We have four types of equity-based compensation: stock options, restricted stock, restricted stock units (“RSUs”), and performance stock units (“PSUs”).

STOCK OPTIONS. Under the provisions of our incentive stock plan, key employees and non-employee directors may be granted options to purchase shares of our common stock at a price not less than its fair market value on the date of grant. Vesting requirements are determined at the discretion of the Compensation and Human Resources Committee of our Board of Directors. Option-vesting periods range from one to four years, with the majority of our options vesting ratably over four years. Compensation expense associated with these awards is recognized, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award.

RESTRICTED STOCK AND RSUs. Under the terms of our incentive stock plan, restricted shares of our common stock may be awarded to key employees and non-employee directors. Restrictions on shares of restricted stock expire ratably over a four-year period and restrictions on RSUs granted prior to June 2026 expire after one year (or the date of the next annual meeting of stockholders, if earlier). Restricted stock and RSUs are valued at the market price on the date of award. The terms of our restricted stock provide for continued vesting subsequent to the employee’s retirement (at or after age 55). Compensation expense associated with these awards is recognized on a straight-line basis over the shorter of the requisite service period or the stated vesting period.

PSUs. Under the terms of our incentive stock plan, we granted 92,249 PSUs at target to key employees in September 2025.The PSUs had a grant-date fair value of $236.89 per share. The PSUs conditionally vest on December 31, 2028, subject to the achievement of specified performance objectives. The number of shares ultimately earned may range from zero to 150% of the target number of PSUs granted, based on performance against goals tied to improvement in operating margin of Federal Express.

ASSUMPTIONS. The key assumptions for the Black-Scholes valuation method include the expected life of the option, stock price volatility, a risk-free interest rate, and dividend yield. The following table includes the weighted-average Black-Scholes value per share of our stock option grants, the intrinsic value of options exercised (in millions), and the key weighted-average assumptions used in the valuation calculations for options granted during the years ended May 31, followed by a discussion of our methodology for developing each of the assumptions used in the valuation model:


	2026		2025		2024
Weighted-average Black-Scholes value per share	$	82.66	$	104.42	$	79.48
Intrinsic value of options exercised	$	548	$	263	$	290
Black-Scholes assumptions:
Expected lives	6.1 years		6.3 years		6.4 years
Expected volatility	38%		37%		35%
Risk-free interest rate	4.12%		4.59%		3.94%
Dividend yield	2.45%		1.84%		2.03%

The expected life represents an estimate of the period of time options are expected to remain outstanding, and we examine actual stock option exercises to determine the expected life of the options. Options granted have a maximum term of 10 years. Expected volatilities are based on the actual changes in the market value of our stock and are calculated using daily market value changes from the date of grant over a past period equal to the expected life of the options. The risk-free interest rate is the U.S. Treasury Strip rate posted at the date of grant having a term equal to the expected life of the option. The expected dividend yield is the annual rate of dividends per share over the exercise price of the option. Estimates of expected forfeitures are based on historical data.


	Stock Options
	Shares Subject to Stock Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)(1)
Outstanding at June 1, 2025	11,712,352	$	222.31
Granted	1,858,618	243.07
Exercised	(4,824,124)	209.54
Forfeited or expired	(333,980)	243.01
Outstanding at May 31, 2026	8,412,866	233.46		6.2	$	1,500
Exercisable	4,871,197	220.65		4.6	931
Expected to vest	3,188,210	251.07		8.4	512
Available for future grants	9,581,694


	Restricted Stock and RSUs
	Shares/Units	Weighted- Average Grant-Date Fair Value
Unvested at June 1, 2025	306,279	$	253.66
Granted	260,093	236.63
Vested	(143,195)	247.96
Forfeited	(2,839)	236.15
Unvested at May 31, 2026	420,338	247.03
Available for future grants	2,252,275

During the year ended May 31, 2025, there were 150,967 shares of restricted stock granted with a weighted-average fair value of $276.44 per share. During the year ended May 31, 2024, there were 169,371 shares of restricted stock granted with a weighted-average fair value of $239.33 per share. The total fair value of restricted stock vested during the years ended May 31, 2026, 2025, and 2024 was $35 million, $40 million, and $36 million, respectively.

As of May 31, 2026, there was $246 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements. This compensation expense is expected to be recognized on a straight-line basis over the remaining weighted-average vesting period of approximately two years.