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SHARE-BASED COMPENSATION
 9 Months Ended
Sep. 30, 2024
Share-Based Payment Arrangement [Abstract]  
SHARE-BASED COMPENSATION SHARE-BASED COMPENSATION
In April 2024, the Company’s shareholders approved an amended and restated 2010 Incentive Award Plan to provide for an increase in the number of shares of common stock reserved for issuance thereunder from 110,350,000 to 115,350,000. As of September 30, 2024, approximately 20.6 million shares were reserved for future issuance under the Company’s stock plans, and a maximum of approximately 8.9 million of these shares can be awarded as restricted stock units (“RSUs”).
Restricted Stock Units
A summary of RSU activity under all stock plans for the nine months ended September 30, 2024, is presented as follows (in millions, except per share amounts):
 SharesWeighted-Average
Grant-Date Fair Value
Unvested balance as of December 31, 2023
5.0 $245.75 
RSUs granted2.4 $390.22 
RSUs vested(1.8)$236.63 
RSUs forfeited(0.3)$282.86 
Unvested balance as of September 30, 2024
5.3 $311.73 
Stock Options
A summary of stock option activity under all stock plans for the nine months ended September 30, 2024, is presented as follows (in millions, except per share amounts):
 Stock Options Outstanding
 Number
Outstanding		Weighted-Average
Exercise Price Per
Share
Balance as of December 31, 2023
9.8 $174.90 
Options granted— $— 
Options exercised(2.2)$117.26 
Options forfeited or expired
(0.1)$255.85 
Balance as of September 30, 2024
7.5 $190.36 
As of September 30, 2024, options to purchase an aggregate of 6.3 million shares of common stock were exercisable at a weighted-average price of $176.05 per share.
Performance Stock Units
In 2022, the Company began granting performance stock units (“PSUs”) to officers and other key employees subject to three-year cliff vesting and pre-established, quantitative goals. Whether any PSUs vest, and the amount that do vest, is tied to completion of service over three years and the achievement of three equally-weighted, quantitative goals that directly align with or help drive the Company’s strategy and long-term total shareholder return.
The 2022 PSU grant metrics are focused on relative total shareholder return (“TSR”), year-over-year da Vinci procedure growth for 2023, and two-year compound annual da Vinci procedure growth for 2024. The 2023 PSU grant metrics are focused on relative TSR, da Vinci and Ion procedure growth in 2024 compared to 2022, and da Vinci and Ion procedure growth in 2025 compared to 2022. The 2024 PSU grant metrics are focused on relative TSR, da Vinci and Ion procedure growth in 2025 compared to 2023, and da Vinci and Ion procedure growth in 2026 compared to 2023. The TSR metric is considered a market condition, and the expense is determined at the grant date. The procedure growth metrics are considered performance conditions, and the expense is recorded based on the forecasted performance, which is reassessed each reporting period based on the probability of achieving the performance conditions. The number of shares earned at the end of the three-year period will vary, based on actual performance, from 0% to 125% of the target number of PSUs granted. PSUs are subject to forfeiture if employment terminates prior to the vesting date. PSUs are not considered issued or outstanding shares of the Company.
The Company calculates the fair value for each component of the PSUs individually. The fair value for the component with the TSR metric was determined using a Monte Carlo simulation. The fair value per share for the components with the procedure growth metrics is equal to the closing stock price on the grant date.
A summary of PSU activity for the nine months ended September 30, 2024, is presented as follows (in millions, except per share amounts):
 
Shares		Weighted-Average
Grant Date Fair Value Per Share
Unvested balance as of December 31, 20230.2 $259.60 
Granted0.1 $395.92 
Vested— $276.20 
Performance change— $290.33 
Forfeited— $294.75 
Unvested balance as of September 30, 20240.3 $306.94 
Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan (“ESPP”), employees purchased approximately 0.6 million shares for $114.9 million and approximately 0.5 million shares for $104.5 million during the nine months ended September 30, 2024, and 2023, respectively.
Share-Based Compensation Expense
The following table summarizes share-based compensation expense for the three and nine months ended September 30, 2024, and 2023 (in millions):
 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
Cost of revenue – product (before capitalization)
$27.5 $24.7 $75.7 $70.4 
Amounts capitalized into inventory
(25.6)(23.2)(70.7)(63.1)
Amounts recognized in income for amounts previously capitalized in inventory23.0 21.1 66.2 53.0 
Cost of revenue – product
$24.9 $22.6 $71.2 $60.3 
Cost of revenue – service
7.9 7.3 22.5 21.3 
Total cost of revenue
32.8 29.9 93.7 81.6 
Selling, general, and administrative77.6 71.9 225.4 206.6 
Research and development65.4 55.3 188.7 157.7 
Share-based compensation expense before income taxes175.8 157.1 507.8 445.9 
Income tax benefit36.9 28.7 105.4 85.2 
Share-based compensation expense after income taxes$138.9 $128.4 $402.4 $360.7 
The Black-Scholes-Merton option pricing model is used to estimate the fair value of stock options granted under the Company’s share-based compensation plans and the rights to acquire stock granted under the ESPP. The weighted-average estimated fair values of stock options and the rights to acquire stock under the ESPP, as well as the weighted-average assumptions used in calculating the fair values of stock options and the rights to acquire stock under the ESPP that were granted during the three and nine months ended September 30, 2024, and 2023, were as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
Stock Options
Risk-free interest rate—4.5%—4.6%
Expected term (in years)—2.9—3.2
Expected volatility—32%—33%
Fair value at grant date—$82.63—$77.41
ESPP
Risk-free interest rate4.6%5.2%4.6%5.0%
Expected term (in years)1.21.21.21.2
Expected volatility29%31%29%33%
Fair value at grant date$131.01$98.96$130.00$89.42