How Has Big Tech Grown FCF So Rapidly?

I’m trying to do some valuations and running into a fundamental question: how is any of this possible?

Meta free cash flow (billions):

  • 2021: $23B
  • 2022: $38B
  • 2023: $19B
  • 2024: $44B (estimate)
  • TTM: $52.1B

Amazon:

  • 2021: $26B
  • 2022: -$15B
  • 2023: -$17B
  • 2024: $32B (estimate)
  • 2025: $71B (estimate)

Netflix:

  • 2021: $2B
  • 2022: -$0.1B
  • 2023: $1.6B
  • 2024: $7B (estimate)

These numbers are wild. Is this accounting fraud or what?

When it’s literally free to grow your revenue…

Tech margins are crazy.

META and others have been streamlining. For example, META had its ‘year of efficiency’ and cut headcount significantly. Amazon has also focused on cutting layers of management. Reduced expenses + growth = skyrocketing free cash flow.

Deferred stock compensation and corporate treasury changes often don’t impact free cash flow. That might explain part of the numbers.

Simple: all expenses are stock-based compensation. :joy:

No fraud here. These companies make upfront investments (capex) that drive free cash flow growth later. Think of it like building a factory now and reaping benefits for years.

Tech companies are harder to value with discounted free cash flow (DCF) because growth is unpredictable, and a lot of cash gets spent on R&D and soft costs. These aren’t fraud—it’s just the nature of the sector.

It’s not fraud; tech just had a good year. For instance, Meta benefited from strong ad revenue and lower capex. Amazon’s AWS and AI integrations drove growth, while Netflix saw price hikes and strong subscriber growth.

Check your chart against the cost of capital. Money was incredibly cheap for a decade, and tech thrived on that advantage.

These profits partially come from leveraging their ad/subscription models. Inflation also plays a role, as costs get passed down the line to consumers.

Tech companies grow rapidly, plain and simple. It’s like asking how a 7ft person grows so tall.