We recognize compensation cost for stock-based awards to employees based on the awards’ estimated grant-date fair value using a straight-line approach over the service period for which such awards are expected to vest. We account for forfeitures as they occur.

The estimation of the fair value of market-based restricted stock units, stock options and Employee Stock Purchase Plan (“ESPP”) purchase rights is affected by assumptions regarding subjective and complex variables. Generally, our assumptions are based on historical information and judgment is required to determine if historical trends may be indicators of future outcomes. We estimate the fair value of our stock-based awards as follows:

•Restricted Stock Units and Performance-Based Restricted Stock Units. The fair value of restricted stock units and performance-based restricted stock units (other than market-based restricted stock units) is determined based on the quoted market price of our common stock on the date of grant.

•Market-Based Restricted Stock Units. Market-based restricted stock units consist of grants of performance-based restricted stock units to certain members of executive management that vest contingent upon the achievement of pre-determined market and service conditions (referred to herein as “market-based restricted stock units”). The fair value of our market-based restricted stock units is estimated using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient.

•Stock Options and ESPP. The fair value of stock options and stock purchase rights granted pursuant to our equity incentive plans and our 2000 Employee Stock Purchase Plan, as amended, respectively, is estimated using the Black-Scholes valuation model based on the multiple-award valuation method. Key assumptions of the Black-Scholes valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends. The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant for the expected term of the option. Expected volatility is based on a combination of historical stock price volatility and implied volatility of publicly-traded options on our common stock. An expected term is estimated based on historical exercise behavior, post-vesting termination patterns, options outstanding and future expected exercise behavior.


	Three Months Ended September 30,
	2024		2023
Risk-free interest rate	4.5 - 5.0%		5.4 - 5.5%
Expected volatility	21 - 22%		23 - 24%
Weighted-average volatility	21	%	24	%
Expected term	6 - 12 months		6 - 12 months
Expected dividends	0.6	%	0.8	%

The following table summarizes our stock option activity for the six months ended September 30, 2024:


	Options (in thousands)	Weighted- Average Exercise Prices		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding as of March 31, 2024	12	$	64.00

Granted	2	137.55
Exercised	(4)	88.68
Forfeited, cancelled or expired	(1)	58.76
Outstanding as of September 30, 2024	9	$	65.81	3.88	$	1
Vested and expected to vest	9	$	65.81	3.88	$	1
Exercisable as of September 30, 2024	9	$	65.81	3.88	$	1

The aggregate intrinsic value represents the total pre-tax intrinsic value based on our closing stock price as of September 30, 2024, which would have been received by the option holders had all the option holders exercised their options as of that date. We issue new common stock from our authorized shares upon the exercise of stock options.

The following table summarizes our restricted stock units activity for the six months ended September 30, 2024:


	Restricted Stock Units (in thousands)	Weighted- Average Grant Date Fair Values
Outstanding as of March 31, 2024	7,480	$	128.31

Granted	4,173	137.78
Vested	(2,585)	129.89
Forfeited or cancelled	(250)	130.26
Outstanding as of September 30, 2024	8,818	$	132.28

Our performance-based restricted stock units vest upon the achievement of pre-determined performance-based milestones, including, but not limited to, management reporting milestones of net bookings and operating income metrics, as well as service conditions. If these performance-based milestones are not met but service conditions are met, the performance-based restricted stock units will not vest, in which case any compensation expense we have recognized to date will be reversed. Generally, the measurement periods of our performance-based restricted stock units are 3 years, with awards vesting after each annual measurement period or cliff-vesting after the completion of the total aggregate measurement period.

Each quarter, we update our assessment of the probability that the performance milestones will be achieved. We amortize the fair values of performance-based restricted stock units over the requisite service period. The performance-based restricted stock units contain threshold, target and maximum milestones for each performance-based milestone. The number of shares of common stock to be issued at vesting will range from zero to 200 percent of the target number of performance-based restricted stock units attributable to each performance-based milestone based on the company’s performance as compared to these threshold, target and maximum performance-based milestones. Each performance-based milestone is weighted evenly and the number of shares that vest based on each performance-based milestone is independent from the other.

