Revenues of USD 47.56 billion hit expectations almost exactly (USD 47.54 billion), but remained roughly flat year-on-year and operating margin fell from 12.2% to 4.6%.

Production: Hess drives growth, Tengiz puts the brakes on volumes

The upstream segment remains a key driver. In 1Q 2026, Chevron earned $3.9bn in upstream, up about 4% from a year ago, primarily due to higher oil prices. Production in the United States rose 388k b/d of oil equivalent - driven by the Hess (Guyana) acquisition and higher production in the Gulf of Mexico and Permian Basin.

International upstream production added another 117 thousand barrels per day, again mainly driven by Hess, but some of this gain was erased by outages at the Tengizchevroil consortium in Kazakhstan. Due to the fire at the Tengiz field, total production pulled back slightly to 3.86 million barrels of oil equivalent per day from the previous quarter, although it still remains in the 3.8-3.9 million barrel range that management had indicated ahead of the results.

On a positive note for investors, US production exceeded 2m b/d for the third consecutive quarter, confirming the portfolio's shift towards safer jurisdictions and high-margin production in the Permian and Guyana.

'Counterfeit' derivatives: $2.9bn accounting noise set to return

The main reason why reported earnings are down year-on-year is not fundamentals, but accounting timing. Chevron already warned in its April 8-K that it expects negative after-tax timing effects of $2.7-3.7 billion in the downstream segment due to mark-to-market losses on revalued derivatives and the impact of LIFO inventory accounting.

These items arise because the firm must revalue financial derivatives at current market prices before it physically sells the commodity to which they are linked, while at the same time accounting for inventories at historical (lower) purchase prices. As a result, in an environment of soaring oil prices, accounting "punishes" results in the short term, even when cash flow and economic reality look better. Management expects this loss to gradually reverse in subsequent quarters as physical deliveries occur and inventories are revalued.

CFO Eimear Bonner pointed out that roughly $1bn of these positions are expected to close and deliver profits as early as 2Q 2026. Adjusting for these effects, Chevron is thus reporting higher quarter-on-quarter profits due to rising production and improving refining margins.

US-Israel vs. Iran oil war: Brent above $120 and a boost for upstream

The results come at a time when the oil market has experienced its sharpest rise since the pandemic. Both Brent and WTI prices have jumped roughly 60% since the start of the US-Israeli war against Iran on February 28. According to CNN, Brent briefly touched $126.41 a barrel before correcting to around $115-116.

Chevron said the rise in Brent alone from around $62 in early January to over $100 at the end of March will add $1.6-2.2 billion to upstream earnings compared to the previous quarter. The high prices are a direct result of the blockade of the Strait of Hormuz, through which around a fifth of the world's oil and LNG supplies normally pass, and where daily tanker numbers have plunged to units since the conflict broke out.

Cash flow in the red: working capital and a generous payout mix

The weakest point of the report is cash flow. Free cash flow fell to USD -1.5bn in 1Q 2026, while it was +USD +5.5bn in 4Q 2025 and +1.3bn a year ago. Operating cash flow was US$2.5bn (vs. US$10.8bn in 4Q 2025), with a key role played by an increase in working capital in the form of receivables from higher oil prices - the money is "earned" on the books but hasn't physically arrived yet.

Bonner predicts that operating cash flow will continue to be weighed down by expected working capital outflows in the US$2bn-US$4bn range in the coming quarters until oil market and payment conditions stabilise. However, despite the negative FCF, Chevron paid out US$3.5bn in dividends and repurchased US$2.5bn of its own shares in 1Q 2026. Buybacks were slightly lower than in the previous quarter, but the company continues to target an annual range of USD 10-20bn in buybacks.

The board confirmed a quarterly dividend of $1.78 per share, payable on June 10, 2026, which follows a 4% dividend increase announced at the 4Q 2025 results. This confirms Chevron's image as the "dividend aristocrat" of the oil sector, maintaining payout discipline even in a period of higher volatility.

Management: volatility is accounting noise, core business is going

Commenting on the results,CEO Mike Wirth stressed that despite heightened geopolitical volatility and supply disruptions, the company delivered a "solid performance" in 1Q, confirming the resilience of its portfolio. Bonner also asked the market to separate short-term accounting effects from the core business, which it said was showing earnings and cash flow growth and progressing according to plan.

For investors, several key points follow:

• Reported EPS looks weak, but adjusted numbers show a significant beat to expectations and rising upstream profitability.

• Upstream growth in the US (Permian, Gulf of Mexico) and Guyana via Hess is shifting the portfolio towards premium low-cost barrels in safer regions.

• Negative timing effects and working capital distort the cash flow picture in the short term, but management explicitly announces a partial reversal in 2Q and beyond.

• Chevron is using the oil boom to maintain a generous dividend and massive buybacks, even at the cost of temporarily negative free cash flow.

For a while it looked like tobacco companies would fall out of favor and their sales would decline, but the opposite is true. For example, Altria ($MO) reported very strong results yesterday and its shares gained more than 8% that day. Overall, tobacco companies are a great business. The combination of solid performance over the past few years and a dividend yield above 5% is, in my opinion, excellent. Personally, I'd guess these companies could still grow quite well over the next five years.

The key part of the story is not just the number of ships, but the cost structure and capital policy. The Eagle Bulk integration has delivered $21.8 million in synergies and is running at an annual savings rate of over $50 million, with daily operating costs per ship of around $5,200 and cash overhead of around $1,300 per ship among the best in the fleet segment.

Top points of analysis

• The combined post-merger fleet has around 150+ ships of over 14-15 million dwt, with an average age of around 10 years.

• Revenues grow 33% to $1.265 billion in 2024, net income to $304.7 million and EPS to $2.85.

• Gross margin is around 34%, operating margin around 12% and net margin almost 6%, with EBITDA reaching over $500 million.

• The company has achieved cumulative synergies of $21.8 million as of April 2024 and current running savings equate to an annual run rate of over $50 million.

• The dividend policy allocates up to 60% of excess cash flow to dividends, with the remainder going to buybacks, growth and fleet renewal; last year the company paid a dividend of $2.14 per share.

• Leverage is about 3.5 times EBITDA on a full debt basis, net debt about 2.6 times EBITDA; interest coverage is weaker, but the balance sheet remains rather conservative within the industry.

• The stock trades at roughly 0.9-1.1 times book value, with a fair price of $35.92 and a P/E of around 17 on "normalized" earnings, the upside comes out to around 40-50%.

Company performance

Star Bulk Carriers $SBLK is one of the largest players in the dry bulk segment in the world. It focuses on the transportation of commodities such as iron ore, coal, grain, bauxite and other raw materials that flow primarily between mining zones (Australia, Brazil, USA, South Africa) and consumption centers (Asia, Europe, Mediterranean). The merger with Eagle Bulk has created an entity that dominates publicly traded dry bulk carriers in terms of number and tonnage of ships.

The fleet ranges in size from large Newcastlemax and Capesize ships of over 170 to 200 thousand dwt (dwt stands for deadweight tonnage ), which are deployed on major iron ore and coal routes, to smaller Ultramax, Supramax and Handymax units, capable of serving smaller regional ports and more complex routes. This diversification allows the company to balance cycles between commodities and geographies. During periods when the main routes are weaker, a larger portion of the fleet can capitalize on regional grain flows or smaller volumes of other commodities.

The sustainability of the business rests on relationships with major commodity traders, miners and trading houses. They prefer partners with large, standardised fleets, reliable technical management and the ability to deliver capacity on time. The combination of scale, cost efficiency and a reputation for safety and quality of service makes the company a natural partner for long-term contracts, although much of its revenue still comes from the spot market and short-term charters.

