This might or might not represent cash coming through the door in this quarter, but it represents that there is an agreement for cash and goods/services to change hands.
Operating income:
Money left over after you subtract the costs of operating the business and making the sale. In a manufacturing firm, for example, you would subtract the cost of the materials in the goods sold. For Google they are deducting things like the running costs of data centres and wages for staff.
Operating margin:
You can think of this as raw profitability. Given the things management has direct, somewhat immediate control over, how good is the company at taking in more money than they spend?
Net income:
Take the Operating Income and then subtract taxes, interest payments, depreciation of assets and the like. These are all expenses, but not expenses directly connected to current activities.
In the rest of the figures they give metrics that are intended to help analysts understand the dynamics of the business that lead to the financials. So for example they showed how different categories contribute to the bottom line. They also show headcount, which can be seen as a leading signal of intention and ability to grow the business. That operating income has grown even with a very large headcount growth is impressive.
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I am not a lawyer, accountant or financial advisor, don't rely on this as professional or investment advice.
Small clarification, this is sales recognized. For example, if your customer signs a 2 year service agreement at the start of a quarter, the revenue reported that quarter should be 1/8th of the total contract amount (assuming you are recognizing revenue at a flat rate).
Thankyou, this is an important correction. I expect a number of Google's contracts will be structured this way.
For those following along, spending some time with an introductory financial accounting book or textbook is a very useful way to understand a lot of business behaviour. I took a 101-level accounting course during my computer science degree and it has proved to be a very useful thing to have learned about.
I’ve always wondered this - why do internet comments have to explicitly say “I’m not a lawyer and this is not a legal advice”?
I think that it’s pretty obvious and needless. What’s the consequence of not having a disclaimer? Internet has a lot of noise and it is the responsibility of the reader. I never understood why people have to say this.
Same goes for “I am not a Doctor”.
Are there any legal ramifications to:
A) Comment has legal terminology and kind of sounds like legal advice but has no disclaimer.
B) What if someone falsefully claims they’re a Lawyer and puts out a comment on the internet?
I am bothered by this since the dawn of the internet and never understood it.
For a few years I studied law. The first lecture was, essentially: "You are not lawyers. Do not give legal advice. Do not claim to know anything. You are not lawyers".
The most important number and the least spoken about: free cash flow. They had $4.6B this quarter. In laymen's terms that means - at the end of this quarter they have an extra $4.6B of capital sitting around to deployed for investment (employee bonuses, acquisitions, capital expenditures, etc).
If you're interested in the finance behind software companies, highly recommend following Tren Griffin:
I'm struggling to see that number in the report. Is this something we need to go diving in for and calculate? I note from the twitter post you put up (thanks for the tip, now following Tren), that FCF is often obscured. Tips on how to find it/work it out?
