Item 8

  

NOTE 17 — EMPLOYEE STOCK AND SAVINGS PLANS

We grant stock-based compensation to employees and directors. Awards that expire or are canceled without delivery of shares generally become available for issuance under the plans. We issue new shares of Microsoft common stock to satisfy vesting of awards granted under our stock plans. We also have an ESPP for all eligible employees.

  

Stock-based compensation expense and related income tax benefits were as follows:

> **(In millions)**
>
> Year Ended June 30, ..................... 2025 / 2025 / 2024 / 2024 / 2023 / 2023
> Stock-based compensation expense ........ $ / 11,974 / $ / 10,734 / $ / 9,611
> Income tax benefits related to stock-based compensation ... 2,027 / 1,826 / 1,651

Stock Plans

Stock awards entitle the holder to receive shares of Microsoft common stock as the award vests. Stock awards generally vest over a service period of   four years   or   five years  .

Executive Incentive Plan

Under the Executive Incentive Plan, the Compensation Committee approves stock awards to executive officers and certain senior executives. RSUs generally vest ratably over a service period of   four years  . PSUs generally vest over a performance period of   three years  . The number of shares the PSU holder receives is based on the extent to which the corresponding performance goals have been achieved.

Activity for All Stock Plans

  

The fair value of stock awards was estimated on the date of grant using the following assumptions:

> **Year Ended June 30,**
>
> Year Ended June 30, / 2025 / 2024 / 2023
>
> Dividends per share (quarterly amounts) ... Dividends per share (quarterly amounts) / $ / 0.75  –  0.83 / 0.75  –  0.83 / 0.75  –  0.83 / $ / 0.68  –  0.75 / 0.68  –  0.75 / 0.68  –  0.75 / $ / 0.62  –  0.68 / 0.62  –  0.68 / 0.62  –  0.68
> Interest rates .......................... Interest rates / 3.4 % –  5.5 % / 3.4 % –  5.5 % / 3.4 % –  5.5 % / 3.8 % –  5.6 % / 3.8 % –  5.6 % / 3.8 % –  5.6 % / 2.0 % –  5.4 % / 2.0 % –  5.4 % / 2.0 % –  5.4 %

  

During fiscal year 2025, the following activity occurred under our stock plans:

> **Shares**
>
> Shares / Shares / Shares / Weighted Average   Grant-Date Fair   Value / Weighted Average   Grant-Date Fair   Value
>
> (In millions) ........................... (In millions) / (In millions) / (In millions)
> Stock Awards ............................ Stock Awards / Stock Awards / Stock Awards / Stock Awards / Stock Awards / Stock Awards / Stock Awards
> Nonvested balance, beginning of year .... 88 / $ / 292.28
> Granted  (a) ............................ 39 / 413.90
> Vested .................................. ( 38 / ) / 293.25
> Forfeited ............................... ( 7 / ) / 317.23
> Nonvested balance, end of year .......... 82 / $ / 347.44

  (a)  Includes  1  million of PSUs granted at target and performance adjustments above target levels for each of the fiscal years 2025, 2024, and 2023.

As of June 30, 2025, total unrecognized compensation costs related to stock awards were $ 21.6  billion. These costs are expected to be recognized over a weighted average period of   three years  . The weighted average grant-date fair value of stock awards granted was $ 413.90 , $ 339.46 , and $ 252.59  for fiscal years 2025, 2024, and 2023, respectively. The fair value of stock awards vested was $ 16.2  billion, $ 16.0  billion, and $ 11.9  billion, for fiscal years 2025, 2024, and 2023, respectively. As of June 30, 2025, an aggregate of  98  million shares were authorized for future grant under our stock plans.

  

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PART II