The following table summarizes our performance-based restricted stock unit activity, presented with the maximum number of shares that could potentially vest, for the six months ended September 30, 2024:


	Performance- Based Restricted Stock Units (in thousands)	Weighted- Average Grant Date Fair Value
Outstanding as of March 31, 2024	836	$	129.60
Granted	763	137.53
Vested	(277)	133.67
Forfeited or cancelled	(318)	129.29
Outstanding as of September 30, 2024	1,004	$	134.60

Our market-based restricted stock units vest contingent upon the achievement of pre-determined market and service conditions. If these market conditions are not met but service conditions are met, the market-based restricted stock units will not vest; however, any compensation expense we have recognized to date will not be reversed. The number of shares of common stock to be issued at vesting for these awards are based on our total stockholder return (“TSR”) relative to the performance of either companies in the Nasdaq-100 or the S&P 500 Index over a three-year period (“Relative TSR”). Payout with respect to the Relative TSR component ranges from zero to 200 percent of the target number of Relative TSR units granted. Market-based restricted stock units granted in fiscal year 2025 also vest based on absolute TSR performance measured against pre-established goals over a three-year period (“Absolute TSR”). Payout with respect to the Absolute TSR component ranges from zero to 75 percent of the target number of units underlying the base award (which is comprised of Performance-Based Restricted Stock Units and Relative TSR units).

The following table summarizes our market-based restricted stock unit activity, presented with the maximum number of shares that could potentially vest, for the six months ended September 30, 2024:


	Market-Based Restricted Stock Units (in thousands)	Weighted- Average Grant Date Fair Value
Outstanding as of March 31, 2024	354	$	168.53
Granted	381	80.91
Vested	(25)	173.25
Forfeited or cancelled	(73)	173.25
Outstanding as of September 30, 2024	637	$	115.43

The following table summarizes stock-based compensation expense resulting from stock options, restricted stock units, market-based restricted stock units, performance-based restricted stock units, and the ESPP purchase rights included in our Condensed Consolidated Statements of Operations (in millions):


	Three Months Ended September 30,				Six Months Ended September 30,
	2024		2023		2024		2023
Cost of revenue	$	4	$	2	$	8	$	4
Research and development	122		113		223		206
Marketing and sales	16		13		28		24
General and administrative	32		27		58		51
Stock-based compensation expense	$	174	$	155	$	317	$	285

During the three and six months ended September 30, 2024, we recognized $22 million and $42 million, respectively, of deferred income tax benefit related to our stock-based compensation expense. During the three and six months ended September 30, 2023, we recognized $21 million and $50 million, respectively, of deferred income tax benefit related to our stock-based compensation expense.

As of September 30, 2024, our total unrecognized compensation cost related to stock options, restricted stock units, market-based restricted stock units, and performance-based restricted stock units was $1,047 million and is expected to be recognized over a weighted-average service period of 2.0 years. Of the $1,047 million of unrecognized compensation cost, $973 million relates to restricted stock units, $52 million relates to performance-based restricted stock units, $22 million relates to market-based restricted stock units.

In May 2024, the Company’s Audit Committee, upon delegation from the Company’s Board of Directors, authorized a new program to repurchase up to $5.0 billion of our common stock. This program supersedes and replaces the August 2022 program and expires on May 9, 2027. Under this program, we may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. We are not obligated to repurchase a specific number of shares of our common stock under this program and it may be modified, suspended or discontinued at any time. We are actively repurchasing shares under this program.

The following table summarizes total shares repurchased during the three and six months ended September 30, 2024 and 2023:


	August 2022 Program			May 2024 Program				Total
(In millions)	Shares	Amount(a)		Shares		Amount(a)		Shares	Amount
Three months ended September 30, 2024	—	$	—	2.6		$	375	2.6	$	375
Six months ended September 30, 2024	1.2	$	152	$	4.2	$	598	5.4	$	750
Three months ended September 30, 2023	2.6	$	325	—		$	—	2.6	$	325
Six months ended September 30, 2023	5.2	$	650	—		$	—	5.2	$	650
(a)Amount excludes excise taxes. Accrued excise taxes are included in accounts payable, accrued, and other current liabilities and additional paid-in capital on the Condensed Consolidated Balance Sheets.