Business and products

The basis of earnings is the daily time charter equivalent (TCE) rate the company achieves on its fleet. In 2024, the average TCE rate was approximately $18,392 per ship per day, with an average of 144 ships in operation. This is a significant improvement over previous years, which is reflected in the growth in both revenues and profits. The main sources of revenue are a combination of spot shipments and shorter contracts, which, while bringing volatility, allows the company to benefit more quickly from the growth phases of the market.

The current combined post-merger fleet allows the company to optimise the mix between long-term hedging and spot. Large ships are often partially hedged with longer contracts to reduce sensitivity to short-term fluctuations, while smaller ships have more flexibility in the spot market. This creates scope for better use of the cycle - in good years, a larger part of the fleet is released to spot, while in bad years longer contracts help stabilise cash flow.

Synergies from the merger cut directly into the operating model. Consolidated technical fleet management, joint purchasing of fuel, lubricants and spare parts, and merged administrative facilities have reduced daily overhead costs per ship (G&A) to around $1,264 in the fourth quarter of 2024, and daily operating expenses (OPEX) to around $5,200. This puts the company in a cost leader position: competitors with smaller fleets and worse purchasing conditions often have costs higher by several hundred dollars per ship and day, which adds up to hundreds of ships and thousands of days and translates into tens of millions of dollars of difference per year.

Market and addressable potential

The dry bulk market is a classic cyclical segment, with demand driven by global flows of iron ore, coal, grain and other raw materials. China is the largest driver of demand - absorbing roughly two-thirds of the world's seaborne traffic on iron ore alone, plus coal and other commodities. When China's construction and industrial sectors are running at full speed, demand grows for big ships carrying ore from Australia and Brazil; when they slow down, the market feels the chill.

In recent years, the market has been plagued by a combination of big swings in China's economy and gradual fleet growth, but by 2025 the balance was beginning to tighten - shipping demand was growing faster than ship capacity, although the Baltic Dry Index was still volatile. Importantly, the global orderbook - that is, the number of new ships ordered - remains relatively low, while part of the existing fleet is ageing. This creates medium-term scope for higher rates, unless there is a sharp drop in demand.

The addressable market for the company is therefore essentially the entire dry bulk shipping business in the medium and large ship segment. The real constraint is not demand but how many ships the company physically owns and how efficiently it can deploy them. In an environment where demand is growing at least moderately and the supply of ships is not growing too fast, a large, cost-efficient fleet has room to increase profits even with questionable investment in new ships.

Competition and market position

In the dry bulk segment, the company competes with other large players such as Genco Shipping & Trading $GNK, Golden Ocean Group, Pacific Basin and a number of smaller fleet owners. Some competitors specialize in specific ship sizes (for example, Pacific Basin in smaller handys and supramaxes), while others have similarly diversified portfolios like Star Bulk. The key differences are fleet size, average ship age and cargo structure.

With the merger with Eagle Bulk, the company has one of the largest fleets in the industry and can operate it at some of the lowest costs. This gives it a competitive advantage in downcycling. In upcycles, it then grows by "multiplying" rate growth into profits due to scale and low costs.

But at the same time, it is not alone in striving for efficiency. Competitors are investing in upgrading fleets, installing efficient technologies and optimising operating costs. In an environment of stricter environmental regulations, the race is on to see who has a fleet with a better emissions footprint and fuel consumption. Here, the company is investing in retrofits and technology to keep up - the advantage is scale, the disadvantage is the higher absolute volume of investment.

Management and CEO

The company is headed by Petros Pappas, an experienced Greek shipping magnate who has a long history of managing and building dry bulk fleets. Under his leadership, the company has grown into one of the biggest players in the industry and has successfully navigated several dry shipping cycles, including tough downcycles. The merger with Eagle Bulk is the latest strategic move to confirm his bet on economies of scale and the importance of a shale cost structure.

Capital discipline has visibly shifted in recent years. In addition to the traditional use of debt to fund the fleet, management has introduced an explicit dividend policy based on excess cash flow and has reinstated a buyback program. This shows that the goal is not just to grow the fleet, but to return capital to shareholders when it makes sense.

Management's priorities now stand on three pillars: to complete the integration of Eagle Bulk, taking full advantage of synergies; to maintain one of the best cost structures in the industry; and to manage debt so that the company will be able to survive any prolonged period of weaker rates. In the context of a cyclical dry bulk market, this makes sense - the investor is buying both the fleet and its cash flow and the experience of a captain who has weathered similar storms.

Financial performance

Over the past four years, the numbers are typically cyclical but trend-wise interesting. Revenues hovered around $1.43 billion in 2021 and 2022, fell by about 34% to $949 million in 2023, and rose again by 33% to $1.265 billion in 2024. This reflects a combination of rate movement and fleet expansion. Gross profit is up almost 48% to $583 million in 2024, implying a gross margin of around 34% - a solid number in a cyclical segment.

Operating profit is up 61% to $383 million in 2024, after falling from $608 million in 2022 to $238 million in 2023. An operating margin of around 11-12% is relatively decent for shipowners carrying large depreciation and fleet financing. Net income rose 75% to $304.7 million, which equates to a net margin of around 6% and EPS of $2.85 - up from $1.76 the previous year.

EBITDA was around $505-547 million in 2024 (depending on definition), versus $335-377 million in 2023 and nearly $766-887 million in 2022. This volatility reflects continued strength in 2021-2022, followed by weakness in 2023 and a partial recovery in 2024. The number of shares outstanding grows slightly (around 108-109 million in 2024), related to the Eagle Bulk acquisition and capital transactions, but the firm also repurchases some shares.

Cash flow, dividend and capital discipline

Operating cash flow is about $471 million in 2024, up from $336 million in 2023, reflecting strong profitability and a good ability to convert accounting profit into cash. Free cash flow after capex is in the hundreds of millions of dollars, giving management room for a combination of dividends, share buybacks and fleet maintenance.

Dividend policy is tied to what is known as surplus cash flow - up to 60% of this surplus can go to dividends, with the rest going to buybacks, growth and fleet renewal. In 2024, the company paid out $2.14 per share in dividends (vs. $1.42 in 2023), for a total dividend payout of over $200 million. That means the dividend is funded mostly from operating cash flow, not debt. The current quarterly dividend of $0.09 in Q4 2024 reflects a weaker Q1/Q4 season and a more cautious approach until synergies and the market fully materialize.

• The current dividend yield is just over 2%.

In addition to the dividend, the company has launched a $100 million buyback program, some of which it has already used - buying back around 900k shares since January 2025. This shows that management views the stock as undervalued relative to the value of the fleet and the cash flow generated. Overall, the capital discipline is set up to return some of the wealth to shareholders in good years, while maintaining flexibility for worse times.

Balance sheet and debt

The balance sheet is relatively solid for a shipping company, but debt is not trivial. Total debt is around $1.3 billion, which at an EBITDA of around $380-550 million implies a debt/EBITDA in the range of 2.5-3.5 times depending on whether you look at gross or net debt. The debt-to-asset ratio is around 0.32, and debt-to-equity around 0.5 - that's roughly mid to upper range within the industry.

Meanwhile, liquidity is good: a current ratio of around 1.7, a cash ratio of over 1.2, and working capital of around $268 million. The company has cash on hand and available credit lines that allow it to bridge even weaker periods. Interest coverage (EBIT/interest) of around 1.5 times shows that interest rates are not negligible, but manageable for now - but could become a source of pressure in a very weak market.

