FCF

Orennji

They have $16B in annual revenue and $2B in FCF. I don't see the comparison.

Prudent-Corgi3793

I use *en* dashes quite frequently because I read Strunk & White and an early age. When I type on a keyboard, it gets stylized as an '--'. If I type on the Reddit mobile app, it gets processed into '—'. I personally enver use *em* dashes because I get lazy (namely, three characters instead of two), but despite agreeing that that may be a red flag, personally, I think this is clearly not AI for many reasons: - There are several clear typos that an LLM would not make (i.e. the use of apostrophes in the wrong place for a possessive) - More gratuitous use of commas than an LLM would use - More liberal use of non-standard abbreviations such as OAI - Formatting errors that a LLM would not commit (no space after "GPUs,CPUs". - Use of capitalization for emphasis (LLM would use markdown) - Shifts between somewhat lazy, succinct bullet-point style text to longer-prose (which is natural) - Non-standard formatting such as "100%+". - Initial metrics provided using non-breaking lines instead of bullet points or checkmarks and Xs. Now, I disagree with the OP's bullishness on ORCL, and he clearly took some effort to format his post, which most users do not do. But there's no doubt in mind that this was not written by AI. When most people reflexively say "AI slop", I think heuristically they mean "there are elements of this that are similar to the output of an LLM" without considering all the elements that are not. As for ORCL itself, I think it's reasonable from a forward P/E valuation standpoint and has a lot of upside/growth potential if it ever converts its backlog into real revenues. But it also checks too many of my red flags--insane debt (especially compared to sector peers), negative FCF, highly negative momentum, execution risk, low margins, concentrated risk in single party, history of optimistic forward guidance, and bearish sentiment in the overall sector in general. There's a world in which I think ORCL delivers positive returns, but it's one in which GOOGL, MSFT, and AMZN also do as well with much better risk-adjusted returns, and I'd rather just stay invested in those names with leverage.

Prudent-Corgi3793

I use *en* dashes quite frequently because I read Strunk & White and an early age. When I type on a keyboard, it gets stylized as an '--'. If I type on the Reddit mobile app, it gets processed into '—'. I personally enver use *em* dashes because I get lazy. Personally, this is clearly not AI for many reasons: - There are several clear typos that an LLM would not make (i.e. the use of apostrophes in the wrong place for a possessive) - More gratuitous use of commas than an LLM would use - More liberal use of non-standard abbreviations such as OAI - Formatting errors that a LLM would not commit (no space after "GPUs,CPUs". - Use of capitalization for emphasis (LLM would use markdown) - Shifts between somewhat lazy, succinct bullet-point style text to longer-prose (which is natural) - Non-standard formatting such as "100%+". - Initial metrics provided using non-breaking lines instead of bullet points or checkmarks and Xs. Now, I disagree with the OP's bullishness on ORCL, and he clearly took some effort to format his post, which most users do not do. But there's no doubt in mind that this was not written by AI. When most people reflexively say "AI slop", I think heuristically they mean "there are elements of this that are similar to the output of an LLM" without considering all the elements that are not. As for ORCL itself, I think it's reasonable from a forward P/E valuation standpoint and has a lot of upside/growth potential if it ever converts its backlog into real revenues. But it also checks too many of my red flags--insane debt (especially compared to sector peers), negative FCF, highly negative momentum, execution risk, low margins, concentrated risk in single party, history of optimistic forward guidance, and bearish sentiment in the overall sector in general. There's a world in which I think ORCL delivers positive returns, but it's one in which GOOGL, MSFT, and AMZN also do as well with much better risk-adjusted returns, and I'd rather just stay invested in those names with leverage.

Crazy_Donkies

FCF =/= GAAP profits. We will see where they're going but I think AI has only just begun.

dimdada

I was looking at this stock today wondering if I should jump in where it’s trading at today. The negative FCF is a huge problem, unless someone can convince me otherwise.

andy897221

Have you checked the projected FCF of the hyperscalers?

New_Sympathy5203

So the bet is simple...cheap if the upmarket shift stabilizes revenue and a value trap if FCF keeps shrinking.

New_Sympathy5203

So the bet is simple...cheap if the upmarket shift stabilizes revenue and a value trap if FCF keeps shrinking.

-Authorised-

Fair points, and I'll take them head-on rather than dodge. SBC: yes, 2025 SBC was \~$51M. But two things. It's falling fast - it was \~$74M in 2024, so they cut it by a third in a year. And even if you fully expense every dollar of it against FCF, you still get \~$53M of clean FCF. Against a \~$140M enterprise value that's under 3x. The thesis holds even on your stricter measure. Dilution: the buyback authorization (\~$59.5M remaining) is ongoing and the trailing 12-month share count is now down, not up. The SBC is being mopped up, not left to run wild. The Q1 declines: active buyers down 18% and marketplace revenue down 14% are the low-value $5-gig transactional junk rolling off by design. That IS the thesis. Over the same period services revenue grew 30% and spend per buyer rose 15%. They're trading a pile of tiny gigs for fewer high-value projects. Revenue optics look worse, unit economics look better. Is it sustainable? They guide FY2026 adjusted EBITDA of $60-80M in a year they are openly calling a heavy investment/reset year. A business throwing off that kind of cash while re-architecting itself, with net cash worth most of the market cap, is not priced for "maybe the FCF holds." It's priced for terminal decline. Those are very different things, and that gap is the trade.

New_Sympathy5203

Cheap? Maybe. But the post ignores the main risk. 2025 FCF was 103M, but SBC was 51M, and shares still increased despite buybacks. In Q1 2026, active buyers fell 18%, marketplace revenue fell 14% and FCF fell 23%. So the question isn’t whether Fiverr looks cheap on last year's FCF. It’s whether that FCF is sustainable.

Sarah-Lucerll

$MSFT FCF is expected to nearly triple from \~$55B in 2027 to \~$165B by 2030 as Copilot scales across its existing enterprise customer base.

