What is stock-based compensation (SBC)?

Stock-based compensation is non-cash compensation paid to employees through equity awards - typically stock options, restricted stock units (RSUs), or performance shares. While it doesn't consume cash, SBC dilutes existing shareholders by increasing the total share count over time.

How does SBC affect shareholders?

SBC creates dilution - when new shares are issued to employees, your ownership percentage decreases. A company with 5% annual dilution means your stake is worth 50% less after 14 years, all else equal. Some companies offset this with buybacks; others let shareholders absorb the full cost.

What is a good SBC to revenue ratio?

For mature tech companies, SBC/Revenue under 5% is healthy. 5-10% is elevated but manageable with buyback offsets. Over 15% without buybacks is a red flag - shareholders are subsidizing employee compensation. Snowflake at 41% is extreme; NVIDIA at 4% with $34B buybacks is well-managed.

Which tech company has the highest SBC?

By absolute dollars, Alphabet ($22.8B), Amazon ($22.0B), and Meta ($16.7B) lead. As a percentage of revenue, Snowflake (41%) and Palantir (24%) are the highest among major tech companies. Both have SBC sustainability ratings of 'concerning' and 'elevated' respectively.

How do buybacks offset SBC dilution?

Companies can repurchase shares to offset the dilution from SBC. Alphabet spends $62B on buybacks vs $23B on SBC - a 2.7x coverage ratio - meaning net share count actually decreases. Snowflake and Palantir have minimal buybacks, so shareholders bear the full dilution cost.

What is unvested stock-based compensation?

Unvested SBC is compensation that has been granted but not yet vested to employees - it represents future dilution that's already committed. Meta has $46.75 billion in unvested SBC liability, meaning that much dilution is coming regardless of future grants.

Why do tech companies use so much SBC?

SBC allows companies to attract talent without spending cash, preserve capital for growth, and align employee incentives with stock performance. However, excessive SBC transfers wealth from shareholders to employees - it's a hidden cost that doesn't appear on the income statement as a cash expense.

Does SBC show up on the income statement?

Yes, SBC is expensed on the income statement under operating expenses (usually in R&D and SG&A). However, it's added back in the cash flow statement because it's a non-cash expense. Many companies report 'adjusted' earnings that exclude SBC, obscuring its true impact.

How do I calculate dilution rate?

Dilution rate = (New shares issued - Shares repurchased) / Beginning share count. Or simply: (Ending diluted shares - Beginning diluted shares) / Beginning shares. Palantir's 8.9% annual dilution means shareholders lose nearly 9% of their ownership stake every year.

Should I avoid high-SBC companies?

Not necessarily - but understand the cost. Companies with >15% SBC/Revenue should have substantial buyback programs (>1.5x SBC coverage) to offset dilution. If they don't, you're effectively subsidizing employee compensation through ownership dilution. Factor this into your valuation.

What is the 'SBC tax' on shareholders?

The 'SBC tax' refers to the hidden cost shareholders pay through dilution. If a company has 5% annual dilution without buybacks, shareholders effectively 'pay' 5% of the company's market cap annually to fund employee compensation. Over time, this compounds significantly.

Morgan Stanley estimates 99% of software FCF goes to stock-based compensation. But the impact varies dramatically: Snowflake's SBC is 14x higher than Amazon's as a percentage of revenue. Our Filing Intelligence analysis reveals which companies offset dilution - and which leave shareholders holding the bill.

The SBC Tax: Which Tech Giants Are Diluting Your Shareholder Returns?

Q: What does SBC sustainability rating mean?

MetricDuck's Filing Intelligence rates SBC sustainability as 'sustainable,' 'elevated,' or 'concerning' based on SBC/revenue ratios, dilution trends, and buyback coverage. 'Concerning' (like Snowflake) indicates SBC that threatens long-term shareholder value without adequate offset.

Last Updated: December 16, 2025 Data Currency: FY2024/FY2025 10-K and Q3 2025 10-Q filings. SNOW, PLTR, META, NVDA, AMZN, GOOGL, CRM

TL;DR: Stock-based compensation is the "silent tax" tech shareholders pay - but the rate varies 14x across companies. Snowflake's SBC consumes 41% of revenue (rated "concerning"). Palantir's 8.9% annual dilution means your shares are worth half in 8 years. Meanwhile, Alphabet spends $62B on buybacks vs $23B SBC, actually reducing share count. The biggest hidden number: Meta's $46.75 billion in unvested SBC liability - future dilution that's already committed.

