Share-Based Compensation

3 Months Ended

Mar. 29, 2025

Share-Based Payment Arrangement [Abstract]

The Company issues share-based compensation awards under the Zebra Technologies 2018 Long-Term Incentive Plan (“2018 Plan”), approved by shareholders in 2018, which superseded and replaced all prior share-based incentive plans. Outstanding awards issued prior to the 2018 Plan are governed by the provisions of those plans until such awards have been exercised, forfeited, cancelled, expired, or otherwise terminated in accordance with their terms. Awards available under the 2018 Plan include stock-settled awards, including stock-settled restricted stock units, stock-settled performance stock units, restricted stock awards, performance share awards, stock appreciation rights, incentive stock options, and non-qualified stock options. Awards available under the 2018 Plan also include cash-settled awards, including cash-settled stock appreciation rights, cash-settled restricted stock units, and cash-settled performance stock units.

The Company uses treasury shares as its source for issuing shares under the share-based compensation programs. As of March 29, 2025, the Company had 1,424,590 shares of Class A Common stock remaining available to be issued under the 2018 Plan.

The compensation expense from the Company’s share-based compensation plans and associated income tax benefit, excluding the effects of excess tax benefits or shortfalls, are included in the Consolidated Statements of Operations as follows (in millions):


	Three Months Ended
Compensation costs and related income tax benefit	March 29, 2025		March 30, 2024
Cost of sales	$	4	$	2
Selling and marketing	10		5
Research and development	17		6
General and administration	22		8
Total compensation expense	$	53	$	21
Income tax benefit	$	9	$	3

As of March 29, 2025, the total unearned compensation cost related to the Company’s share-based compensation plans was $190 million, which will be recognized over the weighted average remaining service period of approximately 1.7 years.

The majority of the Company’s share-based compensation awards are issued as part of its employee and non-employee director incentive program each fiscal year. Beginning in 2025, the annual employee equity incentive awards were granted in the first quarter. The non-employee director equity awards will continue to be granted in the second quarter. The Company also issues awards associated with business acquisitions and other off-cycle events. The majority of the Company’s share-based compensation is comprised of stock-settled awards.

The compensation cost of awards is expensed over each award’s service period, which is generally subject to certain employment conditions. The Company’s 2025 award agreement provisions resulted in increased recognition of compensation cost as compared to previous awards.

Stock-settled awards

The Company’s awards are typically time-vested with stock-settled RSUs vesting ratably in three annual installments and stock-settled PSUs vesting at the end of the three-year period. Upon vesting, stock-settled RSUs and PSUs convert to shares of Class A Common Stock that are released to participants.

Compensation cost is calculated as the fair market value of the Company’s Class A Common Stock on the grant date multiplied by the number of units granted, net of estimated forfeitures. The expected attainment of the performance goals for the stock-settled PSUs is reviewed at the end of each reporting period, with adjustments recorded to compensation expense in the Consolidated Statements of Operations, as necessary.

A summary of the Company’s restricted and performance stock-settled awards for the three months ended March 29, 2025 is as follows:


	RSUs			PSUs
	Units	Weighted-Average Grant Date Fair Value		Units	Weighted-Average Grant Date Fair Value
Outstanding at beginning of period	482,067	$	295.39	241,946	$	304.44
Granted	255,307	307.02		97,861	306.84
Released	(5,646)	300.29		—	—
Forfeited	(7,405)	287.04		(1,420)	304.51
Outstanding at end of period	724,323	$	299.53	338,387	$	305.18

Stock Appreciation Rights (“SARs”)

SARs were previously granted primarily as part of the Company’s annual share-based compensation incentive program. Beginning in 2021, the Company no longer included SARs in its annual share-based compensation award issuances. As of March 29, 2025, there were 214,243 outstanding SARs, all of which were exercisable with a weighted-average remaining contractual life of 1 year.

Cash-settled awards

The Company also issues cash-settled share-based compensation awards, including cash-settled restricted stock units and cash-settled performance stock units that are classified as liability awards and typically have a vesting period of three years. Compensation cost is calculated as the fair market value of the Company’s Class A Common Stock on the grant date multiplied by the number of share-equivalents granted, net of forfeitures. The fair value for all cash-settled awards and the expected attainment of the performance goals for the cash-settled performance stock units is reviewed at the end of each reporting period, with adjustments recorded to compensation expense in the Consolidated Statements of Operations, as necessary. Cash settlement is based on the fair value of share equivalents at the time of vesting, which was not significant for the three months ended March 29, 2025 or March 30, 2024. Share-equivalents issued under these programs totaled 52,395 and 273 during the three months ended March 29, 2025 and March 30, 2024, respectively.

Employee Stock Purchase Plan

Eligible Zebra employees may purchase common stock at 95% of the fair market value at the date of purchase pursuant to the Zebra Technologies Corporation 2020 Employee Stock Purchase Plan (“2020 ESPP”). Employees may make purchases by cash or payroll deductions up to certain limits. The aggregate number of shares that may be purchased under the 2020 ESPP is 1,500,000 shares. As of March 29, 2025, 1,304,693 shares remained available for future purchase.