Teva Pharmaceutical Industries Limited (TEVA) Cash Flow Statement

The ratio is distorted by net losses in several quarters, such as the $576M loss in Q2 2026 against $411M of operating cash flow, which makes the ratio mathematically unstable rather than purely informative. Working capital swings of several hundred million dollars per quarter, including a $617M outflow in Q1 2026 and a $327M inflow in Q3 2026, appear to be the primary driver of the divergence. Analysts should treat trailing multi-quarter averages rather than individual quarters as the more reliable measure of earnings quality.

Free cash flow margins swung between roughly negative 6 percent and 21.6 percent, a range too wide to support a stable trend assumption. The recent quarter Q3 2026 produced $121M of free cash flow at a 2.8 percent margin, which is positive but well below the peak periods. Investors should monitor whether the latest quarter reflects a durable recovery or another temporary inflection tied to working capital timing.

Capex is running below quarterly depreciation and amortization of roughly $240M to $270M, which implies the asset base is being consumed faster than it is being replaced, a pattern that may warrant monitoring over time. Because capex is consistent, the variability in free cash flow is driven by operating and working capital items rather than by investment decisions. The gap between capex and D&A also means the reported capital intensity may understate the true cost of maintaining the asset base.

The absence of dividends and buybacks means that free cash flow generated in stronger quarters has not been returned to equity holders during this window, which is consistent with a company prioritizing balance sheet repair. Acquisition spending of $692M in Q2 2026 stands out as the largest single deployment and warrants review of its strategic rationale and returns. The data does not disclose debt repayment, so the use of positive free cash flow beyond acquisitions cannot be fully traced from the supplied figures.

Net income was negative in four of the ten quarters, yet operating cash flow was positive in most periods, which means the divergence runs in both directions depending on the period. Stock-based compensation of roughly $30M to $50M per quarter is small relative to the swings, so it does not explain the gap. Investors should treat the cumulative cash picture as more informative than any single period, while recognizing that the supplied data window may not capture the full cycle.