Track SBC across your portfolio: MetricDuck's Filing Intelligence extracts SBC sustainability ratings, unvested liabilities, and dilution metrics from SEC filings - flagging companies where stock compensation threatens shareholder value. See it in action →

The Numbers: Stock-Based Compensation Across Big Tech

Morgan Stanley estimates that 99% of large-cap software free cash flow goes to stock-based compensation. When analysts celebrate "cash flow positive" SaaS companies, they're often ignoring that nearly all that cash gets recycled into offsetting employee dilution.

But the impact varies dramatically. Here's how seven major tech companies compare:

Company	Revenue	SBC	SBC/Rev	Dilution	Buybacks	Sustainability
SNOW	$3.63B	$1.48B	41%	~0%	$1.93B	Concerning
PLTR	$2.87B	$0.69B	24%	8.9%	$0.06B	Elevated
CRM	$36.5B	~$3.2B	8-9%	~2%	~$3B	Elevated
META	$164.5B	$16.69B	10%	3.2%	$30.12B	Elevated
GOOGL	$350.0B	$22.79B	7%	1.0%	$62.22B	Sustainable
NVDA	$130.5B	$4.74B	4%	1.0%	$33.71B	Sustainable
AMZN	$638.0B	$22.01B	3%	2.4%	N/A	Sustainable

Source: FY2024/FY2025 SEC filings, MetricDuck Filing Intelligence analysis

The range is striking: Snowflake's 41% SBC/Revenue is 14 times higher than Amazon's 3%.

The Three Models of SBC Management

Our analysis reveals three distinct approaches to stock-based compensation:

Model 1: Pure Dilution (SNOW, PLTR)

The worst case for shareholders. These companies issue substantial equity compensation without meaningful buyback offsets.

Snowflake (SNOW):

SBC sustainability rating: "Concerning"
41% of revenue goes to stock compensation
Unvested SBC liability: $11.1 billion
Started buybacks ($1.93B in FY2025) but still not covering dilution
Operating income remains negative partly due to SBC burden

"Snowflake's stock-based compensation sustainability is rated 'concerning' by MetricDuck Filing Intelligence, with SBC consuming 36.4% of revenue."

MetricDuck Filing Intelligence, Q1 FY2026

View SNOW SEC Filing →

Palantir (PLTR):

SBC sustainability rating: "Elevated"
24% SBC/Revenue - second highest among major tech
8.9% annual dilution rate - the highest in our analysis
Minimal buybacks ($60M vs $690M SBC)
At 8.9% annual dilution, shares are worth 50% less after 8 years

The math is brutal for Palantir shareholders: if you bought $10,000 in stock and the price stays flat, dilution alone makes your stake worth ~$5,000 after 8 years.

View PLTR SEC Filing →

Model 2: Buyback Offset (META, GOOGL, NVDA)

The shareholder-friendly approach. These companies use substantial buybacks to offset - and often exceed - SBC dilution.

Alphabet (GOOGL):

SBC sustainability: Sustainable
$62.22B in buybacks vs $22.79B in SBC
2.7x buyback coverage ratio
Net share count actually decreasing despite high absolute SBC
Dilution rate: only 1.0%

NVIDIA (NVDA):

SBC sustainability: Sustainable
$33.71B in buybacks vs $4.74B in SBC
7.1x buyback coverage ratio - best in class
SBC/Revenue dropped from 10% (FY2023) to 4% (FY2025) as revenue exploded
Unvested SBC liability: $13.1 billion (manageable given scale)

Meta (META):

SBC sustainability: Elevated (was "sustainable," recently upgraded to "elevated")
$30.12B in buybacks vs $16.69B in SBC
1.8x buyback coverage ratio
$46.75 billion in unvested SBC liability - the largest we found
This unvested amount represents committed future dilution

The $46.75 billion Meta unvested liability deserves attention. This is compensation already granted but not yet vested - meaning this dilution is coming regardless of future grants. It's nearly 3x Meta's annual SBC expense.

Hidden liability alert: Meta's $46.75 billion in unvested stock-based compensation represents future dilution that's already committed - nearly 3x the company's annual SBC expense. This is compensation already granted to employees that will vest over coming years.

