Neutral impactResults
Why Warren Buffett and Charlie Munger don't like EBITDA as an earnings metric
Economic Times 1 hr ago·22 Jul 2026, 11:01 am
Warren Buffett and Charlie Munger have long criticized EBITDA, or Earnings Before Interest, Taxes, Depreciation, and Amortization, as a flawed measure of a company's true profitability. They argue that ignoring depreciation and amortization—a real cost of doing business—can paint an overly optimistic picture of a company's financial health. This metric is popular in the tech sector because it excludes non-cash charges, but the legendary investors warn it may be used to mislead investors about a firm's actual earnings power.
For investors, this highlights the importance of looking beyond headline numbers. While EBITDA is useful for comparing capital-intensive industries, it should not be the sole metric for assessing a company's performance. Relying on it can obscure the true cash flow required to maintain and grow a business. Understanding this distinction helps investors make more informed decisions by focusing on metrics that reflect actual economic reality.
Key takeaways
- Category: Results.
Why it matters
A routine update. Use the price and stock snapshot to gauge how the market is responding.
