The Company records stock-based compensation expense as a component of Selling, general and administrative expenses and Cost of goods sold in the unaudited Condensed Consolidated Statements of Comprehensive Income. The following table presents the stock-based compensation expense for the three and six months ended June 27, 2026 and June 28, 2025:


(in millions)	Three Months Ended				Six Months Ended
Classification	June 27, 2026		June 28, 2025		June 27, 2026		June 28, 2025












Equity-classified awards	$	29	$	14	$	51	$	30
Liability-classified awards	—		1		1		4
Total	$	29	$	15	$	52	$	34

Medline Holdings had two classes of incentive units, Class B units and Class B CUPIs (“Holdings Incentive Units”) that were granted to certain employees and vested upon satisfaction of one or multiple market, performance, and/or service conditions of each award. In accordance with ASC 718, “Compensation - Stock Compensation” (“ASC 718”), all incentive units officially granted represent ownership interests and are classified as equity.

All of the Holdings Incentive Units included a put right that permitted the holders to redeem certain units under conditions outside of the control of the Company. The redemption rights terminated upon the IPO, and the redeemable units were reclassed to permanent equity. See Note 12—Stockholders’ Equity, Mezzanine Equity and Partners’ Capital for additional information regarding mezzanine equity.

The Class B CUPIs vested prior to 2025. The Class B units were subject to a five-year vesting period, with 20% of units vesting on each of the five anniversaries of the grant date. Total fair value of Class B units vested was $6 million and $13 million during the three and six months ended June 28, 2025, respectively.

The time-vesting and performance-vesting Class B units held by certain pre-IPO holders of Class B units (the “Continuing Unitholders”) were reclassified into vested Incentive Units, in the case of vested Class B units, and unvested Incentive Units, in the case of unvested Class B units, in Medline Holdings. These Incentive Units retain the vesting attributes of the Class B units reclassified, including original service period vesting start date. The Class B CUPIs were reclassified to vested Common Units in Medline Holdings. The fair value of Incentive Units was the same immediately prior to and after the reclassification.

Total fair value of Incentive Units vested was $7 million and $11 million for the three and six months ended June 27, 2026, respectively. As of June 27, 2026, there was $30 million of unrecognized compensation cost related to unvested Incentive Units, which is expected to be recognized on a graded or straight-line basis over a weighted-average period of 1.0 year. The following table summarizes the Incentive Units activity and related information for the six months ended June 27, 2026:

In June 2026, there were two exchanges by Continuing Unitholders: (i) 1,163,309 Incentive Units in Medline Holdings for 673,281 shares of Class B common stock and an equal number of Common Units in Medline Holdings; (ii) 1,893,419 shares of Class B common stock and an equal number of Common Units in Medline Holdings for 1,893,419 shares of Class A common stock. No proceeds were received from these exchanges by the Company.

The Holdings Incentive Units and Class A units held by participants other than Continuing Unitholders (the “Exchanging Unitholders”) were exchanged for vested Class A common stock and RSUs, in the case of Class A units and Class B CUPIs, and vested Class A common stock, RSUs, RSAs, and options, in the case of Class B units, in the Company. The RSAs, RSUs, and options will vest according to the same vesting schedule as the corresponding Class B units, in respect of which they are being granted, except that no awards will vest until the later of the date that is 180 days following the IPO and the existing vesting date of the underlying Class B units. This modification resulted in the re-measurement of the awards in accordance with ASC 718. Total compensation cost for the modified awards equaled the grant date fair value of the pre-IPO awards, plus any incremental compensation cost measured at the modification date (i.e. the IPO date). The change in fair value of these awards prior to and after the reclassification was not material. The modification impacted 68 participants.