Market_Pro99

Two clocks on the FCF question: the cash is going out now (\~$190B), but the depreciation hit to earnings drags out 5-6 years. So even if demand holds, it weighs on reported earnings well after the cash outflow peaks. The market isn’t wrong that it shows up later, it’s arguing about whether later is priced. How long does the tolerance last? Usually right up until revenue decel and capex accel land in the same print. Capacity-constrained is the whole bull case, and it holds until it doesn’t. On your 2027 600s: right instinct to give the thesis room to resolve. Just watch the vol. If the capex fear fades slowly instead of in one repricing, you can be directionally right and still bleed as IV comes out.

Maleficent-Letter356

The FCF contraction is the real hangup and it is not going away this year or next. But thirty percent off the high for a company with this much pricing power and demand visibility seems like the market is asking for perfection on the spend timing

enbomot

Exactly. The market isn't saying "don't build AI infra, rather the multiple needs proof that the spend converts into durable FCF. Azure growth is great, but if every beat comes with a bigger capex bill, options traders are going to care more about guidance and cash flow than the headline numbers

Klutzy-Sea-4857

Your thesis is fine, but 600 calls by Dec 27 is a 55% move in 2 years on a mega cap. That is not a valuation trade, that is a momentum bet dressed up as one. If you actually believe the 20x forward story, LEAPs closer to ATM or just stock give you way better odds. FCF question: the market usually gives 3-4 quarters of grace, then wants to see unit economics on the AI revenue, not just top line growth.

obb223

I'm not sure I agree on the hyperscalers, money doesn't automatically rotate into them just because semi stocks are down. Over the next 5 years I think Goog, MSFT and AMZN will do very well but the next 1-2 years they could still struggle as lack of FCF is punished

ga643953

Of course it doesn't move 1 to 1 with the sector but the trend is the same. Are you really pretending you can't see what the market has been doing when they bid up chips and have to sell SaaS or the other way around everyday? As for why I can still tell you how the market will move, it's simply because the market has always been stupid. The market doesn't understand most sectors, either. But do they shoot before asking questions first? Is it really hard to interpret what the market is thinking based on the pattern and the price movements? NVDA and hyperscalers have way better businesses with greater revenue visibility and longevity the short term FCF beneficiaries. There is also no point in all this AI buildout if there is no application layer. But what has the market been since the beginning of the year? Sell everything to buy your memory names. If the forces driving the market isn't expertise and understanding for the sectors but hype, trends, and irrationality, then why would you need to be knowledgeable about the secotrs to know if something is a good investment after these stock have gone parabolic? The trade has already happened and I can assure you there are more people in these memory names that have no idea what HBM even does than those who do. The stock is not the business, otherwise everyone can simply do a spreadsheet exercise and outperform the market every year.

Cav829

I follow both cases. It's because the bulls are convinced there's this larger breakout signal about ready to get set off and they're desperate to not let it collapse as it'll be back to weeks of potential chop. Meanwhile the bears are not testing their luck because there's still enough sign money is rotating instead of outright leaving that they're not pushing their luck. It's funny because both cases end up on the same conclusion: either the semis recover, or we're boned. The money can rotate a bit, but there's no sector that can absorb the money that would have to come out of the semis if it falls apart that can carry us currently. Yeah, SaaS is massively oversold, but the CapEx is currently insane and with few exceptions the bottom line isn't matching the P/E you'd need to go to. Like how much more money can we put into AMZN when they're expected to hit negative FCF soon?

_hiddenscout

Oh I don't disagree, but I think looking at the fundamentals here paints a better picture of it being overvalued rather than just looking at that enterprise stuff. I'm just calling out that if a single team or two teams use a tool, it's possible for the company to say it's being used. It doesn't tell you the full story. Using fundamentals tells the same story, but it's actual a piece of data: [https://stockanalysis.com/stocks/fig/statistics/](https://stockanalysis.com/stocks/fig/statistics/) Forward PE is 85, PS is 9, P/FCF is 44 and PEG is 4.7. That 100% tells a story of a stock being overvalued.

clingbat

There isn't enough cash in the market to fund this hype long term. Private equity is already drying up and most of the big players FCF levels are dropping and/or they are taking on big debt themselves. I wouldn't want to be holding Oracle or Coreweave for example, but that's just me. And anyone who goes anywhere near an OpenAI IPO is insane.

drkgla

Question is how cheap do these get before they do share buybacks with all that FCF.

SuperSultan

And the Metaverse was 1% of its FCF too

Ethraelus

I’ve been buying with my new money. Not quite at the point of selling other stocks to buy, but to me it seems like a no-brainer: \- PE at 22 (historical lows, normally it’s 35) \- current investment which is reducing FCF is to cover committed demand (at a gross margin of \~30%) \- their software business is still healthy, sticky and growing at a reasonable \~8%

SteakEater137

Its weird seeing a company with +200% or more net income YoY but still down like 15% stock price during the same period. Oh and with strong PE, growth, FCF, etc Whats even the value of a stock based on now, really?

MC1065

That's a very interesting way of looking at things but unfortunately it's highly unlikely things will shake out that way. Firstly, these companies (the hyperscalers as they're called) have invested tons of capex which is not reflected in their books unless you're looking at free cashflow. They've bought a ton of GPUs but haven't taken them out of the box, and to them that means depreciation hasn't started, effectively making the purchase free. But once the crash happens, they're either going to have to start depreciating all of them or take an impairment (basically writing them off as worthless) to reflect their new value of $0. Obviously, this is going to have a negative effect on the stock price. Secondly, the hyperscalers are starting to go into debt for AI. FCF is going negative for these guys which means they're using all of their net profits plus debt to finance purchases of even more GPUs they don't need. This will significantly weigh down their balance sheets since they'll be paying back debt with interest, debt that didn't benefit their businesses at all. The downward pressure from the crash combined with a lack of cash to actually do buybacks with makes this whole idea about these companies going back to stock buybacks a complete non starter. It used to be easy for asset light software companies that made tons of cash to do buybacks, but now the hyperscalers are asset heavy (and these are mostly useless assets to boot) and cash light thanks to debt. There's really only one way this can go.

