Valuation / Earnings Glossary (Practical Edition)¶
Not a textbook translation — every term explained with real numbers from real companies.
1. Revenue Related¶
Revenue (Total Revenue)¶
How much money the company received from sales this quarter (before deducting costs).
Look at YoY (Year-over-Year) growth and QoQ (Quarter-over-Quarter) growth. For AI companies, YoY +50%+ is considered "healthy," <30% is a "slowdown warning."
Segment Revenue¶
Large companies have multiple businesses; segment reporting tells you where the money comes from.
- NVDA: Data Center (~88%), Gaming (~8%), Professional Visualization (~2%), Auto (~2%)
- MSFT: Productivity (Office), Intelligent Cloud (Azure), More Personal Computing
- AMZN: AWS, Online Stores, 3P Seller Services, Subscription, Advertising
⚠️ Key Insight: Revenue up 30% looks good, but if within segments Data Center is up +75% while other businesses decline, that's "AI pulling + other businesses deteriorating." Only by looking at segment breakdown can you gauge thesis strength.
Gross Margin¶
(Revenue - Cost of Goods Sold) / Revenue %.
- NVDA: 75% (software + high-end chip pricing power)
- TSM: 53-58% (depends on process node advancement)
- MU (Micron): 35-45% (memory cyclicality)
- HPE: 30% (servers, low margin)
Watch gross margin trend — rising means improving pricing power (e.g., NVDA H200 vs H100), falling means intensifying competition or cost overruns.
Operating Margin¶
(Revenue - All operating costs including R&D, SG&A) / Revenue %.
- MSFT: 45% (cloud scale effects)
- NVDA: 60%+ (jaw-dropping)
- TSM: 47%
- AMD: 7-12% (pales in comparison to NVDA)
2. EPS / Cash Flow¶
EPS (Earnings Per Share)¶
Net Income / Shares Outstanding.
⚠️ GAAP vs non-GAAP: GAAP includes stock-based compensation and other "non-cash" costs; non-GAAP excludes them. The market focuses more on non-GAAP, but a large GAAP-to-non-GAAP gap (e.g., >20%) is a yellow flag (company masking weak operations with incentives).
FCF (Free Cash Flow)¶
Operating Cash Flow - Capital Expenditure (Capex). This is the money the company actually pockets, not accounting profit.
- **MSFT TTM FCF**: $74B
- **GOOGL TTM FCF**: $72B
- **NVDA TTM FCF**: $60B
- **ORCL TTM FCF: -$24.7B (Negative!)** ← Because AI capex far exceeds operating cash flow
⚠️ AI Era Key: Many AI companies' FCF turns negative due to massive capex (Microsoft / Amazon / Oracle are close to or already negative). This is a key thesis question — is capex for the future or a black hole?
Capex (Capital Expenditure)¶
Money spent on long-term assets (servers/GPUs/data centers/fiber optics).
- **MSFT FY26 capex estimate**: ~$80B
- **GOOGL FY26 capex estimate**: ~$75B
- **AMZN FY26 capex estimate**: ~$90B
- **META FY26 capex estimate**: ~$60B
Total = $300B+, this is the source of the "hyperscaler $725B+ AI capex" number. This money almost entirely flows to NVIDIA / TSMC / Micron / Coherent / Vertiv / power companies — that's why all the AI "picks and shovels" stocks are rising.
3. Valuation Multiples¶
P/E (Price-to-Earnings Ratio)¶
Stock Price / EPS.
- Historical SPX average P/E: 16-20x
- **NVDA fwd P/E**: 30-35x (high but supported by growth)
- **MSFT fwd P/E**: 30x
- MU fwd P/E: 8-10x ← Low PE for cyclical companies
- **CRWV fwd P/E**: N/A (loss-making)
PEG (Price/Earnings to Growth)¶
P/E ÷ EPS Growth Rate (%). Entry-level golden rule: PEG < 1 = cheap, > 2 = expensive (but depends on industry).
- MU PEG: 0.4 (memory cycle undervalued)
- **NVDA PEG**: 1.0 (reasonable)
- **LRCX PEG**: 2.0 (semiconductor equipment expensive)
- **AVGO PEG**: 0.9
EV/Revenue (Enterprise Value / Revenue)¶
Suitable for unprofitable/low-margin companies (e.g., SaaS, Neocloud).
