Warren Buffett complained for decades that boosting profits by excluding exec stock comp was ‘cynical’—Nvidia just surprised Wall Street and agreed

Tucked neatly inside the investor materials Nvidia produced last week to show its record full fiscal year 2026 revenues of $215.9 billion and a fourth quarter revenue beat of $68.1 billion, were a few lines in the chief financial officer’s commentary that caught even some close observers of the company by surprise.

“Beginning in the first quarter of fiscal 2027, we will include stock-based compensation expense in our non-GAAP financial measures,” chief financial officer Colette Kress noted in her prepared commentary. “Stock-based compensation is a foundational component of our compensation program to attract and retain world-class talent.”

It may sound like a bit of financial minutiae but it’s actually a notable move. Like a lot of tech companies, Nvidia has historically left stock-based compensation out of what are called the “adjusted” financial figures it publishes along with its official GAAP results. Those adjusted figures—particularly a company’s earnings-per-share number—are known as non-GAAP figures, and they are typically the ones Wall Street uses to assess performance and set targets for the next quarter.

Critics, including Warren Buffett, have long argued that leaving out stock-based compensation, while perfectly legal, understates a company’s true cost of paying employees and inflates profitability. But many companies insist they’re giving investors a more accurate snapshot of the business’ core performance by removing the expense: Stock-based pay isn’t cash, the logic goes, and it can be difficult for outside analysts to properly estimate the total each quarter in their valuation models.

What’s clear is that the same company’s financial results can look different depending on how stock-based compensation is accounted for—sometimes even turning a bottom-line loss into an........

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