Altman's Z-score of around 1.7 suggests that the company is in a "grey zone" - not close to bankruptcy, but not in a completely safe zone either, should the market go through a significant and long downcycle. A stress scenario would look like rates falling 50-70% for several quarters to years, which would reduce TCE, EBITDA and refinancing pressure. In such a situation, the company would have to cut the dividend, suspend buybacks and perhaps sell some ships to keep the balance sheet healthy.

Valuation

According to current market data, the stock is trading at a price that corresponds to a P/E of around 46 for the last cyclical year - this looks high at first glance. But this number is skewed by a combination of volatile EPS and expected improvement - the forward P/E based on outlook and normalised earnings comes out in the range of around 6-8x, which already looks more attractive relative to the sector.

A price to earnings ratio of around 2.6 and a price to book value of around 1.14 suggest the market is still valuing the company roughly at or slightly above the value of its fleet and other assets, with a relatively modest cash flow premium. A P/B of around 0.9-1.1 in a cyclical sector where fleets often trade below replacement value is traditionally seen as a reasonable entry point if we believe in a return to better rates.

An EV/EBITDA of around 11x is more at the upper end of the range on dry bulk, but in the context of synergies, a strong fleet and dividend profile, this is still acceptable. A fair price of $35.92 corresponds to a P/E of around 12-15 on normalized earnings and a P/B of around 1.6-1.7, which would make sense in a good market and fully realized synergies. For "cheap" (P/E 6-8 forward, P/B ~1) to become "expensive", rates would have to fall, synergies fail to meet expectations, and profitability return to 2023 levels or worse.

Growth catalysts and outlook

There are three positive catalysts for the coming years. The first is the full translation of synergies from the merger with Eagle Bulk into results - $21.8 million in savings already achieved, running savings of around $50 million per year; if this effect becomes embedded, it will boost EBITDA and net income in every scenario.

The second catalyst is the potential tightening of the dry bulk market - a low global orderbook, an aging fleet and gradually increasing demand for shipping raw materials can combine with geopolitical factors (redirecting coal, grain, ore flows) to deliver higher rates. Already 2025 has shown that after a weaker start to the year, a significant recovery may come in the second half.

The third catalyst is capital allocation - a combination of cash flow-linked dividends and share buybacks. If the stock continues to trade near or below book value, buybacks make sense and increase value per share. Of the measurables it makes sense to track:

• average TCE rate by quarter

• EBITDA and free cash flow

• amount of synergies (running annual run rate vs. 50 million target)

• Debt to EBITDA ratio (a trend to 2x or less would be positive)

• the amount of dividends and the volume of redemptions in each quarter

Investment scenarios

Optimistic scenario

In the optimistic scenario, the dry bulk market will tighten in the coming years: Chinese demand for raw materials will remain solid, ship orderbook will remain low and rates will stay at the top of the historical range. On average, TCE rates will approach or exceed 2021-2022 levels, EBITDA will move back towards $700-800 million and net profit towards $500-600 million. EPS in that case could again be in the $4-6 per share range.

With a price-to-earnings ratio of around 7-9 - typical for dry bulk in good years - that would imply a potential price of $28-45 per share, plus a rich dividend tied to cash flow (easily a double-digit yield in good years). For today's investor, this would be a very attractive combination of capital appreciation and dividends, but with an awareness of cyclical risk.

A realistic scenario

The realistic scenario assumes a slightly tight market and fully delivered synergies, but without an extreme boom. TCE rate is in the $17-20k range, EBITDA around $500-600m and net income $250-350m. EPS in this world would be $2.0-3.0, dividend $1.5-2.5 per share per year (based on 60% payout from excess cash flow).

At a P/E of around 8-10, the stock would be priced at $20-30 per share at these numbers; a fair price of around $35 would reflect an expectation that the company is more in the upper end of that range. For an investor buying around $24, that would imply decent upside and a dividend yield in the low to mid-unit percentages in a "normal" year, higher in a good year.

The negative scenario

In a negative scenario, the dry bulk market enters a deeper and longer downcycle: Chinese demand weakens, the global economy slows, and at the same time new orderbook ships are added to the fleet. TCE rates plunge to $10-13k, EBITDA falls below $300m and net profit shrinks to low-double digit values, or even into the red in some years. EPS would be $0-1, and the dividend policy would likely be severely curtailed or suspended.

The market would value the stock rather defensively in such an environment, P/E would not be well used, and valuations would be P/B oriented - typically 0.5-0.8x book value. This would imply a potential price range of $12-18 per share. An investor in such a scenario would have to be prepared for significant drawdowns and a rather long wait for the next cycle.

What to take away from the article

• The company is one of the largest players in dry cargo today, with a fleet of around 150+ ships and a very good cost structure.

• The merger with Eagle Bulk has brought synergies that are already translating into results, with annual savings heading towards $50 million.

• Revenues, profits and cash flow show that it can generate hundreds of millions of dollars of profit and free cash flow in the current cycle, a significant portion of which it returns to shareholders in the form of dividends and buybacks.

• Debt is higher but acceptable within the industry - the key is that earnings and cash flow are well covered in the current environment, risk increases in a deeper down cycle.

• Valuation looks reasonable to attractive if we believe in at least a stable or slightly positive market; should a prolonged downcycle come, the P/E could quickly become illusory and ship value will remain the mainstay.

• As investors, we look at the combination: a cheaply valued fleet, decent cost advantage, smart capital policy - while accepting cyclical risk and dependence on China and global commodity demand.

The healthcare sector is acting as a classic defensive shelter this year at a time when investors are becoming more wary of highly priced AI titles. After years of below-average performance, there is renewed enthusiasm. A wave of mergers and acquisitions, a return of interest in healthcare giants and a parallel explosion of thematic funds on narrowly defined trends such as weight-loss drugs are to blame. But this sector is specific in its own way and behaves differently from the rest of the market. Choosing the right ETF depends on several important factors that should not be underestimated. Our analyst team has selected 4 ETFs with exposure to this sector and compared them to each other so that everyone can make a choice.

Health Care Select Sector SPDR ETF $XLV

XLV is a bet on the entire healthcare sector within the S&P 500 index. The fund, which is managed by State Street, tracks the Health Care Select Sector Index and holds 58 of the largest U.S. healthcare companies weighted by market capitalization. Top positions include classic names like Eli Lilly $LLY, Johnson & Johnson $JNJ, UnitedHealth Group $UNH, AbbVie $ABBV and Merck $MRK. So this is exposure to established healthcare and insurance giants with strong cash flow and stable dividends.

Morningstar noted in a February rating that XLV maintains a significant cost advantage over its competitors and is one of the cheapest funds. For an investor looking for low-cost, defensive exposure to U.S. healthcare, XLV remains the clear choice. It is important to note, however, that the fund holds over half of its assets in the ten largest titles, so if one of the giants hits a regulatory problem or patent cliff, it will show up noticeably in the portfolio.

The largest positions in the ETF

$XLV lends itself as a core sector position for long-term investors. It's not a fund that captures rapid thematic capital rotation, but it provides steady exposure to cash flow generating businesses with a long history of dividends. In the context of 2026, when investors are moving away from expensive AI titles, XLV fills this position very well.

ROBO Global Healthcare Technology and Innovation ETF $HTEC

HTEC is a fundamentally different product than XLV. Instead of the established healthcare giants, it focuses on healthcare technology and innovation across 9 sectors and 15 countries, with an index structured to limit reliance on the largest market capitalizations. The fund holds 59 titles and bets on high-growth companies that have at least some business in health technology, robotics, genomics, data analytics or digital health.

