Glossary

The financial and technology terms used across Earnings Driver articles, each defined once. Financial terms come first, then chip and technology terms. Terms that belong to one company's own business, such as Tesla's FSD or Visa's payments volume, are explained in that company's article. Widely reported chip technologies, such as TSMC's CoWoS and Intel's EMIB, are defined here.

Where a term is explained in the book Earnings Driver, the chapter is given.

Jump to: Financial terms · Chips and technology

Average selling price

Revenue from a product divided by the number of units sold. A falling average selling price can come from lower prices or from selling more of the cheaper models.

Backlog

The value of work or orders a customer has signed for but that the company has not yet delivered or counted as revenue. A growing backlog points to future revenue, but signed work can still be delayed or canceled, and each company measures it in its own way. In Earnings Driver: Chapters 10, 18, 23, 24, 26, 29, 38.

Basis point

One hundredth of a percentage point. A margin that rises from 18.0% to 18.5% has risen 50 basis points.

Capital spending

Cash spent on things that last for years, such as factories, equipment and data centers. Companies report it as purchases of property and equipment. It is spread over the years of use as depreciation. Also called capital expenditure or capex. In Earnings Driver: Chapters 1, 27.

Cash from operations

The cash a company's business brought in over a period, after paying suppliers, staff and taxes, and before capital spending. It differs from operating income because profit counts sales and costs when they are earned or used, not when cash changes hands. In Earnings Driver: Chapter 1.

Consensus estimate

The average of analysts' forecasts for a company's revenue or profit in a coming period. Results are often described as beating or missing it.

Constant currency

Growth measured as if exchange rates had not changed from the earlier period. It shows how much of a change came from the business rather than from currency moves.

Cost of revenue

The direct cost of making or buying what a company sold: materials, production wages, and the depreciation and rent of factories. It leaves out selling, research and head-office costs. For a goods company it is also called cost of goods sold (COGS). In Earnings Driver: Chapter 1.

Deferred revenue

Money collected for something not yet delivered, such as a subscription paid in advance. The company records it as owed to the customer and counts it as revenue as it delivers. In Earnings Driver: Chapters 1, 13, 26.

Depreciation

The yearly charge against profit that spreads the cost of equipment or a building across the years it is used. The cash is spent once, at purchase. In Earnings Driver: Chapter 1.

Earnings call

The call a public company holds with analysts after it reports results. Executives comment on the results and answer questions. Most companies post a recording on their investor-relations site.

Earnings per share

Net income divided by the number of shares. Also called EPS.

Enterprise value

The value of a whole company to all its owners and lenders: the market value of its shares plus its debt, minus its cash and short-term investments. It is compared with operating income, because operating income is earned before interest is paid to lenders.

Fixed costs and variable costs

Fixed costs, such as rent and salaries, stay about the same whether a company sells more or less. Variable costs, such as materials, rise and fall with each unit sold. In Earnings Driver: Chapter 1.

Form 10-Q and Form 10-K

The reports US-listed companies file with the Securities and Exchange Commission. The 10-Q covers a quarter and the 10-K covers a full year. They hold more detail than the results release.

Free cash flow

Cash from operations minus capital spending. It is the cash a business generates that could be paid to its owners without shrinking the business. In Earnings Driver: Chapter 1.

GAAP and non-GAAP

GAAP (generally accepted accounting principles) are the accounting rules US companies follow in their official reports. Non-GAAP, or adjusted, figures leave out items a company chooses, such as share-based pay or restructuring charges, and the company must show how they connect to the GAAP figures.

Gross margin

Gross profit as a share of revenue. A gross margin of 18% means 18% of sales is left after the direct cost of making what was sold. In Earnings Driver: Chapter 1.

Gross profit

Revenue minus the cost of revenue: what is left from sales after the direct cost of making or buying what was sold, before research, selling and head-office costs. In Earnings Driver: Chapter 1.

Guidance

A company's own forecast for a coming period, such as expected revenue or capital spending.

Inventory

Goods a company has made or bought but not yet sold, including materials and unfinished products.

Margin

Any profit measured as a percentage of revenue, such as gross margin or operating margin. In Earnings Driver: Chapter 1.

Market value

The share price multiplied by the number of shares: what the stock market values the company's shares at. Also called market capitalization.

Net income

What is left after every cost, including interest and tax. Also called net profit or earnings.

Operating expenses

The costs of running the business beyond the direct cost of what was sold: research and development, selling, general and administrative costs, and any restructuring charges.

Operating income

Gross profit minus operating expenses: what a company earns from running its business, before interest and tax. The book calls it operating profit. In Earnings Driver: Chapter 1.

