What is EBITDA?

What the letters stand for

Earnings Before Interest, Taxes, Depreciation and Amortization. Depreciation spreads out the cost of physical things like warehouses and servers, and amortization does the same for things you can't touch, like patents.

Worked out on Amazon

Start with profit after tax and add back what EBITDA ignores. The year ended in December 2025.

Why ignore these lines?

Interest depends on how the company chose to borrow, not on how well the business is doing.

Tax depends on the country and its rules.

Depreciation isn't a payment that year. If a company buys a $100 server meant to last ten years, the cost is often booked at $10 a year, although the money went out at once.

Without these lines, it is easier to compare two companies in one industry, even if they have borrowed different amounts. That is why the measure is common when companies are bought and sold, and in businesses with heavy networks and buildings, where depreciation is large.

EBITDA divided by revenue is the EBITDA margin.

What EBITDA leaves out

EBITDA looks like money left over, but it isn't. Interest and tax must be paid, and servers eventually have to be replaced. Amazon spent $132 billion on capital projects the same year, equal to 80% of EBITDA. That is the line in the cash flow statement, and a company's own measure of investment can count differently. What was really left shows up in cash flow.

So two companies with the same EBITDA can earn very different amounts. The one that has to invest the most and pay the most interest has the least left.

Companies often also report their own adjusted EBITDA, removing costs they consider temporary. It can differ from this calculation, so read what it includes.

More numbers are on the Amazon stock page.