SBC

dagilisek

The buybacks are real cash but they're not small next to the cash coming in. Q2 buybacks were about $235M and operating cash flow was about $262M. SBC plus related payroll taxes was about $107M for the qtr. So SBC is a real cost but the profit isn't only a paper number.

markhalliday8

I feel you have hit the nail on the head. Reddit will grow earnings. There's no way they grew it by 60 percent last quarter and they haven't this quarter. The place is flooded with adverts. That being said, I feel it's a coin toss on DAU in the USA and this seems to be the only metric they care about. SBC is always a big talking point. If Reddit is spending billions of profit buying back the stock to prevent dilution, is it actually making anywhere near the profit they claim to be? Regardless of if they are paid fairly or not, this is also a big cloud hovering over the stock.

Extaz

People like you are not build for buying individual stocks. Because if you built a diversified portfolio of 8 or so names in differnet sectors with reasonable valuations and most importantly THEY ARE PROFITABLE. You would perhaps be down around like a little more than the sp500 but not that much. That is because the weighted BETA is not much more than the SP500. You bought shit companies that are highly speculative, high beta, enourmous SBC and shareholder dilution. No buyback support. and so on..

Remarkable_Cat_8696

If I understand correctly, there may be a typo. Non gaap net income adds SBC back to gaap net income. So the third column should be GAAP NI, and the second column is Non GAAP NI.

Prudent-Corgi3793

Yes and no. This is quite common for tech companies. The larger Mag 7 companies actually pay out more in stock-based compensation than Tesla. However, for the Mag 7 peers: - Stock-based compensation makes up a much smaller proportion of their net incomes because they are highly profitable - The non-operating income sources (such as mark-to-market investment gains) make up much more significant distortions, especially in recent quarters, to the point that I think non-GAAP earnings is a better metric here - All of them except for AMZN and TSLA are pretty good about aggressively repurchasing shares that go towards SBC anyway. AMZN occasionally has done so in prior quarters (most recently 2022). Tesla has never done so. Here are the the most recent data I have, which is actually a bit lagged (earnings period ending June 30 for all except NVDA, which ended in July). My source didn't have non-GAAP NI for NVDA or META populated yet. | Company | GAAP NI | Non-GAAP NI | Non-Op Inc | SBC | Share Repurchases | |---|---|---|---|---|---| | NVDA | $59.69B | ? | $8.00B | $2.03B | $22.13B | | AAPL | $29.79B | $28.11B | $0.527B | $3.40B | $28.32B | | GOOGL | $112.19B | $35.01B | $99.62B | $7.96B | $6.57B | | MSFT | $35.77B | $35.29B | $4.29B | $3.12B | $4.58B | | AMZN | $62.65B | $21.53B | $54.61B | $6.04B | $0B | | META | $15.85B | ? | $0.764B | $7.66B | $4.28B | | TSLA | $1.11B | $1.16B | $1.01B | $1.15B | $0B |

filwu

Alongside the adjustment bridge, compare basic and diluted weighted-average shares over several years. An adjusted EPS series can remove SBC expense while still using diluted shares; checking the stated EPS basis and share-count trend helps separate the add-back from dilution.

Prudent-Corgi3793

For many companies, non-GAAP earnings are a useful way to eliminate the effects of one-time distortions, both favorable and unfavorable. For instance, NFLX had a favorable effect in Q1 2026 due to the payout from the WBD deal (GAAP EPS $1.25 vs. adjusted $0.70). META had a very unfavorable one in Q3 2025 due to the one-time non-cash accounting charge (GAAP EPS $7.25 vs. adjusted $1.08). The problem is that for some companies, this is not a one-time distortion, but a systematic one. Typically, these occur in unprofitable or minimally profitable tech startups that issue a lot of new shares to provide stock-based compensation. Tesla is not the worst offender, but it is the one of the most high profile and consistent of these examples. It doesn't make very much in profit, consistently issues new shares for SBC (and has never bought back a single share nor paid out a dividend). Here are data I was able to pull from IBES. It doesn't include the earnings report today (Q3 2026), since it usually lags by a few weeks. I haven't looked into the other sources of differences between GAAP and non-GAAP net income. | Period | GAAP NI | Non-GAAP NI | Stock Based Compensation | |---|---|---|---| | Q2 2026 | $1.11B | $1.16B | $1.15B | | Q1 2026 | $1.45B | $0.477B | $1.03B | | Q4 2025 | $1.76B | $0.84B | $0.954B | | Q3 2025 | $1.77B | $1.37B | $0.663B | | Q2 2025 | $1.39B | $1.17B | $0.635B | | Q1 2025 | $0.934B | $0.409B | $0.573B | | Q4 2024 | $2.56B | $2.13B | $0.579B | | Q3 2024 | $2.55B | $2.17B | $0.457B | | Q2 2024 | $1.81B | $1.4B | $0.439B | | Q1 2024 | $1.58B | $1.39B | $0.524B |

JayArlington

Non-GAAP is a better metric for understanding a core business. I know it's wonky for things like SBC, but its smoother for things like acquisitions/divestitures and unrealized gains/losses from investments. Examples of large companies with large differences between GAAP/non-GAAP earnings includes every megacap invested in OpenAI/Anthropic but those companies show HIGHER GAAP earnings due to unrealized gains.