Operating leverage

The effect of fixed costs on profit. When sales grow and fixed costs stay about the same, operating income grows faster than sales. When sales fall, it falls faster. In Earnings Driver: Chapter 1.

Operating margin

Operating income as a share of revenue. In Earnings Driver: Chapter 1.

Organic growth

Revenue growth that leaves out the effect of companies bought or sold, and often of currency moves.

Price-to-earnings ratio

The share price divided by earnings per share. Also called the P/E ratio.

Research and development

Spending on designing new products and technology, such as engineers' salaries, testing and prototypes. Also called R&D. Most companies report it every quarter as a single line for the whole company.

Results release

The announcement a company publishes when it reports results, usually with the main figures and tables. Some companies call it a quarterly update or shareholder letter.

Revenue

The value of everything a company sold in a period, before any cost is taken out. Also called sales. In Earnings Driver: Chapter 1.

Segment

A part of a company that it reports separately, such as a business line or a region, often with its own revenue and profit.

Selling, general and administrative

The costs of selling products and running the company: stores, sales staff, marketing and head-office costs. Also called SG&A.

Advanced packaging

Joining several chips, such as a processor and stacks of memory, into one part so that data passes between them quickly. TSMC's CoWoS and Intel's EMIB are examples. In Earnings Driver: Chapters 27, 29.

Arm

A British company that designs processors and licenses its instruction set and chip designs to other companies, which use them to build their own chips. In 2026 it also began selling a chip of its own. Most phones and a growing number of servers use Arm-based chips.

ASIC

A chip designed for one particular task rather than for general use. Short for application-specific integrated circuit. Large cloud companies have their own designed for AI work, such as Google's TPU. In Earnings Driver: Chapter 27.

CoWoS

TSMC's advanced packaging, which places chips side by side on a thin wiring layer, called an interposer, that sits on a substrate, so they work as one part. Short for chip-on-wafer-on-substrate. In Earnings Driver: Chapter 27.

CPU

The processor that runs a computer's main tasks. Short for central processing unit. Most CPUs in PCs and servers are designed by Intel and AMD.

Data center

A building full of servers that store data and run software for many users at once. In Earnings Driver: Chapter 27.

DRAM

The working memory in a computer. It holds data while the processor uses it and loses it when the power is off. Short for dynamic random-access memory. In Earnings Driver: Chapter 28.

EMIB

Intel's advanced packaging, which joins chips through a small piece of silicon set into the substrate. Short for embedded multi-die interconnect bridge.

EUV lithography

The step that prints the finest patterns onto wafers, using extreme ultraviolet light. ASML is the only company that sells EUV machines. In Earnings Driver: Chapter 29.

Fabless

Describes a chip company that designs chips and has a foundry make them. Nvidia, AMD and Qualcomm are fabless. In Earnings Driver: Chapter 27.

Foundry

A company or business that makes chips designed by other companies. TSMC is the largest. In Earnings Driver: Chapter 27.

GPU

A processor that does many simple calculations at the same time. First built for graphics, it is now the main chip for training and running AI models. Short for graphics processing unit. In Earnings Driver: Chapter 27.

HBM

DRAM chips stacked on top of each other, wired together through the silicon, and placed next to a processor in the same package so that data moves between them faster. Used mostly with AI chips. Short for high-bandwidth memory. In Earnings Driver: Chapters 27, 28.

Hyperscaler

One of the companies that build and run the largest data centers, such as Amazon, Microsoft, Google and Meta. In Earnings Driver: Chapter 27.

Inference

Running a trained AI model to answer a request. Training is the work of building the model in the first place. In Earnings Driver: Chapter 27.

Instruction set

The basic set of commands a processor understands. Software built for one instruction set must be rebuilt or translated to run on another. x86 and Arm are the main instruction sets in PCs, servers and phones.

NAND flash

Memory that keeps data when the power is off, used for storage in phones and solid-state drives. In Earnings Driver: Chapter 28.

Process

A generation of chip-making technology, also called a node. A newer process usually fits more transistors into the same space. Process names such as 3-nanometer or 18A are labels, not measurements of any part of the chip. In Earnings Driver: Chapter 27.

Substrate

The base a chip sits on inside its package, which connects the chip to the circuit board.

Wafer

The polished disc of silicon that chips are made on. Many chips are made on one wafer and then cut apart. In Earnings Driver: Chapter 27.

x86

The instruction set used by Intel and AMD processors in most PCs and servers.

Yield

The share of chips on a wafer that come out working. A higher yield lowers the cost of each good chip. In Earnings Driver: Chapter 27.

Educational only, not investment advice.