Equity Compensation · 18 min read

NVIDIA’s ESPP: How the 24-Month Lookback and Reset Work

The Financial Sciences Company Published Sep 26, 2026

The short answer

NVIDIA’s ESPP buys shares every six months at 85% of the lower of the price when the 24-month offering began or the price on the purchase date, so a rising stock locks in a deep discount for two years; if the price is at or below the offering-date price when a new purchase period starts, the plan resets you into a new offering at the lower price. Purchases may proceed during a closed trading window, but selling is a trade subject to the window. A sale two years after the offering date and one year after purchase caps the ordinary income at the offering-date discount; an earlier sale makes the whole purchase-date discount wages, with no withholding, and California taxes both at ordinary rates.

NVIDIA’s employee stock purchase plan is unusual in one respect: each offering runs about two years, not six months, and the purchase price looks back to the start of the offering for every one of the four purchases inside it. That single design choice is why the plan attracts so much attention, why the built-in gain on a purchase can be far larger than the 15% discount most people expect, and why the sell-or-hold decision on the shares is harder than it looks. This guide works through the mechanics from the plan document and NVIDIA’s filings, the tax on each path at 2026 federal rates and under California’s wage treatment, the trading-window rule that lets purchases happen but not sales, the paperwork, and what changes when you leave. It does not explain the general rules for every §423 plan beyond a paragraph, and it says nothing about where NVIDIA’s stock is headed; every price below is a round hypothetical. Confirm your own numbers with a CPA or tax counsel.

How does NVIDIA’s 24-month ESPP offering work?

Each offering lasts about 24 months, divided into four six-month purchase periods, and shares are bought at the end of each period for 85% of the lower of two prices: the stock’s fair market value when the offering began, or its value on the purchase date. Participants may have up to 25% of their earnings withheld, a percentage the Board may reduce, and offerings commence in March and September of each year (NVIDIA fiscal 2026 Form 10-K, Note on stock-based compensation). The proxy filed in May 2026 described the purchase period then under way as running to August 31, 2026, which places purchase dates at the end of February and the end of August (NVIDIA 2026 proxy statement, equity compensation plan information). Your enrollment materials give the exact dates.

The plan itself is the Amended and Restated 2012 Employee Stock Purchase Plan, filed as an exhibit to the fiscal 2025 10-K. It has a component intended to qualify under Section 423 of the Internal Revenue Code, caps any offering at 27 months, sets the purchase price at not less than the lesser of 85% of the participant’s offering-date price or 85% of the purchase-date value, and lets the Board set a maximum number of shares per purchase date (NVIDIA Amended and Restated 2012 ESPP, sections 4(a), 6(c) and 6(d)). Section 423 is what makes the tax treatment below possible: it requires an option price of at least 85% of value, a holding period of two years from grant and one year from purchase for favorable treatment, and a $25,000-a-year cap (26 U.S.C. §423(a), (b)(6) and (b)(8)). In plan language the “grant” is the offering date and the “exercise” is the purchase date; both clocks below run from those days.

Two features distinguish NVIDIA’s plan from the six-month plans at many employers. The first is the length of the lookback: a price fixed in March 2026 still governs a purchase in February 2028. The second is the reset. The Board may structure an offering so that if the stock’s value on the first trading day of a new purchase period is at or below a participant’s offering-date price, that offering ends for the participant on that day and the participant is automatically enrolled in a new offering that begins the same day (NVIDIA Amended and Restated 2012 ESPP, section 4(c)). The lookback protects you when the price rises; the reset re-prices the offering when it falls. The two hypothetical offerings below show each.

A rising price: the offering-date price locks in for two years

Assume, for arithmetic only, an offering-date price of $100 and contributions of $8,500 per purchase period, enough for 100 shares at $85. The stock is assumed to rise at each purchase date. None of these prices is NVIDIA’s, past or predicted.

Hypothetical offering, rising price. Offering-date price $100; purchase price is 85% of the lower of $100 or the purchase-date price (NVIDIA 2012 ESPP §6(d); fiscal 2026 10-K). Built-in gain is the purchase-date value less the purchase price. Illustrative only.
Purchase period	Purchase-date price	Purchase price	Shares for $8,500	Built-in gain per share	Effective discount
1 (March to August, year 1)	$120	$85	100	$35	29%
2 (September to February)	$150	$85	100	$65	43%
3 (March to August, year 2)	$180	$85	100	$95	53%
4 (September to February)	$200	$85	100	$115	58%
Offering total			400	$31,000

The participant paid $34,000 for shares worth $65,000 on the days they were bought. In a six-month plan the third and fourth purchases would have been priced off $180 and $200; here they are priced off the $100 fixed two years earlier. That is the whole case for the long lookback, and it is also the reason the tax on a later sale is unusual, covered below.