terminalguy007

Stock picking based on narrative. For the first several years I invested, I ran concentrated positions on companies I'd built conviction around through qualitative research — management quality, competitive moat, industry tailwinds. The problem wasn't the framework; it was that narrative is infinitely malleable. You can always find a reason to hold a loser and a reason the winner still has room to run. I'd drift from "this is undervalued" to "this is a long-term compounder" to "I'm waiting for the thesis to play out" — all with the same stock at -40%. The opinion I replaced it with: hard quantitative gates first, narrative second. Now I don't look at a company until it clears ROIC > 12% (5-year average), FCF yield > 4%, and net debt/EBITDA < 2.5x. Those three filters alone eliminate roughly 85% of the market. The 15% that remains is where I do qualitative work. The behavioral shift this created was more valuable than the filters themselves — when your conviction is anchored in a quantitative threshold, there's no room to rationalize holding a deteriorating position. If ROIC drops below threshold for two consecutive years, it's on the sell list, full stop. It removed the narrative loop entirely.

terminalguy007

The screener isn't your research — it's your rejection engine. 187 companies is not a buy list, it's a pile you have to cut down to 10 or fewer before any real work starts. What helps me: run a second-pass filter immediately after the first. After your initial criteria (PE under 20, revenue growing, debt manageable), add two or three constraints that almost nothing passes. Return on invested capital above 12% for at least five consecutive years is one I use — most of your 187 will fall out on that alone because sustaining ROIC above the cost of capital consistently is actually rare. FCF conversion above 80% of net income is another. Insider ownership above 5% is a third. You don't need all three, but pick at least one quality filter that isn't just price-based. The deeper issue in your post is the one you identified yourself: you ended up buying names you already knew. That's actually the screener working against you by creating choice paralysis. When the list is unmanageable, the brain defaults to what's familiar. A tighter upfront filter that gets you to 15-20 names solves that problem — at that size you can at least glance at a 10-K summary for each one and eliminate another half. The research happens in that second pass, not in the screener output.

ptexpat

Depreciation is a non cash expense. Doesn't impact FCF. Infact,.it reduces your tax burden. Reduces GAAP earnings for those who care about it. The crux of all this is whether the infrastructure being built will be in demand or not and generate appropriate ROIC. No one really knows what the future holds. Everyone is just speculating and talking their book! We just have to wait and see how it unfolds.

terminalguy007

A few things worth separating out here:1. \*\*Dividend yield vs. FCF yield\*\* — A stock paying 6% in dividends but only generating 5% FCF yield is paying out more than it earns. That's unsustainable. Always check FCF payout ratio (dividends / free cash flow), not just earnings payout ratio — earnings can be manipulated, cash flow is harder to fake.2. \*\*Tax treatment at your bracket\*\* — At $95k MFJ (2024), you're likely in the 0% or 15% qualified dividend bracket depending on total income. Most common dividend ETFs qualify. But REITs and bond funds pay ordinary income, which could push you into 22%+ effective on that $100k. Worth modeling the after-tax yield, not headline yield.3. \*\*Sequence of returns on dividend stocks\*\* — High-dividend stocks (utilities, REITs, telecoms) tend to be rate-sensitive. If rates stay elevated, NAV compression can wipe out 2-3 years of yield income. You're not "not eroding the pot" if the stock drops 20% while paying 5%.4. \*\*Concentration risk\*\* — To hit $100k on a $X portfolio with dividends, you'd need either high portfolio value or high concentration in risky high-yielders. Diversified dividend ETFs (VYM, SCHD) yield \~3.5-4%. You'd need $2.5M-$2.85M to generate $100k from those.The math works if the portfolio is large enough to use diversified, sustainable payers. If you're reaching for 8-10% yields to hit the target, that's where the principal erosion risk actually lives.

terminalguy007

The total return equivalence argument is theoretically correct but misses the behavioral piece — most people at or near retirement find it psychologically easier to spend dividend income than to sell shares, especially during drawdowns when selling feels like locking in losses.More practically relevant here: what matters is not the yield itself but the FCF coverage ratio. A company paying a 4% dividend yield while generating 8% FCF yield has 2x coverage — the business is funding the payment from cash operations produce, you're not eroding anything. Compare that to a 6% yield company running on 5% FCF — that's where you get actual payout risk or balance sheet deterioration over [time.At](http://time.At) $100k, targeting a 4% yield on high-coverage payers (payout ratio <60%, debt/EBITDA <2x, FCF yield >6%) would generate around $4k/year without touching principal, assuming the underlying businesses hold up. The tax angle also matters — qualified dividends are taxed at 15% federal if you're in the 22–24% bracket, which often improves on your marginal rate for ordinary earned income.The real risk isn't the income mechanism itself. It's concentration. Two or three bad picks can wipe out years of dividends. A basket of 15–20 payers across uncorrelated sectors is meaningfully safer than chasing highest yields.

terminalguy007

P/E multiples. I spent years treating them as the primary filter for whether something was cheap or expensive. Low P/E meant value, high P/E meant speculation. Simple, fast, felt rigorous. Then I ran a proper back-test on a portfolio I'd built using that framework and compared it to what FCF yield was telling me at the same time. The divergence was uncomfortable. Companies with "cheap" P/Es that were eating cash to generate those earnings. Companies with "expensive" P/Es that were converting almost all of it to free cash flow and compounding quietly. The problem with P/E is that earnings are after the accountants are done with them. FCF yield is much harder to manipulate over sustained periods. You either have cash in the door or you don't. I still look at P/E as a rough screen to understand what the market is pricing in. But I stopped trusting it as a valuation tool in isolation around 2022 after getting burned on two positions that looked cheap on earnings and turned out to be cash incinerators on closer inspection. Now it's the last number I look at, not the first.

terminalguy007

Used to think P/E ratio was reliable shorthand for "cheap." Spent a good chunk of 2020-2021 convincing myself that low P/E energy companies were value plays. They were cheap for reasons I wasn't willing to examine closely enough. What changed my mind: doing the actual work on free cash flow. P/E can be gamed in ways FCF yield generally can't — capex timing, depreciation schedules, one-time adjustments that become regular. A company trading at 8x earnings with negative free cash flow isn't cheap; it's a cash incinerator with decent accounting. Now I won't look seriously at anything until I've calculated FCF yield independently and compared it to stated EPS. The gap between those two numbers is usually where the real story is hiding.

ptexpat

Let's say you made $100 from your corporate job. You spent $20 of that on your living expenses. Instead of keeping the remainder in cash, or earning 3% on it, you decided to spend it on a capital expenditure - you got a house built for $80 and started renting it. Each year your net profit from renting it is $8. This year your FCF was $0. But in the upcoming years your FCF would be $7 (10 - 3) more than what it would have been if you hadn't made the CapEx. Your CapEx of $80 generates you an ROIC of 10%, which being greater than the risk free rate of 3%. That's essentially what the hyperscalers are doing. They are hoping (time will tell whether that's the case or not) that the AI infrastructure they are building (i.e., CapEx) will have a higher ROIC than other alternative uses for d their cash.