Ephemeral_limerance

And this argument is exactly why there are questions about how well the financial statements reflect stock based compensation. It’s not the first time people have had this debate. Ultimately the payment for SBC results in equity dilution, so shareholders pay the bill when the time to exercise and sell.

Ok_Cardiologist_7456

They do not want to show the SBC

theruthlessinvestor

I treat stock comp as a real expense. FCF adds SBC back since it's non-cash, so subtract it out and watch what's left per share over a few years. If the buyback is just offsetting dilution, the cash is basically covering stock comp, not increasing what you own. Flat share count isn't automatically bad. If cash per share keeps growing and they're not overpaying for the stock, fine. But if SBC is big, the count isn't dropping, and FCF per share after SBC isn't growing, you're spending a lot of money just to stand still.

WickedSensitiveCrew

This is a useless indicator. If they get paid in stock, they don’t need to buy shares. Tim Cook gets paid in Apple RSUs and sells every time they vest, and nobody calls that bearish. It seems only when stocks go down that arent popular do people bring up this indicator of a CEO with SBC selling. I have no position in CRWW. Im team NBIS. But get tired of seeing this with so many stocks.

WickedSensitiveCrew

This is a mostly useless indicator. If they get paid in stock, they don’t need to buy shares. Tim Cook gets paid in Apple RSUs and sells every time they vest, and nobody calls that bearish. It seems only when stocks go down that arent popular do people bring up this indicator of a CEO with SBC selling.

ReadDailyFive

One way to separate the two: treat the buyback dollars that just offset SBC as a compensation expense, not a capital return. Take net shares retired times average price paid as the "real" buyback, and subtract the rest from free cash flow when you value the business. A flat share count can still be fine if SBC is modest relative to FCF and the repurchases happened below a reasonable estimate of intrinsic value, but if offsetting dilution eats most of FCF every year, the headline buyback is really just a payroll line.

Ill_Discussion6447

right question to ask, because most buyback headlines are meaningless I largely ignore the dollar amount announced. I would look at a few things: Net share count change YoY. If they spent $2B and shares went from 100M to 99M, the real buyback yield is \~1%, not whatever % the press release implies. SBC as % of buyback spend. If stock comp is offsetting 70-80% of the repurchases, the buyback is basically a transfer to employees, funded by shareholders. Price paid versus intrinsic value. Buying back aggressively at 30x earnings destroys value just as surely as a bad acquisition. A buyback only creates value if they are buying below what the business is worth.

Ill-Mousse-3817

Oh, don't worry, he is very solvent. He has been selling his SBC at every chance he got.

Such-Ad3356

No, explicitly included in both Q2 and Q3. It was only SBC that was excluded in Q2.

Such-Ad3356

They did say exactly how they calculate profit, by excluding the Stock comp. But that was in Q2, allegedly in q3 they made profit even including SBC. If true would mean anthropic is profitable without any qualifiers.

ZucchiniConstant

I looked into their revenue a little bit more because i knew i missed some, so that income increase of 66M 64% of that was non-cash accounting adjustments. Stock-Based Compensation (SBC) expense temporarily dropped on a quarterly comparison basis, and purchase amortization fell from $17M to $3M. Looks great on paper but when you dig down more accounting tricks, moving money around and less about their actually business doing better. FCF rose to 40% by doing a few things. slashing capex spending and internal spending. In their official guidance for the full year, management explicitly cautioned that full year cash margins will actually step down (guiding FCF margin to 28% down from 31% delivered previously) due to lower interest income and share buyback cash drains. FCF at 40% is not compoundable rate and even the company itself stated 28% margin on the year for FCF, but like i said some good accounting to make the quarter look solid.

MandingoPants

if you look at SBC as a cost that should be included, you are a fucking idiot and a dinosaur and I'll gladly keep taking your money. Dumbass cunts like you were citing SBC on TEAM when it was below $100, now go look where it is.

sublimepact

Yes you can.. employees need to stop being so scared and grow a sack. But yes the SBC sucks.

ap485860281

So $RDDT has always been an interesting play for me. Having bought digital advertising in the past, it offers great value in reach and pricing versus Google, Meta, etc. But it's let down by things like excessive SBC, meh ad sales execution and the bots issue. I’ve been in and out over the years with decent returns. At this point, it looks like a value play to me. Then again, what do I know?

