How It Works
GAAP EPS follows Generally Accepted Accounting Principles, the standardised rulebook that all US-listed companies must use. It includes every cost the business incurred: restructuring charges, stock-based compensation, amortisation of acquired intangible assets, legal settlements, and one-time write-downs.
Adjusted EPS (also called non-GAAP EPS) starts from that same figure and strips out items the company considers non-recurring or non-cash — things management argues don't reflect the underlying operating performance of the business.
The formula is straightforward:
GAAP EPS = Net income (as reported) / Diluted shares outstanding
Adjusted EPS = (Net income + excluded items, net of tax) / Diluted shares outstanding
Amazon is a useful example. In a recent full year, Amazon's GAAP EPS came in well below its adjusted figure, largely because of the enormous stock-based compensation it grants to employees — a real economic cost under GAAP rules. When that expense is added back, adjusted EPS can look considerably more flattering. Amazon also periodically records large gains or losses from its equity investment in Rivian, the electric vehicle maker, which swings GAAP earnings dramatically from quarter to quarter without touching the core retail and cloud business at all.
How to Read It
A large gap between GAAP and adjusted EPS is a signal worth examining, not ignoring. If a company routinely excludes stock-based compensation, that cost is still being borne by shareholders through dilution — it doesn't disappear just because it's labelled "non-cash." On the other hand, stripping out a genuine one-time legal settlement can give a cleaner picture of repeatable earnings power.
Sector context matters: technology and pharmaceutical companies tend to show the widest GAAP-to-adjusted gaps, because they carry heavy stock compensation and large intangible amortisation from acquisitions. Industrial or retail businesses typically show smaller differences.
A high adjusted EPS relative to GAAP EPS indicates the company is excluding significant costs. Analysts use both figures — GAAP to compare companies on a level playing field, and adjusted to model the cash-generating rhythm of the core business.
Where to Find It on Quantify
Both GAAP and adjusted EPS figures are displayed on Quantify stock pages, making it easy to spot the gap at a glance without digging through earnings releases. You can explore Amazon's full earnings breakdown, including historical EPS trends for both measures, directly on the Amazon (AMZN) stock page on Quantify. The side-by-side view helps contextualise how consistently — or inconsistently — the two figures diverge over time.
Common Mistakes
Assuming adjusted EPS is always the "real" number. Companies define their own adjustments, and there is no standard rulebook for non-GAAP reporting. Two companies in the same industry can exclude entirely different items, making direct comparisons unreliable unless you check the footnotes.
Ignoring stock-based compensation as "just an accounting entry." It dilutes existing shareholders and represents genuine value transferred to employees. Treating it as irrelevant systematically overstates how profitable a business actually is on a per-share basis.