FCF

cantTankThisFox

Plus they have so much FCF they would buy each other first

whatever_1232342

Yes it is. FCF is not affected by useful-life assumptions. Maybe at least use a payed model.

Important-Range166

Sure open source means that everyone has access to a model to fine tune it for their needs. It means more people use AI and helps the hyperscalers because open sourced workloads don’t cost as much to run and can even be done on older mold chips. It helps them pay off the cost of infrastructure spend by making money faster because open sourced workloads aren’t as expensive for customers. Open AI and Anthropic are very much against open source or put another way AI distillation because they don’t make as much money if someone doesn’t used their model that is closed source. SPE obligations are a contingency. It means that if someone can’t pay for something, you will pay for it for them. The dangerous thing is who are the obligations with and why? I would guess Open AI primarily because that was MSFT’s exclusive partner until this year. So just to take this further, if Open AI can’t pay for $350 billion of obligations and flounders financially, MEFT owes $350 billion. To put that in prospective, that is more than all of the capex spend this year for MSFT up in smoke. FCF would instantly disappear and the balance sheet would become more leveraged. Their credit rating would drop, their ability to get more financing would weaken, and they would be instantly behind not just in terms of capex buildout or FCF, but revenue as well. I have a sneaky suspicion that a large part of this revenue they are collecting is coming from Open AI. Nvidia just agreed to backstop Open AI with compute and Nvidia dropped 5%. This is called a B2B loop.

spicykimchi_inmybutt

They stretched data center lease depreciation from 15 years to 25 years and shifted future leases from finance to operating without actually reducing capex, which led to 'positive' FCF. The market loved that and pumped it. Someone smarter than me can probably explain it better

charon-the-boatman

Okay so the call was good. Revenue **up** **18%**, operating income **up** **18%**, EPS **up** **23%**, Microsoft Cloud revenue **up** **27%**, and Azure **up** **43%**. That Azure number is the big one! Copilot also looks very good. Paid seats went from **20M+ to 30M+** in one quarter! That’s still low penetration compared to the full M365 base, but the growth rate here is amazing. Backlog also moved from **$627B to $678B**, so demand still looks strong. Q4 capex was still around **$41B**, and FCF is still not tracking earnings because so much cash is going into AI/data centers. But the demand side looks much better now and it again shows Microsoft is very well positioned to win the AI monitization race. I'm fully in.

NoProfessional4650

Gotta say I’m impressed w MSFT for holding its pump for so long. Thought it would fade immediately like everything else in this fucking market. My hypothesis is it’s because MSFT addressed the biggest fear in the market rn — that AI can’t be monetized effectively. FCF beat + sustained capex basically breaks that entire narrative which seems to be giving the market the lifeline it needed.

random-meme422

META lost most of their FCF and all they really have to show for it is “trust me it’s coming” whereas MSFT lowered capex spend a bit while blasting all expectations and actively showing ROI on their AI spend.

johnec4

that MSFT capex number isn't discipline, it's an accounting change. they stretched data center lease depreciation from 15 years to 25 and shifted more future leases from finance to operating, and said outright that actual spending plans are unchanged. $190B to $175B is a pencil, not a decision. same quarter they signed $130B+ of new data center leases and disclosed $329B of leases that haven't even commenced. the FY27 "positive FCF" guide rides on the same useful-life extension. reported Q4 FCF was $19.6B, down 23% yoy. and google's chart is not unclear lol. GOOGL +75% over 52 weeks vs MSFT -22.5% going into the print. google has been the megacap trade. microsoft was the one everybody gave up on. picking MSFT. it's a valuation call, that's it.

ga643953

At least they haven't gone FCF negative like some company I know.

thelegendJimmy27

You still think MSFT is issuing shares over the next 2 years? They have over $75B in cash, and can gain an extra $15B from stopping share repurchases. Confirmed they will be FCF positive for all of FY27 after deducting capex. Also one of 2 US companies with a AAA credit rating. So let me get this straight, not only does MSFT print free cash flow after deducting capex, they also have over $75B in cash to deploy and $15B in savings by pausing share buybacks. On top of that, it's one of the most credit worth companies in the US which can easily tap the debt markets. You truly are the greatest regard with the hubris to match. You absolute moronic dimwit. I will keep you updated after every quarterly earnings to remind you how confidently moronic you are. You absolute imbecile.