No_Register556

yeah, if you look at the whole long‑term SBC grant schedule it does dilute future returns, but the point is that the money that ends up out of the firm is sitting on grant pots that never really get spent. so the real free cash flow that Reddit could have used for growth or share buybacks is still being eaten by that SBC engine.

rudolf_de_Leeuw

Netting SBC-offset buybacks against free cash flow is the fairer comparison, since a buyback that only cancels dilution isn't really returning anything to holders.

sportingpool

Wong gets at least 4.5m shares over a 5y period as part of Reddit's 2023 SBC scheme. in my view these shares are worth $250m a year. and this is designed as a giveaway, with payout probability near 100% all the time. also, her pay isnt limited to that scheme only. and a company like reddit will continue to find a way to funnel every incremental revenue dollar towards SBC.....

sportingpool

the reported (gaap) SBC is not based on current stock prices. thats the "nonsensical accounting rules" part. to offset dilution, all of FCF is gone.

femalediesinendgame

Oooh boy, where do I even start with this… I know I’m about to make some of you WSB regards who bought AMD at the tippity top really mad, but it’s ok. Let’s see… To be fair, the fact that it’s gone parabolic recently makes an investor who doesn’t want to incinerate their money a little suspicious that this stock is a bit overvalued, but let’s ignore that; it happens. [Here are the values of some core valuation metrics for AMD](https://prnt.sc/dOM3ewxR0QGo); even when compared to its own ridiculous historical valuation metrics, it still prints as overvalued currently, or at the very least fairly elevated. But let’s ignore this too; at the end of the day, it’s a growth stock, right? And it also has low debt. That’s a good thing. Having a clean balance sheet is nice, but not going bankrupt is the absolute bare minimum for a company trading at such top-tier valuations. Let’s start talking numbers: ROIC is a measly 9.11%. NVDA: 72.42%, AVGO: 24.39%, MU:59.39%, TSMC: 31.23%, all way cheaper (in terms of multiples) than AMD too. The highest EV/EBITDA of all these is 33.87 for AVGO; AMD’s is 103.39. You’re paying $1T for $41B of sales and $6.4B of earnings, and all of that while AMD is also doing tiny buybacks and SBC is 18.8% of operating cash flow and 22.6% of free cash flow. The company is surviving on pure growth expectations; it’s not even funny. The TTM SBC-adjusted FCF yield is a mere 0.65%. AMD is actively diluting you through all this too; its shares outstanding have been increasing 5.78% p.a. for the last 5 years. EVEN after accounting for its good revenue growth, you’re still paying an unfathomable premium for the absolute bottom of the elite semiconductor pack; almost every other major player has been growing quicker, more efficiently, with better prospects of further growth, higher gross margins, AND without diluting their shareholders as much as AMD has been at the same time. Oh, and they are ALL cheaper. I’ll add my own little analysis here; I’m going to calculate a rough estimate of a fair price for this thing, and I’ll give you a little peek at how much you’re paying for actual existing cash generation and business, and how much you’re paying for pure SPECULATION and EUPHORIA. The 3-year normalized average owner earnings (FCF-SBC-CAPEX) is a tiny $3.01B. Applying an asset-light-business multiplier of 12.5x to that, adding the current $13.11B in cash, and dividing the total by the current float, you get a structural target price of $31.12 per share… Assuming a 4% equity risk premium over the 10Y Treasury yield of 5.24%, you get an annual cost of equity of 9.24%. Capitalizing owner earnings + current cash at that rate and dividing by a current float of 1.63B shares, you get a macro target price of $28.02 per share. Current share price is COMPLETELY detached from cash-generating reality; it’s literally funny how much hopium it takes to buy at the current valuation. The growth premium multiple is 608.49/31.12=19.55x meaning that out of the 608.49 you’re paying per share right now, $577.36 (1-1/19.55=0.9488 or 94.88% of the price) is PURE SPECULATION, and $31.12 is anchored on real current cash generation. The unlevered cash yield on this thing is only 0.3%, bro… Mind you, ALL the figures in that analysis completely ignore the $3.23B in debt you’d have to pay before paying the shareholders. Taking that into account, the intrinsic values have become $29.14 and $26.04 respectively, making the case for buying even worse than it already is. The growth premium multiple becomes 20.88x the real value of the company, meaning you spend over 95% of the share price on PURE SPECULATION and yet UNPROVEN growth expectations. At this point, I think it’s relevant to remind you that we are talking about a highly cyclical industry at peak euphoria; the real question here then is what exactly on earth makes you think AMD is anything near an opportunity at this price?

TheSixthNonsense

In what way exactly? Gross vs net revenue recognition only affects profit margin % not $ amount; model training cost is already accounted for in the adjusted operating income. We don’t know the precise SBC figure to ascertain one way or another, and it’s not like it matters in the unit economics discussion.

TheSixthNonsense

SBC has nothing to do with the that particular analogy or unit economics. The point is “every single ride loses them money” isn’t correct.

Serious-Pirate-5680

Buybacks that just mop up SBC dilution aren't really returning capital, they're just a payroll expense with extra steps. The outperformance studies usually filter for net buybacks so the headline numbers here would get carved out pretty quick

Designer_Respect4285

Over half of Anthropic's revenue comes from consumers, not hyperscalers. It's hard to know exactly how much over half. The fact that they went from -2.5b profit to 1b profit excluding SBC also shows it's not just circular.

CanYouPleaseChill

A market cap of 34 billion for a company with negative FCF - SBC and whose share count has increased by 14% over the past several years? Good luck with that.

