John Murray
Pulling the reconciliation table up next to net income is such a good habit, because it shows exactly which costs got added back. If you're ever unsure what an adjusted number includes, the earnings release spells it out line by line.
What is EBITDA, and why do companies report an "adjusted" version next to their actual
Discussion
profit?
EBITDA stands for earnings before interest, taxes, depreciation and amortization. It starts with a company's profit (net income) and adds back the interest it paid on debt, its taxes, and depreciation and amortization, which is the accounting cost of equipment and other long-term assets spread out over time. The idea is to show what the core business earns from its day-to-day operations. "Adjusted EBITDA" goes a step further and also adds back other items the company chooses, such as stock-based pay for employees or one-time costs. Each company writes its own definition, so one company's adjusted EBITDA isn't always comparable to another's.
A real example: on Nov 4, AppLovin reported third-quarter revenue of $2.18 billion (up 55% from a year earlier), net income of $1.44 billion and adjusted EBITDA of $1.84 billion. FactSet's consensus estimate for adjusted EBITDA was $1.73 billion, and the stock jumped more than 20% after hours. The gap between $1.44 billion and $1.84 billion is explained in the company's reconciliation table, which adds back about $305 million in taxes, $84 million in stock-based compensation, $51 million in interest and $34 million in amortization, depreciation and write-offs, among other items.
Why it matters for a new trader: EBITDA is not cash in the bank, and it isn't profit under official accounting rules. Interest and taxes are real bills, and stock-based pay is a real cost to shareholders because new shares can dilute them. When a headline says a company "beat on adjusted EBITDA," compare that number with net income and free cash flow, and look for the reconciliation table in the earnings release to see exactly what was added back. This is a learning example, not a reason to buy or sell anything. Got a question about EBITDA or any other earnings term? Ask below, there are no silly questions here.
Sources: AppLovin Q3 2026 earnings release (Business Wire, Nov 4, 2026); CNBC "Stocks making the biggest moves after hours" (Nov 4, 2026).