cucci_mane1

Top line growth of 25-30% YoY for a company with revenue base of >$200B is very impressive. Forward PE after this drop is 15-16x. Stock is dropping bc FCF fell 90% YoY due to capex and legal fees for their addiction trial. These legal fees aren't recurring costs each year. Market is skeptical of Zuck as he has awful track record of Metaverse disaster. But these are short term noise imo. As long as the company grows top line 20%+ YoY next several years, stock will hit well north of $1k a share. BTW 8-10% fall after ER is common for tech stocks. I mean stocks can rip 20% after ER but fall 30-40% after that pop in subsequent weeks... ex: MU

cantTankThisFox

Just so confused what the market wants from AAPL earnings ... Like yes they will probably show good growth and beat expectations slightly with high FCF. But does that mean they deserve a 40 P/E ratio? How much farther can this stock pump before everyone thinks it is way too over valued and starts selling?

Sufficient_Habit5091

>"Extending the estimated useful life of our data centers from 15 to 25 years" Hahaha >Expected to be FCF positive in 2027, despite the increase in capex Cool story bro! >The industry has under-built historically for the wave of AI adoption Riiight. So under-built which is why only 2% of companies say they see measurable increase in profits or reduction in costs from AI.

Reggio_Calabria

I can’t even imagine how markets would have reacted to Microsoft letting open the door to not being FCF positive in 2027 while having nothing to show for the capex. Pretending they would be FCF negative with their current product offering and service level is as ridiculous as Microsoft being FCF neg in 2005 due to Clippy capex. I am worried about the true fragility of the AI bubble if bulls are grasping such straws.

IvoryTowerResident

from Serenity on X Microsoft: \- Expected to be FCF positive in 2027, despite the increase in capex (extremely positive for AI buildout that it's funded by operating income) \- "Free cash flow was $19.6 billion, reflecting higher capital expenditures" \- Quartely capex was $41B, roughly 2/3rds were "short lived assets, primarily CPUs and GPUs" \- Expects capex spend will be over $50 billion for next quarter \- Capex Guidance at \~$175 billion and 2027 capex roughly the same. Spending plans unchanged and in line. \- "Extending the estimated useful life of our data centers from 15 to 25 years" \- "We will be among the first cloud providers to deploy next generation rack-scale AI infrastructure based on Meta: \- Capex $130-$145 billion (narrowed range), from $125B-$145B. \- Meta is receiving offers at a "significant premium" to what they paid for it (compute scarcity, positive for neoclouds like ) \- Expects significant portion of compute (like the 1 GW DC in El Paso) to develop internal models. \- Meta has multiple ROI-positive uses for additional compute across its core business (internally, not Meta Compute) \- "Finally, we believe that overall industry capacity is going to remain tight for the foreseeable future" \- "The industry has under-built historically for the wave of AI adoption, making existing capacity, including our own, extremely valuable" - Susan Li

Electrical_Life9697

Google has negative FCF with capex being funded by financing MSFT Doesnt have this issue Hence why GOOG down MSFT up

Electrical_Life9697

FCF is all that matters

MrForever_Alone69

META is poor now with that horrendous FCF and MSFT finally overturned its bad stonk price streak… what a time to be alive

TypicalAvgStudent

the only thing im concerned about is big money is not liking capex increases rn -- google first time ever neg FCF, META missed on report lol -- so if amzn increases capex might get punished -- lets see --

SpongEWorTHiebOb

It reached $425 at some point. All the analysts congratulated them on a great quarter. Azure growth expected at 45% next quarter. Capex was slightly below their guidance for this past quarter. Capex is estimated at $50 Billion next quarter but no share sales. No bond issues and they expect to remain FCF positive for FY 2027. They are the cleanest shirt in the hyper scaler laundry.

Cav829

Yes, but it wasn't just an amazing bottom line. They also said they weren't raising CapEx forecasts. It was as A+ an earnings report as you can get. Google in comparison had fake numbers: using one-time investments to cook the EPS number even as they would have missed without it and announcing huge CapEx increases. Compare that to last quarter where Google had an insane legitimate beat and Amazon meanwhile went FCF negative. And meanwhile Meta is just a lost child in an adult world.

