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Stock-Based Compensation | 12 Months Ended
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Dec. 03, 2021
Share-based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Our stock-based compensation programs are long-term retention programs that are intended to attract, retain and provide incentives for employees, officers and directors, and to align stockholder and employee interests. We have the following stock-based compensation plans and programs: Restricted Stock Units and Performance Share Programs We grant restricted stock units and performance share awards to eligible employees under our 2019 Equity Incentive Plan (“2019 Plan”). Restricted stock units generally vest over four years. Certain grants have other vesting periods approved by the Executive Compensation Committee of our Board of Directors. As of December 3, 2021, we had reserved 46.0 million shares of our common stock for issuance under our 2019 Plan and had 37.9 million shares available for grant. Our Performance Share Programs aim to help focus key employees on building stockholder value, provide significant award potential for achieving outstanding Company performance and enhance the ability of the Company to attract and retain highly talented and competent individuals. The Executive Compensation Committee of our Board of Directors approves the terms of each of our Performance Share Programs, including the award calculation methodology. Shares under outstanding Performance Share Programs may be earned based on the achievement of an objective relative total stockholder return measured over a three-year performance period. Performance share awards will be awarded and cliff-vest upon the later of the Executive Compensation Committee's certification of the level of achievement or the three-year anniversary of each vesting commencement date. Participants can earn between 0% and 200% of the target number of performance shares. In January 2021, the Executive Compensation Committee approved the 2021 Performance Share Program, the terms of which are similar to prior year performance share programs as discussed above. As of December 3, 2021, the shares awarded under our 2021, 2020 and 2019 Performance Share Programs remained outstanding and were yet to be achieved. Employee Stock Purchase Plan Our Employee Stock Purchase Plan (“ESPP”) allows eligible employee participants to purchase shares of our common stock at a discount through payroll deductions. The ESPP consists of twenty-four-month offering periods with four six-month purchase periods in each offering period. Employees purchase shares in each purchase period at 85% of the market value of our common stock at either the beginning of the offering period or the end of the purchase period, whichever price is lower. The ESPP will continue until the earlier of termination by the Board of Directors or the date on which all of the shares available for issuance under the plan have been issued. As of December 3, 2021, we had reserved 103.0 million shares of our common stock for issuance under the ESPP and approximately 11.6 million shares remain available for future issuance. Issuance of Shares Upon vesting of restricted stock units and performance shares or purchase of shares under the ESPP, we will issue treasury stock. If treasury stock is not available, common stock will be issued. In order to minimize the impact of on-going dilution from issuance of shares, we instituted a stock repurchase program. See Note 14 for information regarding our stock repurchase programs. Valuation of Stock-Based Compensation Stock-based compensation cost is measured at the grant date based on the fair value of the award. Our restricted stock units are valued based on the fair market value of the award on the grant date. Our performance share awards are valued using a Monte Carlo Simulation model. The fair value of the awards are fixed at the grant date and amortized over the longer of the remaining performance or service period. We use the Black-Scholes option pricing model to determine the fair value of ESPP shares. The determination of the fair value of stock-based payment awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, a risk-free interest rate and any expected dividends. Summary of Restricted Stock Units Restricted stock unit activity for fiscal 2021 was as follows:
| Number of Shares (in millions) |  | Weighted Average Grant Date Fair Value |  | Aggregate Fair Value(1) (in millions) |  | Weighted Average Remaining Contractual Life (years)
Beginning outstanding balance | 7.0 |  |  | $ | 285.69 |  |  |  |  |
