ADJ EPS Non-GAAP (Adjusted) EPS
Earnings per share after management strips out items it considers non-operating — share-based compensation, amortisation of acquired intangibles, goodwill impairments, restructuring charges, and gains or losses on investments. It is the number companies guide to and the number almost every beat/miss table compares.
Formula
How to Interpret
Read it alongside GAAP, never instead of it. Non-GAAP removes noise — one-off charges and mark-to-market swings that obscure the trend in the core business — which makes quarters and peers comparable. It also removes real costs: share-based compensation is a genuine transfer to employees, and a company that adds it back every quarter for a decade is not adjusting for something unusual. The gap between the two lines is the thing to watch. A stable gap is a definition; a gap that swings is telling you something, and a gap that only ever flatters is a warning.
Why It Matters
Companies guide on non-GAAP, so analysts model on non-GAAP, so consensus is non-GAAP — which means a headline 'beat' or 'miss' is almost always measured against this line and not the audited one. Subtract a non-GAAP consensus from a GAAP result and you get a number that looks like a verdict and is not: Alibaba's June 2026 quarter was a 21% miss on non-GAAP EPS per ADS and a 68% one against GAAP, for the same three months. Valuation multiples for tech and high-growth names are usually quoted on this basis too, so a P/E computed on GAAP earnings is rarely the P/E being discussed.
Example
Alibaba's June 2026 quarter: GAAP diluted EPS per ADS of $0.55 and non-GAAP diluted EPS per ADS of $1.26. The $0.71 difference is mostly share-based compensation, amortisation of intangibles and a goodwill impairment. Consensus was $1.60 — a 21% miss on the basis it was set on.