What is free cash flow, and why can it differ from profit?

Free cash flow is the cash a business has left over after paying to run itself and after spending on long-term things like factories, equipment and buildings (called capital expenditures, or capex). The simple version is: cash from operations minus capex. It matters because it's the money a company can actually use to pay down debt, pay dividends, buy back shares or reinvest, which is why you'll often hear it come up on earnings day.

Tesla gave a real example on Wednesday, Oct. 21, when it reported third-quarter results after the bell. Net income, the accounting profit, was $787 million, while free cash flow came in at about $1.5 billion, and CNBC noted that Tesla's free cash flow had been negative in the second quarter. Profit and free cash flow don't match because accounting profit includes non-cash items and timing differences, while free cash flow tracks the cash that actually came in and went out. One more thing to know: free cash flow isn't an official accounting (GAAP) number, so companies can calculate it slightly differently, and one quarter on its own doesn't tell the whole story.

Try it yourself: next time a company reports earnings, look for both net income and free cash flow and ask why they're different. Got a question about cash flow or reading an earnings report? Drop it below, there are no silly questions here.

Sources: CNBC, Oct. 21, 2026 (Tesla Q3 2026 earnings report); The Wall Street Journal live coverage, Oct. 21, 2026; Investopedia, "Free Cash Flow (FCF)" and "Free Cash Flow Formula"; Morningstar investing terms, "Free Cash Flow".