SpongEWorTHiebOb

No share sales. No bond issues. Expect to remain FCF positive in 2027. Azure growth of 45% expected in next quarter. Emphasis on providing commercial customers choice of models. Much better call than last one.

Top-Meaning2626

FCF negative, MSFT positive

Criticall16

Not sure if it’s a buying opportunity given Zucks history with cash burning. FCF is now below $1bn and DAP is also flat. Having said that, META is still a better buy than OpenAI which is selling LLMs that are basically commodities at this point.

JefeDiez

I don't think so. I still have quite a few shares but the company's books are not looking good. Looking at the chart we are still up on the 2 year with less FCF than 2 years ago- I see it going below the 2 year like MSFT before it begins an uptrend potentially after October earnings but more likely in 2027.

Boss1010

Their low end moved up and it comprises a large part of their FCF

Electrical_Life9697

Why do ppl keep repeating this Price is forward looking, the market already knew it would be sold out for years, hence the massive gains in the past few months that happened aldy Market is pricing risk of memory still being in a commodity cycle especially with China news Market is also pricing in risk of funding cuts. Google FCF aldy went negative and all it takes is one hyperscaler to cut capex and it’s all over

Electrical_Life9697

Price is forward looking, the market already knew it would be sold out for years, hence the 300% gains in a few months Market is pricing risk of memory still being in a commodity cycle especially with China news Market is also pricing in risk of funding cuts. Google FCF aldy went negative and all it takes is one hyperscaler to cut capex and it’s all over

nordik1

FCF down 91%

MitchCurry

TYL spent over $500MM on buybacks in Q2 and retired 5.6% of their shares outstanding and authorized a new $1.5B buyback plan. Meanwhile SaaS revenue was over 20% growth for the 22nd consecutive quarter, showing excellent execution on moving government services to the cloud. SaaS bookings hit a new quarterly high so pipeline is strong . FCF was up nearly 35% on only 8.2% revenue growth which shows their exceptional operating leverage. And the 8.2% revenue growth being so low is because migration from license to SaaS is accelerating which means license and maintenance revenue is falling fast than legacy maintenance typically churns.  All in all, outstanding quarter in my opinion. Up 2% AH. This continues to be one of my favorite SaaS companies that I think will benefit from, rather than be disrupted by, AI. 

Top-Meaning2626

Another mag7 with $0 FCF

Reddit_Wombat

They are all zero or negative FCF. The next 3-5 years of increasing capex was already priced in to NVDA and all semis - now it looks unsustainable

SpongEWorTHiebOb

MSFT crushed earnings: Major beat across the board. Revenue of $90B exceeded estimate of $87.6 B for the quarter. EPS actual of $4.74 way higher than estimate of $4.24. Cloud revenue increased by 27% year over year. Capex for quarter was below guidance actual was $35.8 B, they guided for $40 Billion. Operating income increased by 18% which also exceeded guidance. FCF was a positive $19.6 Billion. Only hyperscaler with positive FCF for latest quarter.

ContemplatingGavre

Yea, multiple compression. 2021 ADBE P/FCF: 50 Today: 10 2021 NOW P/FCF: 80 Today: 20 2021 INTU P/FCF: 50 Today: 15 Over this same time free cash flow has gone up 50%, 150%, and 100% respectively. These are not garbage companies. The market overpriced them and then underpriced them and will soon price them appropriately.

AdMysterious8464

New money is needed to sustain stock prices and when everybody is in the same trade it can only go down. That and the fact that all this buildout is being supported almost entirely by VC money and FCF of the hyperscalers. There is still no real AI or LLM product which generates profit that comes close to the amount of money being incinerated. Hyperscalers are increasingly taking on debt to finance this buildout and their stock prices are getting hammered, while bystanders (Apple) are running up. Their boards can fight the shareholders for a couple more quarters, but if their AI products don't start printing money soon, they will be forced to revert course