A falling price: the reset re-enrolls you at the lower price

Same offering-date price of $100 and the same $8,500 per period, but the stock is assumed to fall to $80 by the first purchase date and to sit at $80 on the first trading day of the second period.

Hypothetical offering, falling price with a reset under NVIDIA 2012 ESPP §4(c). After the reset the participant’s offering-date price is $80 and a new 24-month offering begins. Illustrative only.
Purchase period	Purchase-date price	Offering-date price in force	Purchase price	Shares for $8,500	Built-in gain per share
1	$80	$100	$68	125	$12
Reset: $80 on the first trading day of period 2 is at or below $100		New offering at $80
2	$90	$80	$68	125	$22
3	$110	$80	$68	125	$42
4	$120	$80	$68	125	$52

Without the reset, periods 2 through 4 would have been priced at 85% of the lower of $100 or the purchase-date price: $76.50, $85 and $85. With it, every later purchase is priced off $80. The reset has three side effects that are easy to miss. The new offering has its own 24-month term, so the lookback clock restarts. The offering date moves, so the two-year holding period for a qualifying disposition, and California’s sourcing window described below, both restart from the reset date. And the $25,000 limit is now measured at $80 rather than $100.

The $25,000 cap, in shares

Section 423 limits what you may buy, not what you may contribute: no more than $25,000 of stock, valued at the offering-date price, for each calendar year in which the purchase right is outstanding (26 U.S.C. §423(b)(8)). NVIDIA’s plan applies the limit at the offering-date price, and the proxy confirms the current purchase period is sized against it (NVIDIA 2012 ESPP, section 5(d); 2026 proxy statement). Under the regulations the right accrues in each calendar year the option is outstanding, even a partial year, and an accrued right under one option cannot be carried to a different option (Treas. Reg. §1.423-2(i)). At a $100 offering-date price the limit is 250 shares for each calendar year of the offering; a 24-month offering that begins in March touches three calendar years. Contributing the plan maximum can run into it: 25% of a $200,000 salary is $25,000 per six-month period, which at $85 a share would buy 294 shares, and in the calendar year with two purchase dates that is 588 shares against a 250-share ceiling. How unused room is tracked across the offering is a plan-administration question, so ask the administrator how your limit is applied before you set a contribution rate. After a reset to $80 the same $25,000 buys up to 312 shares a year.

Offerings begin every March and September and each runs two years, so offerings overlap on the calendar. The plan contemplates a participant holding more than one purchase right and directs that the one with the lower price be exercised first (NVIDIA 2012 ESPP, section 4(b)); whether you are ever in two offerings at once depends on the enrollment terms in your materials.

Sell or hold NVIDIA ESPP shares: what the tax looks like on each path

The tax character of an ESPP sale turns on two clocks. A qualifying disposition is a sale at least two years after the offering date and at least one year after the purchase date; anything earlier is disqualifying (26 U.S.C. §423(a)). On a qualifying disposition of shares bought at a discount, the ordinary income is the lesser of the discount measured at the offering date (value at grant less the price as if bought that day) or the actual gain on the sale; the rest is capital gain, and a loss is entirely capital (IRS Publication 525, employee stock purchase plan, holding period requirement satisfied; 26 U.S.C. §423(c)). On a disqualifying disposition, the ordinary income is the purchase-date value less the price paid, whatever the sale price, and that amount is added to basis; the difference between the increased basis and the sale price is capital gain or loss (IRS Publication 525, holding period requirement not satisfied).

Under a long lookback those two rules diverge sharply. For the rising-price offering above, the discount measured at the offering date is $15 a share (a $100 value against an $85 price) on every lot, while the purchase-date discount runs from $35 to $115. A qualifying sale caps the ordinary income at $15 a share and turns the remaining $100 of gain per share into capital gain; a disqualifying sale makes the whole purchase-date discount wages. The holding period therefore matters more for NVIDIA’s plan than for a plan with a six-month lookback, where the two measures are usually close.

