Advanced Micro Devices (AMD) reported earnings of $2.65 a share for 2025 under US accounting rules, known as Generally Accepted Accounting Principles (GAAP). In the same earnings release, it reported $4.17 a share on its own adjusted basis, called non-GAAP. The second figure is 57.4% higher. Both are diluted earnings per share, which count the shares that stock awards could add.
The $1.52 gap comes from ten named adjustments. Four add to profit, while six take profit away. The figures come from AMD's earnings release and annual report for the year ended 27 December 2025.
What is the difference between GAAP and non-GAAP earnings? GAAP earnings follow the US accounting rulebook, Generally Accepted Accounting Principles. Non-GAAP earnings are a company's own adjusted figure. The company picks which costs and gains to leave out.
AMD's 2025 earnings were $2.65 a share under GAAP and $4.17 non-GAAP, a gap of $1.52.
Two adjustments add back $2.38 a share: pay given in shares and the cost of intangible assets from bought businesses, spread over several years.
Four adjustments add $2.53 a share in total, while six take away $1.01. The net is the $1.52 gap.
What do GAAP and non-GAAP earnings mean?
A US public company files an annual report, called Form 10-K, with the Securities and Exchange Commission (SEC). Its financial statements follow GAAP, the rulebook that fixes which costs count and when.
A non-GAAP measure is any figure that does not follow those rules. GAAP does not define it, so each company chooses what to leave out.
A company publishes its non-GAAP figures in its earnings release, which it furnishes to the SEC on Form 8-K.
Regulation G, in force since 28 March 2003, requires a company that discloses a non-GAAP measure to show the most directly comparable GAAP figure. The SEC adopted it in Release 33-8176. The company must also give a reconciliation, which is a table that walks from one figure to the other, item by item.
How does AMD get from $2.65 to $4.17?
Earnings per share (EPS) is net income divided by the shares in issue. Net income is profit after all costs, interest and tax.
The reconciliation below covers AMD's fiscal year 2025. It starts from GAAP net income of $4,335 million and ends at non-GAAP net income of $6,831 million.
Fiscal year 2025, year ended 27 December 2025 | Net income ($ millions) | Per diluted share |
|---|---|---|
GAAP net income and diluted EPS | 4,335 | $2.65 |
Amortisation of acquisition-related intangibles | 2,254 | $1.38 |
Stock-based compensation | 1,638 | $1.00 |
Acquisition-related and other costs | 231 | $0.14 |
Inventory loss at (recovery from) contract manufacturer | -67 | -$0.04 |
Loss contingency on legal matter | 21 | $0.01 |
Gains on long-term investments, net | -365 | -$0.22 |
Equity income in investee | -26 | -$0.02 |
Release of reserves for uncertain tax positions | -853 | -$0.52 |
Income tax provision (AMD's normalised 13% rate) | -271 | -$0.17 |
Income from discontinued operations, net of tax | -66 | -$0.04 |
Non-GAAP net income and diluted EPS | 6,831 | $4.17 |
Adjustments are added to GAAP net income. A minus sign means the adjustment lowers it. Source: AMD earnings release (Form 8-K), 3 February 2026
Source: AMD earnings release (Form 8-K), 3 February 2026
Chart 1 shows the largest steps and groups the four smallest. The four smaller items are the contract manufacturer recovery, the legal charge, profit from a part-owned company and income from the ZT Systems manufacturing business that AMD sold. Together they net to a $0.09 reduction.
Which adjustments add to profit?
Four adjustments add to profit, by a total of $2.53 a share. Amortisation and stock-based compensation make up $2.38 of that.
Amortisation of acquisition-related intangibles adds $2,254 million, or $1.38 a share. Amortisation spreads the value AMD assigned to the intangible assets of bought businesses over several years as a cost.
Stock-based compensation adds $1,638 million, or $1.00 a share. It is pay given in shares instead of cash. GAAP counts it as a cost, while AMD adds it back.
Acquisition-related and other costs add $231 million, or $0.14 a share. The earnings release lists transaction costs and certain pay charges among them. A charge for a legal matter, which AMD booked as an expected loss, adds $21 million, or $0.01.
Which adjustments take profit away?
Six adjustments remove $1.01 a share. The net is the $1.52 gap.
The largest is the release of a tax reserve, an amount AMD had booked as a liability in case a tax authority rejected a tax position. It was $853 million, or $0.52 a share. According to the earnings release, the Internal Revenue Service approved the relevant tax relief in the second quarter of 2025.
GAAP included the release in profit, while non-GAAP removes it.
Gains on long-term investments take out $365 million, or $0.22 a share.
The tax line takes out $271 million, or $0.17 a share. AMD uses a fixed tax rate of 13% for its non-GAAP figures. The rate leaves out the tax effect of the other adjustments.