JabCrossE4E5Quark

Great EPS from accounting BS, but horrendous FCF because you cant account that away

avsfan0829

JPMorgan warns next round of selling will hit indexes beyond just single stocks: "Focus remains firmly on the AI/Tech/MOMO unwind. Key concerns include competitive threats from China — open-source models and DUV production, even as China SPEs are down again today — as well as circular financing and the role of leverage. The widening in NVDA CDS, as the receiver of capex with rising FCF, is more concerning than the move in hyperscalers’ CDS. We maintain factor hedges because crowding risk has not fully cleared on our books. It is worth considering whether another leg lower from here could come with a more pronounced pickup in index correlation." - JPM Market Intel

PotadoLoveGun

Not on vibes, on EPS increases starting negative then $5, going to $10, then $20 and will be over $33/share after Aug 5th. Whether that is sustainable or not, thats debatable. The revenue and profit are real dollars, and cash is being added to the balance sheet. They had 3B in FCF last quarter

vish_NZ

I get what you’re saying, but these things are FCF machines and get the music needs to stop at some point, but these things shear amount of buybacks these guys can do in 2027 is wild. Obviously expansion/capacity capex will offset this, but in a base case do nothing and see your pipeline/LTAs out the amount of cash that will be brought in is staggering

Peanutbuttersaltine

Google had 1Q of negative FCF at like 4b. They have 250b in cash and marketable securities… Again, name me 1-2 AI stocks that are down in the year.

cantTankThisFox

No RAM is not going to be cheap again. China is not going to flood the markets either. The memory cartel is going to make so much money they are going to completely buy out their own companies with all the FCF.

music_is_gud

They won't, coz memory companies have the best FCF yield right now among all nasdaq companies and will do so for the next 2-3 years too. So in a way memory companies are best positioned to print cash of all companies.

Scriptum_

Oh yeah, I'm sure mega-caps posting negative FCF is totally sustainable... ////s

LarryStink

Unless theres a surprise hike (99.9% chance of pause given every fed meeting since fed fund futures existed has been in line with market pricing) fomc wont move markets much. The AI narrative is the only thing that matters so all eyes will be on MSFT guidance, capex, and how much their FCF falls.

mr_malifica

jesus dude... Free cash flow (FCF) measures the actual cash a company generates after paying for its operating expenses and capital expenditures (CapEx). When a company is in a **negative free cash flow** position, it means the total cash flowing out of the business during a specific period is greater than the cash flowing in from its regular operations.

mattyhtown

They’re also used to reporting negative FCF

jvaritek33c

Divergence is due to AI. Historical FCF charts won't tell the whole story here

Mammoth-Cry8936

The tell isn't Microsoft or Google spreads as those are pristine because they're funding with cash flow and have fortress balance sheets. It's one layer down: the neoclouds and the off-balance-sheet SPVs. When Meta or Oracle finances a datacenter through a JV so the debt doesn't hit the parent's books, that debt prices at what the market actually thinks of the project economics, stripped of the parent's credit halo. That's where the nervousness shows up. And the mechanism you're describing works more through the GPUs than the bonds. The whole model rides on depreciation schedules — if a chip is productive 6 years the math works, if it's obsolete in 3 the returns evaporate regardless of rates. Rates just make a fragile return profile more fragile. Where I'd push back: I don't think bonds are ahead of stocks. Equity already showed the crack - FCF prints going negative, people noticed. Both markets are staring at the same thing, credit's just quieter about it. I think the actual early warning isn't spreads. It's the move to off-balance-sheet financing itself. When you have to hide the debt to make the story work, that's the signal.

_hiddenscout

Mature companies can still be growth companies. Rather than focus if something is matured or not, you should just focus if the company is quality and if the valuation makes sense. I'm a GARPy investor, which means I want growth at a responsible price. Not sure why you brought up analyst estimates, that was never mentioned by me. Just added in the idea of using P/FCF, which gives you a better idea of how the company is valued. Like this is an example of a screener I've been using for years: [https://finviz.com/screener?v=111&f=fa\_epsqoq\_o5%2Cfa\_peg\_u2%2Cfa\_pfcf\_u40%2Cfa\_quickratio\_o1%2Cfa\_roi\_o10%2Cfa\_salesqoq\_o10&ft=2&o=industry](https://finviz.com/screener?v=111&f=fa_epsqoq_o5%2Cfa_peg_u2%2Cfa_pfcf_u40%2Cfa_quickratio_o1%2Cfa_roi_o10%2Cfa_salesqoq_o10&ft=2&o=industry) The list is around 133 companies with good ROIC, Quick Ratio, P/FCF, EPS Growth, Revenue Growth and PEG under 2.