OpenDaCloset

This has been the worst investment of my lifetime. Incessant SBC selling by everyone in the company just losing money every year since going public. The best thing that could happen is they sell the company and it gets broken up. Evan Spiegel is an insufferable POS. worst CEO 2026.

phi_matt

The company's pocket **IS** your pocket. You own the company. If you own 100% of a business with $10k in its bank account, that $10k is part of your net worth. It doesn't magically belong to someone else. Also, your theory on raising money completely falls apart in the real world. Amazon, Alphabet, and Metaspent decades attracting the best talent on earth and raising billions without paying a single cent in dividends. Why? Because employees and shareholders wanted **share price growth**. Talent wants stock options that double in value, not a 2% dividend check. If the share price tanks, your SBC becomes worthless talent leaves, and you can't raise future capital. Share price is the *only* thing that actually matters.

kooj80

> If you don't pay workers, you have no product. If you don't pay shareholders you're not going to be able to reliably raise money for future endeavors. And SBC for employees will become less attractive, thus less quality talent, thus lower quality products. >Dividends are paid with what's left *after* everyone is paid. Correct >the value isn’t 'recouped' automatically I know. Same way that the value isn't recouped automatically after paying employees. The employees actually have to go and produce a product that is worth more than what they're being paid. Same concept with returning cash to shareholders. It's the cost of doing business as a public company. >You are celebrating a company moving money from your left pocket to your right pocket while capping its ability to grow. The money was never in my pocket to begin with. It was in the company's pocket.

kooj80

Yea this is something I wonder too. When you're public it's easier to do SBC for employees and you can also acquire other companies with your stock. And of course you can raise capital thru new issuances. But if you're a company like Nordstrom idk how beneficial those would be

MatthewCollins1990

Honestly, the SBC distinction gets glossed over way too often in these threads

danieljapps

I have nothing against high forward P/E, but high forward P/E combined with high sales multiple combined with CFO selling 1/4 of his shares combined with insiders overall selling 54% more shares compared to last year combined with rising bond yield combined with 25% SBC - this together makes me think maybe, just maybe its time for a little pullback so earnings/revenue can catch up.

LongLonMan

This is not referring to SBC, SBC is an expense to the company at time of award to an employee, even if it somehow was, SBC this large would be ridiculous. This is actually convertible debt FMV adjustments. So your premise still holds that this is non-cash, buts it not SBC.

baldr83

\>I’m guessing most of it is not SBC. you wouldn't have to guess if you read the article. It says $34B/$42B is SBC \>The near-$42 billion net loss included a roughly $34 billion accounting charge that reflected an increase in the estimated value of financing that could eventually ‌turn into Anthropic ⁠shares, rather than money the company spent running its business.

LongLonMan

I’m guessing most of it is not SBC.

Hacking_the_Gibson

Lol, losing $8B on $4B of revenue is an absolutely massive loss... Are you serious? If I told you I was running a lemonade stand that was losing $0.50 for every $1.00 of revenue I generated, you'd call me a fucking idiot.  You moved the goal post to talk about stock based compensation, I didn't. Also, you don't get to just handwave away the SBC charge. Arguably, it's even worse than if the company itself pays its own people because what they are literally telling you, Mr. Shareholder, is that you will be paying my people directly out of your share, not mine.  SBC is neutralized with buybacks, which are only possible when the company has FCF.  Look, the whole fucking point of tech businesses from the before time is that they are cash machines because the cost of distribution of their solution approaches zero. Serving one more web page is next to nothing. This shit is obviously more like a standard service business because of the absolutely eye watering capex commitments. Even if we say that by magic, Anthropic is going to reach net income of $100B/year by 2027, you're still talking about five full years of net income as the most profitable business on the planet being exclusively committed to capex. Plus, the 10Y is now over 5%. 

Ettenmaster

their best year was also their only positive earnings year: 2023, where they made $0.09 per share. stock is trading at \~$260. mark to market, it has maybe 2 billion tangible book value (thank god for SBC) at \~260B market cap. stupid people and grandma's pension contributions make the world go 'round

danieljapps

I have nothing against the company. But does that mean we now have to ignore valuation completely? If that's the case, why have insiders already sold 54% more shares in 2026 than they did last year? I'm sure the company will continue to grow its revenue and earnings, but that doesn't mean the share price can't decline in an environment of rising interest rates and bond yields. Especially with a non-GAAP forward P/E of 180 and 23-25% of revenue going toward SBC.

greenpride32

Because their non-GAAP earnings are substantially better than GAAP, their top line growth is consistently at 25-30%+, RPO is growing rapidly due to transition to subscription based services and they have high margin. The PE will collapse quickly. With tech companies, stock based compensation (SBC) has become mandatory to attract talent. In the earlier years, these tech companies will offer a lot more compensation because that's the only way they can compete with more established firms. But this puts a lot of downward pressure on GAAP earnings. As they become more established themselves, there is more draw to work there and less need for outsized grants. As that happens, the GAAP earnings will improve greatly due to both less pressure from SBC and growing top and and bottom line. So one would say a company is "operationally profitable" when earnings would be GAAP positive if you took out SBC. That presents a very different picture than a company struggling to turn non-GAAP positive.

