By Zev Fima
Publication Date: 2026-03-16 17:17:00
Nvidia has breathed new life into a hotly debated topic on Wall Street: paying executives in stock and how it impacts investors’ ownership positions in companies. The AI powerhouse updated its methods alongside its recent quarterly results . With so many other important discussion points involving the world’s most valuable company, accounting for stock-based compensation (SBC) was largely overlooked at the time. But it matters because it does, ultimately, impact earnings. And, we believe as fundamental investors that earnings drive stock prices. Here’s what CFO Colette Kress said on Nvidia’s post-earnings conference call on Feb. 25: “Starting this quarter, we will be including stock-based compensation expense in our non-GAAP results. Stock-based compensation is a foundational component of our compensation program to attract and retain world-class talent.” — Kress That may seem like some kind of bean-counter minutiae. But legendary investor Warren Buffett has long criticized the practice of not including SBC. In his 2018 letter to Berkshire Hathaway shareholders, Buffett wrote: “Managements sometimes assert that their company’s stock-based compensation shouldn’t be counted as an expense. (What else could it be – a gift from shareholders?)” — Buffett Before we dive into this, let’s briefly explain the difference between GAAP and non-GAAP earnings, which we covered extensively last fall ; it’s worth a read if you haven’t already. A quick summary here: GAAP is short for…