HTEC represents a more volatile, international version of the sector's exposure to healthcare. The downside is the relatively small fund size, higher beta and underperformance over the past year. However, for the investor looking for exposure to the "hardware" and technology side of healthcare, this is one of the few ETFs that can bring this together under one roof.

The largest positions in the ETF

HTEC is for investors who already have core healthcare exposure in the form of $XLV or $VHT and wants to add leverage to the innovation segment. The fund is riskier, more expensive and more volatile. But over the long term, it may make sense for those who believe in the growing adoption of AI and robotics in healthcare.

Amplify Weight Loss Drug & Treatment ETF $THNR

THNR is a narrowly focused thematic fund that tracks the VettaFi Weight Loss Drug & Treatment Index and invests in global companies that economically benefit from the development and production of weight loss drugs, holding 20 titles. Following the explosion in popularity of GLP-1s like Ozempic, Wegovy, Mounjaro and Zepbound, a whole new thematic ETF category has formed around this thesis.

The ETF operates as a passive fund and its success or failure is very closely tied to the performance of Novo Nordisk $NVO and Eli Lilly $LLY. Those two titles make up nearly a quarter of the portfolio. This is a double-edged sword. When the GLP-1 market rises, the fund profits. When Novo Nordisk underperforms, as it has repeatedly done in recent quarters, it affects the performance of $THNR more than the broad sector funds.

Top ETF positions

The market for weight loss drugs has enormous structural potential. Approximately 40% of the U.S. population is obese and GLP-1 indications are expanding to cardiovascular prevention, liver disease, sleep apnea and other areas. The question, however, is how much of this value will be captured by publicly traded stocks and how much is already priced in by Novo Nordisk and Eli Lilly. THNR is a purely thematic speculation on the GLP-1 drug market, not a diversified position.

Tema Heart & Health ETF $HRTS

HRTS is an actively managed fund focused on companies that have at least 50% of their revenues from cardiovascular and metabolic disease treatments, including GLP-1. The fund manages Tema ETFs with a portfolio manager with a medical degree and 25 years of experience investing in the sector. Top positions include Eli Lilly $LLY, Alnylam Pharmaceuticals $ALNY, Edwards Lifesciences $EW and others. In total, you'll find 45 titles in this ETF.

HRTS differentiates itself from $THNR by combining a bet on GLP-1 with a cardiovascular and metabolic thesis. It is not a pure concentration on weight loss drugs, but on the entire complex of chronic diseases that are the leading cause of death in developed economies. Active management gives the fund manager the flexibility to respond to each company's pipeline and move opportunistically between GLP-1 players, heart valve manufacturers and RNAi therapeutics.

Top ETF positions

$HRTS is for investors who believe in the long-term future of cardiometabolic disease as a key pharmaceutical growth area, but want a more diversified approach as opposed to $THNR. The higher expense ratio and high portfolio change ratio adds to fees through active management. Thus, the fund must have high performance to pay off.

Fund Comparison

Strategic consideration

The choice between these four funds is not a "better versus worse" choice.

$XLV is clearly the cheapest and provides the broadest exposure, but does not capture the rapid thematic rotation. $HTEC offers an innovation premium at the cost of higher volatility and higher fees. $THNR is a narrow bet on GLP-1 that stands and falls with the performance of Novo Nordisk and Eli Lilly. $HRTS combines GLP-1 with a broader cardiometabolic approach and active management, but at the highest cost.

Several factors will be key for the group in the coming quarters. For XLV, it's the results of its largest holdings, Eli Lilly, J&J and UnitedHealth, where tariffs, drug pricing and political pressures are having an impact. For HTEC, it will be crucial whether the innovation segment returns to positive numbers or remains under pressure in a higher interest rate environment. For THNR and HRTS, the GLP-1 pipeline for new indications, potential price regulation in the US and competition from generics and oral forms will be critical.

Although iPhone sales narrowly missed the estimate, other categories - Mac, iPad, wearables and services - beat expectations and China rebounded strongly after a weaker period. The combination of strong numbers, a new $100 billion share buyback program, and a 4% dividend increase helps keep sentiment positive even as the market views Apple mainly through the prism of AI and succession from Tim Cook.

Q2 FY 2026 results: revenue, profit and margin

For the quarter ended March 28, 2026, Apple's net sales were $111.2 billion, up from $95.4 billion a year ago, or approximately 17 percent. Compared to analyst consensus of around $109.7 billion, it was a beat of about $1.5 billion, so Apple comfortably beat expectations with sales.

Products earned $80.2 billion (versus $68.7 billion last year), services $31.0 billion (versus $26.6 billion). Gross profit rose to $54.8 billion from $44.9 billion, gross margin increased to 49.3 percent, with the market expecting about 48.4 percent - another beat. The long-term trend of margins moving from the "high 30s" to nearly half of sales continues.

Operating profit came in at $35.9 billion, up from $29.6 billion last year. Net income rose to $29.6 billion from $24.8 billion (+19 percent), and earnings per share (diluted EPS) were $2.01 versus $1.65 a year ago. The consensus was for EPS of $1.95, so Apple beat estimates by about 3 percent.

So for the first six months of the fiscal year, Apple earned $254.9 billion (versus $219.7 billion last year) and netted $71.7 billion (versus $61.1 billion). EPS for the six months is $4.85 versus $4.05 a year ago.

Segments: iPhone, Mac, iPad, wearables and services

By product category, the quarter looks like this:

• iPhone: $57.0 billion (vs. $46.8 billion last year), up roughly 22 percent but slightly below market expectations of $57.2 billion.

• Mac: $8.4 billion ($7.95 billion last year), above consensus of $8.0 billion.

• iPad: $6.9 billion ($6.4 billion last year), above consensus estimates of $6.7 billion.

• Wearables, Home and Accessories: $7.9 billion ($7.5 billion last year), slightly above consensus of $7.7 billion.

• Services: $31.0 billion ($26.6 billion last year), up about 16 percent, above consensus of $30.4 billion.

Geographically:

• Americas: sales of $45.1 billion ($40.3 billion last year).

• Europe: 28.1 billion (24.5 billion last year).

• Greater China: 20.5 billion (16.0 billion last year), up roughly 28 percent and a clear recovery after weaker periods.

• Japan and the rest of Asia also grew, albeit at a slightly slower pace.

Thus, the iPhone remains the key driver (about half of sales), but services and China are becoming increasingly important pillars of growth. Weaker-than-expected iPhone sales are a negative detail, but the overall picture is balanced by stronger Mac, iPad, wearables, and especially services.

• Full presentation with results.

Cash flow, balance sheet and capital allocation

For the first half of fiscal year 2026, Apple $AAPL generated operating cash flow of $82.6 billion, up significantly from $53.9 billion in the same period last year. This reflects not only higher earnings but also favorable working capital development (collections of accounts receivable, reduction in vendor receivables).

Investing cash flow was -$11.1 billion as the firm invested $4.3 billion in assets (capex) while actively managing its securities portfolio - $32.4 billion in purchases and $27.3 billion in collections on securities due and sold.

