Under the terms of our Articles of Incorporation, the board of directors (“board”) may determine the rights, preferences and terms of our authorized but unissued shares of preferred stock. We have authorized 20,000,000 shares of preferred stock, $20 par value. No shares of preferred stock are currently outstanding.

We maintain long-term incentive plans for management, certain employees and the nonemployee members of our board. The plans allow for the granting of equity-based compensation awards, including nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, stock- and cash-settled restricted stock units, stock grants or a combination of awards. To date, we have not awarded any incentive stock options.

As of February 28, 2026, a total of 62,850,000 shares of our common stock had been authorized to be issued under the long-term incentive plans. The number of unissued common shares reserved for future grants under the long-term incentive plans was 3,533,209 as of that date.

The majority of associates who receive share-based compensation awards primarily receive cash-settled restricted stock units. Senior management and other key associates receive awards of nonqualified stock options, stock-settled restricted stock units and/or restricted stock awards. Nonemployee directors are eligible to receive awards of nonqualified stock options, stock grants, stock-settled restricted stock units and/or restricted stock awards. Excluding stock grants and stock-settled deferred stock units, all share-based compensation awards, including any associated dividend rights, are subject to forfeiture.

Nonqualified Stock Options. Nonqualified stock options are awards that allow the recipient to purchase shares of our common stock at a fixed price. Stock options are granted at an exercise price equal to the fair market value of our common stock on the grant date. The stock options generally vest annually in equal amounts over four years. These options expire seven years after the date of the grant.

Cash-Settled Restricted Stock Units. Also referred to as CRSUs, these are awards that entitle the holder to a cash payment equal to the fair market value of a share of our common stock for each unit granted. Conversion generally occurs annually in equal amounts over three years. However, the cash payment per CRSU will not be greater than 200% or less than 75% of the fair market value of a share of our common stock on the grant date. The initial grant date fair values are based on the closing prices of our common stock on the grant dates. CRSUs are liability-classified awards and do not have voting rights.

Stock-Settled Market Stock Units. Also referred to as market stock units, or MSUs, these are restricted stock unit awards with market conditions granted to eligible key associates that are converted into between zero and two shares of common stock for each unit granted. Conversion generally occurs at the end of a three-year vesting period. The conversion ratio is calculated by

dividing the average closing price of our stock during the final 40 trading days of the three-year vesting period by our stock price on the grant date, with the resulting quotient capped at two. This quotient is then multiplied by the number of MSUs granted to yield the number of shares awarded. The grant date fair values are determined using a Monte-Carlo simulation and are based on the expected market price of our common stock on the vesting date and the expected number of converted common shares. MSUs do not have voting rights.

Stock-Settled Performance Stock Units. Also referred to as performance stock units, or PSUs, these are restricted stock unit awards with performance conditions granted to eligible key associates that are converted into between zero and two shares of common stock for each unit granted. Conversion generally occurs at the end of a three-year vesting period. For the first- and second-year periods of the fiscal 2023 grants and the first-year period of the fiscal 2024 grants, the conversion ratio is based on the company reaching certain performance target levels set by the board at the beginning of each one-year period, with the resulting quotients subject to meeting a minimum threshold of 25% and capped at 200%. For the third-year period of the fiscal 2023 grants, the second- and third-year periods of the fiscal 2024 grants, the fiscal 2025 grants and the fiscal 2026 grants, the conversion ratio is based on the company reaching certain target levels set by the board, with the resulting quotients subject to meeting a minimum threshold of 50% and capped at 200%. These quotients are then multiplied by the number of PSUs granted to yield the number of shares awarded.

