This guide is for general understanding. It is not financial advice and does not tell you whether to buy, hold or sell anything.
What gets published
Listed companies publish results every quarter. In the US, a typical release includes:
- Press release. Headline results and management's summary, usually on the investor relations site.
- Financial statements. Income statement, balance sheet and cash flow statement.
- Slides or a shareholder letter. Charts and commentary, often the easiest place to start.
- Earnings call. A live call where executives discuss results and answer analysts' questions. Recordings and transcripts usually follow.
- Regulatory filing. In the US, the quarterly Form 10-Q and the annual Form 10-K, filed with the Securities and Exchange Commission. Other countries have their own equivalents.
The lines worth reading
| Line | What it tells you |
|---|---|
| Revenue | Total sales in the period. Compare with the same quarter a year earlier, because many tech businesses are seasonal. |
| Gross margin | Share of revenue left after the direct cost of making the product. Software is typically higher than hardware. |
| Operating expenses | Research and development, sales and marketing, and administration. |
| Operating income | Profit from the core business before interest and tax. |
| Segment results | Revenue and sometimes profit for each reporting segment. |
| Capital expenditure | Spending on long-lived assets such as data centres and factories, found in the cash flow statement. |
| Free cash flow | Cash from operations minus capital expenditure. Companies define it slightly differently. |
GAAP and adjusted figures
US companies report under generally accepted accounting principles (GAAP). Many also show adjusted, or non-GAAP, figures that leave out items such as stock-based compensation or one-off charges. They must show how the two connect in a reconciliation table. Read both. If the adjusted figure always looks much better than the GAAP figure, ask what keeps being left out.
Guidance
Some companies give guidance: a range for next quarter's revenue or margin. Guidance is management's own expectation, not a promise, and companies can change their policy on giving it. News coverage often compares results with analysts' average estimates. That comparison says more about expectations than about the business itself.
Listening to the call
- Read the prepared remarks or slides first.
- Note which products or segments management talks about most.
- Listen to the questions. Analysts often ask about the topics management skipped.
- Write down anything described as a risk, constraint or one-off.
Read slowly, compare over years
One quarter is noise. Put four to eight quarters side by side and the shape of the business appears: which segments are growing, whether margins are rising or falling, and where the company is spending. Apply our profile framework to what you find, and check unfamiliar terms in the glossary.