Financial cash flow was -$61.9 billion, mainly due to:

• $37.0 billion of share repurchases

• dividends of $7.74 billion

• repayment of term debt 7.9 billion and commercial paper 5.9 billion

On the balance sheet we see:

• $45.6 billion in cash and equivalents (vs. $35.9 billion in September 2025)

• short-term securities 22.9 billion, long-term 78.1 billion

• for a total of over $146 billion in cash and liquid investments

• Total long-term and short-term debt has fallen from roughly $98.7 billion to $84.7 billion, so the net cash position is significantly positive

In addition, the board of directors approved a new $100 billion share repurchase program and increased the dividend to $0.27 per share, a 4 percent increase. This makes it clear to investors that Apple has the capacity to return massive amounts of capital to shareholders even in a time of massive investment in AI and products.

Management Commentary, AI and CEO Change

In the earnings conference call,Tim Cook highlighted that the iPhone 17 is "the most popular lineup in history" and that sales have outpaced internal guidance despite constraints in the supply of memory and other components. CFO Kevan Parekh said they faced supply constraints on both iPhones and Macs in the past quarter, with memory cost increases set to be even more pronounced in the current quarter and likely to remain elevated for longer.

AI is a major theme. Both Cook and Parekh openly say R&D spending is growing faster than sales - R&D shot up 33 percent in the quarter to $11.4 billion from $8.6 billion last year. The main reason is AI: Apple sees AI as a significant opportunity in both products and services, and will invest in it beyond its current product roadmap.

A key strategic element is the collaboration with Google - Apple will use the Gemini model to enhance Siri and other features. Cook says that "the collaboration with Google is going well" and that they are happy with both it and their own internal development. In practice, it's a hybrid AI strategy: partnering where it makes sense for speed and quality, while building out their own capabilities in the cloud and on-premises.

Into this comes a personnel change: after fifteen years, Tim Cook is stepping down as CEO to become executive chairman, and John Ternus, the current head of hardware, will be the new CEO from September. Ternus thanked Cook and shareholders at the call and hinted that Apple has an "incredible product roadmap ahead of us", though he didn't reveal details, of course. For investors, the important signal is that this is an internal successor with a twenty-five-year history at Apple, which reduces the risk of a radical change in direction.

Outlook and why the stock is up 3% after the results

Apple said it expects year-over-year revenue growth of between 14 and 17 percent in its fiscal third quarter (June). Meanwhile, analysts were expecting growth of roughly 9.5 percent to $103 billion, so guidance is well above consensus. The company also indicated that services should continue to grow at a rate similar to the 14 percent growth seen in the previous quarter, and that it plans to maintain high margins despite higher memory costs.

Shares rose about 3 percent after the results as the market got what it wanted despite a minor disappointment with the iPhone:

• Sales and EPS beat estimates

• gross margin was better than expected

• Revenue guidance for the next quarter is well above consensus

• Apple announced a new $100 billion share buyback program and raised the dividend

Weaker-than-expected iPhone sales must take a back seat at a time when management says it expects 14 to 17 percent revenue growth in the next quarter despite memory constraints, while clearly communicating an aggressive but controlled AI strategy and continuous management succession. The market reaction is therefore positive, but not overly euphoric - rather, the results confirm that Apple is returning to a growth trajectory after a weaker period, without yet having to dramatically increase capex like some rivals.

Key numbers

• Q2 FY 2026 revenue: $111.2 billion, +17% y/y (vs. $109.7 billion expected).

• EPS: $2.01 (vs. $1.65 last year and $1.95 expected).

• Gross margin: 49.3% (vs. 48.2% last quarter and 48.4% expected).

• iPhone sales: USD 57.0 billion, +22% y/y (vs. USD 57.2 billion expected).

• Services: USD 31.0 billion, +16% y/y (vs. USD 30.4 billion expected).

• Greater China: USD 20.5 billion, +28% y/y.

• R&D spending: USD 11.4bn, +33% y/y.

• Operating cash flow (6M): USD 82.6bn; buybacks USD 37.0bn, newly authorized buyback program USD 100bn, dividend USD 0.27 per share (+4%).

For a whole decade one rule governed the American economy — the consumer pulled the train. Two-thirds of GDP was made up purely by consumers with a credit card, a mortgage, and a taste for shopping. Economists treated it like a law of nature. Then Q1 2026 arrived and quietly buried that belief.

For the first time in the modern era, corporate investment — especially in artificial intelligence — contributed more to GDP growth than household spending. This is not a coincidence but a shift that is rewriting the rules of the U.S. economy.

The Era When Railroads Dominated the 19th Century

To understand why this moment is so significant, we need to go back about 130 years.

In the 1890s, America was in the midst of a railroad boom. Private capital poured into building tracks, telegraph lines, and industrial infrastructure at an unprecedented pace. Consumers were not the engine of growth then — industrial capital investment was. Firms built, invested, and expanded as much as they could. The result was that the U.S. overtook Britain as the world’s largest economy.

Then the electrical revolution came in the 1920s and 1930s, and the same story repeated. $GE, $T massively invested in infrastructure that the market initially didn’t understand and called a gamble. In hindsight, it proved to be the foundation of prosperity for decades to come.

Today we are witnessing a third such wave. Only instead of rails, data infrastructure is being laid.

What Actually Happened in Q1 2026

U.S. GDP grew by 2% in the first quarter. On the surface, a solid number. But you need to look under the hood.

Corporate investment contributed 1.48 percentage points to growth. Consumer spending contributed just 1.08 points. This is a historic reversal. The consumer, who accounts for 68% of the entire U.S. economy, has lost the role of growth driver.

Consumers slowed because of geopolitical fear. The war in Iran created an energy shock, oil prices jumped, households started to tighten their belts, and goods spending fell by 0.03 percentage points. Moody's analysts described it precisely: household spending is "more exposed to the risk from energy price pressures due to the Middle East conflict."

This is exactly the type of geopolitical risk I have been warning about repeatedly. The conflict in Iran is a direct hit to the American consumer’s wallet. If the war escalates or drags on, that 1.08 percentage points from consumption could shrink further.

But back to the good news.

The corporate side is holding — and strongly. $META, $MSFT, $GOOG and $AMZN together announced in their Q1 results that their planned spending on AI infrastructure for 2026 exceeds $725 billion. A figure analysts were estimating at about $670 billion just a quarter ago.

An increase of $55 billion in just a few months.

Capital expenditures of $META.

To put it into perspective — $725 billion is larger than the GDP of the Netherlands or Saudi Arabia. It's one of the largest waves of private infrastructure investment in human history, unfolding in real time.

And economists are taking note. Jeffrey Roach, chief economist at LPL Financial, pointed to a parallel with the late 1990s. His words: the economy has "more to go here if the late 90s is any guide."

What Does This Mean for the Fed and Inflation?

Here’s the complication I have to call out plainly.

The PCE index — the inflation gauge the Fed watches most closely — rose 3.5% year-over-year in March. Core inflation, excluding food and energy, stands at 3.2%. Both figures were in line with expectations, so markets didn’t panic. But they are still clearly above the Fed’s 2% target.

What does this mean? The Fed won’t rush to cut rates. The geopolitical shock from Iran is pushing energy prices higher, and consumer inflation remains sticky. Paradoxically, a massive AI capex boom can add to inflation in the short term because it heats up the labor market in certain segments.

Vojta's Thoughts

I’ll admit this data point didn’t surprise me, but it did please me, because it finally confirms something I’ve been following for much longer.

The market has been divided for a long time. One camp said: "AI is just hype, similar to the dot‑com bubble." The other said: "This is a transformational technology that will change the productivity of the entire economy." I was and remain in the second camp — not because I’m naively optimistic, but because I’ve seen how much money is physically flowing into data centers, infrastructure, and chips.

And now we see it in the macro data too. Corporate investment is pulling GDP more than the consumer.

