v3.26.1
Stock and Stock-Based Incentive Plans
 3 Months Ended
May 31, 2026
Share-Based Payment Arrangement, Noncash Expense [Abstract]  
Stock and Stock-Based Incentive Plans Stock and Stock-Based Incentive Plans
(A)Share Repurchase Program
As of May 31, 2026, a total of $2.0 billion of board authorizations for repurchases of our common stock was outstanding, with no expiration date, of which $1.31 billion remained available for repurchase.
Common Stock Repurchases
 Three Months Ended
 May 31
 20262025
Number of shares repurchased (in thousands)
— 2,952.5 
Average cost per share$— $67.66 
Available for repurchase, as of end of period (in millions)
$1,305.1 $1,737.1 
(B)Share-Based Compensation
We maintain long-term incentive plans for management, certain employees and the non-employee 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.
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.  Non-employee 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 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. Conversion generally occurs annually in equal amounts over three years. SRSUs do not have voting rights.
Other Share-Based Incentives
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-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 second- and third-year periods of the fiscal 2024 grants, the fiscal 2025 grants, the fiscal 2026 grants and the fiscal 2027 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-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 2024 grants, the board certified a performance adjustment factor of 38%. For 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 second-year period of the fiscal 2024 grants, the board certified a performance adjustment factor of 159%. For the third-year period of the fiscal 2024 grants, the board certified a performance adjustment factor of 0%. For the fiscal 2025, fiscal 2026 and fiscal 2027 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.
PSUs do not have voting rights. The grant date fair values are based on the closing prices of our common stock on the grant dates. As of May 31, 2026, 724,329 units were outstanding at a weighted average grant date fair value per share of $54.92.
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 May 31, 2026, 128,526 units were outstanding at a weighted average grant date fair value of $83.61.
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 May 31, 2026, there were no RSAs outstanding.
(C)Share-Based Compensation
Composition of Share-Based Compensation Expense
 Three Months Ended
 May 31
(In thousands)20262025
Cost of sales$1,472 $647 
CarMax Auto Finance income1,379 1,410 
Selling, general and administrative expenses39,703 45,602 
Share-based compensation expense, before income taxes$42,554 $47,659 

Composition of Share-Based Compensation Expense – By Grant Type
 Three Months Ended
 May 31
(In thousands)20262025
Nonqualified stock options$3,831 $19,944 
Cash-settled restricted stock units (CRSUs)15,748 5,867 
Stock-settled market stock units (MSUs)12,040 9,431 
Stock-settled restricted stock units (SRSUs)5,748 — 
Other share-based incentives:
Stock-settled performance stock units (PSUs)4,579 11,739 
Employee stock purchase plan608 678 
Total other share-based incentives5,187 12,417 
Share-based compensation expense, before income taxes$42,554 $47,659 

Unrecognized Share-Based Compensation Expense – By Grant Type
 As of May 31, 2026
Weighted Average
UnrecognizedRemaining
CompensationRecognition Life
(Costs in millions)Costs(Years)
Nonqualified stock options$27.5 2.1
Stock-settled market stock units33.6 2.2
Stock-settled restricted stock units14.8 1.8
Stock-settled performance stock units11.8 2.1
Total$87.7 2.1

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 three months ended May 31, 2026 or 2025.
Stock Option Activity
   Weighted 
  WeightedAverage 
  AverageRemainingAggregate
 Number ofExerciseContractualIntrinsic
(Shares and intrinsic value in thousands)SharesPriceLife (Years)Value
Outstanding as of February 28, 20268,551 $79.83 
Options granted69 $41.01 
Options exercised— $— 
Options forfeited or expired(1,360)$78.36 
Outstanding as of May 31, 20267,260 $79.74 3.6$254 
Exercisable as of May 31, 20265,696 $83.58 3.1$— 

Stock Option Information
Three Months Ended May 31
20262025
Options granted69,179 1,439,463 
Weighted average grant date fair value per share$18.24 $26.23 
Cash received from options exercised (in millions)
$— $8.3 
Intrinsic value of options exercised (in millions)
$— $0.4 
Realized tax benefits (in millions)
$— $0.1 

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.
Assumptions Used to Estimate Option Values
 Three Months Ended May 31
 20262025
Dividend yield 0.0 % 0.0 %
Expected volatility factor (1)
45.3 %-60.6 %41.9 %-42.0 %
Weighted average expected volatility47.0 %41.9 %
Risk-free interest rate (2)
3.6 %-4.2 %3.7 %-4.3 %
Expected term (in years) (3)
 4.7 4.7
(1)Measured using historical daily price changes of our stock for a period corresponding to the term of the options and the implied volatility derived from the market prices of traded options on our stock.
(2)Based on the U.S. Treasury yield curve at the time of grant.
(3)Represents the estimated number of years that options will be outstanding prior to exercise.
Cash-Settled Restricted Stock Unit Activity
  Weighted
  Average
 Number ofGrant Date
(Units in thousands)UnitsFair Value
Outstanding as of February 28, 20261,586 $66.78 
Stock units granted1,615 $38.53 
Stock units vested and converted(741)$67.53 
Stock units cancelled(51)$62.47 
Outstanding as of May 31, 20262,409 $47.71 
Cash-Settled Restricted Stock Unit Information
Three Months Ended May 31
20262025
Stock units granted1,614,500 976,031 
Initial weighted average grant date fair value per share$38.53 $65.52 
Payments (before payroll tax withholdings) upon vesting (in millions)
$37.5 $45.4 
Realized tax benefits (in millions)
$9.3 $11.2 
Expected Cash Settlement Range Upon Restricted Stock Unit Vesting
 As of May 31, 2026
(In thousands)
Minimum (1)
Maximum (1)
Fiscal 2028$38,328 $102,208 
Fiscal 202926,000 69,334 
Fiscal 203013,096 34,922 
Total expected cash settlements$77,424 $206,464 
(1)Net of estimated forfeitures.
Stock-Settled Market Stock Unit Activity
  Weighted
  Average
 Number ofGrant Date
(Units in thousands)UnitsFair Value
Outstanding as of February 28, 2026632 $95.19 
Stock units granted565 $54.59 
Stock units vested and converted(156)$99.37 
Stock units cancelled(8)$88.40 
Outstanding as of May 31, 20261,033 $72.40 
Stock-Settled Market Stock Unit Information
Three Months Ended May 31
20262025
Stock units granted565,143 245,840 
Weighted average grant date fair value per share$54.59 $91.97 
Realized tax benefits (in millions)
$0.9 $1.5 
Stock-Settled Restricted Stock Unit Activity
  Weighted
  Average
 Number ofGrant Date
(Units in thousands)UnitsFair Value
Outstanding as of February 28, 2026117 $39.27 
Stock units granted514 $38.68 
Stock units vested and converted(31)$39.27 
Stock units cancelled(63)$39.25 
Outstanding as of May 31, 2026537 $38.71 
Stock-Settled Restricted Stock Unit Information
Three Months Ended May 31
20262025
Stock units granted513,863 — 
Weighted average grant date fair value per share$38.68 $— 
Realized tax benefits (in millions)
$— $—