Comment on Google just had its first negative cash flow quarter due to massive AI spending
LastYearsIrritant@sopuli.xyz 9 hours ago
Feels like this article got too excited about the headline and the actual meat of the text is lacking in context.
First negative quarter since when? Obviously Google didn’t spawn wholesale making money. Had to look around and it’s their first negative cash quarter since 2004 when it went public. (I assume there’s no real public data before then)
The ars article says
To be clear, Google is still profitable—wildly so.
How can something be profitable, but also have negative cash flow?
Legitimately confused here. Is “cash flow” some hyper specific business term for a very narrow type of money exchange, while profit comes from a different line item?
This is a rare miss from ars, but a HUGE miss.
ryper@lemmy.ca 8 hours ago
It’s been about thirty years since I took an accounting class, but I think capital expenditures like this AI spending are amortized over several years and don’t fully count towards present expenses. So the chunk that counts for this quarter/year can still be small enough to make the company profitable (income > expenses). Free cash flow I would guess is money that came in minus money actually spent, so something like a $1m capital expenditure might count as $100k for this year’s expenses but the full $1m for calculating cash flow.
partofthevoice@lemmy.zip 3 hours ago
Why can they spend money now, but make it so on paper it’s as if they spent it next quarter?
ryper@lemmy.ca 2 hours ago
Capital expenditures are for things that are expected to last a long time, like buildings and vehicles, so I guess the accounting rules around them are meant to allow the costs to be realized over a similarly long time. The idea is probably that companies would be less likely to invest in capital if it meant taking a big hit all at once. But I’m not an accountant.
unknownuserunknownlocation@kbin.earth 4 hours ago
Yes, that's essentially it. Also, for instance, if a company buys something in one month and pays for it the next, then the costs apply to the first month, but it affects the cash flow on the second.