Three smaller subtractions remain. The contract manufacturer recovery of $67 million takes out $0.04. Profit from a company that AMD part-owns takes out $0.02.
ZT Systems income takes out $0.04. It comes from the ZT Systems manufacturing business, which AMD divested in the fourth quarter of 2025.
Does non-GAAP change the margins?
A margin is a share of revenue. Gross margin uses gross profit, which is revenue less the direct cost of the products. Operating margin uses operating income, which is gross profit less running costs. Net margin uses net income.
AMD's non-GAAP operating income was $7,768 million, against $3,694 million under GAAP. That is 2.1 times as much.
Source: AMD earnings release (Form 8-K), 3 February 2026; YX Insights calculation
Chart 2 shows the gap at three levels. Gross margin moves by 2.9 percentage points, from 49.5% to 52.4%. Operating margin moves from 10.7% to 22.4%. Net margin moves from 12.5% to 19.7%. The gap is widest at the operating level.
Two items explain most of the operating gap. Amortisation and stock-based compensation make up $3,892 million of the $4,074 million that AMD added back at the operating level. That is 95.5%.
Is the gap the same every quarter?
The gap changes from quarter to quarter. Chart 3 shows AMD's diluted EPS on both bases for five quarters, from the second quarter of 2025 to the second quarter of 2026.
Source: AMD earnings releases (Form 8-K), 2025 and 2026
In the second quarter of 2025, GAAP EPS of $0.54 sat above non-GAAP EPS of $0.48. The tax reserve release of $0.52 a share lifted GAAP and was removed from non-GAAP.
In the third and fourth quarters of 2025 and the first quarter of 2026, non-GAAP EPS ran above GAAP EPS by $0.45, $0.61 and $0.53. In the second quarter of 2026, non-GAAP EPS of $1.66 was $0.28 above GAAP EPS of $1.38. GAAP included $483 million of gains on long-term investments, or $0.29 a share, which non-GAAP removed.
Stock-based compensation and amortisation were adjusted in all five quarters shown.
What does non-GAAP do to the P/E ratio?
The price-to-earnings (P/E) ratio is the share price divided by earnings per share, as our post on the P/E ratio explains.
Chart 4 uses a different period from the rest of the post. It adds the diluted EPS of the four latest reported quarters, from the third quarter of 2025 to the second quarter of 2026. That gives $3.89 under GAAP and $5.76 non-GAAP, against $2.65 and $4.17 for the 2025 year. AMD closed at $531.28 on 26 October 2026.
Source: AMD earnings releases (Form 8-K); YX Insights price data
The same price gives a P/E of 136.6 on GAAP earnings and 92.2 on non-GAAP earnings.
How can you read a reconciliation table?
A reconciliation table lets a reader check four things.
First, each item traces to a GAAP line. Note 4 (Segment Reporting) of AMD's 10-K lists amortisation of $2,254 million and stock-based compensation of $1,638 million. The earnings release shows the same two figures.
The release also shows acquisition-related and other costs twice. The operating income reconciliation gives $228 million, while the net income reconciliation gives $231 million. The release does not say why they differ.
Second, the quarterly releases show whether an item recurs. Third, the direction of each item shows whether the adjustment lifts or lowers the result. Fourth, a cash measure such as free cash flow tests earnings against money that moved.
For the other lines above net income, see our post on how to read an income statement.
AMD's 2025 earnings were $2.65 a share under GAAP and $4.17 non-GAAP. Ten named items, four up and six down, account for the $1.52 between them.
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Common questions about GAAP and non-GAAP
Is non-GAAP EPS always higher than GAAP EPS?
No. In the second quarter of 2025, AMD's non-GAAP EPS was $0.48 against $0.54 under GAAP, because non-GAAP removed a $0.52 tax benefit. For the full year 2025 it was higher, at $4.17 against $2.65. EPS is earnings per share.
What does non-GAAP earnings leave out?
It leaves out items that the company chooses. At AMD, ten items separate the two 2025 figures, including stock-based compensation, acquisition amortisation and a tax benefit. Four add to profit and six take it away, for a net $1.52 a share. Non-GAAP means a measure outside the GAAP accounting rules.
Does the SEC allow non-GAAP earnings?
Yes, with conditions. Regulation G, in force since 28 March 2003, requires the company to show the most directly comparable GAAP measure and a reconciliation between the two. The SEC is the Securities and Exchange Commission, the US regulator of public companies.
Can you compare non-GAAP earnings between companies?
Not directly. GAAP does not define non-GAAP, so each company sets its own list of adjustments. AMD's 2025 list has ten items. A fair comparison needs both reconciliation tables side by side, with each item matched to the other company's equivalent.
DISCLAIMER: This article is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.