View META SEC Filing →

Model 3: Accumulating Dilution (AMZN)

The middle ground. Low SBC as percentage of revenue, but no buyback offset.

Amazon (AMZN):

SBC sustainability: Sustainable (due to low ratio)
Only 3% SBC/Revenue - lowest among peers
But 2.4% annual dilution with no buyback program since 2022
$22B annual SBC compounds without offset
Share count growing from 10.19B (2022) to 10.72B (2024)

Amazon's approach is defensible given the low SBC/Revenue ratio, but shareholders should understand dilution is accumulating. Unlike Google or Meta, there's no mechanism to reverse share count growth.

The Hidden Number: Unvested SBC Liability

Most investors focus on annual SBC expense. The bigger story is unvested stock-based compensation - equity awards already granted that will vest (and dilute) over coming years.

Company	Unvested SBC Liability	Multiple of Annual SBC	Source
META	$46.75B	2.8x	10-K FY2024
NVDA	$13.1B	2.8x	10-Q Q3 FY2025
SNOW	$11.1B	7.5x	10-Q Q3 FY2026
PLTR	$1.08B	1.6x	10-Q Q3 2025

Source: Filing Intelligence extraction from SEC 10-Q/10-K filings. Click source links to view stock compensation footnotes in MetricDuck viewer.

Meta's $46.75B unvested liability is remarkable - it represents nearly 3 years of current SBC expense already committed. Even if Meta stopped granting new awards today, this dilution is locked in.

Snowflake's ratio is concerning for a different reason: $11.1B in unvested awards on only $1.48B annual expense suggests a 7.5x multiple - massive future dilution relative to current operations.

What Filing Intelligence Reveals

Our Filing Intelligence extraction identifies SBC sustainability concerns that manual analysis often misses:

Red Flags Detected:

Salesforce (CRM): "Substantial stock-based compensation expense relative to revenue" flagged as top concern in Q3 FY2026 analysis
Snowflake (SNOW): "Concerning" sustainability rating with 36.4% SBC/Revenue - the highest we track
Palantir (PLTR): "Elevated" sustainability at 14.59% SBC/Revenue - 7x higher than NVIDIA despite smaller scale
NVIDIA (NVDA): Flagged for "Large increase in unvested stock-based compensation expense" as accounting red flag - though overall sustainability remains healthy due to buybacks

Positive Signals:

NVIDIA: SBC/Revenue improved from 10% to 4% over three years as revenue scaled faster than compensation
Alphabet: 2.7x buyback coverage means shareholders benefit from net share reduction
Amazon: 3% SBC/Revenue is lowest among major tech, reducing dilution concern despite no buybacks

Historical Trends: Is It Getting Better or Worse?

Snowflake: Persistently High

FY	Revenue	SBC	SBC/Rev
2025	$3.63B	$1.48B	41%
2024	$2.81B	$1.17B	42%
2023	$2.07B	$0.86B	42%
2022	$1.22B	$0.61B	50%

Snowflake's SBC/Revenue has actually improved from 50% to 41% - but that's still astronomical. The company started buybacks in FY2025, suggesting management acknowledges the dilution problem.

NVIDIA: Dramatic Improvement

FY	Revenue	SBC	SBC/Rev	Buybacks
2025	$130.5B	$4.74B	4%	$33.71B
2024	$60.9B	$3.55B	6%	$9.53B
2023	$27.0B	$2.71B	10%	$10.04B

NVIDIA's SBC story is one of scaling: as AI-driven revenue exploded from $27B to $130B, SBC as a percentage dropped from 10% to 4%. Combined with ramped buybacks ($34B in FY2025), NVIDIA went from potential concern to best-in-class.

Meta: Stable but Growing Liability

FY	Revenue	SBC	SBC/Rev	Buybacks
2024	$164.5B	$16.69B	10%	$30.12B
2023	$134.9B	$14.03B	10%	$19.77B
2022	$116.6B	$11.99B	10%	$27.96B

Meta's SBC/Revenue has held steady at 10% for three years - not improving despite revenue growth. The $46.75B unvested liability suggests significant committed dilution, though substantial buybacks (~1.8x coverage) provide offset.

