Profit is what the accounting rules say a company earned. Free cash flow is the cash that actually came in, after the company paid to keep its business running and growing. The two can differ a lot, and when they do, the cash is usually closer to the truth.
The formula
Free cash flow = cash from operations − capital expenditure
Both numbers are on the cash flow statement. Cash from operations is the cash the business generated after paying suppliers, staff, tax and interest. Capital expenditure (capex) is what it spent on equipment, buildings and other long-lived assets. What is left is free: the company can use it to pay dividends, buy back shares, repay debt or buy other companies, without borrowing or selling new shares.
Apple’s free cash flow
In billions of US dollars:
| Fiscal 2024 | Fiscal 2025 | 12 months to Jun 2026 | |
|---|---|---|---|
| Revenue | 391.0 | 416.2 | 466.8 |
| Net income | 93.7 | 112.0 | 128.9 |
| Cash from operations | 118.3 | 111.5 | 146.7 |
| Capital expenditure | 9.4 | 12.7 | 10.0 |
| Free cash flow | 108.8 | 98.8 | 136.7 |
| FCF margin | 27.8% | 23.7% | 29.3% |
The FCF margin (free cash flow ÷ revenue) says how much of each dollar of sales ends up as spare cash: for Apple, about 29 cents over the last twelve months. Few large companies manage more than 20%.
Note that fiscal 2025’s free cash flow was lower than fiscal 2024’s even though profit rose. Cash flow moves around from year to year, mostly with working capital (how much cash is tied up in inventory and in bills customers haven’t paid yet). Look at several years, not one.
Does profit turn into cash?
Divide cash from operations by net income to get cash conversion. Over Apple’s last three fiscal years it was 1.12: every dollar of reported profit came with about $1.12 of operating cash. Below 1 for years on end is a warning sign: profits that never become cash can mean aggressive revenue recognition or customers who don’t pay.
FCF yield: the price in cash terms
Divide free cash flow by the company’s market value and you get the FCF yield, the cash return you would earn if you bought the whole company at today’s price.
On October 1, 2026, Apple was worth $4,869.9 billion. Its 136.7 billion of free cash flow is a 2.8% yield. Its price/earnings ratio of 37.8 is an earnings yield of 2.6% (1 ÷ 37.8), so here cash and profit tell the same story.
On its own, 2.8% is a modest return; many bonds pay more. Investors accept it because they expect the cash flow to grow. That makes the useful question: how much growth does the price assume?
What growth does the price imply?
A reverse discounted cash flow (reverse DCF) answers that question. Instead of forecasting growth and working out a value, it starts from today’s price and finds the growth rate that justifies it.
At a 9% discount rate and 2.5% growth after ten years, Apple’s October 2026 price implied free cash flow growing about 13.3% a year for ten years. Apple’s revenue grew 6.4% in fiscal 2025. Whether 13% is achievable is the judgement you have to make; the reverse DCF turns a vague “it looks expensive” into a specific number you can argue with.
Where the cash went
Over five years Apple generated $511.6 billion of free cash flow. It spent $438.6 billion buying back its own shares and $75.0 billion on dividends: everything it made, returned to shareholders. That is what a mature, cash-rich business with little need to reinvest looks like.
Four traps
- Stock-based compensation. Paying staff in shares costs no cash, so it isn’t subtracted from free cash flow, but it dilutes shareholders. Apple’s was $13.7 billion over the last twelve months, about a tenth of its free cash flow. At many tech companies it is far more. A stricter measure is free cash flow minus stock compensation: $123.0 billion for Apple, a 2.5% yield.
- Working capital swings. Collecting old bills faster boosts one year’s cash flow, but it can’t repeat.
- Investment cycles. A company in a heavy building phase shows low free cash flow that may rise sharply later. Separate “maintenance” spending from growth spending where the filing lets you.
- Negative free cash flow. Over the twelve months to June 2026, Rocket Lab’s cash from operations was −$222.5 million and its capex $148.7 million: free cash flow of −$371.1 million. FCF yield and reverse DCF don’t work for such companies; the question becomes how long the cash lasts and how much dilution it takes to reach positive cash flow. See how to read a balance sheet.
Find it for any company
The cash flow statement is in Item 8 of the 10-K (see how to read a 10-K). Tuna Terminal’s company research calculates free cash flow, FCF margin, cash conversion, FCF yield and the reverse DCF for any company it covers. See the Apple summary, or the Rule of 40 screener, which weighs growth against profitability across about 2,000 US stocks.