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Equity Incentive Plans | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Equity Incentive Plans | Equity Incentive Plans In June 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the grant of stock options, restricted stock, RSUs, stock appreciation rights, performance units and performance shares to our employees, directors and consultants. Stock options granted under the 2019 Plan may be either incentive stock options or nonstatutory stock options. Incentive stock options may only be granted to our employees. Nonstatutory stock options may be granted to our employees, directors and consultants. Generally, our stock options and RSUs vest over four years and our stock options are exercisable over a maximum period of 10 years from their grant dates. Vesting typically terminates when the employment or consulting relationship ends. As of December 31, 2023, 131.1 million shares were reserved and available for issuance under the 2019 Plan. The following table summarizes our stock option and RSU activity for the year ended December 31, 2023:
| Stock Options |  | RSUs
| Number of Options (in thousands) |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Life (years) |  | Aggregate Intrinsic Value (in billions) |  | Number of RSUs (in thousands) |  | Weighted- Average Grant Date Fair Value
Beginning of period | 343,564 |  | $ | 30.65 |  |  |  |  |  |  | 21,333 |  | $ | 162.32 |
Granted | 9,521 |  | $ | 226.50 |  |  |  |  |  |  | 11,743 |  | $ | 228.33 |
Exercised or released | (7,626) |  | $ | 43.07 |  |  |  |  |  |  | (11,085) |  | $ | 116.47 |
Cancelled | (1,438) |  | $ | 194.23 |  |  |  |  |  |  | (2,903) |  | $ | 192.22 |
End of period | 344,021 |  | $ | 35.11 |  |  | 4.31 |  | $ | 73.57 |  |  | 19,088 |  | $ | 225.01 |
Vested and expected to vest, December 31, 2023 | 340,884 |  | $ | 33.38 |  |  | 4.27 |  | $ | 73.45 |  |  | 18,446 |  | $ | 225.76 |
Exercisable and vested, December 31, 2023 | 329,124 |  | $ | 27.07 |  |  | 4.11 |  | $ | 72.90 |  |  |  |  |
The weighted-average grant date fair value of RSUs granted in the years ended December 31, 2023, 2022 and 2021 was $228.33, $239.85 and $261.33, respectively. The aggregate release date fair value of RSUs in the years ended December 31, 2023, 2022 and 2021 was $2.50 billion, $4.32 billion and $5.70 billion, respectively. The aggregate intrinsic value of options exercised in the years ended December 31, 2023, 2022, and 2021 was $1.33 billion, $1.90 billion and $26.88 billion, respectively. During the year ended December 31, 2021, our CEO exercised all of the remaining vested options from the 2012 CEO Performance Award, which amounted to an intrinsic value of $23.45 billion. ESPP Our employees are eligible to purchase our common stock through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The purchase price would be 85% of the lower of the fair market value on the first and last trading days of each six-month offering period. During the years ended December 31, 2023, 2022 and 2021, under the ESPP we issued 2.1 million, 1.4 million and 1.5 million shares, respectively. As of December 31, 2023, there were 97.8 million shares available for issuance under the ESPP. Fair Value Assumptions We use the fair value method in recognizing stock-based compensation expense. Under the fair value method, we estimate the fair value of each stock option award with service or service and performance conditions and the ESPP on the grant date generally using the Black-Scholes option pricing model. The weighted-average assumptions used in the Black-Scholes model for stock options are as follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Risk-free interest rate | 3.90 | % |  | 3.11 | % |  | 0.66 | %
Expected term (in years) | 4.5 |  | 4.1 |  | 4.3
Expected volatility | 63 | % |  | 63 | % |  | 59 | %
Dividend yield | 0.0 | % |  | 0.0 | % |  | 0.0 | %
Grant date fair value per share | $ | 121.62 |  |  | $ | 114.51 |  |  | $ | 128.02 |
The fair value of RSUs with service or service and performance conditions is measured on the grant date based on the closing fair market value of our common stock. The risk-free interest rate is based on the U.S. Treasury yield for zero-coupon U.S. Treasury notes with maturities approximating each grant’s expected life. We use our historical data in estimating the expected term of our employee grants. The expected volatility is based on the average of the implied volatility of publicly traded options for our common stock and the historical volatility of our common stock. 2018 CEO Performance Award In March 2018, our stockholders approved the Board of Directors’ grant of 304.0 million stock option awards, as adjusted to give effect to the 2020 Stock Split and the 2022 Stock Split, to our CEO (the “2018 CEO Performance Award”). The 2018 CEO Performance Award consisted of 12 vesting tranches with a vesting schedule based entirely on the attainment of both operational milestones (performance conditions) and market conditions, assuming continued employment either as the CEO or as both Executive Chairman and Chief Product Officer and service through each vesting date. Each of the 12 vesting tranches of the 2018 CEO Performance Award vested upon certification by the Board of Directors that both (i) the market capitalization milestone for such tranche, which began at $100.0 billion for the first tranche and increases by increments of $50.0 billion thereafter (based on both a six calendar month trailing average and a 30 calendar day trailing average, counting only trading days), had been achieved, and (ii) any one of the following eight operational milestones focused on total revenue or any one of the eight operational milestones focused on Adjusted EBITDA had been achieved for the four consecutive fiscal quarters on an annualized basis and subsequently reported by us in our consolidated financial statements filed with our Forms 10-Q and/or 10-K. Adjusted EBITDA was defined as net income (loss) attributable to common stockholders before interest expense, provision (benefit) for income taxes, depreciation and amortization and stock-based compensation. Upon vesting and exercise, including the payment of the exercise price of $23.34 per share as adjusted to give effect to the 2020 Stock Split and the 2022 Stock Split, our CEO must hold shares that he acquires for five years post-exercise, other than a cashless exercise where shares are simultaneously sold to pay for the exercise price and any required tax withholding. The achievement status of the operational milestones as of December 31, 2023 is provided below.
