Nvidia adopts new variable compensation plan for CEO Jensen Huang; it has a footnote on what is said to be part of company's pay-for-performance culture

Nvidia has reportedly introduced a new variable compensation plan for its CEO, Jensen Huang, for the fiscal year 2027. A report by the news agency Reuters cited a regulatory filing released last week to claim that the US-based chip giant has set a cash bonus target of $4 million for Huang. The plan, approved by Nvidia's compensation committee on March 2, links executive cash bonuses to the company meeting specific revenue targets for the fiscal year ending January 31, 2027. This is another example of Nvidia’s pay-for-performance culture, in which bonuses depend on the company’s financial performance. It could be reduced or eliminated if the company fails to achieve the goals.

In 2025, Huang's compensation package totalled $49.9 million, mostly in the form of $38.8 million in stock awards. However, the new plan will have a cash bonus component, but Nvidia will continue to favour stock awards that depend on the company’s long-term success, as reported by Reuters.




The filing follows Nvidia’s earnings report last month, where the company reported results for the January quarter that exceeded analyst estimates and projected current-quarter revenue above Wall Street forecasts, the Reuters report added. This reflects expectations that spending by large technology companies on artificial intelligence (AI) processors will continue. The company has also said that it expects fiscal first-quarter revenue of about $78 billion, plus or minus 2%.

What requirements Nvidia CEO Jensen Huang have to meet to get the cash bonus

Most of CEO Jensen Huang’s pay depends on Nvidia's performance. About 96% of his compensation is tied to company performance goals, according to a Fortune report. Much of the potential earnings come from stock awards that depend on results over several years, such as total shareholder return (TSR), which measures share price gains and dividends.



Despite Nvidia not meeting its fiscal 2023 non-GAAP operating income targets, the company still recorded a three-year relative TSR in the 99th percentile compared with the S&P 500. This result led to full vesting of some performance share unit awards, the Fortune report added.



Nvidia’s compensation structure also reportedly makes it harder for competitors to hire its employees. Many engineers and executives hold large amounts of company stock that have not yet vested, which encourages them to stay.



Nvidia has even said that it will start including stock-based compensation (SBC) in its non-GAAP financial results from the first quarter of fiscal 2027. One estimate suggests this change could reduce earnings per share (EPS) by about 3%, which is lower than the possible impact for some competitors.



Another estimate indicates that companies such as Broadcom, AMD, and Marvell could see their non-GAAP EPS fall by around 14% to 20% if they also include SBC, the Fortune report added.



If investors expect other companies to follow Nvidia’s approach, some companies may reduce stock grants. According to the Fortune analysis, Nvidia may handle the accounting impact of equity compensation more easily than some competitors, which could support its efforts to recruit talent and pursue team-focused acquisitions.