_hiddenscout

I add in things like ROIC, PEG, Quick Ratio, P/FCF PEG is basically what Peter Lynch used to look at companies. Since PE doesn't include EPS Growth, PEG can get you a different look at growth names. ROIC is something that Buffet would look for in companies. Usually high ROIC companies show strong economic moats, efficient capital use, and powerful compounding growth without needing constant heavy reinvestment. A high quick ratio ensures a company has enough cash, marketable securities, and accounts receivable to easily cover its short-term debt without needing to sell inventory. This just shows me that management is good with inventory levels and debt. I think P/FCF also gives you a better insight into the company valuation than just PE

the_mammynun

Yeah OGI has been taken to the woodshed by BAT. The Sanity Group deal was an abomination. But even before that deal, OGIs profitability took a sharp turn. Unfortunate as they have some of the best indoor production assets and brands in canada. I hadn't realized CRON started posting positive FCF. Looks like their NI is still hit or miss, but they have the best balance sheet in the entire industry.

the_mammynun

I'm fully aware of the numbers. It's not a race and that's not Raj's style. HITI takes a disciplined approach to store site selection and funds organic store growth with free cash flow. No need for dilution.  When Trulieve deconsolidated their Arizona, PN rec assets, HITI did not announce that they were now the world leader in retail, even though it was technically true. I think ZG is jumping the gun especially because of the AGCO investigation would risk that title, giving it back to HITI. At any moment, Nasdaq could allow trulieve to reconsolidate, giving the title back to them. A major merger could also happen, sending any of these companies far from the #1 spot. Raj mentioned during the AMA that any new M&A in Canadian retail will likely resemble the recent deal, small 4-store acquisition in differentiated markets at around 4.5x EBITDA valuations. These deals are now typically funded via a 33/33/33 split of dilution, FCF, and debt. I'll be tuning into the SNDL earnings call today. Very curious to hear ZG comment on the AGCO investigation for the first time vocally.

kmouratidis

Google: +213% beat, profiting a lot from their investment in datacenters and finally having something to invest in that can yield the returns people were expecting of them to return Market: OMG, LOOK AT THAT CAPEX AND FCF, AI BUBBLE BAD, -5%!

PyloPower

What will the effect of WW3 be on hyperscaler FCF?

caprividog

It'd be hilarious if GOOG was the only one of MSFT, META, and AMZN to have negative FCF this quarter

PalantirImperator

Palantir has incredible growth, incredible net income, and expanding FCF. It's extremely expensive, but there's at least a reason behind it- it's not a shitco like Tesla.

lostmy2A

Maybe just rotation. . they are not spending all their FCF like other tech cos

mdh1119

I think this could be a shitty rest of the week without unexpected interventions. I don't believe The Guy anymore, and neither does them market based on how quickly the "We're meeting the Iranians" headline sold off. We now face BoJ and Fed decisions in the upcoming days factoring current and anticipated inflation of all of this in. All alongside no relief in sight for the hyperscalers, which still constitute a huge % of the S&P and NASDAQ, and have been unstable due to FCF depression by huge CAPEX that michael burry is also saying is partly being funded by debt that he now asserts is being held by insurance companies and pension funds that are compromised. On top of all this, Orange is still renewing fights with Europe and Canada, and I personally think there is a chance Russia could lash out after some pretty hard-hitting strategic strikes by Ukraine. I'm just saying, this is wacky stuff coming up

LarryStink

Remember when everyone bagged on AAPL because Tim Cook was "useless ceo, no new innovation, falling behind in AI race" well the lack of capex on AI from AAPL turned out to be the winning move, as all the hyperscalers who loaded their balance sheet, ran out of FCF, then started issuing equity to fund the buildout are now paying the price. Too early to call the 🫧 🪡  but risks are building. 

