Two Minutes Reading for business analysis
📌 What is a 10-Q?
- Definition: A 10-Q is a quarterly report that all U.S. public companies must file with the SEC (Securities and Exchange Commission).
- Purpose: It provides an update on the company’s financial performance and condition between annual reports (10-K).
- Frequency: Filed three times a year (the 4th quarter is covered in the 10-K).
- Audience: Investors, analysts, regulators — essentially anyone who needs a transparent view of the company’s financial health.
🗂 Structure of a 10-Q
Here are the main parts you’ll see:
- Financial Statements (Unaudited):
- Income Statement (P&L): Revenue, expenses, net income.
- Balance Sheet: Assets, liabilities, and shareholder equity.
- Cash Flow Statement: How money moves in/out (operations, investing, financing).
- Management’s Discussion & Analysis (MD&A):
- Narrative from management explaining results, trends, risks, and outlook.
- Useful for spotting future growth drivers or warning signs.
- Risk Factors & Legal Proceedings:
- Updates on lawsuits, regulatory issues, or new risks not previously disclosed.
- Controls & Procedures:
- Notes on whether management believes the financial reporting systems are solid.
🔑 How to Read a 10-Q (Step-by-Step)
- Start with the Income Statement:
Look at revenue growth, margins (gross, operating, net), and compare to prior quarters/years. - Check the Balance Sheet:
Focus on cash reserves, debt levels, and working capital (current assets – current liabilities). - Follow the Cash Flow:
Strong companies usually show positive operating cash flow.
Check if cash is being burned on operations or raised through debt/equity. - Read MD&A Carefully:
- What explanations do executives give for changes?
- Are they confident or cautious about the next quarter?
- Look for “between the lines” signals (like blaming external factors vs admitting internal challenges).
- Scan Risk Factors:
Sometimes companies quietly introduce new risks here (e.g., lawsuits, regulatory changes, supply chain issues). - Compare to Expectations:
Cross-check with analyst consensus, guidance, or your own investment thesis.
🎯 Why It Matters for Investors
- Timeliness: Gives you the latest financial health snapshot.
- Transparency: Shows not just numbers, but management’s tone.
- Opportunities/Risks: Helps you spot undervalued stocks or avoid hidden dangers.
As Warren Buffett says: “You have to read the reports. You have to read not only what they print, but also what they don’t print.”
💡 Application Example
Tomorrow (8/27/2025), NVIDIA will release its Q2 earnings report. This is the perfect chance to put these steps into practice. By analyzing NVIDIA’s income statement, balance sheet, cash flow, and MD&A, we can evaluate whether its AI-driven growth momentum is translating into sustainable profitability — or if risks like high capital spending and regulatory headwinds are starting to weigh on results. Stay tuned — we’ll walk through NVIDIA’s Q2 filing as a real case study using this exact framework.
🧘 R2R Takeaway
A 10-Q is your quarterly health check on a business. Don’t just scan the numbers — read between the lines. As Buffett says: “You have to read not only what they print, but also what they don’t print.”