The table applies 2026 federal figures to a hypothetical married couple filing jointly with $450,000 of taxable income before any ESPP income, which puts them in the 32% bracket (it begins at $403,550 and runs to $512,450), keeps their long-term gains at 15% (the 15% rate runs to $613,700 of taxable income), and puts them above the $250,000 threshold for the 3.8% net investment income tax (IRS, tax year 2026 inflation adjustments; Rev. Proc. 2025-32, section 4.03; 26 U.S.C. §1411). All 400 shares from the rising-price offering are sold, at their purchase-date prices in the first path and at an assumed $200 in the other two.

Hypothetical, married filing jointly, $450,000 taxable income before ESPP income; 2026 federal brackets, capital-gains thresholds and NIIT; California at the 2025 rate schedule, 9.3% bracket for joint income between $145,448 and $742,958 (FTB Schedule Y). Sale prices are assumptions, not forecasts. Illustrative only.
Path	Proceeds	Ordinary income	Capital gain	Federal tax	California tax
Sell each lot on its purchase date (disqualifying)	$65,000	$31,000	$0	$9,920	$2,883
Sell all at $200 before the two-year clock has run (disqualifying); lots held over a year	$80,000	$31,000	$15,000 long-term	$12,740	$4,278
Sell all at $200 after both clocks have run (qualifying)	$80,000	$6,000	$40,000 long-term	$9,440	$4,278

Three things stand out. First, the qualifying path converts $25,000 of wages into long-term gain, worth about $3,300 of federal tax in this bracket (32% against 15% plus 3.8%); the saving grows with the bracket and with the size of the purchase-date discount. Second, California gives the holding period no credit at all. California conforms to the federal rules on what counts as wages and what counts as gain (FTB Publication 1004, section F), but it taxes capital gains at the same rates as ordinary income (FTB, capital gains and losses), so the state tax is $4,278 on either $200 path, and for a household above $1,485,906 of joint taxable income the rate on every dollar is 12.3% plus the 1% surcharge (FTB, 2025 California tax rate schedules). Third, the first path looks worst on tax and best on risk: it takes $31,000 of built-in gain off the table with no exposure to the price after purchase, and a lot that is worth $120 the day it is bought can be worth less than $85 a year later. The other two paths hold 400 shares of one company for up to three years to change the character of $25,000. A lot bought in the fourth period cannot qualify until a year after its purchase, which is nearly a year after the offering’s two-year clock runs out, so “hold until qualifying” is a lot-by-lot calendar rather than a single date.

The concentration question sits behind every row. The lookback is a reason to keep contributing, and a two-year offering plus RSU vests can leave one stock as most of a household’s net worth with a very low basis. NVIDIA’s insider trading policy prohibits every form of hedging of its securities, naming equity swaps, prepaid forward sale contracts, collars and straddles, and bars short sales, margin accounts and pledging shares for a loan, for everyone it covers (NVIDIA Insider Trading Policy, Exhibit 19.1, blanket prohibitions). So while you work there, the usual answers to a concentrated position are unavailable, and a written rule for what happens to each ESPP lot on each purchase date, a fixed share sold at purchase or at qualification, is the practical tool; our guide on diversifying concentrated stock after an IPO covers the wider toolkit and its costs, eligibility limits and policy constraints.

Purchases happen in a closed window; sales do not

The policy makes a distinction that matters for anyone whose work touches financial information. Your election to participate in the ESPP and the purchases themselves may occur even while you possess material nonpublic information or during a closed trading window, as may the automatic share withholding at an RSU vest (NVIDIA Insider Trading Policy, Exhibit 19.1, exceptions). Selling the shares is a trade, and the ordinary rules apply: no one covered by the policy may trade while in possession of material nonpublic information, and employees the company designates as Designated Individuals may not trade or gift NVIDIA securities during the quarterly closed window, which starts five weeks before the end of the fiscal quarter and generally reopens on the second trading day after the quarter’s results are announced, other than under a 10b5-1 plan (NVIDIA Insider Trading Policy, Exhibit 19.1, restrictions applicable to Designated Individuals). The policy applies to employees, board members, contractors and consultants, and was last updated October 31, 2025.