_hiddenscout

They do have cash flow just not cash on hand. They are spending money now, but will still produce cash flow. Even if you aren’t a fan of the hyper scaler, you can still look for other companies in the market. You don’t need to invest in the hyper scalers by any means. Just looking at MSFT last year for example, they hand like 30B on cash & equivalents on hand. Spent around 64 billion on capex. Still generated 71B in total FCF. If these companies cut capex, will end at some point, they still generate a ton of FCF.

Sufficient_Habit5091

It's starting to become a ponzi scheme because no one sees that FCF. It was bad enough when it all went into buybacks, which in turn promises actual dividends one day. Now it all goes into CapEx. So it's really becoming just buying stock to sell to someone higher.

_hiddenscout

Usually companies are still buying back stock, which in theory is increasing EPS and meaning the shares you hold are worth more. Also the most simplest idea of investing is paying today for future cash flow. Even without a benefit, a company with more cash flow can do things like buy back more stock, actually offer a dividend one day, or reinvest in the company for more cash flow. That last one is basically what Amazon does. So even the idea of company making more money has more nuance. As an investor, you’ll tend to do better at looking at things like margin growth as well. Some companies for example might see slower revenue growth, but actually better FCF since they improved margins.

Cav829

In my 401, like $80k is set just in either Nasdaq or SMH-esque funds. But I sold out of the hyperscalers in my individual investing account as I'm mostly day trading at this point with that, and I'd rather day trade stocks with better volatility. Yes, somehow I'm doing something both more conservative yet more bullish at the same time lol. That said, I had a MSFT position I liquidated after the $350-$390 climb. I've generally avoided META. I would not mind picking up AMZN again as I'm firmly seeing them as the safest of the hyperscalers long-term, but also they're the one expected to to go FCF negative first, so I'm not in a rush.

SteakEater137

No, they actually have the best case scenario with AI...they can just pretend they have AI and ride the hype without all the insane CapEx spending eating into their FCF like MSFT and META Meanwhile they just go shopping for whichever LLM gives them the most bang for their buck. They dont have to be #1 because thats not their core business, just a perk.

valbolt

So [asignal.io](http://asignal.io) research shows that it is firmly BULLISH on JFrog, despite currently reporting negative net margins on paper, the underlying machinery of the business is highly efficient, generating real cash and showing textbook technical health. Top 3 Bull Drivers 1. Elite Core Technicals: The stock is locked in a verified macro uptrend, trading safely above its 20-day and 50-day moving averages. With an RSI of 58.6, the momentum is strong but crucially not overbought. 2. Massive Pricing Power: JFrog boasts a stellar 25.8% YoY revenue growth driven by a magnificent 77.48% gross margin. This confirms they possess a strong competitive advantage in the DevOps and AI deployment space. 3. The Cash Engine: Even though GAAP earnings are net-negative due to aggressive expansion, the business is completely self-funding. It generated $169.91 million in positive Free Cash Flow and holds a bulletproof balance sheet with $724.8 million in net cash and virtually zero debt. Top 3 Bear Risks 1. Priced for Perfection: At a Price-to-Sales ratio of 19.35x and a forward P/E of 80.35x, the stock trades at an extreme valuation. Any sudden slowdown in corporate tech spending will trigger immediate price contraction. 2. Buffett Framework "Watchlist": Because GAAP net margin is negative (-10.93%) and capital is technically being eroded rather than compounded (ROE is -7.14%), strict value-investing models refuse to mark this as a direct buy, keeping it restricted to a Watchlist. 3. Low FCF Yield: The stock's current free cash flow yield sits at a low 1.56%, meaning it is built strictly for aggressive growth/momentum portfolios rather than defensive or income-focused accounts. Bottom line: A premium, cash-flowing infrastructure play that is actively winning from the AI code-shipping boom. For informational and educational purposes only. Not financial advice. Always consult a licensed financial advisor before making investment decisions.

Maesthro_ger

Dude market is shifting towards two rate hikes lol. No FCF left for the mag 7 and rate hikes.

Maesthro_ger

And where does all the money come from when all their FCF is gone? Debt in a rate hiking market. Nice

gatovision

This stock is a bargain financially and i can see it running big on any catalyst. Positive FCF, positive Net income, no debt. >30% short.

Fuzzy_Louise_2405

I was not buying it while it was at the top last year or before that, it is a new position from this year. Opened the position once it hit below 400 and keep adding it. To me it is a good position to be exposed to the SAASPOCALYSE, I like the business at this valuations and believe once the down sentiment past it will be back to a 25-30P/E and 3-4% FCF while still growing EPS and FCF at 14% CAGR for the next 5-7 years.

GoldenPresidio

The only this is true for is Amazon Crazy pump for Covid but traded sideways as earnings caught up to valuations. And now it’s arguably undervalued depending on how you feel about their future FCF due to ai investments

OnlyTheStrong2K19

Yes, on paper but FCF won't be affected.

MoreOutcome8541

Buddy. You throw around the word billions like it’s nothing. I don’t think you quite understand the scale of the spending. The FCF of all mag 7 is decimated. They’re all taking on debt and Google had to dilute like it’s a fucking penny stock. 790 billion in one fucking year.