Sweaty_Platypus69

Msft and Meta is going to outdo Google on Capex spending.. just you watch.. (as a % of FCF)..

Scouty519

lol nice try but no bags here, just asking the question out loud. if FCF doesn't cut it anymore for these names what's your metric, actually curious

insightful_pancake

I don’t doubt they can. The problem is, the only value for memecoins is narrative. Once the narrative shifts, the value evaporates. I can buy NVIDIA with the expectation that some portion of its $120bn FCF will be returned to me or that the FCF will grow more and some portion of that future value will be returned to me. That is, the value is not just hype. With memecoins, the value is entirely hype. Once the hype dies down, the value evaporates, sometimes entirely.

Different_Reality643

This isn’t just any other company though. This is the second largest company in the world with a market cap of almost 5 trillion dollars that continues to grow that currently gets around 100 billion of FCF a year. If this was being financed by a company that doesn’t have FCF along with bad financials, then yes I think the concerns are valid. But Nvidia has a market cap of the total GDP of France and Mexico combined with the main mission of creating ai infrastructure.

LarryStink

Going balls deep on next friday exp puts. The AI debt load is finally coming home to roost.  Vol expanding and markets still down in light of the oil selloff today.  - Credit spreads are starting to widen with increasing momentum - Correlations rising after a 99th percentile low - News failure on record earnings so far as FCF evaporates and hyperscalers turn to equity issuance to further the ponzi.  Spy 700 2w

Valvador

> do you happen to know their FCF number I linked it in the original post. > For companies that are growing, looking at [Free Cash Flow](https://www.macrotrends.net/stocks/charts/RBLX/roblox/free-cash-flow) is better because it shows the immediate "how much money did they make" vs "how much they spent", without having to wait a year.

isospeedrix

U expect this sub to understand the diff between profit and FCF?

microdosingrn

FCF, buybacks, margins, stickiness, moat, literal money printing machine.

Lazy-Gene-7284

Ok great point, do you happen to know their FCF number ?

L1ME626

apple is huge beneficier of physical AI, and they dont need to waste all FCF into stupid AI model rat race. market appreciates this, + apple hitting that double digit growth again + price increases

Successful_Car1670

Flight to safety disguised as not spending all FCF on capex. Look at a lot of other “value stocks” performance this year

According-Essay-4973

Riddle me this. If majors are FCF negative on capex build, then capex has to come down. It's a fact. Can't be negative FCF forever. Hence semis fooked eventually 

ga643953

Sir, you are very biased against PLTR. I've taken a fuck ton of profits over the past 2 years but it's still 30% of my position due to how much it's grown. When the CEO said they are going to hit 15-18b FCF in 28 (assuming 51% FCF margin) and they're already projected to get to 7b revenue after growing 71% this year and guiding for another 100% growth next year, they'd at least have to hit another 100% growth in 28 to get to 15b FCF. I was initially skeptical when I heard it on CNBC, because it'd mean the stock is actually undervalued at the current price and I did not believe it'd be possible for them to maintain that kind of growth. But after seeing their ZETA partnership and also digging more into their customers' revenue contribution, I'm now starting to get bullish again because there is indeed a path toward that FCF within the timeframe they've given. They've also been under-promising and over-delivering since they launched AIP. I don't get why you say the management can't be trusted when you don't provide any actual reasoning. This is Alex Karp we're talking about, not Elon.

tryexceptifnot1try

I'm wondering what will happen when NVDA reports record profits and negative FCF like Google. I don't think it will happen, but I didn't see GOOG coming either

looool_k_libtard

Look at how dumb the average bull is. There is NO MORE GOOD NEWS. IRAN WILL NOT END ANY TIME SOON BECAUSE 🥭 WONT ACCEPT A LOSS AND IRAN WINS THE LONGER THIS DRAGS ON. ITS EITHER BOOTS ON THE GROUND OR IRAN MAKES BILLIONS TOLLING IT WHILE WE LEAVE. CAPEX IS EXPLODING NO MORE FCF FOR MAG 7. This is the start of a 30 year bear market so prepare accordingly.

theonewiththat

Market is punishing AI capex, and is consistent on that front. Remember how AMZN was fked due to their capex spend earlier last quarter? All institutions have to hedge against any debt or risk of default on any of this AI capex, especially if it puts a company into negative FCF. MAG7 invest in AI, debt hedging pulls everyone down. But conversely, if they reduce AI Capex, or get out of AI, all the downstream shovels get fked. But at least they do get a boost: look at AAPL. If interest rates rise, those with debt (looking at you ORCL) is gonna get a really bad day.

