Editor’s note: An earlier version of this story published on May 20.
“You’ve got to spend money to make money” is one of the most widely accepted business adages of all time. And nowhere is that belief more innate than in Silicon Valley, where companies like Tesla, Uber, Lyft, and Snap command dizzying valuations based on the belief that one day, they will indeed make money. Raising fresh billions to fund operations, boosters of these companies would have us believe, is a regular rite of passage. After all, didn’t giants like Amazon, Apple, Facebook, and Google also burn through tons of cash on their path to profitability?
Fortune decided to find out: How much money did Amazon, Apple, Facebook, and Google spend in their early years? And how does that compare with what today’s hot names are spending? To get the numbers, we went back to each company’s earliest published financial reports, starting with the offering statements for its IPO.
It turns out the assumption that successful tech companies burned lots of cash in their youth isn’t merely wrong—it’s staggeringly wrong. Look closely at the early days of the giants—the Fab Four, as we’ll call Amazon, Apple, Facebook, and Google (now Alphabet), and you’ll see that they were models of frugality compared with the new wave (which we’ll dub the Breakneck Burners: Tesla, Uber, Lyft, and Snap).
It’s true that in the dotcom frenzy of the early 2000s, many tech companies posted losses while devouring new funding. But the ones that burned piles of cash were such failures as Webvan and eToys.com, not winners like Google. Today, says accounting expert Jack Ciesielski, “you’ve got these companies chewing through mountains of cash, and investors are comparing them not with the failures of the dotcom era but with the survivors.”
For this analysis, the crucial measure isn’t net profit but “free cash flow” (FCF), calculated by taking “cash generated by operating activities” minus capital expenditures (capex). In other words, business income minus money you spent to grow your business.
The differences are stark. Let’s start with Google. Amazingly, the company appears never to have been significantly cash flow negative. Similarly, Apple never showed negative free cash flow starting with its first full year in business and weathered only short-lived deficits as a mature player. Facebook showed just two years of negative FCF (in 2007 and 2008, when it burned $143 million).
At Amazon, long the poster child for taking losses today to earn profits tomorrow, the numbers seem almost quaint. The new venture had negative FCF of $10.6 million from 1994 to 1997, but that was just a fraction of total sales. The only major underwater span in its history came from 1999 to 2001, when negative FCF totaled $813 million. But by 2002, Amazon’s FCF turned positive. All told, the Fab Four had total negative free cash flow in their early years of almost exactly $1 billion.
By contrast, the Burners have already torn through $23.9 billion, encompassing 22 years of FCF deficits and outspending the Fab Four by around 20 to 1. At this pace, will they ever reward investors? Here’s the outlook for each.
Tesla
Cash burn (total negative FCF): $10.9 billion over 12 years.
Outlook: Negative FCF ballooned to $4.1 billion in 2017 but narrowed the following year to a (comparatively) modest $222 million. The reprieve was short-lived, as Tesla began to spend heavily to ramp up production of its mass-market Model 3. In the first quarter of this year, sales tumbled, and FCF fell to minus $945 million, forcing Tesla to raise $2.4 billion in equity and debt funding. Morgan Stanley’s Adam Jonas shocked the markets by lowering his previous “bear case” for Tesla’s stock price from $97 to $10, citing dangers of slowing sales in China. Jonas warned that declining overall demand is pushing back the date when Tesla will be able to fund itself from operations.
Jonas’s price target (all targets are for 12 months from now): $230
Current price: $216
Uber
Cash burn: $8.9 billion over three years (not including losses from earliest years).
Outlook: In the offering statement to its long-awaited IPO in May, Uber revealed FCF numbers from 2016 through 2018. In 2016, Uber posted negative cash from operations of $2.9 billion and spent $1.6 billion in capex, for a negative FCF of $4.5 billion. Since then, the shortfalls have been shrinking, although they have remained substantial as the company has offered price promotions to customers and spent heavily on the launch of its Uber Eats food-delivery service, raising sales and marketing expenses by 25% in 2018 and 54% in Q1 of 2019. Tom White of brokerage D.A. Davidson tells Fortune, “Uber has bought itself some time with good recent performance on revenue and bookings. But by the end of this year, investors will start thinking of 2020 as hopefully the year where meaningful progress is made toward profitability.” If quarters keep slipping by without concrete progress, he adds, investors “will get discouraged or impatient.”
White’s price target: $46
Current price: $42.33
Lyft
Cash burn: $1.36 billion over three years and one quarter (not including losses from earliest years, which were not specified in the IPO prospectus).
Outlook: In 2016, Lyft burned $496 million in FCF, and since then, the trajectory has improved only slightly. The shortfall shrank a bit to $350 million in 2018, but in Q1 of this year, it stood at $110 million. Lyft is asset-light, but it’s still spending so heavily on such basics as driver pay, insurance, R&D, and marketing that operating losses have continued to mount. Dan Galves of Wolfe Research points out that Lyft depends on dense urban markets for nearly 60% of its business, despite those areas making up only 5% of U.S. households. And annual growth in those metro areas, he reckons, has slowed to 24%, half the rate in early 2018. Galves also cites high driver costs that “are taking almost all the revenue” and doubts that Lyft will win broad appeal outside the big cities.
Galves’s price target: $52
Current price: $58.32
Snap
Cash burn: $2.72 billion over four years (not including losses from earliest years, which were not in IPO filings).
Outlook: Snap is still burdened by big research expenses, equal to one-third of its total costs, and R&D needed to expand its photo-sharing platform is expected to jump to over $900 million this year. Additionally, it’s instructive to look at how much cash Snap is burning in relation to all the money it collects marketing its service. From the start of 2017 through Q1 of this year, Snap had $2.33 billion in revenues and churned through 73% of that amount, $1.71 billion in cash. Michael Pachter of Wedbush notes that although user and revenue growth is impressive, “the road to profitability appears to have gotten longer.” He’s concerned that big spending on infrastructure and R&D has pushed back the date when Snap will show positive Ebitda to at least Q4 of 2020.
Pachter’s price target: $12.25
Current price: $13.62
A version of this article appears in the July 2019 issue of Fortune with the headline “The Biggest Burners.”
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