What truly keeps me alert, though, is the war in Iran. The energy shock is real and consumers will feel it. If the conflict expands or oil stays expensive, we’ll get a scenario where AI infrastructure grows but consumers pull back. That points to a mildly stagflationary undertone — a moment when GDP is "artificially" inflated by corporate investment while inflation rises and consumers buy more expensive goods.

That’s why I bet on diversification. $AMZN is a key position in my portfolio. It’s exactly the kind of company that sits on both sides of this story. AWS powers AI infrastructure. Its retail and consumer segments depend on a healthy consumer.

For now, AI capex is winning. And that’s enough for me to stay in position.

The American economy is undergoing a quiet transformation. The consumer is handing the baton to corporate investment in AI infrastructure. Historical parallels with the industrial revolution are clear: these structural transitions tend to be lengthy, winding, and full of short‑term pain. But in the end they rewrite the rules of the entire economy.

But I’m curious — which side are you on? Do you believe in an AI boom, or are you skeptical and think AI is just hype?

The deal targets the next generation of "agent AI" - systems that don't just generate text or images, but sync complex, CPU-intensive tasks: reasoning, search, multi-step scheduling, agent coordination, or integration with code and APIs. GPUs remain the cornerstone for training large models, but running these agent systems in high volume interactions is hugely intensive and demanding - and this is where Meta is betting on Graviton5 as an efficient compute base.

Top points of analysis

• Meta will deploy "tens of millions of Graviton cores" on AWS, meaning on the order of hundreds of thousands of physical Graviton chips for agent AI and other CPU-intensive workloads; the contract has explicit room for further expansion.

• Graviton5 is designed specifically for CPU-heavy AI tasks: reasoning, multi-agent workflow orchestration, search, and integration with existing systems, while large GPU clusters (in both AWS and Meta) are used to train the underlying models.

• AWS claims that Graviton generally delivers up to 40% better performance/price ratio and roughly 20-30% lower cost compared to comparable x86 instances, which is critical in AI operations because running agent services makes up a large portion of OPEX.

• Graviton is already used by over 90% of the top 1,000 EC2 customers; this puts Meta among the largest users and gives AWS a strong reference story for other hyperscalers, foundation model companies and the enterprise.

• The financial parameters of the deal are not disclosed, but the scale (tens of millions of cores, multi-year contract) makes it one of the largest single CPU projects in AWS history and a potentially significant contribution to the growth of the AWS compute segment in the coming years.

• For Amazon, it is also proof that its own chip (Graviton, Trainium, Inferentia) can compete with traditional CPU/GPU vendors and improve AWS margins by reducing dependence on Intel/AMD and, to some extent, Nvidia.

What has changed: from a GPU race to a CPU battle for agent AI

Up until now, much of the discussion around AI infrastructure has been centered on GPUs - primarily Nvidia $NVDA, their H100/B100, plus hyperscalers' efforts to push their own chips for training (AWS Trainium, Google TPU, Meta/AMD combo). But agent AI is changing the balance of power: training the base models is an extremely demanding but relatively "sparse" event, but agent inference and orchestration is continuous and massive, often with high demands on the classical CPU.

In the official announcement, Meta$META emphasizes that Graviton5 will be used for just these CPU-heavy parts of agent systems - the real workloads where user queries are evaluated, scheduling routines are run, results from searches are integrated, and long chains of steps are run. These are the tasks that:

• need massive parallelization across tens of millions of cores

• have relatively lower memory requirements per core than training

• are extremely sensitive to the cost per CPU hour

Graviton5 is designed with this profile in mind: ARM-based, power-efficient and price-aggressive, with an emphasis on price/performance. The $META deal is thus not "just another cloud contract" but a demonstration of how AI infrastructure is being cleaved: GPUs for training & heavy inference, CPUs (and custom silicon) for agent orchestration.

What needs to work out to really bring value toAWS and Amazon $AMZN

• Meta needs to realistically deploy these agent systems at the scale of billions of interactions per day - otherwise Graviton's deployment will remain "half throttled".

• AWS must maintain Graviton's technology edge (performance, power efficiency, software stack) so that Meta and other customers have no reason to move some of the workload to other CPU vendors or to their own datacenters.

• Amazon needs to be able to turn the deal into a strong reference - i.e., use Meta as a "beacon" to convince other big AI players and the enterprise that Graviton is the standard for agent-based AI workloads.

How this will become money for Amazon

1) Direct compute revenue from Graviton

The first and most straightforward source is compute consumption itself. Tens of millions of cores means:

• A large number of instances (M, C, R series on Graviton5)

• a multi-year commitment to consume CPU capacity in AWS datacenters

• high utilization rates that help drive efficiency in AWS' own datacenters

Because Graviton is an AWS proprietary product, Amazon has better margins than if it were deploying pure third-party x86 - it doesn't need to pay full "rent" to Intel/AMD and can optimize costs at the whole stack level (chip, rack, power, cooling). In an environment where cloud compute is struggling with price pressure, proprietary CPU is a key margin lever.

2) Cross-sell and other AI services

The deal with Meta is not isolated: the official text explicitly states that it builds on Meta's longstanding use of AWS and Amazon Bedrock to support next-generation AI.

This means:

• increased use of Bedrock and related services (hosting model, inference, orchestration)

• greater uptake of data and storage services (S3, dynamic storage) as a backend for agent AI

• Potential to migrate part of the Meta workload (e.g. B2B AI services, developer tools) to AWS as the preferred platform

Each additional downstream use of AWS services adds up: compute on Graviton generates underlying revenue and attracts other higher margin services to it.

3) Effect on other customers

With this move, Meta becomes one of Graviton's largest reference customers. For AWS, this is an argument that can be used at:

• Other Big Tech companies (foundation model players, large SaaS platforms)

• Enterprise that are considering migrating AI workloads to the cloud

• Startups and scaleups looking for a combination of performance and price for their agent systems

When a hyperscaler publicly announces that "Meta runs agent AI on Graviton", it carries different weight than any marketing presentation. AWS has previously stated that Graviton is used by over 90% of its 1,000 largest EC2 customers and that Graviton accounts for around 20% of CPU usage in AWS - Meta is only accelerating this trend.

How much can this cost and how much of it is Amazon's

The contract doesn't have published unit prices, but a framework can be considered:

• Graviton instances typically show 20-40% cost savings over comparable x86 instances; AWS reports up to 40% better price/performance.

• Meta will be motivated to take advantage of these savings because AI operations are extremely expensive - every percentage point saved in CPU costs translates into billions of dollars of OPEX over time.

• Still, Amazon's aggressive pricing pays off, as margins on Graviton compute remain high thanks to its own silicon; plus, high datacenter utilization reduces unit fixed costs.

So, in real terms:

• Meta probably pays less per CPU unit than in the x86 world

• Amazon has a higher margin than if the same workload ran on foreign CPUs

• while creating a reference case that can bring in other large customers - that's indirect value beyond the contract itself

Who else might be interested in a similar deployment

This deal is a signal to several groups of customers:

• Other hyperscalers / Big Tech - companies with a mix of on-prem and multi-cloud strategies looking to optimize CPU costs for inference and agent systems (e.g., large SaaS players, other social networks, cloud-native platforms).

• Foundation model firms - companies developing generative models that already use Graviton for pre-training and inference; Meta joins them as a "leader" example.

• Enterprise - banks, industry, retail looking to build their own AI agents (e.g., internal assistants, process automation, search agents) and looking for an efficient way to run them in the cloud.