Dingis__Khan

Meta and Microsoft will raise capex when reporting earnings and also enter negative FCF with uncertain returns on AI this will be a deadcat bounce we're about to see a 10 percent correction.

Etherius

I’m hoping Google keeps tanking Id kill to buy them at a discount. So many regards whining about FCF completely forget just who the fuck they’re talking about Google, Amazon, and Facebook are the progenitors of what I call the “plant and harvest” capex cycle.

drummer820

Feels like more in the financial press should be asking questions like “how can a company backstop a data center for a single vendor for more money than their annual revenue?”, to say nothing of actual profit/FCF. No one is denying that Nvidia makes a shit load of money, but this is getting ri-goddamn-diculous

banzanar

Buy. I'm sure it won't go to absolute shit in the next year. Beat GAAP EPS, got GAAP profit, has +25% or something organic growth with their cloud, free cash flow is what seems good, 2Q FCF rose to +20% something reaching €3.0B, H1 FCF - €6.3B, guidance for FCF full year is close to €10B. Debt/equity 0.17, nearly debt free, buys back shares and has practically no dilution. Trailing PE 24.91x, forward PE 20.87x, EV/EBITDA 15.55x. Stock down by 40% something in the past 52W. Roic is >15%. Frankly dude, just buy it. Double check the numbers, I might be wrong, but nonetheless they are doing very well financially.

wafflepiezz

Lol bro thinks he’s financially literate when doesn’t know the difference between FCF and Capex spending.

yourgirl696969

Pausing or reducing capex means you’ll fall behind the race go extinct. Google is leading the way and literally just raised capex guidance this year and said it’ll significantly increase next year. They’re already seeing the ROI on it with cloud growth at 83% and half a trillion in backlog. Capex spending isn’t slowing down anytime soon. Eventually investors have to stop panicking about FCF and realize the ROI that’s happening is just lagging a year or two behind the capex spending

Itchy_Big_7995

We’re just a few bucks away from birkshire’s avg price (if they haven’t liquidated already on negative FCF news that is)… do with this info what you will

Big_Crab_7923

Your growth estimate for Nvidia feels like the whole model is riding on that one variable, if you drop it even to 15% the ranking changes a lot. Not saying it's wrong just that the output is super sensitive to the most subjective input Also curious how you actually normalize FCF yield across a cycle for companies like Micron where the swings are massive, do you take a 5 year average or something more fancy

Etherius

FCF is the metric short term profit-chasers go after That’s not investing.

milkplantation

Nah. FCF yield is widely considered one of the most important valuation metrics in all of investing. Perfectly reasonable for the market to punish Google like they have recently (-20% off ATH) The market knows exactly what it wants. I'm surprised you haven't been able to put it together. They want large investment in new technologies and the monetization of these technologies to prove they can generate durable, high-margin profit. The longer their capex increases without the investment outpacing the infrastructure bill, the more the super scalers will be punished. AI hardware depreciates rapidly. If super scalers build out massive compute capacity today that loses its value before generating durable, high margin profits, those costs will erode earnings for years to come. "Record revenues" doesn't mean shit in this environment.

Etherius

Of course they’re FCF negative They’re doing it on purpose. What an absolutely bonkers criticism.