Total Annualized Revenue |  | Annualized Adjusted EBITDA
Milestone (in billions) |  | Achievement Status |  | Milestone (in billions) |  | Achievement Status
$ | 20.0 |  |  | Achieved |  | $ | 1.5 |  |  | Achieved
$ | 35.0 |  |  | Achieved |  | $ | 3.0 |  |  | Achieved
$ | 55.0 |  |  | Achieved |  | $ | 4.5 |  |  | Achieved
$ | 75.0 |  |  | Achieved |  | $ | 6.0 |  |  | Achieved
$ | 100.0 |  |  | - |  | $ | 8.0 |  |  | Achieved
$ | 125.0 |  |  | - |  | $ | 10.0 |  |  | Achieved
$ | 150.0 |  |  | - |  | $ | 12.0 |  |  | Achieved
$ | 175.0 |  |  | - |  | $ | 14.0 |  |  | Achieved
Stock-based compensation under the 2018 CEO Performance Award represented a non-cash expense and was recorded as a Selling, general, and administrative operating expense in our consolidated statements of operations. In each quarter since the grant of the 2018 CEO Performance Award, we had recognized expense, generally on a pro-rated basis, for only the number of tranches (up to the maximum of 12 tranches) that corresponded to the number of operational milestones that had been achieved or had been determined probable of being achieved in the future, in accordance with the following principles. On the grant date, a Monte Carlo simulation was used to determine for each tranche (i) a fixed amount of expense for such tranche and (ii) the future time when the market capitalization milestone for such tranche was expected to be achieved, or its “expected market capitalization milestone achievement time.” Separately, based on a subjective assessment of our future financial performance each quarter, we determined whether it was probable that we would achieve each operational milestone that had not previously been achieved or deemed probable of achievement and if so, the future time when we expected to achieve that operational milestone, or its “expected operational milestone achievement time.” As of December 31, 2022, all remaining unrecognized stock-based compensation expense under the 2018 CEO Performance Award had been recognized. For the years ended December 31, 2022 and 2021, we recorded stock-based compensation expense of $66 million and $910 million, respectively, related to the 2018 CEO Performance Award. Other Performance-Based Grants From time to time, the Compensation Committee of our Board of Directors grants certain employees performance-based RSUs and stock options. As of December 31, 2023, we had unrecognized stock-based compensation expense of $655 million under these grants to purchase or receive an aggregate 5.3 million shares of our common stock. For awards probable of achievement, we estimate the unrecognized stock-based compensation expense of $110 million will be recognized over a weighted-average period of 4.0 years. For the years ended December 31, 2023 and 2022, we recorded $57 million and $159 million, respectively, of stock-based compensation expense related to these grants, net of forfeitures. Summary Stock-Based Compensation Information The following table summarizes our stock-based compensation expense by line item in the consolidated statements of operations (in millions):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Cost of revenues | $ | 741 |  |  | $ | 594 |  |  | $ | 421 |
Research and development | 689 |  |  | 536 |  |  | 448 |
Selling, general and administrative | 382 |  |  | 430 |  |  | 1,252 |
Total | $ | 1,812 |  |  | $ | 1,560 |  |  | $ | 2,121 |
Our income tax benefits recognized from stock-based compensation arrangements were immaterial while we were under full valuation allowances on our U.S. deferred tax assets during the years ended December 31, 2022 and 2021. With the release of the valuation allowance associated with our federal and certain state deferred tax assets in 2023, income tax benefits recognized from stock-based compensation expense were $326 million during the year ended December 31, 2023. During the years ended December 31, 2023, 2022 and 2021, stock-based compensation expense capitalized to our consolidated balance sheets was $199 million, $245 million and $182 million, respectively. As of December 31, 2023, we had $4.82 billion of total unrecognized stock-based compensation expense related to non-performance awards, which will be recognized over a weighted-average period of 2.8 years.

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 505 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//505/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 718 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//718/tableOfContent + Details
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