For the first- and second-year periods of the fiscal 2023 awards and the first-year period of the fiscal 2024 awards, the performance targets were based on annual pre-tax diluted earnings per share, excluding any unrealized gains or losses on equity investments in private companies, and market share. For the first-year period of the fiscal 2023 awards, the board certified a performance adjustment factor of 4%. For the second-year period of the fiscal 2023 grants and the first-year period of the fiscal 2024 grants, the board certified a performance adjustment factor of 38%. For the third-year period of the fiscal 2023 awards and the second- and third-year periods of the fiscal 2024 awards, the performance targets are based on annual pre-tax earnings, excluding any unrealized gains or losses on equity investments in private companies and any significant non-recurring non-cash gains or losses. For the third-year period of the fiscal 2023 grants and the second-year period of the fiscal 2024 grants, the board certified a performance adjustment factor of 159%. For the fiscal 2025 and fiscal 2026 awards, the performance targets are based on cumulative three-year pre-tax earnings, excluding any unrealized gains or losses on equity investments in private companies and any significant non-recurring non-cash gains or losses.

Stock-Settled Deferred Stock Units. Also referred to as deferred stock units, or DSUs, these are restricted stock unit awards granted to non-employee members of our board that are converted into one share of common stock for each unit granted. Conversion occurs at the end of the one-year vesting period unless the director has exercised the option to defer conversion until separation of service to the company. The grant date fair values are based on the closing prices of our common stock on the grant dates. DSUs have no voting rights. As of February 28, 2026, 128,526 units were outstanding at a weighted average grant date fair value of $83.61.

Stock-Settled Restricted Stock Units. Also referred to as SRSUs, these are restricted stock unit awards granted to eligible key associates that entitle the holder to shares of common stock equal to the fair market value of our common stock on the grant date. The awards have a one-year vesting period; provided however that pro-rata vesting will be applied to the SRSUs based upon the number of months served by the associates. SRSUs do not have voting rights. As of February 28, 2026, 117,138 units were outstanding with a grant date fair value per share of $39.27.

Restricted Stock Awards. Restricted stock awards, or RSAs, are awards of our common stock that are subject to specified restrictions that generally lapse after a one- to three-year period from the date of the grant. The grant date fair values are based on the closing prices of our common stock on the grant dates. Participants holding restricted stock are entitled to vote on matters submitted to holders of our common stock for a vote. As of February 28, 2026, there were no RSAs outstanding.

Employee Stock Purchase Plan. We sponsor an employee stock purchase plan for all associates meeting certain eligibility criteria. We have authorized up to 8,000,000 shares of common stock with a total of 1,146,005 shares remaining available for issuance under the plan as of February 28, 2026. Associate contributions are limited to 10% of eligible compensation, up to a maximum of $10,000 per year. For each $1.00 contributed to the plan by associates, we match $0.15. Shares are acquired through open-market purchases. We purchased 347,156 shares at an average price per share of $53.06 during fiscal 2026, 247,277 shares at an average price per share of $77.11 during fiscal 2025 and 264,628 shares at an average price per share of $73.74 during fiscal 2024.


	Years Ended February 28 or 29
(In thousands)	2026		2025		2024
Cost of sales	$	3,710	$	5,296	$	4,644
CarMax Auto Finance income	4,240		5,024		3,643
Selling, general and administrative expenses	93,400		126,931		114,090
Share-based compensation expense, before income taxes	$	101,350	$	137,251	$	122,377


	Years Ended February 28 or 29
(In thousands)	2026		2025		2024
Nonqualified stock options	$	38,836	$	41,008	$	50,456
Cash-settled restricted stock units (CRSUs)	30,366		55,124		48,762
Stock-settled market stock units (MSUs)	21,957		19,560		16,298
Other share-based incentives:
Stock-settled performance stock units (PSUs)	5,069		17,167		2,046
Stock-settled deferred stock units (DSUs)	1,665		1,850		1,850
Stock-settled restricted stock units (SRSUs)	1,125		—		—
Restricted stock (RSAs)	—		—		307
Employee stock purchase plan	2,332		2,542		2,658
Total other share-based incentives	10,191		21,559		6,861
Share-based compensation expense, before income taxes	$	101,350	$	137,251	$	122,377


