When analyzing stocks, itโs not enough to just look at revenue or net income.
One of the most important โ yet often overlooked โ financial statements is the Cash Flow Statement.
In this guide, weโll compare Alphabet (Googleโs parent company) and AppLovin (a mobile advertising platform) to show how beginners can easily understand and use cash flow statements in investing.
๐ก What Is a Cash Flow Statement?
A cash flow statement shows how a company generates, invests, and spends cash during a given period.
It is divided into three main categories:
- Operating Cash Flow (CFO) โ Cash earned from core business activities
- Investing Cash Flow (CFI) โ Spending on assets, acquisitions, R&D
- Financing Cash Flow (CFF) โ Debt, share buybacks, dividends
๐ Alphabet (Google) Cash Flow Overview
- Operating Cash Flow: Consistently strong, fueled by advertising and cloud revenue.
- Investing Cash Flow: Large, ongoing spending on AI, data centers, and infrastructure.
- Financing Cash Flow: Significant share repurchases (shareholder returns).
๐ In short: Alphabet makes money steadily, invests aggressively in growth, and rewards shareholders with buybacks.
๐ Alphabet โ Cash Flows (Last 3 Years, USD millions)
| Category | 2022 | 2023 | 2024 |
|---|---|---|---|
| Operating CF | 91,495 | 101,746 | 125,299 |
| Investing CF | -20,298 | -27,063 | -45,536 |
| Financing CF | -69,757 | -72,093 | -79,733 |
โ Key Insights
- CFO rose from $91B โ $125B in just two years โ proof of stable profitability.
- CFI turned more negative in 2024, reflecting AI and infrastructure investments.
- CFF remained negative due to ongoing buybacks and shareholder returns.
๐ AppLovin Cash Flow Overview
- Operating Cash Flow: Positive for 5+ years, with rapid growth โ showing improved profitability.
- Investing Cash Flow: Volatile due to acquisitions and R&D-heavy business model.
- Financing Cash Flow: Reliant on debt issuance, with consistent outflows for repayments.
๐ In short: AppLovin generates cash from operations but carries higher growth risk due to its debt and acquisition strategy.
๐ AppLovin โ Cash Flows (Last 3 Years, USD thousands)
| Category | 2022 | 2023 | 2024 |
|---|---|---|---|
| Operating CF | 412,773 | 1,061,510 | 2,099,011 |
| Investing CF | -1,371,468 | -77,829 | -106,754 |
| Financing CF | -526,848 | -1,562,791 | -1,749,844 |
โ Key Insights
- CFO jumped from $0.4B โ $2.1B โ a huge improvement.
- CFI was highly negative in 2022 due to acquisitions, but later stabilized.
- CFF remained negative, driven by debt repayments and buybacks.
โ๏ธ Alphabet vs. AppLovin โ Side by Side
| Category | Alphabet | AppLovin |
|---|---|---|
| Operating CF | Very stable, steadily rising | Positive but smaller, rapid growth |
| Investing CF | Heavy AI & data center spending | Acquisition-driven, volatile |
| Financing CF | Buyback-focused | Debt-dependent, higher risk |
| Profile | Mature, stable giant | Growth stock with risks & opportunities |
๐ง Key Lessons for Beginners
- Look at Operating Cash Flow before net income
โ Accounting profits can be manipulated, but cash flow is real money. - Negative Investing CF is not always bad
โ It often means the company is actively investing in future growth. - Financing CF shows company strategy
โ Shareholder returns (buybacks/dividends) vs. debt-funded growth.
โ Final Takeaways
- Alphabet: Stable, cash-rich, shareholder-friendly โ ideal for long-term investors.
- AppLovin: Growing fast, but carries higher volatility โ more suited for growth-focused investors.
- Cash flow statements give the clearest picture of a companyโs financial health.
๐ฌ โRevenue is vanity, profit is opinion, but cash flow is reality.โ
By building the habit of analyzing cash flow, youโll gain a deeper understanding of how companies operate โ and make smarter investment decisions.
๐ Disclaimer
This article is intended for educational purposes only. It does not constitute financial, investment, or legal advice. All investment decisions involve risks, and readers should conduct their own research or consult with a licensed financial advisor.
๐ ย How to Read a Cash Flow Statement โ Operating vs. Investing vs. Financing