Record revenue and margins, but cash burn and dilution cloud the beat

The quarter beat the company’s old forecast, but was roughly pre-announced. Revenue came in at $11.12 billion, near the low end of the prior $11.0–$12.5 billion range, while non-GAAP diluted EPS reached $1.70 versus prior guidance of $0.65–$0.79. Gross margin was the real upside: 17.6% non-GAAP versus the previously guided 8.2%–8.4% range (Financial Highlights). However, the July 21 preliminary update had already disclosed revenue near the low end and gross margins of 15%–17%, so much of that improvement was known before this filing. Against the published pre-release consensus of roughly $11.7 billion in revenue and about $0.71 EPS, revenue was below expectations while earnings were substantially above them.

Profitability improved sharply, although full-year margins still slipped. Q4 gross margin nearly doubled year over year to 17.5%, lifting adjusted EBITDA margin to 15.0% from 5.8% (Non-GAAP gross margin reconciliation; Adjusted EBITDA reconciliation). That is a meaningful improvement over the weak margin profile investors had been concerned about. But the full-year gross margin was 10.8%, down from 11.1%, and stock-based compensation totaled $412.1 million, or roughly 10% of GAAP net income (Income Statement; Stock-Based Compensation table). The filing supports a much better quarter—not yet a fully demonstrated, durable margin reset.

The biggest deterioration is cash conversion, not the income statement. The company generated $2.23 billion of net income but used $6.81 billion of operating cash for the year, driven primarily by a $3.92 billion increase in receivables and an $8.88 billion increase in inventory (Cash Flow statement). Year-end inventory reached $12.90 billion and receivables $6.13 billion, versus $4.68 billion and $2.20 billion respectively a year earlier (Balance Sheet). Financing supplied $9.48 billion of cash, including $4.23 billion from mandatory convertible preferred stock and $1.41 billion from common-stock issuance (Cash Flow statement). That leaves the growth story requiring substantial external funding and working-capital execution, while common-share dilution is already visible in the 745 million GAAP and 761 million non-GAAP fully diluted shares assumed in Q1 guidance (Q1 FY2027 outlook).

The next-quarter outlook is strong on sales but less compelling per share. Q1 FY2027 revenue guidance of $14.5–$15.5 billion implies another major sequential increase, and management cited more than $60 billion of new orders plus record backlog entering the year (Business Outlook; CEO commentary). But non-GAAP diluted EPS guidance of $1.01–$1.10 is below the $1.70 just reported, despite the higher revenue base, and assumes 761 million diluted shares (Business Outlook). No dependable published consensus for that new quarter is established here, so the guidance cannot be called a beat or miss; the clean read is strong demand paired with a still-unsettled earnings-conversion and dilution story.

Net read: operationally better than feared, but not a clean positive surprise. The filing confirms an exceptional Q4 margin rebound and strong order momentum, offset by revenue below published expectations, a cash-flow collapse caused by inventory and receivables, substantial financing-driven dilution, and an unresolved independent review of export-control transactions (Cash Flow statement; Balance Sheet; Forward-Looking Statements). Because the key margin improvement was previewed three weeks earlier and the results remain preliminary and unaudited, the filing changes the picture less than the headline earnings growth suggests.