boredandreddit

Everything we know is already priced in and then some. I looked into it last weekend. They release a new GTA once a decade. They have a market cap of 38 billion usd! GTA V sold about 230 million copies through its lifetime across 3 different generations of consoles and PC. Take away mobile gaming, gaming as a whole has not grown a whole lot since 2013. But let’s bullishly assume they will sell 300 million copies across the next decade. If we are generous they will be selling them at an average of about 75 usd a piece. This gives us 75x300 mill=22,5 bill usd. Out of those 22,5 billon they need to pay 30% in platform fees to Microsoft and Sony, less for pc, but at the same time the pc games are cheaper. In addition to this they will need to continuously update the game for releases to new generations and patch the game from time to time. At best they will reach margins of 45% for every game sold after taxes. This gives us 0,45 x 22,5 bill = 10,1 bill earnings in sales over a decade. Let’s assume that about 20 billion of the entire market cap of TTWO is tied to the GTA franchise alone. Let’s assume the margins for gta online drops all the way down to 35% with server, platform and maintenance fees. This means that each year gta online will have to generate about 3 billion a year from gta online annually for it to have payed back current investors after a decade of investing. GTA online have never generated more than 600 million USD per year which implies a growth of about 5x which they will have to maintain not only through the first year when the hype is at its peak but its entire life time. And then you still have about 18 billion on all the other assests. And those assets have not been all that good. They had multiple years of negative cashflow and managed to turn it positive only last year. Still if we take away SBC they only made about 400 million usd last year. If we strip away gta online this implies a pe of 18/0,4=45 on the rest of the business that does not include gta. This is all still really high considering zynga is really struggling at the mobile front and Konami more or less consists of only its nba franchise which already is as monetized as it can be, so I don’t see much further growth here. They can also publish a couple of dlc’s for gta vi which could help all this and I am not saying gta online won’t hit 3 billions usd per year considering Fortnite generates 5-6 billion, but my point is that the stock probably wont move much before we get some insight of when the new gta online will launch and what they are planning to do with it as a whole. They have to have some pretty ambitious plans for the stock to move considerably from here. Take into account that Sony and msft has pushed out next generation of consoles due to supply constraints and surging hardware costs there is a real risk we won’t see more than 1 other generation of consoles through the next decade. GTA V sold 230 million copies across three generations of consoles, while gta VI will only have 2 generations of plattforms to do it in which makes hitting the 300 million magnitudes tougher. TLDR: An insane amount of GTA VI is already priced in and it’s already priced in that this will be one of the biggest cultural phenomenons ever. GTA 6 will make ttwo an insane amount of money which already is priced in. The stock still have a lot of room to grow, but there is a whole lot of risks from here.

CanYouPleaseChill

A market cap of $461B for a company that made 2.5B in FCF - SBC over the past year. Clown market.

Remarkable_Cat_8696

So the company recognized the SBC when it was first issued to employees, and employees pay tax on stock appreciation/depreciation when vested, as employees now own the stock.

LongLonMan

What does this mean…outgoing expense…SBC is inherently a non-cash charge to a company, that’s why ppl look at it closely.

Birdperson15

When a company awards you stock they buy/dilute those shares upon the grant. They may then vest them over the next couple years, but the shares have been ‘paid’ for already. So SBC will be high but it’s not because the stock price went up, it’s because they paid huge comp for top talent.

ConcentrateLanky7576

Because they want to IPO at 2T. I haven’t seen the report you are saying but training, and profit sharing with cloud providers is a huge cost. SBC is no peanuts either. Also, how fast it went from 100M to 100bn ARR doesn’t mean much to me now. The key questions are can they be profitable and/or can they keep growing, or am I exit liquitidy? There are good reasons to be skeptical of both, but no one knows how the future will turn out.

yapyd

>The best guess right now probably puts Anthropic somewhere near profitable as well. In Q2, they were profitable when including training costs, but not SBC. Where did you get the idea that it includes training costs? >According to the report, adjusted operating income excludes stock-based compensation, which is not unusual for technology companies. However, the report also quotes its gross margins - above 80% - exclude revenue shared with distribution partners, as well as the cost of training its models. Training costs can be massive. At SpaceX (SPCX) , which admittedly is behind OpenAI and Anthropic in attracting users, the AI segment's research-and-development costs of $2.03 billion in the second quarter outpaced its $1.47 billion in revenue. SpaceX says the AI segment's R&D expenses "mainly relate to the training of Grok, our leading frontier model, development, build, and testing of our next-generation AI-enabled products and data center costs to train AI-enabled products." The partner revenue split is also significant, though likely not as much as training costs. The Information reported earlier this year that Anthropic's revenue split to partners including Amazon (AMZN) ran at about 10% of sales, though that was during a period when the Claude large-language-model maker was bringing in less in revenue. Source: [https://www.morningstar.com/news/marketwatch/2026091414/the-very-big-caveat-to-the-report-that-anthropic-is-profitable-for-a-second-straight-quarter](https://www.morningstar.com/news/marketwatch/2026091414/the-very-big-caveat-to-the-report-that-anthropic-is-profitable-for-a-second-straight-quarter) Long Story Short: I'll believe the numbers when I see it.

insightful_pancake

SBC, from company perspective, is recognized at the time of the grant rather than when vested. If anthropic paid $500k in RSUs in 2022 that are worth $20mm in 2026, anthropic recognizes $500k expense in 2022.

