Much has been written about how massive and influential a handful of U.S. tech giants have collectively become. Observers have pointed to how their sales have grown to eye-popping levels, their massive and expanding reach in everything from consumer electronics to advertising to online services, and how their tremendous resources often make it very difficult for smaller rivals to compete.

Much has also naturally been written about how markets have rewarded these tech giants for their success by steadily propelling their shares higher, leading them to account for a giant portion of the Nasdaq's total market cap. Between them, Apple Inc. (AAPL) , Alphabet Inc./Google (GOOGL) , Microsoft Corp. (MSFT) , Facebook Inc.  (FB) and Amazon.com Inc.  (AMZN) are now worth about $3 trillion, or more than the annual GDP of every country except the U.S., China, Japan and Germany.

Such a combined market is of course not only a reflection of the growth the companies have delivered to date, but also the confidence investors have in their long-term competitive positions. Some of these tech giants -- Amazon, Facebook and Google come to mind -- have chosen to cash in on Wall Street's faith in them by willingly depressing near-term profits to make big long-term investments.

And now, all five are confident markets won't mind if they report only relatively low earnings figures relying on generally-accepted accounting principles (GAAP), rather than also reporting higher adjusted (non-GAAP) earnings figures that often back out items such as stock compensation, restructuring charges and acquisition write-downs.

On Thursday, Microsoft became the latest big-name tech company to announce it will only report using GAAP. As it is, the software giant had taken a relatively conservative approach to its non-GAAP reporting: While its non-GAAP figures would record deferred Windows 10 revenue on an up-front basis and back out "impairment and restructuring expenses," they still included stock compensation expenses, something that many of its tech peers don't do with their non-GAAP numbers. Microsoft's stock comp totaled $3.3 billion in fiscal 2017, which ended in June, up from $2.7 billion in fiscal 2016.

A Microsoft store.
A Microsoft store.

Nonetheless, Microsoft's non-GAAP numbers have been considerably stronger than its GAAP numbers. In fiscal 2017, the company reported GAAP revenue of $90 billion and EPS of $2.71, and non-GAAP revenue of $96.7 billion and EPS of $3.31 (Windows 10 revenue recognition was the biggest factor in the difference). To put this into context, Microsoft is trading for 22 times its trailing non-GAAP EPS, but 27 times its trailing GAAP EPS.

Jim Cramer and the AAP team hold positions in Apple, Alphabet and Facebook for their Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AAPL, GOOGL or FB? Learn more now.

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Microsoft's move comes just a few months after Facebook and Alphabet shifted to GAAP-only reporting. And for these companies as well, the impact of the shift is pretty big. Facebook posted 2016 GAAP EPS of $3.49 and non-GAAP EPS of $4.23, while Alphabet had 2016 GAAP EPS of $27.85 and non-GAAP EPS of $34.73.

Stock expenses -- fueled in large part by aggressive R&D hiring -- are the biggest reason why both companies' non-GAAP earnings are much stronger than their GAAP earnings. Facebook's stock comp totaled $3.2 billion in 2016, and Alphabet's $6.7 billion.

Apple and Amazon have long been reporting earnings only in GAAP, and it certainly doesn't look as if their shares have suffered any serious ill effects from it. Analysts estimate that for Apple's fiscal 2016, which ended in September 2016, EPS would have totaled $9.08 if it used non-GAAP reporting that backed out stock compensation, rather than the reported $8.31. Amazon, in spite of its breakneck spending pace, is estimated to have produced $11.05 in 2016 non-GAAP EPS, compared with a reported $4.90.

As tech giants learn to stop worrying and love GAAP, it's possible that many relatively smaller tech firms that have earned a healthy amount of investor trust will do the same. Chip giant Texas Instruments Inc.  (TXN) has been only reporting EPS in GAAP for a while. And online travel giant Priceline Group Inc. (PCLN) recently took a step in this direction: Though still reporting both GAAP and non-GAAP earnings, Priceline's non-GAAP numbers no longer back out stock expenses.

If companies like Nvidia Corp. (NVDA) , Applied Materials Inc. (AMAT) and PayPal Holdings Inc. (PYPL)   also got on the GAAP bandwagon, it's hard to imagine markets being all that bothered by it, considering how comfortable they've been with the reporting decisions of the tech giants. If equity markets remain strong, look for more tech companies to follow Apple and Amazon's trendsetting ways later this year.

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