Investment Implications

Red Flags to Avoid

>15% SBC/Revenue without buyback offset

SNOW at 41%, PLTR at 24% are concerning
If buyback coverage is <1x, shareholders absorb the full dilution cost

High annual dilution rate (>5%)

PLTR's 8.9% is the worst in our analysis
Rule of thumb: >3% annual dilution should trigger deeper investigation

Growing unvested liability without revenue scaling

Watch the ratio of unvested SBC to annual expense
5x multiple (like SNOW's 7.5x) suggests future dilution acceleration

Characteristics of Well-Managed SBC

SBC/Revenue <7% for mature companies

NVDA (4%), AMZN (3%), GOOGL (7%) hit this benchmark
For growth companies, <15% is acceptable if improving

Buyback coverage >1.5x

GOOGL (2.7x), NVDA (7.1x), META (1.8x) offset dilution effectively
Look for companies where net share count is flat or declining

Improving trends

NVDA improved from 10% to 4% SBC/Revenue over 3 years
Deteriorating ratios (or stable at high levels like META's 10%) warrant scrutiny

How MetricDuck Tracks SBC

Filing Intelligence extracts SBC metrics that aren't readily available elsewhere:

SBC Sustainability Rating: "sustainable," "elevated," or "concerning" based on SBC/revenue ratio, dilution trends, and buyback coverage
Unvested SBC Liability: The committed future dilution from awards already granted
SBC Red Flags: Automatic detection of concerning patterns like "Substantial stock-based compensation expense relative to revenue"
Dilution Analysis: Year-over-year share count changes with buyback offset calculations

The sustainability rating synthesizes multiple factors - a company can have high absolute SBC (like Alphabet's $23B) but rate "sustainable" if buybacks adequately offset dilution.

Methodology

Data Sources:

SEC filings via MetricDuck XBRL extraction
stock_comp, sbc_to_revenue, dilution_rate, stock_repurch from filing_metrics
Filing Intelligence sbc_analysis from accounting_quality dimension
Unvested SBC liability from quarterly 10-Q note disclosures

Companies Analyzed:

NVDA, META, GOOGL, AMZN, PLTR, SNOW, CRM
FY2022-FY2025 data (varies by fiscal year end)
CRM Filing Intelligence data with limited metrics history

Calculations:

SBC/Revenue = Stock Compensation Expense / Total Revenue
Dilution Rate = (Ending Diluted Shares - Beginning Diluted Shares) / Beginning Diluted Shares
Buyback Coverage = Annual Buybacks / Annual SBC Expense

Key Takeaways

The SBC tax varies 14x: Snowflake (41%) vs Amazon (3%) shows how differently tech companies approach employee compensation
Buybacks matter: Alphabet's $62B buybacks turn $23B SBC into a net positive for shareholders. Palantir's $60M buybacks against $690M SBC means shareholders absorb 91% of dilution
Watch unvested liability: Meta's $46.75B and Snowflake's $11.1B in unvested SBC represent committed future dilution
Sustainability ratings reveal truth: "Concerning" (SNOW) and "elevated" (PLTR, CRM) ratings identify companies where SBC threatens shareholder value
Improvement is possible: NVIDIA went from 10% to 4% SBC/Revenue while ramping buybacks to $34B - demonstrating that growth companies can become shareholder-friendly over time

This analysis uses data extracted from SEC filings via MetricDuck's Filing Intelligence platform. All figures are from official company disclosures. SBC sustainability ratings are generated by Filing Intelligence algorithms based on multiple factors including SBC/revenue ratios, dilution trends, and buyback coverage.

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The SBC Tax: Which Tech Giants Are Diluting Your Shareholder Returns?

The SBC Tax: Which Tech Giants Are Diluting Your Shareholder Returns?

The Numbers: Stock-Based Compensation Across Big Tech

The Three Models of SBC Management

Model 1: Pure Dilution (SNOW, PLTR)

Model 2: Buyback Offset (META, GOOGL, NVDA)

Model 3: Accumulating Dilution (AMZN)

The Hidden Number: Unvested SBC Liability

What Filing Intelligence Reveals

Historical Trends: Is It Getting Better or Worse?

Snowflake: Persistently High

NVIDIA: Dramatic Improvement

Meta: Stable but Growing Liability

Investment Implications

Red Flags to Avoid

Characteristics of Well-Managed SBC

How MetricDuck Tracks SBC

Methodology

Key Takeaways

Explore More Earnings Quality Analysis

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