- **CRWV EV/Rev**: 12-15x (high, AI neocloud premium)
- **NBIS EV/Rev**: 10x
- **SNOW EV/Rev**: 13x
- CBRS EV/Rev: 77x ← Crazy valuation post-IPO
Rule of 40¶
Revenue Growth Rate + Operating Margin ≥ 40% is considered a "healthy growth stock."
- CRWD: 36% + 24% = 60% ✓
- DDOG: 25% + 25% = 50% ✓
- MDB: 22% + 7% = 29% ✗
4. AI-Specific Terms¶
RPO (Remaining Performance Obligations)¶
The amount of revenue from signed contracts not yet recognized. Core AI-era metric — reflects locked-in revenue for the next 1-3 years.
- **ORCL Q3 FY26 RPO: $553B** (~$300B of which is the OpenAI contract, accounting for 54%)
- **MSFT RPO**: $260B (cloud commitments)
- NVDA: Not explicitly disclosed, but CoreWeave's $99.4B backlog reflects forward demand
⚠️ ORCL's $553B RPO originates from OpenAI — single-customer concentration is a core thesis risk.
Backlog¶
Similar to RPO — signed but undelivered orders. CRWV uses backlog (~$99.4B).
Capex Cycle¶
Watch whether hyperscaler next-year capex guidance is raised: - Raised → Entire AI chain is bullish (NVDA/COHR/CEG) - Flat → AI narrative plateaus, 2nd derivative = 0 - Lowered → Major bear catalyst
Key: Watch the 2nd derivative, not just the absolute value. MSFT is already at $80B/yr; going to $85B = 5% increase, not a major positive. Going from $80B → $100B (25% increase) is a bull catalyst.
Wafer Capacity / HBM Capacity¶
Wafer foundry capacity (TSM 3nm / Samsung 2nm) and HBM memory capacity (SK Hynix / Micron / Samsung) are real physical bottlenecks. - TSM 3nm capacity determines NVDA / AMD / Apple shipment ceilings - HBM shortages directly cap NVDA H200 shipments
Hyperscaler vs Neocloud¶
- Hyperscaler: MSFT Azure / GOOGL Cloud / AMZN AWS — Large, multi-business clouds
- Neocloud: CRWV (CoreWeave) / NBIS (Nebius) / ORCL OCI — AI-dedicated clouds
Difference: Neoclouds have high customer concentration (e.g., CRWV client MSFT 60%+, ORCL client OpenAI 54%) → high client concentration risk but explosive growth.
5. 13F / Institutional Holdings¶
13F-HR¶
Institutional investors (>$100M AUM) must disclose holdings quarterly. Important caveat: It's a quarter-end snapshot, disclosed 45 days later, so what you see on 5/15 is holdings as of 3/31 — data from 6 weeks ago.
- Bridgewater / Coatue / Tiger Global / Citadel / Druckenmiller / Tepper — Top tech-savvy macro funds; position changes carry signals
- Berkshire — Buffett, classic value; adding/reducing AAPL/AMZN/GOOGL is big news
- Lone Pine / Whale Rock / Altimeter — Top hedge funds with concentrated AI holdings
⚠️ 13F Limitations: (1) 6-week lag (2) Doesn't show short positions (3) Doesn't show options (Aschenbrenner's $1.57B NVDA put was a rare 13F disclosure case)
Smart Money Divergence¶
When Bridgewater reduces a position but Citadel increases the same stock — indicates internal divergence among smart money; a single 13F signal < average expectation.
6. Earnings Calendar Terms¶
Fiscal Year¶
Not necessarily = Calendar Year:
- NVDA: FY27 = 2026-02 → 2027-01 (Similar to Apple; fiscal year is 1 month ahead of calendar)
- MSFT: FY27 = 2026-07 → 2027-06
- ORCL: FY26 = 2025-06 → 2026-05
- CSCO: FY26 = 2025-08 → 2026-07
⚠️ When you see an earnings headline "Q1 FY27," always verify which calendar month this corresponds to.
Pre-announcement / Guidance¶
- Pre-announcement: Key figures disclosed before earnings (usually 2 weeks prior) — can be good or bad
- Guidance: Next quarter/full-year expectations disclosed on earnings day — Market reaction often depends on guidance, not the current quarter's results
How to Use This Glossary¶
Don't memorize it — refer back when you encounter a term. Use it alongside Layer 5 · Corpus Reading Map to read real company earnings reports one by one; the terms will naturally become internalized.
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