We recognize compensation cost for stock-based awards to employees based on the awards’ estimated grant-date fair value using a straight-line approach over the service period for which such awards are expected to vest. We account for forfeitures as they occur.

The estimation of the fair value of market-based restricted stock units, stock options and ESPP purchase rights is affected by assumptions regarding subjective and complex variables. Generally, our assumptions are based on historical information and judgment is required to determine if historical trends may be indicators of future outcomes. We estimate the fair value of our stock-based awards as follows:

•Restricted Stock Units and Performance-Based Restricted Stock Units. The fair value of restricted stock units and performance-based restricted stock units (other than market-based restricted stock units) is determined based on the quoted market price of our common stock on the date of grant.

•Market-Based Restricted Stock Units. Market-based restricted stock units consist of grants of performance-based restricted stock units to certain members of executive management that vest contingent upon the achievement of pre-determined market and service conditions (referred to herein as “market-based restricted stock units”). The fair value of our market-based restricted stock units is estimated using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient.

•Stock Options and Employee Stock Purchase Plan. The fair value of stock options and stock purchase rights granted pursuant to our equity incentive plans and our 2000 Employee Stock Purchase Plan, as amended (“ESPP”), respectively, is estimated using the Black-Scholes valuation model based on the multiple-award valuation method. Key assumptions of the Black-Scholes valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends. The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant for the expected term of the option. Expected volatility is based on a combination of historical stock price volatility and implied volatility of publicly-traded options on our common stock. An expected term is estimated based on historical exercise behavior, post-vesting termination patterns, options outstanding and future expected exercise behavior.

There were no ESPP shares issued during the three months ended June 30, 2021 and 2020. There were an insignificant number of stock options granted during the three months ended June 30, 2021 and 2020.

The assumptions used in the Monte-Carlo simulation model to value our market-based restricted stock units were as follows:


	Three Months Ended June 30,
	2021	2020
Risk-free interest rate	0.4%	0.2%
Expected volatility	24 - 76%	23 - 63%
Weighted-average volatility	40%	37%
Expected dividends	None	None

The following table summarizes our stock option activity for the three months ended June 30, 2021:


	Options (in thousands)	Weighted- Average Exercise Prices		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding as of March 31, 2021	267	$	35.71
Assumed via acquisition	150	60.87
Granted	1	141.18
Exercised	(18)	42.62
Forfeited, cancelled or expired	(9)	63.26
Outstanding as of June 30, 2021	391	$	44.59	4.39	$	39
Vested and expected to vest	391	$	44.59	4.39	$	39
Exercisable as of June 30, 2021	273	$	36.78	3.23	$	29

The aggregate intrinsic value represents the total pre-tax intrinsic value based on our closing stock price as of June 30, 2021, which would have been received by the option holders had all the option holders exercised their options as of that date. We issue new common stock from our authorized shares upon the exercise of stock options.

The following table summarizes our restricted stock unit activity for the three months ended June 30, 2021:


	Restricted Stock Rights (in thousands)	Weighted- Average Grant Date Fair Values
Outstanding as of March 31, 2021	5,764	$	113.25
Assumed via acquisition	816	120.54
Granted	3,032	142.43
Vested	(1,503)	116.87
Forfeited or cancelled	(202)	120.27
Outstanding as of June 30, 2021	7,907	$	124.33

Our performance-based restricted stock units vest upon the achievement of pre-determined performance-based milestones as well as service conditions. If these performance-based milestones are not met but service conditions are met, the performance-based restricted stock units will not vest, in which case any compensation expense we have recognized to date will be reversed.

Each quarter, we update our assessment of the probability that the performance milestones will be achieved. We amortize the fair values of performance-based restricted stock units over the requisite service period. The performance-based restricted stock units contain threshold, target and maximum milestones for each performance-based milestone. The number of shares of common stock to be issued at vesting will range from zero to 200 percent of the target number of performance-based restricted stock units attributable to each performance-based milestone based on the company’s performance as compared to these threshold, target and maximum performance-based milestones. Each performance-based milestone is weighted evenly and the number of shares that vest based on each performance-based milestone is independent from the other.