Ok-Adeptness-5834

People also don't realize that SBC cost is so high cause some new grad who joined 2 years ago is now looking at that grant being worth $50 million dollars, and guys who joined 4 years ago are getting close the billion dollar range. But these are not costs that will continue (unless the valuation goes up another 100x in which case I dont think anyone is concerned about higher SBC cost).

Designer_Respect4285

They were already profitable q2 including training costs, but not including SBC, SemiAnalysis projects them to be profitable Q3 on a GAAP basis.

Designer_Respect4285

No my original comment was:" They were also profitable Q2 including training costs, it was mostly SBC that was excluded. There probably isn't going to be some massive surprise." After that, someone said their profitability numbers didn't include training costs. I then replied with "their q2 numbers included training costs". Obviously when I say numbers there, I'm talking about profitability numbers, not gross margins, since I'm replying to a comment about profitability.

Designer_Respect4285

So you're just going to ignore a source you don't like? Ok then, so let's wait for when they publish their official Q3 results right before the IPO, you're very likely going to be in for a surprise: [https://newsletter.semianalysis.com/p/anthropic-3q26-profit-over-1b-the](https://newsletter.semianalysis.com/p/anthropic-3q26-profit-over-1b-the) Semianalysis is projecting GAAP profit, including SBC as well.

DapperCam

Every report of their "profitability" I saw for Q2 excluded training costs, SBC, and payouts to partners/distributors.

Designer_Respect4285

Saying their books are bad enough to pop the bubble and yet people are still trying to invest in them after seeing these books is a bad guess as to what is happening. Reddit is obsessed with finding tortured explanations that fit their worldview instead of just realizing that the simplest explanation is the best the vast majority of the time. It was the same shit when everyone was so sure Mitch McConnell was dead. Not everything is some huge conspiracy. People invest in Anthropic, at a 1.5T valuation, it's because the business is bad. People don't invest, it's also because the business is bad. You already have your conclusion, and then no matter what the data shows, you force that data to fit your conclusion. Their books being "non-GAAP" is completely irrelevant to anything that was discussed. Private capital isn't just looking at the word "profit" and neglecting that it might exclude SBC. You're also just assuming the books shown to investors were non-GAAP, what are you basing that on?

Designer_Respect4285

They are projected by SemiAnalysis to be profitable q3 on a GAAP basis. They were already likely profitable Q2 including the cost of training, just excluding SBC, which means they were close. Fuck facts though, let's just upvote anything as long as it's anti-AI.

dubswho

lol stripping out stock comp is hilarious. That no doubt it is a huge line item for them but im pretty sure there is no precedent for including it below the line. Interested to see how this turns out. What I think is more likely is they are going to "report" income in earnings and PRs without the impact of SBC which is what a lot of Companies do internally given it is a non-cash expense but its not GAAP.

SnooPeppers4261

it’s relatively common to exclude SBC from Non-GAAP metrics for relatively new companies on open market. One way of looking at it is investors are accepting stock dilutions anticipating high growth. https://www.equitymethods.com/articles/non-gaap-metrics-and-their-dual-intersection-with-stock-based-compensation-part-1-sbc-expense-as-a-common-non-gaap-exclusion-in-street-earnings/

Luqt

Yes, will be interesting to see market reaction to increasing supply of shares from overvalued IPOs, equity offerings (Alphabet, AMD, Broadcom and Oracle to name a few, raising billions) and less/zero free cash flow to support buybacks that simply counteracted SBC 😂

azakhi

SBC = Stock Based Compensation Companies giving stock to their employees as salary and then dropping it in "adjusted earnings" because "it is not a cash expense".

Birdperson15

They are profitable when not accounting for stock based compensation, they are a private company so SBC is meaningless until they go public. Everything else is accounted for people are reading way too deep into some bad wording….

After_Olive5924

What’s SBC

a_trerible_writer

Nearly all software companies have been taking SBC out of "adjusted" profit measures for years now. I don't agree with it, but that's just what it is.

