Learn · Explainer
Stock-based compensation
Paying employees in shares: how it's expensed, why it's added back to cash flow, and how large it is at each company.
The short answer
Stock-based compensation is pay in the form of shares or options instead of cash, usually restricted stock units that vest over several years. It's a real expense on the income statement, spread over the vesting period, but no cash leaves the company, so it's added back in operating cash flow. Across the 92 companies here, it's a median 1.3% of revenue; at Palo Alto Networks it's 15.5%.
How it's accounted for
A company values each award at the grant date, then records that value as an expense over the years until the award vests, inside cost of sales, R&D and other operating expense lines. The total for the year is shown in the operating section of the cash flow statement, where it's added back to net income, and the notes give the details: awards granted, vesting schedules and the expense still to come.
Who pays for it
No cash goes out, but shareholders bear the cost through dilution: new shares from vesting awards spread profits across more shares. Many companies buy back stock partly to offset that, which does take cash. So when a company's free cash flow looks strong because stock pay is added back, the buybacks line in financing activities is the other half of the picture. Insiders' vesting awards also show up on Form 4, often with shares withheld to cover taxes.
In adjusted earnings
Many technology companies leave stock-based pay out of their non-GAAP earnings. GAAP figures include it. GAAP vs. non-GAAP explains the difference, and the size of this line tells you how much it matters for a given company.
Every company
Revenue from each income statement and stock-based compensation from each cash flow statement, latest fiscal year, sorted by share of revenue.
Common questions
Is stock-based compensation a real expense?
Yes. It's recorded as an expense under GAAP and reduces net income. It isn't a cash cost, but it dilutes existing shareholders as awards vest.
Why is stock-based compensation added back in cash flow?
Because no cash was paid out for it during the year. The cash flow statement starts from net income and adds back non-cash expenses.
What are RSUs?
Restricted stock units: promises to deliver shares once the employee has stayed for a set period or met conditions. They're the most common form of stock pay at large companies.
Which companies pay the most in stock?
Relative to revenue, technology companies. In the table, Palo Alto Networks has the highest share at 15.5%.
How do buybacks relate to stock pay?
Companies often buy back shares partly to offset the new shares created by vesting awards. The buybacks use cash even though the stock pay itself doesn't.
Disclosures
- Editor holdings
- The editor holds shares of Tesla (TSLA) and SpaceX in a long-term retirement account. The editor holds no position in any other company named on this page. As of Nov 11, 2026.
- Compensation
- Nobody paid for this page. No affiliate links on this page.
- Sources
- Each company's own SEC filings, linked next to each number.
- Last updated
- Nov 9, 2026
General education, the same for every reader. Not a recommendation to buy, sell or hold any security, and it doesn't consider your situation.
More in Learn and Tools · Methodology & Disclosures explains where every number comes from.