Awarded | 3.6 |  |  | $ | 504.69 |  |  |  |  |
Released | (3.4) |  |  | $ | 269.55 |  |  |  |  |
Forfeited | (0.7) |  |  | $ | 351.46 |  |  |  |  |
Increase due to acquisition | 0.1 |  |  | $ | 548.91 |  |  |  |  |
Ending outstanding balance | 6.6 |  |  | $ | 411.52 |  |  | $ | 4,039 |  |  | 1.25
Expected to vest | 6.0 |  |  | $ | 408.08 |  |  | $ | 3,702 |  |  | 1.19
_________________________________________ (1) The aggregate fair value is calculated using the closing stock price as of December 3, 2021 of $616.53. The weighted average grant date fair values of restricted stock units granted during fiscal 2021, 2020 and 2019 were $504.69, $358.68 and $253.91, respectively. The total fair value of restricted stock units vested during fiscal 2021, 2020 and 2019 was $1.83 billion, $1.61 billion and $970 million, respectively. Summary of Performance Shares Performance share activity for fiscal 2021 was as follows:
| Number of Shares (in millions) |  | Weighted Average Grant Date Fair Value |  | Aggregate Fair Value(1) (in millions) |  | Weighted Average Remaining Contractual Life (years)
Beginning outstanding balance | 0.7 |  |  | $ | 333.85 |  |  |  |  |
Awarded | 0.4 |  |  | $ | 325.24 |  |  |  |  |
Achieved | (0.4) |  |  | $ | 218.55 |  |  |  |  |
Forfeited | (0.1) |  |  | $ | 388.11 |  |  |  |  |
Ending outstanding balance | 0.6 |  |  | $ | 408.84 |  |  | $ | 358 |  |  | 1.04
Expected to vest | 0.5 |  |  | $ | 404.37 |  |  | $ | 333 |  |  | 0.99
_________________________________________ (1) The aggregate fair value is calculated using the closing stock price as of December 3, 2021 of $616.53. Shares awarded during fiscal 2021 include 0.2 million additional shares awarded for the final achievement of the 2018 Performance Share Program which was certified in the first quarter of fiscal 2021. The remaining awarded shares were for the 2021 Performance Share Program. Shares achieved during fiscal 2021 resulted from 200% achievement of target for the 2018 Performance Share Program. The weighted average grant date fair values of performance awards granted during fiscal 2021, 2020 and 2019 were $325.24, $271.62 and $177.33, respectively. The total fair value of performance awards achieved during fiscal 2021, 2020 and 2019 was $212 million, $273 million and $204 million, respectively. Summary of Employee Stock Purchase Plan Shares Employees purchased 1.0 million shares at an average price of $294.15, 1.2 million shares at an average price of $218.37, and 1.5 million shares at an average price of $150.55 for fiscal 2021, 2020 and 2019, respectively. The intrinsic value of shares purchased during fiscal 2021, 2020 and 2019 was $256 million, $216 million and $179 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares. Compensation Costs We recognize the estimated compensation cost of restricted stock units, net of estimated forfeitures, on a straight-line basis over the requisite service period of the entire award, which is generally the vesting period. The estimated compensation cost is based on the fair value of our common stock on the date of grant. We also recognize the estimated compensation cost of performance shares, net of estimated forfeitures, on a straight-line basis over the requisite performance period or service period of the entire award, whichever is longer. Our performance share awards are earned upon achievement of an objective total stockholder return measure at the end of the three-year performance period, as described above. We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate forfeitures and record stock-based compensation expense only for those awards that are expected to vest. As of December 3, 2021, there was $2.26 billion of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based awards and purchase rights which will be recognized over a weighted average period of 2.23 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. Total stock-based compensation costs included in our Consolidated Statements of Income for fiscal 2021, 2020 and 2019 were as follows:
(in millions) |  | 2021 |  | 2020 |  | 2019
Cost of revenue | $ | 70 |  |  | $ | 61 |  |  | $ | 55 |
Research and development | 549 |  |  | 467 |  |  | 375 |
Sales and marketing | 307 |  |  | 261 |  |  | 249 |
General and administrative | 164 |  |  | 120 |  |  | 109 |
Total (1) | $ | 1,090 |  |  | $ | 909 |  |  | $ | 788 |
_________________________________________ (1)During fiscal 2021, 2020 and 2019, we recorded tax benefits related to stock-based compensation costs of $395 million, $352 million and $248 million, respectively.

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