Icy_Cartographer5466

Well everyone in tech looks healthy if you ignore SBC

PaddingCompression

Adjusted EBITDA that excludes SBC is basically what every tech company reports on. You might not like it, but it is the de-facto standard in the industry, rather than custom things one company in particular is doing to hide things. If they reported GAAP as their headline numbers that would cause \*more\* concern among Wall Street analysts that they're hiding something, since that is not the customary number. If they are excluding things like \*training costs\* and \*revenue sharing\* from their adjusted profits, though, that is highly unusual.

greenpride32

We won't know until the S-1 comes out how AI training costs are factored in. As with most emerging high tech companies, SBC alone is enough to prevent GAAP earnings. But if the company proves it is operationally profitable, than investors will just let the SBC smooth out over time. If you are to believe the recent leaks, training costs were included in opex, not capex and that bodes very well for Anthropic. Also consider that private company investors do get access to the books. While it's true early stage investors don't necessarily need a startup investment to ever be profitable as they'll exit sooner; the firms who invested at $965b valuation do need to see some return on their investment. So one would have to wonder how they could raise $65b in new investment if there wasn't anything of substance. Keep moving the needle. AI is useless and not smarter than a person. Oh wait the rogue AI agents worked together to accomplish skillful tasks faster than a group of humans ever could. No profits, to adjusted income, and next step is net income.

Lopsided-Tea-2586

‘Adjusted operating income’ hahaha yeah I bet all they’re stripping out is stock based compensation. Sure bro. And their SBC DEFINITELY isn’t an obscene amount either

MagnoliaRoofConsult

RDDT has too much SBC - Stock Based Cuckolding

ClassroomDesigner945

I used notebooklm to go though this stock , remove this if not suitable here isthe result CORE DECISIONS & EXECUTIONS * **PRIMARY INVESTMENT CLASSIFICATION:** **QUALITY AT REASONABLE PRICE** * **PRICE ACTION CLASSIFICATION:** **BUY SMALL / SCALE IN** * **WHY NOT BUY NOW?** Dilution risk and a low margin of safety to base value ($8.07) are compounded by negative operating cash flow conversion (-0.18x TTM), requiring cautious entry sizing . * **WHAT COULD MAKE THIS A GREAT BUY?** A price correction to the confluence support and unfilled gap range between **$5.90–$6.12**, which would significantly expand the margin of safety . * **WHAT WOULD BREAK THE THESIS?** A failure to achieve positive GAAP net income in FY 2027 or a sequential degradation of non-GAAP EBITDA margins, indicating integration failure of the Legend deal . * **3 THINGS TO MONITOR:** 1. GAAP operating cash flow conversion to verify working capital normalization . 2. The rate of change in diluted share count to monitor ongoing SBC dilutive drag . 3. A price drop below the zero-gamma flip level of $7.10, which would initiate a high-volatility regime . * **RE-EVALUATION TRIGGER:** A missed EBITDA guidance or downward revision in FY 2026 raised targets ($285M–$295M range) . * **FINAL DECISION STATEMENT:** `QUALITY AT REASONABLE PRICE / BUY SMALL / SCALE IN — BUY BELOW $7.10 — ACCELERATING GROWTH WITH DEPRESSED EARNINGS QUALITY — EXPECTATIONS REASONABLE — ACCELERATING COMP-TECH DATA MODEL Grinds UPWARDS SUPPORTED BY COMPACT EV/EBITDA AND POSITIVE GEX OVER CONFLUENCE SUPPORT` Would you like me to model a multi-scenario discounted cash flow (DCF) schedule using these financial targets, or should we examine the capital-cycle competitive dynamics of the sports tech sector in further detail?

MagnoliaRoofConsult

What’s going to be the narrative that keeps RDDT down this week? SaaS? AI? Social Media? Advertising? DAU? SBC? Or all the above! Tune in to find out!

Erocdotusa

Whats funny is I feel the exact same way about RDDT and the absolutely insane SBC Jen Wong gets. This lady dumps millions of dollars of shares every month

Immediate_Code_9272

I mean, it's a growth stock. You can rate it for its merits on that basis but why are you why are you looking at EV/FCF? its essentially useless at this stage. Revenue growing 39% YoY, non-GAAP operating margins are 9% in expansion phase. This stock really is a bet on AI - whether you think it will be revenue generator or sink. If its a sink then yes you might be right. If it can further increase revenue and also reduce development costs in terms of future SBC, then its a huge tailwind. If it can sustain 3 years of 45% growth or higher (personally I think AI credits for software are a revenue tailwind) on this years. That gives 4.46B revenue in 3 years, at a more normal 30% operating margin for software (maybe better with reduced dev headcount due to AI) gives 1.4B looking at around 1B net. So lots of potential expansion on multiple over the next few years as it matures. (presuming the growth rates will still be high then, even if decelerating) Of course this is predicated on maintaining or accelerating growth, which is the whole point. FCF is not.

MitchCurry

IOT with accelerating module adoption among both large customers and all customers, along with ARR from the $100,000+ customers. SBC as a % of revenue still under 20% for the 4th consecutive quarter but it was 19.9% so up sequentially. Still want to see that fall consistently below 15% by EOFY28. Up 14% pre-market on yesterday evenings earnings.

MitchCurry

IOT with accelerating module adoption among both large customers and all customers, along with ARR from the $100,000+ customers. SBC as a % of revenue still under 20% for the 4th consecutive quarter but it was 19.9% so up sequentially. Still want to see that fall consistently below 15% by EOFY28. Up 14% pre-market on yesterday evenings earnings.