Sweaty_Platypus69

Hyperscalers are spending so much that they are having negative FCF. I.e. They need to borrow money either issuing bonds or diluting share holders. (See Google) Likely Msft and Meta & Amazon will join the club. None of them are saving a single penny.

icydragon_12

I'm a professional analyst but don't cover this sector/stock. Recently I built out my meta model, since I'm considering it for my PA. In this first step, I look at the revenue mechanics based on company disclosure (DAP x impressions per DAP = Total ad impressions x Average price per ad = ad rev), a full fin model and a DCF. I calibrate it to consensus, and then look at intrinsic value based on price target setting methodology (i.e. the NPV/sh 12 months from now), which came out to \~$850. The revenue modelling made one thing pretty clear though, METAs revenue growth at this point, is no longer from DAP growth - basically everybody in the world who can use technology and wants to be on their apps is already on one. Their real torque to rev can only come from impressions growth and price per a growth. and on this front, to get to their current share price, you'd have to assume that these rates moderate considerably from current levels. Then I consider.. what's in consensus that might be way off from reality. And as you mentioned, capex, and really FCF are a big question mark. This is a big part of why I'm not piling into the stock just yet. Based on my model, 2026 and 2027 are basically 0 FCF, and this seems to be what the market is really focused on. If you're really a 10 year horizon type of guy, I'd say go for it. In reality, the vast majority of the world's money is manged in 12 month horizons, and this actually can provide true long term investors with a great arbitrage opportunity. Personally, I think that the capex story will continue to weigh on the stock until at least 2H 27.

Camile_Washington

There is no doubt Netflix is still a good business, but the question is what multiple the market is willing to pay for it. Revenue, margins, and FCF still look strong, but a premium growth multiple is harder to defend if engagement and subscriber growth keep slowing. I checked the financials on moomoo after the drop, and that's the part I'm weighing.

HulksInvinciblePants

There may be some room, but as last week’s market activity, 2 hikes by December sits at 65% with one hike next month almost entirely priced in. DCF adjustments and oil as an input were susbstantial factors in all that. Capex has been an earnings thorn for the last year, but outside of Oracle, every exposed tech company has enough FCF to cover their obligation in a year’s time. The nominal values are staggering, but the math isn’t.

colts_guy

Yes, but they are different beasts. The market got spooked about GOOG’s first negative quarterly FCF since its IPO. Didn't bother me; I gladly bought more.

git0ffmylawnm8

Google blew the socks off earnings expectations and have negative FCF even though they need to spend money building data centers for growing cloud demand. There's no way in hell MSFT or META having a better earnings story than Google. Expect drops

WorkSucks135

Everything you said can be true but still not be a bubble. For one there are too many people already betting against it. A bubble is impossible if some critical mass thinks there's a bubble. The other thing the majority of the AI buildout is being funded with FCF of companies whose prices have been rightfully suppressed for doing so, and whose current valuations are quite reasonable. Ironically, outside of Tesla, Apple is the most richly priced of the Mag7 and have commanded that premium as some sort of flight to quality as they haven't been materially participating in the AI buildout. The current PE of the S&P is only moderately elevated over historical norms, and less so when you take into account accounting standards shifting in the 2000s that make stock appear richer in valuation than h istorically.  https://www.multpl.com/s-p-500-pe-ratio

teslaTools

semis capex hitting the P&L next year is gonna be ugly, especially if hyperscaler orders soften even a little. rotation happens fast when the FCF story cracks.

No_Cell6708

It's cheap until you consider the current state of the balance sheet. Market cap might have dropped to $16b but enterprise value is a whopping $113B lol. That FCF yield suddenly isn't so hot. If what people have said is accurate about them spending $70+B on buybacks, then they dun goofed lol

Best-Bodybuilder9015

Burning cash to build CapEX for future hopium, that’s turning FCF negative, yes problem

account-names

GOOG has FCF of I think negative 8.5B. Tell me how it is not a growth stock firm? /s

superhappykid

Yay another -10% next week. Wait until MSFT raises Capex and goes into Negative FCF, another -10%.

looool_k_libtard

Google rallied finally after doing nothing for 4 years and they decide to go FCF negative for the first time in the history of the company. They’re going to be acquired by Allbirds soon.

HAL-_-9001

Google is an excellent company. I'm bullish on their prospects long term. I merely have questions in the short/medium term. It's undeniable AI is benefitting them but it's not material compared to their Capex outlay atm. They just raised Capex guidance this year to about $200B. It will be significantly increased for next year. Likely around $300B. FCF will likely decline to tens of billions. Another capital raise is a high probability. If fang stocks declined due to high Capex, what will they do when they spend even more this year and especially next year? I'd rather invest in the plays that are directly receiving and monetizing that Capex from the hyperscalers.