Stock-Based Compensation

12 Months Ended

Dec. 31, 2025

Share-Based Payment Arrangement [Abstract]

Note 19. Stock-Based Compensation

At the May 2021 Annual Meeting, the shareholders approved the Amended and Restated 3M Company 2016 Long-Term Incentive Plan (LTIP), which included an increase of 27 million in the number of shares available for issuance. Awards may be issued in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock awards, and performance units and performance shares. As of December 31, 2025, the remaining shares available for grant under the LTIP are 21 million and there were approximately 6,400 participants with outstanding options, restricted stock, or restricted stock units.

The Company’s annual stock option and restricted stock unit grant is typically made in February to provide a strong and immediate link between the performance of individuals during the preceding year and the size of their annual stock compensation grants. The grant to eligible employees uses the closing stock price on the grant date. Accounting rules require recognition of expense under a non-substantive vesting period approach, requiring compensation expense recognition when an employee is eligible to retire. Employees are considered eligible to retire at age 55 and after having completed ten years of service. This retiree-eligible population represents 31 percent of the annual grant stock-based compensation expense; therefore, higher stock-based compensation expense is typically recognized in the first quarter. However, due to the spin-off of Solventum (see Note 2), the 2024 annual grant was made in May, after the April 1, 2024 separation.

In addition to the annual grants, the Company makes other minor grants of stock options, restricted stock units and other stock-based grants. The Company issues cash settled restricted stock units and stock appreciation rights in certain countries. The cash settled grants do not result in the issuance of common stock and are considered immaterial by the Company, and not included in the tables below.

In connection with the Solventum separation on April 1, 2024 (see Note 2), all outstanding stock-based compensation awards associated with Solventum employees converted into Solventum awards, became Solventum’s responsibility and were cancelled from 3M plans. In addition, for awards associated with remaining 3M employees, the number of shares underlying unvested stock awards was adjusted along with the exercise price and the number of shares underlying outstanding stock options. The adjustments to shares underlying unvested stock awards and outstanding stock options did not result in a material stock-based compensation cost.

Stock-Based Compensation Expense: Amounts recognized in the financial statements with respect to stock-based compensation programs, which include stock options, restricted stock, restricted stock units, performance shares and the General Employees’ Stock Purchase Plan (GESPP), are provided in the following table. Capitalized stock-based compensation amounts were not material.



(Millions)	2025		2024		2023
Cost of sales	$	32	$	39	$	38
Selling, general and administrative expenses	158		185		165
Research, development and related expenses	35		44		38
Stock-based compensation expenses	225		268		241
Income tax benefits	(41)		(31)		(41)
Stock-based compensation expenses (benefits), net of tax	$	184	$	237	$	200

Stock Option Program: The following table summarizes stock option activity:



(Options in thousands)	Number of options	Weighted average exercise price		Weighted average remaining contractual life (months)	Aggregate intrinsic value (millions)
Under option —
As of January 1, 2025	32,523	$	150.50
Expired	(91)	167.20


Granted	723	148.87
Exercised	(10,871)	139.29
Forfeited	(41)	143.52
As of December 31, 2025	22,243	155.87		45	$	284
Options exercisable
As of December 31, 2025	20,716	$	158.35	41	$	227

Stock options generally vest over a period from one to three years with the expiration date at ten years from date of grant. As of December 31, 2025, there was $14 million of compensation expense that has yet to be recognized related to non-vested stock option based awards. This expense is expected to be recognized over the remaining weighted-average vesting period of 23 months.

The following table summarizes additional information relative to stock options exercised during the respective years:



(Millions)	2025		2024		2023
Cash received from options exercised	$	1,514	$	26	$	147
Intrinsic value of options exercised	163		3		29
Tax benefit realized related to options exercised	35		1		6

For the primary annual stock option grant, the weighted average fair value at the date of grant was calculated using the Black-Scholes option-pricing model and the assumptions that follow.


	2025			2024			2023
Exercise price	$	148.87		$	97.15		$	116.90
Risk-free interest rate	4.5		%	4.4		%	3.8		%
Dividend yield	3.9		%	3.8		%	3.3		%
Expected volatility	26.1		%	24.6		%	22.8		%
Expected life (months)	91			95			84
Black-Scholes fair value	$	33.04		$	20.53		$	22.22

Expected volatility is a statistical measure of the amount by which a stock price is expected to fluctuate during a period. Expected volatility is based upon three volatilities of 3M stock: the median of the term of the expected life rolling volatility; the median of the most recent term of the expected life volatility; and the implied volatility on the grant date. The expected term assumption is based on the weighted average of historical grants.