	As of February 28, 2026
			Weighted Average
	Unrecognized		Remaining
	Compensation		Recognition Life
(Costs in millions)	Costs		(Years)
Nonqualified stock options	$	31.3	2.0
Stock-settled market stock units	16.5		1.3
Other share-based incentives:
Stock-settled performance stock units	4.0		1.5

Stock-settled restricted stock units	1.1		0.2

Total other share-based incentives	5.1		1.2
Total	$	52.9	1.7

We recognize compensation expense for stock options, MSUs, PSUs, DSUs, SRSUs and RSAs on a straight-line basis (net of estimated forfeitures) over the requisite service period, which is generally the vesting period of the award. The PSU expense is adjusted for any change in management’s assessment of the performance target level that is probable of being achieved. The variable expense associated with CRSUs is recognized over their vesting period (net of estimated forfeitures) and is calculated based on the closing price of our common stock on the last trading day of each reporting period.

The total costs for matching contributions for our employee stock purchase plan are included in share-based compensation expense. There were no capitalized share-based compensation costs as of or for the years ended February 28, 2026, February 28, 2025 or February 29, 2024.


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
(Shares and intrinsic value in thousands)	Shares	Price		Life (Years)	Value
Outstanding as of February 28, 2025	7,309	$	82.32
Options granted	1,452	65.44
Options exercised	(132)	63.05
Options forfeited or expired	(78)	73.05
Outstanding as of February 28, 2026	8,551	$	79.83	3.3	$	3

Exercisable as of February 28, 2026	6,105	$	84.19	2.5	$	—


	Years Ended February 28 or 29
	2026		2025		2024
Options granted	1,452,018		1,234,215		1,554,029
Weighted average grant date fair value per share	$	26.20	$	29.21	$	29.11
Cash received from options exercised (in millions)	$	8.3	$	73.7	$	44.8
Intrinsic value of options exercised (in millions)	$	0.4	$	19.9	$	15.0
Realized tax benefits (in millions)	$	0.1	$	3.0	$	3.6

For stock options, the fair value of each award is estimated as of the date of grant using a binomial valuation model. In computing the value of the option, the binomial model considers characteristics of fair-value option pricing that are not available for consideration under a closed-form valuation model (for example, the Black-Scholes model), such as the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life and the probability of termination or retirement of the option holder. For this reason, we believe that the binomial model provides a fair value that is more representative of actual experience and future expected experience than the value calculated using a closed-form model. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the recipients of share-based awards.


	Years Ended February 28 or 29
	2026					2025					2024
Dividend yield				0.0	%				0.0	%				0.0	%
Expected volatility factor (1)	36.3	%	-	54.8	%	35.5	%	-	46.7	%	39.2	%	-	45.9	%
Weighted average expected volatility				41.9	%				45.4	%				44.6	%
Risk-free interest rate (2)	3.4	%	-	4.4	%	3.5	%	-	5.4	%	3.6	%	-	5.5	%
Expected term (in years) (3)				4.7					4.7					4.6


		Weighted
		Average
	Number of	Grant Date
(Units in thousands)	Units	Fair Value
Outstanding as of February 28, 2025	1,524	$	71.07
Stock units granted	978	65.49
Stock units vested and converted	(727)	73.97
Stock units cancelled	(189)	67.01
Outstanding as of February 28, 2026	1,586	$	66.78


	Years Ended February 28 or 29
	2026		2025		2024
Stock units granted	978,159		918,098		915,122
Initial weighted average grant date fair value per share	$	65.49	$	67.22	$	70.69
Payments (before payroll tax withholdings) upon
vesting (in millions)	$	47.7	$	42.8	$	39.0
Realized tax benefits (in millions)	$	11.8	$	10.6	$	9.7


		Weighted
		Average
	Number of	Grant Date
(Units in thousands)	Units	Fair Value
Outstanding as of February 28, 2025	525	$	104.12
Stock units granted	252	91.45
Stock units vested and converted	(130)	124.11
Stock units cancelled	(15)	94.81
Outstanding as of February 28, 2026	632	$	95.19