What Is a Restricted Stock Unit?

By Jeremy Bowman – Updated Dec 7, 2025 at 2:04 AM EST

Key Points

RSUs let companies offer shares that vest over time, tying employee rewards to company performance.
They are favored by public firms for stability, unlike RSAs used by early-stage companies.
No purchase needed for RSUs, which turn into ordinary shares after vesting completes.
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Start-ups and publicly traded companies have a number of options for compensating employees in addition to a cash salary.

Often, employees are given stock options, company shares, or restricted stock units (RSUs) to tie their compensation to the success of the company, incentivizing employees to stay with the company and saving the company money.

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Various stock certificates in a pile. — Image source: Getty Images.

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Options

Stock options are contracts that give the owner the right -- but not any obligation -- to buy or sell a stock at a certain price by a certain date.

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RSUs have long been a favorite compensation mechanic in the tech industry, allowing fast-growing, cash-strapped companies to avoid cash compensation in favor of share-based compensation.

With the tech sector soaring this year and the Nasdaq on the verge of a new bull market, RSUs could grow even more popular as tech companies look to invest in artificial intelligence and other growth markets.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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