Crazy_Donkies

FCF =/= GAAP profits. You sir have your head in the sand. https://newsletter.semianalysis.com/p/anthropic-3q26-profit-over-1b-the https://www.resetera.com/threads/wsj-mind-blowing-growth-is-about-to-propel-anthropic-into-its-first-profitable-quarter.1526530/ https://finance.yahoo.com/video/new-analysis-shows-anthropics-q3-profit-hitting-1b-breaking-down-the-financials-160416841.html https://www.bloomberg.com/news/articles/2026-05-20/anthropic-on-pace-for-first-profitable-quarter-as-revenue-surges I'll watch for your "but but but" rebuttal.

Crazy_Donkies

Go out and get an accounting degree. FCF =/= GAAP profits. https://newsletter.semianalysis.com/p/anthropic-3q26-profit-over-1b-the

trsx5

MU gonna dilute. They won't touch their FCF for these buildouts. They'll shelf offer to fund expansion.

mansfall

Or, if you're dead-set on stock picking (which tons of folks do....), find those companies which have huge volumn (>2million traded shares), have > 10% FCF, aren't in debt up to eyeballs and over-all are managed well. There's tons of these companies. Then just sell options rather than buy them. You become the insurance guy. Collect premium for selling, pulling in 2% a month. You cap your upside but what you get in return is risk management. You can do better than that on higher IV stocks, but the swings are obviously bigger. Buying options is full-on market timing... you need to know when to get out. Selling options is still market timing to a degree, but less so. You don't really care much about expiration, and if you get assigned (or called away if selling covered calls), you do so from a position where you're ok with it.

ai___________

You’ll be surprised if you look at their FCF charts against the semis FCF charts

Sanpaku

OP doesn't understand who sell-side analysts are working for. Traders that set stops can do well buying dips. Longer term investors are better served by waiting until valuation, confidence in management and price action are in alignment. MSFT presently trades at a 2.56% FCF yield (ttm), closer to 1.78% once share repurchases to counter SBC dilution is accounted for. Little confidence in management, given the malinvestment in gen AI and Copilot debacle. Since early November, its only been above its 50d SMA mid-April to early June. Or just DCAing into broad market indices.

L1ME626

no sh1t, its just proves how strong business it is, they still keep customers and can raise price. thats sign of great business model. also netflix is basically does same sh1t like always, its FCF printer now and it will outperform well

JerryCurlEarl69

Just look at the balance sheet. It's producing more in FCF than both combined, and it probably has more room for growth as well.

Optimal_Image5192

How is a company trying to lower its CapEx a top signal? If you were bullish tech, enterprise-level AI adoption is what you’d want. To justify all this debt and FCF burn these massive companies are doing

TheRedditModsSuck

They're current prices for <10% growth in FCF. The question is how much pricing power they have. I'd argue they can continue to increase prices considering the cost of cable TV back in the 2000/2010s – people were willing to pay $25–100/month depending on their package on the 2000s. As far as I can see, I wouldn't underestimate the lack of frugality in the general population.

Reasonable-Win-2068

You've made up your mind and wont accept that you are wrong. FCF Q1 2025 19 billion Q2 2025 5.3 billion Q3 2025 24.5 billion Q4 2025 24.6 billion Q1 2026 10.1 billion Google has never been cash flow negative, despite your claim. The AI infrastructure roll out IS expensive, massively expensive, but its not going to burn google. And again, your claim was that 71% of the mag 7s revenue was circular AI investment, which again is an insane claim.

Reasonable-Win-2068

Google is not cashflow negative are you serious? lol FCF was almost 200 billion dollars last year. Im not saying AI isnt in a bubble, but the vast majority of all revenue from google isnt some circular AI spending, they had 150 + billion in revenue BEFORE AI

RiPFrozone

Solstice Advanced Materials, they just had a merger of equals and diluted shareholder 44%. However when this deal closes first half of 2027, this new materials conglomerate is going to be worth between 18-25b. At 15x FCF (combining both companies 2027 FCF projections) you get a value of 10.5b. Originally I bought this company itself when it was trading at 7.5b last year and valued it at 10b, after the 44% dilution if it drops to 5.6b value you are essentially buying the ESI part of the business for free. Now I don’t see it getting that low, however it’s currently trading at just under 10b which is where I’m looking to double down on my current position. I’ll happily pay 15x FCF for this future business, and in 3 years while they reduce debt and continue to increase dividends, this stock should be a great long term play.

Ill-Mousse-3817

I agree about this, but I think the issue is that there is much more inertia than you people give it credit for. Take for example the datacenters they own. Right now they are CIP (construction in progress) and part of them will come online in the next two years. Only when CIP ends depreciation starts being accounted for, and then is going to stay for 4-6 years. So, even if they stop now, 7 years from today you will still have an impact on earnings. But okay, this is just accounting, the FCF got hit today, and will be okay from tomorrow. SPVs look worse. Look for example at the Beignet notes, which are described in detail on S&P. Four 5-year contracts, for a total of 20 years with auto-renewal and the penalty of paying the entire value of the datacenter in case of cancellation: they don't show up on balance sheet or cash flow statements, because GAAP doesn't require to add optional contracts, but at the same time they are more or less forced, because of the penalty. Meta is impacting their FCF 20 years from now with these contracts.

notreallydeep

Well the point is that if it shows no growth, it'll stop. It's not like their FCF is structurally diminished. META isn't a 0 FCF business, it's only a 0 FCF business \*for a while\* if there are returns.

luvz

FCF is calculated after opex and capex. You can engage in a disagreement without resorting to one-word insults.

luvz

Their FCF makes their debt essentially nothing. I have a mortgage but my cash exceeds my mortgage. I could pay it off, but I choose not to since I can get better returns than the 5% interest I pay on the mortgage.