NVIDIA’s fiscal year ends on the last Sunday in January, so its quarters end in late April, July, October and January (NVIDIA fiscal 2026 Form 10-K). Purchase dates at the end of February and August therefore land shortly after a window would typically reopen, and the next closed window begins five weeks before the late-April or late-October quarter-end. For a Designated Individual the open stretch after each purchase is measured in weeks, and whether you are one is checked on the company’s tracker, not assumed. A sell-at-purchase rule that cannot be executed on the purchase date is executed at the next opening, or written into a Rule 10b5-1 plan, which the policy allows to execute inside a closed window once it is in effect and which can schedule ESPP lots in advance, subject to the company’s 10b5-1 guidelines.

The paperwork: Form 3922, the W-2 and the 1099-B basis trap

Three documents cover an ESPP lot, and they arrive in different years.

Form 3922, in the purchase year. A corporation must file it for the first transfer of legal title of shares bought under a Section 423 plan at a discount, including the first transfer to a broker, and depositing the shares into a brokerage account counts; the statement is due to you by January 31 (Instructions for Forms 3921 and 3922). It reports the offering date, the purchase date, the value per share on each, the price paid, the share count and, in Box 8, the price as if the shares had been bought on the offering date, which is the figure the qualifying-disposition rule uses. Keep every one; a sale in 2029 is computed from a form issued in 2027.
The W-2, in the sale year. The ordinary income from a disqualifying disposition is compensation for the year of the sale, and the Code provides that no income tax withholding is required on it (26 U.S.C. §421(b)). In practice the employer includes the amount in Box 1 wages when the plan broker reports the sale to it, with nothing withheld, so a large disqualifying sale creates a tax bill that nothing on the payslip has covered. Income from a qualifying disposition is also reported as wages, on the W-2 if the employer learns of the sale and otherwise on the return.
The 1099-B, in the sale year. The broker reports the price you paid as basis. For compensatory options granted after 2013, the basis on Form 1099-B does not reflect any amount included in income on exercise, and the instructions direct you to enter the reported figure in column (e) of Form 8949, correct it with an adjustment in column (g) and code B in column (f), so that basis equals the price paid plus the ordinary income (Instructions for Form 8949, columns (e), (f) and (g)). A return that copies the 1099-B taxes the discount twice: once as wages, again as gain. On the rising-price offering above, that error would overstate gain by $31,000 on a disqualifying sale.

What happens to the ESPP when you leave NVIDIA

The plan is explicit about an offering in progress. Purchase rights terminate immediately if the participant is no longer an employee for any reason, or is otherwise no longer eligible, and the company distributes all accumulated but unused contributions (NVIDIA 2012 ESPP, section 7(c)). No purchase is made for the period in progress; the money comes back as cash. Timing decides the last lot: leave the day after a purchase date and that lot is yours, leave a week before and the six months of contributions are refunded. Withdrawing from an offering while still employed works the same way, with the purchase right ending and the contributions returned (NVIDIA 2012 ESPP, section 7(b)). Anything more specific, such as treatment on a transfer to an affiliate or a leave of absence, is in the plan and your enrollment agreement; check them rather than assume.

Shares already bought stay yours, and both Section 423 clocks keep running from their original dates. The Form 3922 for a purchase in the year you leave still arrives by the following January 31. Once you are no longer an employee, the policy’s closed windows and hedging restrictions no longer apply to you as an employee, though the insider trading laws still bar trading on any material nonpublic information you hold, and any separation terms govern.

Moving from California to Texas

If you sell ESPP shares after becoming a nonresident of California, California taxes the ordinary-income portion, qualifying or disqualifying, to the extent you performed services in California between the offering date and the purchase date; any capital gain is sourced to your state of residence when you sell (FTB Publication 1004, section F, nonresident on date of stock sale). For a lot bought entirely on California workdays, the $15 or $35 of wages per share stays California-source however long you wait; the capital gain above it belongs to Texas, which has no personal income tax (Tex. Const. art. 8, §24-a). A reset moves the offering date, which shortens the sourcing window for later lots, and a lot bought after the move on Texas workdays carries no California wages. Sell while still a California resident and the state taxes all of it. The residency file and the workday count are the subject of our guide on moving from California to Texas before a liquidity event.