With this move, Graviton shifts the perception: from "interesting, cheap option" to a standard platform for large-scale AI orchestration. This can bring AWS billions more in compute and related services in the coming years without having to base all of its growth on GPUs alone.

Why this is important to Amazon shareholders (future potential)

For an investor in Amazon, this news means several things:

• It reinforces the custom processor strategy - Amazon is showing that Trainium, Inferentia and Graviton are not a sideline, but a key pillar of future growth and margins in AWS.

• Gives AWS a competitive advantage in AI infrastructure - it holds its own CPU for agent AI alongside Nvidia. This makes it difficult for competitors (Azure, Google Cloud) to easily copy the pricing and margin structure.

• Increases visibility of AWS compute growth - a multi-year contract of this magnitude improves visibility of future CPU capacity revenue.

• Creates leverage - each new large client that migrates a portion of AI workload to Graviton moves AWS away from pure commodity "compute for X dollars" towards higher value-added complex AI services.

Simply put: it's the next step in AWS' transformation from a "cloud for everything" to a "full-fledged AI infrastructure" where Amazon controls both the software and an increasing portion of the hardware.

Comcast Corporation is one of the largest telecommunications and media conglomerates in the world. Under the Xfinity brand, it provides broadband internet, cable television and mobile services to approximately 30 million U.S. households. In addition, it owns the NBCUniversal studio complex, the Peacock streaming platform and Universal's renowned theme parks.

Following the spin-off of the cable networks into a new entity, Versant Media Group (ticker VSNT) in January 2026, Comcast has morphed into a leaner company focused on connectivity, streaming and theme parks.

Yet on April 24, 2026, something unexpected happened. Shares of $CMCSA wrote down more than 12.9%, despite favorable results. The trigger for the selloff was not just earnings season, but a combination of Deutsche Bank' s $DB downgrade and disastrous sector numbers from direct competitor Charter Communications $CHTR, which fell 25% that day. The market views US cable companies as a single entity and the negative sector contagion quickly transferred selling pressure to Comcast as well. Is this an opportunity because the value doesn't even come close to matching the price, or a warning sign of structural decline in the cable business?

What really happened on April 24, 2026

Comcast reported Q1 2026 results back on April 23, and the stock reacted positively then. The company reported total revenue of $31.46 billion, which represented 5.3% year-over-year growth and beat analyst consensus by 3.4%. Adjusted EPS of $0.79 also beat estimates. The entertainment, studio and theme parks segments performed at least as well as the center's analysis had predicted.

The strength of the results was primarily in the wireless portfolio. Xfinity Mobile's wireless lines had their best quarter ever with 435,000 new line additions. Peacock reached 46 million paying subscribers, up 12% year-over-year, and Universal theme parks saw 24% revenue growth to $2.33 billion thanks to the opening of Epic Universe in May 2025.

Double whammy: Deutsche Bank and Charter

The major blow came the following day on Thursday, April 24.

Deutsche Bank downgraded its recommendation on $CMCSA from Buy to Hold and cut its target price to $34. Analyst Bryan Craft cites lower estimates for EBITDA and free cash flow from 2027 forward due to sharpening competition in the broadband segment.

At the same time, Charter Communications, via its Q1 2026 report, revealed a loss of 120,000 broadband customers in the same period, which was more than double the loss from the previous year. Charter was down 25% on the day.

The market interpreted Charter's results as evidence of a systemic problem for the entire cable sector, not just one company. This sector contagion put selling pressure on $CMCSA, although the company's own numbers did not justify such a steep decline.

Thus, a very different effect was at work here than the one the market closely followed after Intel's $INTCresults , which in turn carried $AMD stock to higher levels.

Broadband: the core of the problem

Comcast lost 65,000 residential broadband customers in Q1 2026. A result that may seem very negative at first glance, but it represents an improvement of 117,000 customers year-over-year, the best trend since 2020. The current numbers therefore represent continued underlying pressure, but also the first solid signals that the company's new strategy is starting to deliver results.

Two competing forces are primarily behind the subscriber outflow:

1. The aggressive expansion of optical networks by telecom operators such as AT&T $T or Verizon $VZ.

2. Fixed wireless access (FWA), i.e., home internet via 5G networks, which is actively offered by T-Mobile $TMUS and again by Verizon.

Both technologies are sufficiently attractive alternatives to cable internet for less demanding users or areas with softer demand.

ARPU pressure and strategy reassessment

In addition to the declining customer numbers, investors are also concerned about average revenue per user (ARPU). Comcast has been implementing a unified, transparent pricing strategy in recent quarters that emphasizes spot pricing instead of short-term discounting. The risk here, however, is that this strategy may reduce ARPU in the short term during a transition period while the customer base stabilizes. Management suggests that ARPU pressures will continue in Q2 2026. It is this recognition of the problem that has caused Deutsche Bank to revise its estimates downwards.

Three drivers to offset the revenue shortfall

1. Peacock and streaming

Peacock is one of the best performing segments of the entire Comcast today. In Q1 2026, the platform reached 46 million subscribers, up 12% year-over-year. Peacock's revenue grew 16% YoY and its operating loss narrowed significantly: it improved by $424 million in Q1 2025 vs. Q1 2024.

The entire media segment posted a 21% increase in EBITDA. Peacock is driven primarily by a strong sports portfolio: NBA on NBC and Peacock, the Winter Olympics and the Super Bowl. Sports content attracts new subscribers and maintains retention, which is critical for streaming services.

Peacock is likely to reach operating profitability during 2026, which would be a significant catalyst for stock revaluation. A more relevant comparison than Netflix $NFLX is offered by Disney+ $DIS, which at a similar stage was losing hundreds of millions of dollars per quarter before reaching profitability. Peacock is on a better trajectory than Disney+ was at a comparable point in its evolution.

2. Epic Universe and theme parks

The opening of Epic Universe in May 2025 was a strategic milestone.

Universal's theme parks reported Q1 2026 revenues of $2.33 billion, up 24% year-over-year. Parks segment EBITDA was up 33% to $551 million. Management points out that Epic Universe is generating higher per capita spending and higher total attendance at its other Orlando parks as well. The leakage to the entire resort is an obvious and measurable fact.

Theme parks are an interesting counterweight to the company's traditional business, primarily because their EBITDA margins are around 35%, revenues are relatively resistant to digital competition, and the company won't have to invest in the immediate years after Epic Universe opens. This is a structurally attractive segment with clear returns from physical presence.

3. Xfinity Mobile wireless services

The third growth pillar is the mobile business. Xfinity Mobile operates an MVNO model on the Verizon network and had its best quarter ever with 435,000 line additions in Q1 2026. The total number of wireless lines reached 9.7 million.

Mobile services are an important retention tool because customers connected by both services are significantly less likely to leave for competitors. In addition, new premium plans like Mobile+ allow the company to gradually increase the average revenue per customer.

Valuation: Comcast at historic lows

After the plunge, $CMCSA is valued at one of the lowest levels in its history as a publicly traded company. The trailing P/E ratio is around 5.4×, and EV/EBITDA is around 4.0×. By comparison, the broader S&P 500 index trades at a P/E of about 22×. The dividend yield is over 4.9%, and the company has a solid history of dividend growth. The analyst consensus remains mostly positive with an average target price of around $34.50, suggesting upside potential of more than 16% from current levels. While this is slightly lower than the Fair Price Index on Bulios indicates, it does confirm that the stock is currently below its fair price.

