GAAP and non-GAAP

GAAP stands for generally accepted accounting principles, the standard accounting rules public companies in the United States are required to follow when reporting financial results. GAAP figures are calculated consistently across companies, which makes them comparable, but the rules can sometimes obscure how a business is actually performing.

Non-GAAP figures are an alternative version of the same numbers, adjusted by the company to exclude items it considers one-off or not reflective of core operations, such as stock-based compensation, restructuring costs, or acquisition-related charges. Because companies choose their own adjustments, non-GAAP figures are not standardized and can vary in how aggressively they are adjusted from one company to the next.

Neither version is automatically more correct. GAAP gives a consistent, audited baseline. Non-GAAP can give a clearer picture of ongoing operations, but only if the adjustments are reasonable, and it requires more scrutiny since the company controls what gets excluded.