSUs contain service-only vesting conditions. The fair value of RSUs is based upon Solventum's closing stock price on the grant date, and the awards generally vest over periods ranging from to three years from the grant date assuming continued employment. The following table summarizes the RSU activity:
| (Units in thousands) | Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||||
Non-vested as of December 31, 2024 | 3,337 | $ | 67.89 | |||||||||||
| Granted | 1,488 | 75.13 | ||||||||||||
| Vested | (1,014) | 73.80 | ||||||||||||
| Forfeited | (286) | 68.96 | ||||||||||||
Non-vested as of December 31, 2025 | 3,525 | $ | 69.15 | |||||||||||
As of December 31, 2025, there was $92 million of compensation expense that has yet to be recognized related to non-vested RSUs. This expense is expected to be recognized over the remaining weighted-average service period of 22 months.
The following table summarizes additional information relative to RSUs for the respective years. There were no Solventum equity-based awards prior to the Spin-Off:
| (Millions, except per-share amounts) | 2025 | 2024 | 2023 | |||||||||||||||||
| Weighted average grant date fair value of RSUs granted (per unit) | $ | 75.13 | $ | 62.77 | $ | — | ||||||||||||||
| Total fair value of RSUs vested | 75 | 9 | — | |||||||||||||||||
| Tax benefit realized related to RSUs vested | $ | 1 | $ | — | $ | — | ||||||||||||||
Performance Share Units
The Company grants PSUs to members of its executive management team. PSUs vest upon completion of the requisite service period of three years, or one year for employees who meet the retirement criteria, and upon the achievement of certain performance metrics or market conditions. Performance metrics relate to Company performance against financial targets related to constant currency revenue and adjusted earnings per share. The market condition relates to Solventum's total shareholder return relative to a selected industry peer group. Performance is measured over three years, and the number of shares of common stock that will vest at the end of the performance period is between 0% to 200% of the target number of PSUs granted based upon actual performance. The fair value of the performance vesting conditions is based upon Solventum's closing stock price on the grant date. The fair value of the market vesting condition is estimated using a Monte Carlo simulation.
In 2024, the Talent Committee of the Board of Directors approved PSU awards for members of the executive management team; however, the cumulative three-year performance metrics for these awards were not established. The Company began accruing the compensation cost related to these awards on the service inception date. In 2025, the grant-date fair value of these awards was determined upon the approval of the cumulative three-year performance metrics. The 2025 annual PSUs were also granted in 2025. The following table summarizes the PSU activity; the granted number of shares represents the shares that will vest based upon attainment of the performance and market conditions at target (i.e. 100%):
| (Units in thousands) | Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||||
Non-vested as of December 31, 2024 | — | $ | — | |||||||||||
| Granted | 1,121 | 80.46 | ||||||||||||
| Vested | — | — | ||||||||||||
| Forfeited | (51) | 80.79 | ||||||||||||
Non-vested as of December 31, 2025 | 1,070 | $ | 80.45 | |||||||||||
As of December 31, 2025, there was $53 million of compensation expense that has yet to be recognized related to PSUs. This expense is expected to be recognized over the remaining weighted-average service period of 19 months.
Stock Options
The following table summarizes stock option activity:
| (Options in thousands) | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (months) | Aggregate Intrinsic Value (millions) | ||||||||||||||||||||||
Outstanding as of December 31, 2024 | 3,991 | $ | 106.63 | |||||||||||||||||||||||
| Granted | — | — | ||||||||||||||||||||||||
| Exercised | (17) | 73.44 | ||||||||||||||||||||||||
| Forfeited | (7) | 74.74 | ||||||||||||||||||||||||
| Expired | (422) | 106.37 | ||||||||||||||||||||||||
Outstanding as of December 31, 2025 | 3,545 | 106.88 | 47 | $ | 1 | |||||||||||||||||||||
Exercisable as of December 31, 2025 | 3,465 | 107.66 | 46 | 1 | ||||||||||||||||||||||
| Expected to vest | 80 | $ | 73.44 | 85 | $ | — | ||||||||||||||||||||
Stock options outstanding and exercisable in the table above relate to the awards previously granted under 3M Company. The outstanding stock options vest over a period of three years from the grant date and expire ten years from the grant date. As of December 31, 2025, there was $0.1 million of compensation expense that has yet to be recognized related to non-vested stock options. This expense is expected to be recognized over the remaining weighted-average service period of 1 month.
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.