Zealousideal-Plan-66

It moves opposite of the companies it has to pay for Capex build out, less Capex = more FCF

MispricedAssets

It’s inflected to FCF positive. To answer your question bluntly: financial analysis. Looking am forward on the trajectory they’re on and having business sense. Don’t just look at GAAP EPS to tell u if a business is doing well

jrex035

No offense, but Samsung projecting such a huge quarter IS evidence of the bubble. Hyperscalers are dumping all their FCF (and thensome) into buying up all the memory, chips, etc they can get their hands on, sending valuations of everything through the stratosphere. And all to build out AI infrastructure despite there being minimal evidence that AI will actually have a profitable ROI for the companies dumping ungodly amounts of money into this cycle. SpaceX being a complete turd has little bearing on whether or not everything AI-related has significantly overheated in the face of a global economy sleepwalking through multiple crises, including an energy crisis that's clearly far from resolved.

MrFyxet99

Yes and now their FCF is down 95% YOY.

wthshark

Well, there’s no “numerator” because it’s not a fraction or division. It’s a P&L, a waterfall of revenue. Secondly, what exactly do you mean by “accounting nonsense used for AI profits”? I would argue that, yes, some of these items are capitalized, but that is exactly what capex spending is, spending for capital investments. So yes you could use their FCF pre-capex as a gauge instead (only reason I didn’t flag out FCF and wanted to call profits was to not confuse people). Regardless their pre-capex FCF is still ridiculously high and my point still holds true

groceriesN1trip

They’re spending the money. The beneficiaries of this spend are the companies that have seen their stock price increase 2x-5x.  They’re taking on long term debt, selling treasury stock, and spending their FCF. Once the infrastructure spend slows to a snails pace, they’ll rerate 

drew-gen-x

I buy & hold $VXUS, $EWY, $EWJ, and I trade $DRAM for my AI/Semis positions. My thesis is different from many others here I am sure. I think we are seeing the beginning of a long term cycle of cash move from West to East. The AI cap ex spenders (Google, Microsoft, Amazon, and META) have stopped all their stock buybacks and are now spending all of their 2026 FCF, diluting shareholders, and adding debt and sending the majority of that cash to Pacific Asia. (SK Hynix, Samsung, ASML, TSM, Kioxia and Softbank). I want to own the indices that are receiving this cash and reinvesting that cash back into their local economies (South Korea, Japan, Taiwan, etc.) This has more volatility than $VTI, $QQQ, or even $SOXX as I also face USD currency fluctuations. But I am looking at the long term big picture as we enter a new market cycle. I own $DE for the USA data center build out since it is trading at a much cheaper valuation than $CAT. Good Luck

Ordinary-Experience

They just released info showing a +25% increase in deliveries, and Q1'26 showed +16% YoY automotive revenue and +42% YoY FSD et al increase. Gross margin ~21%, FCF ~1.4B. They are most definitely profitable, and spending almost 10% of total revenue (!!!) on R&D for FSD, Cybercab, Optimus, etc. Hate is blinding you. Also no subsidies is helping Tesla, and hurting other automakers, not the other way around.

alvarezbooks

One thing I don't see mentioned enough is the valuation. The market cap is only around $1.6B, but they're still guiding for $190-205M in free cash flow this year. That's roughly a 12% FCF yield. Add a 6.5% dividend while you wait, plus the agreement to open up to 1,000 restaurants in China over the next decade, and I think there's more here than just a meme

alvarezbooks

One thing I don't see mentioned enough is the valuation. The market cap is only around $1.6B, but they're still guiding for $190-205M in free cash flow this year. That's roughly a 12% FCF yield. With 6.5% dividend while you wait, plus the agreement to open up to 1,000 restaurants in China over the next decade, I think there's more here than just a short squeeze. $WEN is such an undervalued company

TangerineTrades

>they have a lot of work to do before they can genuinely grow (if ever). What exactly do you mean by "genuinely grow"? From Q1 2026 earnings: * Active accounts grew 1% * Total payment volume grew 8% * Revenue grew 5% * Transaction margin $ grew 3% * EPS grew 1% * FCF grew 25% Not bad for a struggling company repurchasing shares at a ~15% FCF yield. While PayPal definitely has some issues that have taken too long for the company to recognize and address, they aren't exactly in dire straits. A personal anecdote of a poor experience is inevitable when there are 440 million (and growing) active users.

Admirable_Glove2359

I think what people here are mistaken about is that the numbers currently are not an argument against the AI erosion case, but the short-term reversion case to a better multiple. Trading at 8x with all their FCF going to either dividends or buybacks is either management believing there is a valuation gap or that the company is trying to hold on to any stock value that remains before the more-than-likely AI erosion case over the next 5-10 years. I think for short-term that there is a valuation gap and that it should revert to 10x, 50/share. The problem I see with software cases is that the majority of these companies have genuine growth. If revenue or margins dropped, then the case of AI replacement is threatening, but people are pricing in something that has not happened and may take years. The Dotcom Bubble took years to takeover and dominate.

BiggFuss

Don't fall for Meta's P/E. Net income hides the true, immediate cash hit of their massive AI CapEx. Their FCF is also a mirage: they add back billions in employee stock options to boost operating cash, then turn around and spend over 96% of their reported FCF buying back shares just to stop dilution. If you subtract the cash needed to keep the float flat, their real Price-to-FCF ratio sits north of 1000x. Everything now hinges on whether this CapEx layout actually pays off.

hazxrrd

Pasted from another reply.. Tbh I think it was overvalued at >30x TTM earnings, but then they were hit with a perfect storm: Maturing business, Figma acquisition fail, GPT release, SaaSpocalypse, CEO/CFO departure, etc. I think the market has really overshot the correction at <10x Non-GAAP earnings. Sub $100B market cap with this kinda FCF is ridiculous. Add in the buyback authorization, and I think the math starts to get compelling. Really all it needs is a sentiment shift, and it can rerate back to \~20x TTM earnings, which puts it around $200B market cap. Depending on how many shares they buyback, the price would be >$500 (503 with current shares)

hazxrrd

Tbh I think it was overvalued at >30x TTM earnings, but then they were hit with a perfect storm: Maturing business, Figma acquisition fail, GPT release, SaaSpocalypse, CEO/CFO departure, etc. I think the market has really overshot the correction at <10x Non-GAAP earnings. Sub $100B market cap with this kinda FCF is ridiculous. Add in the buyback authorization, and I think the math starts to get compelling. Really all it needs is a sentiment shift, and it can rerate back to \~20x TTM earnings, which puts it around $200B market cap. Depending on how many shares they buyback, the price would be >$500 (503 with current shares)