How we approach an NVIDIA ESPP in a plan

We start with the lot list: purchase date, offering date, price paid, value on both days from the Forms 3922, and the date each lot qualifies. The contribution rate is set against the $25,000 limit, the household’s cash needs and the total already held in the stock, since RSU vests are adding to the same position. Each lot then gets a written rule that can be carried out inside the trading calendar, and the tax on the year’s sales, with no withholding on the wage portion, is fed into estimated payments alongside the RSU withholding gap. That work sits inside our equity compensation and concentrated stock practice and our tax planning process, coordinated with the household’s CPA, and it feeds the larger question of what to plan after a large gain.

Questions worth answering before the next purchase date

What is my offering-date price, and has a reset changed it since I enrolled?
How many shares can I buy this calendar year under the $25,000 limit, and is my contribution rate above it?
For each lot I hold, when do the two-year and one-year clocks run out?
Am I a Designated Individual, and when does the next closed window begin relative to the purchase date?
If I sell a lot this year, how much is wages with no withholding, and is that in my estimated payments?
Do I have every Form 3922, and does my 1099-B basis need a code B adjustment on Form 8949?
What share of our net worth is in NVIDIA stock after this purchase, counting RSUs?
If we have moved or may move, which lots carry California-source wages, and how many workdays were in California?

What this does not mean

Nothing here recommends buying, selling or holding NVIDIA shares, enrolling in or leaving the plan, or waiting for a qualifying disposition. The prices in the examples are round numbers chosen to show the arithmetic, not observations or forecasts, and the built-in gain on a purchase can disappear if the price falls after it. The tax figures are 2026 federal amounts and California’s 2025 rate schedule; a different bracket, filing status, state or year changes every line. Plan terms are summarized from public filings as of September 2026 and may change; your plan documents and enrollment agreement govern, and the calculation that counts is the one your CPA or tax counsel prepares from your own records.

Frequently asked questions

How does the NVIDIA ESPP lookback work?

Each offering runs about 24 months in four six-month purchase periods. At the end of each period, shares are bought at 85% of the lower of the stock’s value when the offering began or its value on the purchase date. If the price rises during the offering, every purchase, including the fourth one two years later, is priced off the lower offering-date value, so the effective discount can be far larger than 15%.

What is the NVIDIA ESPP reset?

Under section 4(c) of the plan, if the stock’s value on the first trading day of a new purchase period is at or below your offering-date price, your offering ends and you are automatically enrolled in a new 24-month offering beginning that day, at the lower price. The reset also restarts the two-year holding-period clock and California’s sourcing window, because the offering date has moved.

How are NVIDIA ESPP shares taxed when I sell?

If you sell at least two years after the offering date and one year after the purchase date, ordinary income is limited to the lesser of the offering-date discount (15% of the offering-date price) or your actual gain, and the rest is capital gain. Sell earlier and the whole purchase-date discount is wages, with no withholding, plus capital gain or loss on any movement after purchase. California taxes both parts at ordinary rates.

Can I buy or sell ESPP shares during a closed trading window?

Purchases and your enrollment election may occur during a closed window or while you hold material nonpublic information, under the policy’s stated exceptions. Selling is a trade: Designated Individuals may not trade during the closed window, which begins five weeks before the fiscal quarter-end and generally reopens on the second trading day after results, except under a 10b5-1 plan already in effect, and no one may trade on material nonpublic information.

What happens to my ESPP if I leave NVIDIA?

Your purchase right in the current offering ends immediately and the contributions accumulated since the last purchase date are returned to you in cash; no purchase is made for the period in progress. Shares you already bought remain yours, their holding-period clocks continue, and a Form 3922 for any purchase that year still arrives by January 31.

Does the $25,000 limit apply to what I contribute or what I buy?

To what you buy, valued at the offering-date price, for each calendar year the purchase right is outstanding. At a $100 offering-date price that is 250 shares a year, whatever the purchase-date price. Because NVIDIA’s contributions can reach 25% of earnings, the limit can bind in the calendar year that contains two purchase dates; ask the plan administrator how unused room is tracked.

Sources and further reading

Next steps

Keep reading

Equity Compensation · 15 min readNVIDIA RSUs: Vesting, Leaving, and the Tax at Each Vest

Equity Compensation · 19 min readESPP: Sell Right Away or Hold? The 2026 Tax Rules

Equity Compensation · 15 min readDiversifying Concentrated Stock After an IPO: Your Options

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