EntertainmentSad6624

I’ll use point 7 as a microcosm of this analysis. Conflating 2 factors that aren’t of a similar magnitude. A buyback that is 3% of market cap with 0.5% dilution from SBC. These things aren’t even remotely similar. There’s a bunch more noise and nonsense, but I’ve already spent too much time on this.

longGERN

I just don't really get what they do. Buying into security now.. I've got no clue if clients would choose that or a dedicated. And tonnes of SBC Wasn't really cheap imo, lots of growth required Overall a good decision but seeing it skyrocket 30%... It was always meant to just be a small meme position lol

drakilian

Ford pays a good dividend. I know we all invest in texh and capital return doesn't exist in this sector, only capital theft through dilution and SBC, but there are other ways stocks pay you back than stock price going up

SucklemyNuttle

> Amazon has some of the highest SBC out of any company What's your source for this? Based on my calculations, AMZN has SBC Of ~2.7% - significantly lower than many others tech, e.g. PLTR is at 15%(!), Meta at 10%, GOOGL 6%, MSFT at 4.3%...

Legitimate_Cut_6254

Amazon has some of the highest SBC out of any company resulting in nearly every pop being sold by Amazon employee's

Consistent-Brain-361

FY2026 was the last full year reported under the old SBC-excluding non-GAAP methodology. That is exactly why the reported FY2026 $24.27 and guided FY2027 $22.88–$23.12 look like earnings are declining when they really aren't comparable. On the old basis, FY2027 guidance is about: $22.88–$23.12 + $5.81 SBC impact = $28.69–$28.93 So the economically comparable progression remains approximately: $20.15 → $24.27 → $28.81, **or roughly +20% and then +19% EPS growth.**

Fancy_Cattle_5914

So INTU included SBC in their guidance for the first time, which is why they missed guidance. If you remove the SBC, they have a pretty healthy triple beat. Why tf is it down 10%??? Was already down 40% YTD, now 50%. Massive opportunity?

Individual_Limit_701

It depends entirely on what the non-cash expense is If it's depreciation, it's just accounting for past capex. But for companies like Roblox, the massive non-cash expense is usually Stock-Based Compensation (SBC). While SBC doesn't burn liquid cash today, it dilutes existing shareholders. You are essentially paying employees with pieces of your equity instead of 💵

EuroRichTrader

With that SBC programme execs have, they utterly deserve it.

-CoachMcGuirk-

Just a reminder, SBC is a Zionist who fully supports Israel’s genocide of Palestinians in Gaza.

Sea-Rip-9635

SBC is a racist POS. He is playing on and complimenting propaganda being fed through media conglomerates ho have their agendas dictated/influenced by the same folks that influence governments with big money to manufacture consent for starting trouble with these states. There isnt a state on this planet that is free of some sort of f*ckery towards it's citisens and/or citisens of other states. If it wasn't obvious then, it should be now.

SamLeCoyote_Fix_1

Oups... In Q2 alone: ​​$265.2 million from SBC, representing approximately 25% of the quarterly net profit of $1.066 billion.

SamLeCoyote_Fix_1

In Q2 alone: ​​$265.2 million from SBC, representing approximately 25% of the quarterly net profit of $1.066 billion.

jcool9

Where are you getting ‘billions every quarter’ from? Figma’s total SBC for Q2 was \~$148M across the entire company, not billions paid to the CEO. And Dylan Field recently voluntarily forfeited \~2.4M shares of his CEO award with no replacement award. There are legitimate concerns about Figma’s SBC/dilution, but exaggerating it by orders of magnitude doesn’t help the argument. SBC is common for growth tech companies across the board, it’s just a matter of how it’s addressed over time.

jcool9

That’s the GAAP loss, but Figma generated $53M in free cash flow in the same quarter. The difference is largely SBC. The legitimate concern is dilution from SBC, not cash burn. 1.7B on balance sheet

ga643953

Oh yeah, I just checked, that one was from Yipit. But even so, the same third party has been tracking and estimating their run rate. If they're projecting a slow down using the same metrics, then it still doesn't look good. Not to mention, these are just revenue numbers. We haven't even seen how bad the margins and SBC are. I'm not buying this black box company at $2 trillion valuation.

carnitas_mondays

$24B annual stock-based compensation expense not reflected in expenses, off-balance sheet capex commitments, on top of high capex are reasons this might not be a value at current prices. i have been in and out of meta for a decade. i’ll be interested closer to the $350 range. if you adjust expenses to reflect SBC, they aren’t as compelling as MSFT, AMZN, or GOOG.

DontForgetTheDivy

TTD's SBC is wild.

Erocdotusa

Step 1: fire Wong, remove the SBC

cultoftheclave

where is the daily RDDT C-Suite SBC share dump? oh right, that's only on days with good news

Ryu6912

Don't worry Jen Wong and the other insiders will take advantage of this pump to dump more of their SBC. It's okay it's 'healthy!' /s

Remarkable_Cat_8696

Yea, SBC makes up a large portion of its ocf. It seems like they dilute shareholders ,don't offset it with buybacks and pay no dividends...