Objective_Back_2581

**Fable 5 Max prediction for GEV:** **Bull case:** Q1 was a monster — $163B backlog growing faster than expected, guidance raised to $44.5–45.5B revenue and $6.5–7.5B FCF, with new gas orders priced 10–20 points higher per kilowatt than the old backlog . Zacks Earnings ESP sits at +10.35% , suggesting another beat is likely. **Bear case (this is the real tension):** The average analyst target is \~$1,220 — only \~4% above spot , and the stock trades at roughly 40x NTM EV/EBITDA, more than double the sector median, so any execution slip carries real valuation risk . Smart money is hedging: bearish flow hit this week with \~7,900 puts trading at 1.3x expected volume, concentrated in Aug $1,100 puts and 7/10 weekly $1,000 puts . There’s also sector-wide skepticism creeping into everything data-center-related . **Structures worth pricing out** (check the ATM straddle for the implied move first — I can’t see the live chain): **• Bull put spread** below the implied move (e.g., short \~$1,000/long \~$950, Jul 24 exp): sells inflated IV, wins on beat, flat, or modest dip. Fits the “beats but stock is priced for it” scenario. **• Call debit spread** (\~ATM/+5%) if you want upside without paying full IV-crush tax on naked calls. **• Iron condor** if you think a beat is already priced in and the stock pins — the Q1 pattern (only +2% day-of, with the 14% move spread over a week) actually supports this. **•** Avoid naked long calls/straddles: with IV pumped pre-earnings, you need the move to *exceed* what’s priced just to bre

PsychologicalEmu9096

I think the core question is less whether AI capex is justified in the long run, and more when it starts converting into real earnings power. Microsoft still looks strong, but the scale of spend is so large that FCF and margin pressure matter more than they used to.

DeRham92

I think the accounting standard for SBC are a bit misleading. If you look at SBC for applovin you see very small number, so the FCF net SBC is very high. However if you look at the trend in total shares outstanding you see that the number is not decreasing after 2023. This is due to the "Stock issued in connection with equity awards" reported in "Condensed Consolidated Statements of Stockholders’ Equity": in 2024 and 2025 the total amount of shares buyback just cancel out the stock issued for equity awards. This means that there was no capital returned to shareholders and since 2023 the entire free cash flow was used to avoid diluition. I think that this divergence between the accounting value of SBC and the cost of shares buyback is due to the big appreciation registered by the stock: new stocks issued in 24 and 25 were accounted in SBC years before, due to the vesting period when the price was low. Then at the end of vesting period they were recognized as outstanding stocks and the company did buybacks to keep this number constant. So maybe this will not be a problem for the future because if it is still the case that SBC and actual stock issued diverge that means the price of the stock is up a lot. Otherwise if the stock price does not grow the buybacks should reduce the outstanding stocks. What do you think? Does it make sense?

charon-the-boatman

**Great questions! I agreek this is the right way to look at it and really understand MSFT valuation.** I think Microsoft can no longer be seen or valued as low-capex software compounder it was up to now, since they're guiding to roughly $190B of capex in calendar 2026, which is huge. So from a small investor perspective the main question is when and how does that capex turn into actual earnings power for them (and get my MSFT stock up)? **If Microsoft wants just a 10% annual return on $190B of capex, that’s about $19B of incremental annual after-tax cash flow.** Assuming a 30% FCF margin on incremental AI/cloud revenue, they need roughly **$60B+ of extra annual revenue to justify** it (or at a 15% return, closer to needing $90–100B+ of incremental annual revenue). In terms of fully paying back $190B over five years, that means around $38B of incremental FCF per year, or something like $125B+ of additional annual revenue at a 30% FCF margin. 100M Copilot seats at $30/month brings in "only" $36B annual revenue before costs, so to make this work Microsoft needs to sell the whole stack to compound: Azure AI growth, M365 Copilot penetration, GitHub Copilot, Security Copilot, agents, usage-based Copilot credits, Fabric/Foundry/data services, better GPU utilization, custom chips, and lower cost per token. And capex has to stop surprising higher. And I think this all is quite possible! Demand still looks very strong, and management seems very aware of the capex/FCF problem. If they can pull it off (and again I think they will), Microsoft could end up with a huge new stream of high-value AI revenue on top of their existing business. It is their "killer app."

kriptonicx

Bleh. I think I stand by what I said. It's only been two years and DBX is now trading at an even more attractive valuation of 8.5x cashflows. Earnings are not growing, but the valuation is continuing to improve. If it goes back to it's previously 13x FCF valuation then you'd be looking at a similar return to AAPL over that two year period. While AAPL in that two years has reaccelerated earnings and their valuation has expanded. Maybe AAPL can sustain that growth (I wouldn't bet against them), but it's a very full valuation imo. If DBX see growth reaccelerate it could easily 2-3x. If they can just hold earnings then you'll probably be looking at a decent 8-9% annual return. I suppose it also depends on what "underperform" means given the entire software sector has taken a beating over the last year... I was wrong, but not sure about "dead wrong". It's always easy to leave comments like this after the fact.

Pristine_Eye_8361

They’re cheaper than the majority of the mag7 by forward PE (and PE excluding the ridiculous investment “gains” from GOOGL/AMZN). This doesn’t even consider price to FCF yield, which it’s clearly the cheapest in that regard.

Jeff__Skilling

I mean...do they have the credit capacity? At a $54 / share take out price with 50% coming from diluting common equity, that leaves total debt burden from the deal on RKLB's balance sheet of around ~$3bn? Have trouble seeing a path to additional multi-billion dollar super levered M&A deals in the near term unless these guys are shitting out FCF hand-over-fist

Kablamo92

I'm a chartered accountant - that's not how it works. Capex hits the balance sheet and has no impact on the profit/loss statement. It's debit AUC credit cash / accruals. Depreciation does hit the P/L eventually, which is what I was referring to when I said "when the asset's in use" but by this point, the company is generating more revenues from the asset anyway. On your latter point re cashflows, this is not an issue for MU. They are already substantially cash generative and have very little debt so they aren't spending money beyond their means. Look at their FCF yield and how their net cash position has grown YoY.

