4 ms·

What a sensational way to write this headline. Focusing on profits vs the 11% decline in revenues which is a more salient number.

hospitalJail 3y ago
Profit is more important than revenue.
- mikeryan 3y ago
  No. It’s not. The only time that’s true is if your revenues are flat year over year.
  - barelyauser 3y ago
    >> "The only time that’s true is if your revenues are flat year over year." That also makes a lot of assumptions on its own. Baseline is: profits matter. Capitalists want their cut. Profits is the extraction of the "thing". If capitalists can't put the "thing" in their pockets then why even bother?
    - Jorge1o1 3y ago
      If you're an investor in a company, theoretically you can think of the company as a stream of future dividend payments (cash flows) discounted over time. So maybe the company has $100 in profit in 2024, and they have 5 shares, and they pay out all of their profit as $20 dividend per share. And in 2025 you expect them to make $200 in profit, with the same 5 shares, which is $40 per share. Although that's a theoretical model, and there's many companies that don't pay dividends at all and still command mighty stock prices (e.g. TSLA) this is how real companies are actually valued -- on the expectation of future cash flows, maybe times some multiple. The reason why revenue is more important than profits for the vast majority of technology / growth-stage companies is that most of these companies are focused on creating double-digit percent revenue growth every single year. Their profits will be 0 or negative because all of the money that they make from selling widgets is getting spent on marketing or hiring new engineers to build more widgets, or building a factory. But after 5-10 years, this company will have "scaled over" its fixed expenses like rent, they will have huge revenues, they'll have serious market share, and then you can simply slow down / turn off the marketing and other SG&A expenses, and then suddenly you go from being a 0 or negative profit company to a multi-billion $ profit company. But if you're too focused on clipping coupons and scrounging pennies as a startup founder, you aren't focused on the right aspect: revenue growth.
      - dmoy 3y ago
        > Although that's a theoretical model, and there's many companies that don't pay dividends at all and still command mighty stock prices (e.g. TSLA) this is how real companies are actually valued Gotta look at stock buybacks too, which are effectively the same thing but more tax efficient for investors. (Though TSLA doesn't do significant amounts of that, and many other giant companies also don't do it relative to profits either, so your general point still stands)
        ghaff 3y ago
        Yes, but from the perspective of the theoretical model, the reason stock buybacks increase share price is that now the (theoretically unchanged) dividend payouts are getting divided among fewer shares outstanding. The theory is useful to understand that there's some basis to the share value of equities although it probably doesn't have a lot of practical application.
  - tiahura 3y ago
    Or if your job is to make a profit.
  - marcosdumay 3y ago
    The only time the GP is false is when companies are reinvesting profits in a way that makes it look like costs. But relative changes in revenue are much more impactful than relative changes in profit. This one is obvious, because revenues are much larger and bounded at a minimum of 0.
    - mikeryan 3y ago
      I'm a bit confused These statements seem to contradict themselves? The only time the GP is false is when companies are reinvesting profits in a way that makes it look like costs. (GP said profits are more important) But relative changes in revenue are much more impactful than relative changes in profit (you said revenue is more important)
      - marcosdumay 3y ago
        > you said revenue is more important No. What I said means that relative change isn't a good metric for any of them. But it's much less bad for revenue than for profit.
  - onlyrealcuzzo 3y ago
    > The only time that’s true is if your revenues are flat year over year. That's only true in an environment that values growth dramatically over profit. With non-negative real interest rates - profits actually matter.
hn_throwaway_99 3y ago
Reporters love doing this, and I agree with you, it's always for pure clickbait value. I mean, when a company swings from a profit to a loss (which happens all the time), you rarely see a headline "Profits fell 240%!" because reporters know that would be a confusing way to write it, and it would really call out how dumb it is to use change in profit in the headline.
jackmott42 3y ago
I read the headline and thought "still making a profit! sweet!"

hospitalJail 3y ago

Profit is more important than revenue.

mikeryan 3y ago
No. It’s not. The only time that’s true is if your revenues are flat year over year.
- barelyauser 3y ago
  >> "The only time that’s true is if your revenues are flat year over year." That also makes a lot of assumptions on its own. Baseline is: profits matter. Capitalists want their cut. Profits is the extraction of the "thing". If capitalists can't put the "thing" in their pockets then why even bother?
  - Jorge1o1 3y ago
    If you're an investor in a company, theoretically you can think of the company as a stream of future dividend payments (cash flows) discounted over time. So maybe the company has $100 in profit in 2024, and they have 5 shares, and they pay out all of their profit as $20 dividend per share. And in 2025 you expect them to make $200 in profit, with the same 5 shares, which is $40 per share. Although that's a theoretical model, and there's many companies that don't pay dividends at all and still command mighty stock prices (e.g. TSLA) this is how real companies are actually valued -- on the expectation of future cash flows, maybe times some multiple. The reason why revenue is more important than profits for the vast majority of technology / growth-stage companies is that most of these companies are focused on creating double-digit percent revenue growth every single year. Their profits will be 0 or negative because all of the money that they make from selling widgets is getting spent on marketing or hiring new engineers to build more widgets, or building a factory. But after 5-10 years, this company will have "scaled over" its fixed expenses like rent, they will have huge revenues, they'll have serious market share, and then you can simply slow down / turn off the marketing and other SG&A expenses, and then suddenly you go from being a 0 or negative profit company to a multi-billion $ profit company. But if you're too focused on clipping coupons and scrounging pennies as a startup founder, you aren't focused on the right aspect: revenue growth.
    - dmoy 3y ago
      > Although that's a theoretical model, and there's many companies that don't pay dividends at all and still command mighty stock prices (e.g. TSLA) this is how real companies are actually valued Gotta look at stock buybacks too, which are effectively the same thing but more tax efficient for investors. (Though TSLA doesn't do significant amounts of that, and many other giant companies also don't do it relative to profits either, so your general point still stands)
      - ghaff 3y ago
        Yes, but from the perspective of the theoretical model, the reason stock buybacks increase share price is that now the (theoretically unchanged) dividend payouts are getting divided among fewer shares outstanding. The theory is useful to understand that there's some basis to the share value of equities although it probably doesn't have a lot of practical application.
- tiahura 3y ago
  Or if your job is to make a profit.
- marcosdumay 3y ago
  The only time the GP is false is when companies are reinvesting profits in a way that makes it look like costs. But relative changes in revenue are much more impactful than relative changes in profit. This one is obvious, because revenues are much larger and bounded at a minimum of 0.
  - mikeryan 3y ago
    I'm a bit confused These statements seem to contradict themselves? The only time the GP is false is when companies are reinvesting profits in a way that makes it look like costs. (GP said profits are more important) But relative changes in revenue are much more impactful than relative changes in profit (you said revenue is more important)
    - marcosdumay 3y ago
      > you said revenue is more important No. What I said means that relative change isn't a good metric for any of them. But it's much less bad for revenue than for profit.
- onlyrealcuzzo 3y ago
  > The only time that’s true is if your revenues are flat year over year. That's only true in an environment that values growth dramatically over profit. With non-negative real interest rates - profits actually matter.

hn_throwaway_99 3y ago

Reporters love doing this, and I agree with you, it's always for pure clickbait value. I mean, when a company swings from a profit to a loss (which happens all the time), you rarely see a headline "Profits fell 240%!" because reporters know that would be a confusing way to write it, and it would really call out how dumb it is to use change in profit in the headline.

jackmott42 3y ago

I read the headline and thought "still making a profit! sweet!"