In June 2017, performance-based restricted stock units were granted contingent upon the achievement of the non-GAAP net revenue and free cash flow performance milestones over a four-year performance period. During the three months ended June 30, 2021, approximately 266,000 of the 579,000 outstanding performance-based restricted stock units were earned and vested on May 26, 2021 and the remaining outstanding units were cancelled.

In June 2021, performance-based restricted stock units were granted contingent upon the achievement of net bookings and operating income performance milestones over three annual measurement periods, with awards either vesting after each annual measurement period or cliff vesting after the completion of the three-year period.

The following table summarizes our performance-based restricted stock unit activity, presented with the maximum number of shares that could potentially vest, for the three months ended June 30, 2021:


	Performance- Based Restricted Stock Units (in thousands)	Weighted- Average Grant Date Fair Value
Outstanding as of March 31, 2021	579	$	110.51
Granted	219	142.60
Vested	(266)	110.51
Forfeited or cancelled	(313)	110.51
Outstanding as of June 30, 2021	219	$	142.60

Our market-based restricted stock units vest contingent upon the achievement of pre-determined market and service conditions. If these market conditions are not met but service conditions are met, the market-based restricted stock units will not vest; however, any compensation expense we have recognized to date will not be reversed. The number of shares of common stock to be issued at vesting will range from zero to 200 percent of the target number of market-based restricted stock units based on our total stockholder return (“TSR”) relative to the performance of companies in the NASDAQ-100 Index for each measurement period, over either a one-year, two-year cumulative, and three-year cumulative period, a two-year and four-year cumulative period or a three-year period.

The following table summarizes our market-based restricted stock unit activity, presented with the maximum number of shares that could potentially vest, for the three months ended June 30, 2021:


	Market-Based Restricted Stock Units (in thousands)	Weighted- Average Grant Date Fair Value
Outstanding as of March 31, 2021	2,195	$	134.60
Granted	159	173.25
Vested	(176)	128.62
Forfeited or cancelled	(593)	154.50
Outstanding as of June 30, 2021	1,585	$	131.69

The following table summarizes stock-based compensation expense resulting from stock options, restricted stock units, market-based restricted stock units, performance-based restricted stock units, and the ESPP purchase rights included in our Condensed Consolidated Statements of Operations (in millions):


	Three Months Ended June 30,
	2021		2020
Cost of revenue	$	1	$	1
Research and development	85		66
Marketing and sales	12		11
General and administrative	27		24
Stock-based compensation expense	$	125	$	102

During the three months ended June 30, 2021 and 2020, we recognized $24 million and $22 million, respectively, of deferred income tax benefit related to our stock-based compensation expense.

As of June 30, 2021, our total unrecognized compensation cost related to stock options, restricted stock units, market-based restricted stock units, and performance-based restricted stock units was $991 million and is expected to be recognized over a weighted-average service period of 2.1 years. Of the $991 million of unrecognized compensation cost, $884 million relates to restricted stock units, $79 million relates to market-based restricted stock units, $20 million relates to performance-based restricted stock units at an 129 percent average payout, and $8 million relates to stock options.

In May 2018, a Special Committee of our Board of Directors, on behalf of the full Board of Directors, authorized a program to repurchase up to $2.4 billion of our common stock. We completed repurchases under the May 2018 program in April 2020.

In November 2020, our Board of Directors authorized a program to repurchase up to $2.6 billion of our common stock. This stock repurchase program expires on November 4, 2022. Under this program, we may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. We are not obligated to repurchase a specific number of shares under this program and it may be modified, suspended or discontinued at any time. We are actively repurchasing shares under this program.

The following table summarizes total shares repurchased during the three months ended June 30, 2021 and 2020:


	May 2018 Program	November 2020 Program		Total
(In millions)			Shares	Amount		Shares	Amount		Shares	Amount
Three months ended June 30, 2021			—	$	—	2.3	$	325	2.3	$	325

Three months ended June 30, 2020			0.7	78		—	$	—	0.7	$	78