DealerDefiant9392

The question is really what’s the most probable earnings result over the next few years. Could earnings drop 80%? Well yeah, but you could say that about any company as a theoretical worst case scenario. Charter is a cable company with a telecommunications arm. Cable has been dying, that’s true. The question is how many subscribers can they lose before it cuts into cash needed for buybacks? Can Spectrum mobile earnings continue to increase and how much do they offset that? The reality is that they would have to lose millions of subscribers a year before the buybacks are threatened, and that’s not including spectrum possibly offsetting this through growth or even the Cox merger expanding their footprint. Charter seems like one of the most hotly debated stocks right now. If management’s guidance is right and the Capex build drawdown happens on time, that frees up a lot of FCF to execute their strategy which would be very shareholder friendly.

MarbleMuffin

P/E vs Historical P/E PRICE VS FCF PEG DCF Whether forward indicators are still looking good after a massive drop. Analyze whether the moat still holds while outlook is depressed. Buy into fear and sell into greed https://edition.cnn.com/markets/fear-and-greed Easier said than done, but that's what I do Index funds are nice if you want passive returns but you are capping risk and reward Individual stocks obviously increase risk and will also in crease reward Just a matter of your risk tolerance, and also how much you are willing to research and spend on investing too

FutureMassive69

The mag7 are currently all ruining what made them special, going from low capex high cash flow money machines to extremely high capex no FCF with a highly uncertain return on that investment. Ai with be great for consumers but bad for the businesses. Competition is for losers

Inevitable-Poetry447

High FCF, pricing power relative to peers, real estate giant. They will pay steady divs and could have 30+% upside by EOY 2027

MaximumDiscipline843

your fundamentals aren't wrong, but i think you're answering "is the business great" when the market is actually pricing "can they execute and convert it to cash". those are different questions. the thing your PEG framing skips is free cash flow. Q1 2026 operating profit was up but operating FCF was actually negative (around -€285M) because of huge upfront payments, inventory buildup and working capital. so earnings are growing fast, cash isn't keeping up yet. that's a big reason the multiple looks "cheap" — the market is discounting execution risk, not doubting the growth. and execution risk is real and recent: the stock dropped \~18% in a single day last week on reports germany is scrapping the F126 frigate program rheinmetall was lead contractor on. it's already down \~30% from january highs on exactly this fear — that the spending headlines won't fully convert into signed, delivered, paid contracts. so the bear case isn't really "defense slows down", it's "the backlog is real but turning €73B of backlog into recognized revenue and actual cash is slower and messier than the EPS curve implies". worth noting the flip side though — an entity tied to the CEO bought \~€4M of stock at these levels in june, which is at least a signal insiders think it's oversold. you're not missing the growth. you might be underweighting how much the market cares about cash conversion and procurement execution vs reported EPS

Prudent-Corgi3793

At the end of 2020, BABA was trading for an unjustifiable P/E >50 and a P/S approaching 10. Now the P/E is less than 15 and the P/S is under 1.5, but the risk is its capex crushing its FCF, just as it is with the US hyperscalers.

AChocolateHouse

The thing is they Wendy's doesn't need to do well. They just need to do 'normal'. The bar is extremely low when the P/S of the stock is less than 1, and FCF yield is at like 17%. I agree on not trusting reddit. Do your own research always. I was in this stock way before the reddit craze. Even if wsb/reddit is wrong 90% of the time, 10% of the time they're going to stumble on a genuinely undervalued stock. I believe this is one of those moments.

thelegendJimmy27

Nobody outside of uneducated regards on reddit like yourself thinks MSFT will issue shares. Memory prices have already spiked, and they still have positive FCF. They can continue to spike and FCF would still be positive. Even if FCF goes negative for 2 to 3 quarters assuming an unrealistic worst case scenario for memory prices, MSFT can comfortably use its balance sheet and issue debt to cover it. Let’s see how many shares they issue over the next 2 years moron.

ThirdWaveCat

FCF is negative, debt is spiking, talent pipelines are turned off, and tech CEOs are the only people claiming this isn't bubble. If this bubble doesn't burst it will be because a meteorite ended us.

AChocolateHouse

> A 6.7x FCF multiple isn't automatically cheap if FCF keeps declining. > Won't decline. This is Wendy's we're talking about, not Lehman brothers. >International expansion only creates value if the new stores have attractive unit economics. Duh. They know that. >The buyout angle is speculation, not a catalyst until an actual offer exists. Peltz, a billionaire, filed legal paper work saying he was working on a buyout. I don't know what more you need. This is not speculation. >Most importantly, it never explains why Wendy's will start taking share again in one of the most competitive industries. A new CEO alone isn't an investment thesis. They never lost any share in the first place. They just got pressured like all fast food when people felt a bit of a pinch because of inflation.

TheGrimSpecter

Great DD overall, but I think there are a few assumptions that deserve a closer look: * A 6.7x FCF multiple isn't automatically cheap if FCF keeps declining. * International expansion only creates value if the new stores have attractive unit economics. * The buyout angle is speculation, not a catalyst until an actual offer exists. * Most importantly, it never explains why Wendy's will start taking share again in one of the most competitive industries. A new CEO alone isn't an investment thesis.

thelegendJimmy27

MSFT has $78B in cash, generated $125B+ in operating cash flow so far for FY26. Last quarter they generated positive $15.8B FCF (even after deducting capex). They can easily sustain this level of capex. Even if they couldn’t they would finance it with debt long before they offer a single share to raise cash. You are truly regarded.

tarcus

Has promise for a turnaround but FCF not great and 11% dilution from what I'm reading. I might pick up a contract worth though. I love a good shake lol

SpongEWorTHiebOb

Cloud growth and perception that they caught up in AI. However, it’s showing weakness and is 13% below its high. They have lost very talented AI personnel. FCF may go negative in coming quarters and they issued more shares and long term debt. Personally I think MSFT is the better option based on valuation, similar cloud strength and they are still far from going FCF negative.