Restricted Stock Units: The following table summarizes restricted stock unit activity:



(Units in thousands)	Number of units	Weighted average grant date fair value
Nonvested balance —
As of January 1, 2025	6,150	$	104.83
Vested	(1,193)	127.28


Granted	517	149.12
Forfeited	(347)	103.22
As of December 31, 2025	5,127	104.18

Restricted stock units granted generally vest three years following the grant date assuming continued employment. Dividend equivalents equal to the dividends payable on the same number of shares of 3M common stock accrue on these restricted stock units during the vesting period, although no dividend equivalents are paid on any of these restricted stock units that are forfeited prior to the vesting date. Dividends are paid out in cash at the vest date on restricted stock units. Since the rights to dividends are forfeitable, there is no impact on basic earnings per share calculations. Weighted average restricted stock unit shares outstanding are included in the computation of diluted earnings per share.

As of December 31, 2025, there was $139 million of compensation expense that has yet to be recognized related to non-vested restricted stock units. This expense is expected to be recognized over the remaining weighted-average vesting period of 17 months.

The following table summarizes additional information relative to restricted stock units for the respective years:



(Millions, except per-unit amounts)	2025		2024		2023
Weighted-average grant-date fair value of restricted stock units (per unit) that were granted	$	149.12	$	98.01	$	114.71
Intrinsic value of restricted stock units that vested	176		73		81
Tax benefit realized related to restricted stock units that vested	35		14		16

Performance Shares: Instead of restricted stock units, the Company makes annual grants of performance shares to members of its executive management. The 2025 performance criteria for these performance shares (free cash flow and earnings per share) were selected because the Company believes that they are important drivers of long-term stockholder value. The 2025 plan also includes a multiplier based on 3M total shareholder return versus an index. The number of shares of 3M common stock that could actually be distributed at the end of the three-year performance period may be anywhere from 0% to 200% of each performance share granted, depending on the performance of 3M during such performance period. When granted, these performance shares are awarded at 100% of the estimated number of shares at the end of the three-year performance period and are reflected under “granted” in the table below. Non-substantive vesting requires that expense for the performance shares be recognized over one or three years depending on if the employee is retirement eligible. The performance share grants accrue dividends; therefore, the grant date fair value is equal to the closing stock price on the date of grant. Since the rights to dividends are forfeitable, there is no impact on basic earnings per share calculations. Weighted average performance shares whose performance period is complete are included in computation of diluted earnings per share.

The following table summarizes performance share activity:



(Shares in thousands)	Number of shares	Weighted average grant date fair value
Undistributed balance —
As of January 1, 2025	782	$	101.99
Vested	(99)	127.42


Granted	325	169.38

Performance change	26	79.53
Forfeited	(122)	114.86
As of December 31, 2025	912	120.88

As of December 31, 2025, there was $50 million of compensation expense that has yet to be recognized related to performance shares. This expense is expected to be recognized over the remaining weighted-average earnings period of 21 months.

The following table summarizes additional information relative to performance shares for the respective years:



(Millions, except per-share amounts)	2025		2024		2023
Weighted average grant date fair value per performance share that were granted	$	169.38	$	97.82	$	110.21
Intrinsic value of performance shares that were distributed	15		9		19
Tax benefit realized related to performance shares that were distributed	4		2		5

General Employees’ Stock Purchase Plan (GESPP): As of December 31, 2025, shareholders have approved 60 million shares for issuance under the Company’s GESPP. Substantially all employees are eligible to participate in the plan. Participants are granted options at 85% of market value at the date of grant. There are no GESPP shares under option at the beginning or end of each year because options are granted on the first business day and exercised on the last business day of the same month.

The following table summarizes additional information relative to GESPP for the respective years:


(Millions, except per-share amounts)	2025		2024		2023
Weighted average fair value per option granted(a)	$	22.44	$	16.76	$	15.77
GESPP options compensation expense	14		12		21

(a) The fair value of GESPP options was based on the 15% purchase price discount.