Total fair value of RSAs vested was $11 million and $12 million for the three and six months ended June 27, 2026, respectively. As of June 27, 2026, there was $8 million of unrecognized compensation cost related to unvested RSAs, which is expected to be recognized on a graded or straight-line basis over a weighted-average period of 1.3 years. The following table summarizes the RSAs activity and related information for the six months ended June 27, 2026:

During the three and six months ended June 27, 2026, RSUs and Performance Stock Units (“PSUs”) were granted to certain employees and board of directors. The grant date fair value of RSUs and PSUs is based on the fair market value of the Company’s underlying common stock at the grant date. The RSUs vest over one to five years contingent upon employment on the vesting date. The PSUs generally vest over four years contingent upon achievement of certain performance conditions and employment on the vesting date. The RSU expense is recognized using a graded vesting method or straight-line method. The PSU expense is recognized using a graded vesting method. The probability of achieving the PSU performance conditions is assessed each reporting period for expense purposes.

Total fair value of RSUs vested was $15 million for both the three and six months ended June 27, 2026. As of June 27, 2026, there was $55 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of 1.8 years, and there was $44 million of unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a weighted-average period of 1.3 years. The following table summarizes the RSUs and PSUs activity and related information for the six months ended June 27, 2026:


	RSUs	Wtd. Avg. Grant Date Fair Value		PSUs	Wtd. Avg. Grant Date Fair Value
Unvested as of December 31, 2025	523,795	$	29.00	—	—
Granted	1,651,688	$	43.98	1,206,267	$	44.05
Vested	(439,903)	$	33.44	—	—
Forfeited	(36,253)	$	42.65	—	—
Unvested as of June 27, 2026	1,699,327	$	42.12	1,206,267	$	44.05

Options issued entitle the holder to future purchases of Class A common stock and are exercisable up to the tenth anniversary of the grant date. The total intrinsic value of options exercised was not material for both the three and six months ended June 27, 2026. As of June 27, 2026, there was $14 million of unrecognized compensation cost related to options, which is expected to be recognized on a graded or straight-line basis over a weighted-average period of 1.4 years. The following table summarizes option activity and related information for the six months ended June 27, 2026:


	Options	Wtd. Avg. Grant Date Fair Value		Wtd. Avg. Exercise Price		Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2025	6,770,442	$	11.97	$	29.00
Granted	—	—		—
Exercised	(27,586)	$	12.40	$	29.00
Forfeited	(156,452)	$	12.31	$	29.00
Outstanding as of June 27, 2026	6,586,404	$	11.96	$	29.00	9.5	$	65
Exercisable as of June 27, 2026	3,032,916	$	11.79	$	29.00	9.5	$	30
Expected to vest as of June 27, 2026	3,553,488	$	12.10	$	29.00	9.5	$	35

Liability-classified awards are presented in Other long-term liabilities on the unaudited Condensed Consolidated Balance Sheets. The Company reevaluates the fair value of liability-classified awards periodically until they are reclassified as equity when granted, with the fair value change recorded ratably in the current-period compensation expense. For the six months ended June 27, 2026 and June 28, 2025, the Company reclassified liabilities of $11 million and $10 million, respectively, to equity.

In March 2025 and March 2024, Medline Holdings authorized Class B units to be granted to certain employees upon fulfillment of certain performance conditions. With each grant, the number of Class B units to be issued and the grant date fair value of the award are dependent on the performance targets achieved and Medline Holdings’ equity value, and will be determined on the official grant date. The Class B units were subject to a five-year service vesting period, with 20% of units vesting on each of the five anniversaries from the official grant date. The award was classified as a liability in accordance with ASC 718 until the official grant date, when it was reclassified as equity.

At the time of IPO, the liability-classified awards authorized in the six months ended June 28, 2025 were not yet granted and classified as a liability (“2025 Awards”). Both the underlying equity instrument and the vesting condition were modified upon the IPO. In March 2026, the 2025 Awards were settled into 521,371 RSUs with grant date fair value of $23 million, and the respective liabilities was reclassified as equity. 25% of the 2025 Awards have vested 180 days post-IPO while the remaining 75% of the 2025 Awards will vest on each of the three anniversaries from the official grant date. As of June 27, 2026, the Company has no liability-classified awards.