Translation: Adjusted Net Income = Adjusted Net Income.

Simplified definition: It is a financial measure that shows a company’s underlying earnings generated solely from its core operating activities, after excluding any exceptional or non-recurring gains or losses. In other words, it is the "clear mirror" that reveals the company’s actual performance to investors, without distorting the picture through temporary events such as selling an asset or paying an unexpected legal fine. It is used to assess how sustainable the company’s earnings will be in the future.

How is it calculated? Adjusted Net Income = (Reported Net Income) ± (Exceptional and non-recurring items)

Example: If a company reports net income of SAR 150 million, but a review of its financial statements shows that SAR 50 million of this profit came from selling land owned by the company (an exceptional event that will not recur next year), then Adjusted Net Income equals SAR 100 million (150 - 50). This means that the actual sustainable earnings generated by the company’s core business amount to only SAR 100 million.

What does it mean for you?

  • Assessing true performance: It helps investors and analysts determine whether a company is achieving sustainable growth from its core operations (such as extracting and selling oil in the case of Aramco), or whether its earnings are merely a temporary "spike" caused by an exceptional event that will not recur.
  • Forecasting the future: Because this measure excludes financial surprises—whether positive or negative—it is considered the more accurate tool for forecasting a company’s earnings in upcoming periods and making sound, long-term investment decisions.
  • Fair comparison: It enables comparisons of a company’s performance across different years, or with competitors in the same sector, in a fair and consistent manner, without the comparison being affected by temporary circumstances that may impact one company but not another.

Frequently asked question: Why not simply rely on the final "Net Income" figure reported in the financial statements? Why do we need to calculate this adjusted measure?

Answer: Because the final "Net Income" figure can sometimes be misleading. A company may report a huge jump in profits, suggesting outstanding operating success, but a closer examination may reveal that sales from its core business are declining and that the profits came solely from selling its old headquarters. The opposite is also true: a company may appear to be loss-making because it paid a one-time extraordinary fine, even though its sales are excellent. Therefore, Adjusted Net Income cuts through this fog and accurately measures the success or failure of the company’s management in its core business—much like assessing a person’s financial capacity based on their regular monthly salary rather than on a one-time inheritance.