Comcast vs. Charter comparison: who's better off

The following table compares key metrics of Comcast and its main cable rival Charter Communications

Strategic view

The 12.9% one-day decline in $CMCSA is not a reflection of deteriorating fundamentals alone. Comcast's own Q1 2026 results beat expectations in both revenue and adjusted EPS. The main problem was sector contagion from Charter and the Deutsche Bank downgrade, which started a wave of institutional selling of cable titles.

For value-oriented investors, there are several arguments in favor of $CMCSA.

• The firm managed to reduce broadband customer losses by 117,000 year-over-year, the first positive trend since 2020.

• Peacock's streaming platform's progress toward profitability is a measurable and directly visible fact.

• Epic Universe is a real EBITDA generating asset and will have a full impact for the first time throughout 2026.

• The company generates free cash flow of over $12 billion annually and has a historically stable dividend policy.

• The main risk remains whether the broadband sector will be able to stabilize or whether the decline in subscribers will be deeper than previously expected. Valuations therefore reflect real uncertainty, not mere market panic.

What to watch next

• Quarterly broadband subscriber numbers in Q2 and Q3 2026 will decide whether the losing trend has broken or continues.

• ARPU development in the residential segment under the influence of the new transparency pricing strategy and its impact on Connectivity & Platforms' EBITDA.

• Streaming's path to operating profitability: if it reaches break-even during 2026, expect significant re-rating of valuation multiples of the entire $CMCSA.

• Epic Universe's growth rate, including attendance and per capita spending data, which management will disclose over time.

• Results of quarterly reports from competitors T-Mobile $TMUS and Verizon $VZ to understand the extent of fixed wireless pressure on the cable sector.

Comcast is not definitively defeated. But it is badly wounded. The 12.9% drop in one day exposed a structural fragility that existed before: the dependence of performance on the broadband segment and the sensitivity of valuation to subscriber trends. Everything else Comcast does, Peacock, Epic Universe and the mobile business, is working and delivering results.

But the appeal of looking at valuation is not unconditional: the key test will be a series of several quarters that will show whether broadband losses have begun to stabilize or whether the worst is yet to come. The market is not yet convinced that the latter is the case. That's why $CMCSA is trading so cheaply.

Sundar Pichai talks about a "terrific start" and points out that AI investments and a fully integrated "full stack" approach (models, infra, products) now permeate the entire business - from Search to Gemini for consumers and businesses to cloud AI services. But at the same time, the results are not just about the AI story: Alphabet delivered its 11th consecutive quarter of double-digit revenue growth and improved operating margin, signaling to the market that it can grow profitably, even though the investment in AI infrastructure is enormous.

Q1 2026 results: strong revenue, margin and profit growth

Alphabet's consolidated $GOOG revenue reached $109.9 billion in Q1 2026, up 22% year-on-year (19% at constant currency) from $90.2 billion in the same quarter of 2025. This is the fastest growth rate since 2022 and the 11th consecutive quarter of double-digit growth.

Operating profit rose from $30.6 billion to $39.7 billion, up 30%, and operating margin improved from 34% to 36.1%, showing strong operating leverage - costs are growing slower than revenue. R&D, sales and marketing, and administrative expenses are growing, but at a lower rate than revenue, and a portion of shared AI costs are charged to "Alphabet-level activities" outside of pure segment results.

Net income jumped from $34.5 billion to $62.6 billion (+81% y/y) and diluted EPS jumped from $2.81 to $5.11 (+82% y/y). The important factor is the "Other income" line, which includes a net gain of $37.7 billion, mostly from unrealized remeasurements of non-traded equity holdings - mainly in AI and tech startups. These gains do not provide the same quality as operating cash flow, but they boosted capital and EPS in the quarter.

Google Services and Google Cloud segments.

Google Services

The advertising and consumer business (Google Services) earned $89.6 billion, up +16% y/y. Inside this segment:

• Google Search & other: $60.4 billion (+19% y/y) - Search had a very strong quarter, with management explicitly saying that AI experiences (AI Overviews, Gemini in Search) are increasing queries and engagement, rather than cannibalizing traditional clicks.

• YouTube ads: $9.9 billion (+11% y/y), driven by higher ad demand and growth in premium subscriptions within the YouTube ecosystem.

• Google Network: $7.0bn (down slightly from $7.26bn), reflecting structural pressure on network partners and a shift of advertising budget directly to Google's own platforms.

• Google subscriptions, platforms and devices: $12.4bn (+19% y/y) - this mainly includes paid subscriptions such as YouTube Premium, YouTube Music, Google One and some devices.

Overall, Alphabet reports that the number of paid subscriptions (across YouTube, Google One and other services) reached 350 million, further evidence that it is building more stable recurring revenue beyond pure advertising.

Google Cloud

Google Cloud is the main growth star. Revenue grew to $20.0 billion, up +63% year-over-year (from $12.3 billion), with growth driven primarily by Google Cloud Platform (GCP) - enterprise AI Solutions, enterprise AI Infrastructure and core GCP services. Demand for AI infrastructure and models (Gemini, Vertex AI, other services) has led to backlog (remaining performance obligation) nearly doubling quarter-over-quarter to over $460 billion.

Google Cloud's operating profit grew from $2.18 billion to $6.60 billion, so not only revenue but profit tripled. This suggests that the cloud business is starting to benefit from scale - fixed costs for datacenters and infrastructure are dissolving into higher volumes, even as Alphabet simultaneously invests aggressively in additional capacity.

Other Bets and Alphabet-level activities

Other Bets took in $411 million (vs. $450 million last year) and generated an operating loss of $2.10 billion (-1.23 billion last year). Sundar Pichai highlighted Waymo, which surpassed 500,000 fully autonomous rides per week, a signal that this "moonshot" is approaching a more commercial phase.

"Alphabet-level activities" posted an operating loss of $5.39 billion (vs. -3.03 billion last year), reflecting more extensive shared AI research and infrastructure costs not allocated to specific segments.

• Full presentation with results.

Cash flow, balance sheet and capital allocation

Operating cash flow in the quarter was $45.8 billion, up from $36.2 billion in Q1 2025. Free cash flow (after investments) is not directly reported in the release, but the cash flow statement shows that Alphabet is investing massively - asset purchases (property & equipment) reached $35.7 billion, roughly double the $17.2 billion last year.

On the balance sheet, we see:

• $126.8 billion in cash and marketable securities

• Non-marketable securities (investments in private companies, often AI and tech) $106.9 billion, up from $68.7 billion at the end of 2025 - an increase partly due to revaluation, partly due to new investments

• Tangible assets (property & equipment) rose to $281.0 billion from $246.6 billion in just three months

Alphabet issued $31.1 billion of new unsecured net revenue bonds in the quarter for general corporate purposes - de facto financing a portion of capital expenditures or general capital structure. Long-term debt rose from $46.5 billion to $77.5 billion.

The dividend was raised by 5% to $0.22 per share for the quarter, a rather symbolic but psychologically positive move for some investors given the size of cash and cash flow.

Management Commentary and AI News

In his commentary, Sundar Pichai repeatedly highlights AI as a key driver of growth:

• AI in Search: new AI experiences (AI Overviews, AI Mode) led to an increase in queries and user engagement, which is behind the 19% revenue growth in Search & other.

• Gemini and consumer AI: Q1 was the strongest quarter ever for "consumer AI plans", driven by Gemini; the number of paid subscriptions (YouTube, Google One, others) reached 350 million.

• Gemini Enterprise: has very strong momentum with 40% quarter-on-quarter growth in paid monthly active users in the enterprise segment.

• Infrastructure and models: first party AI models (Gemini) are processing more than 16 billion tokens per minute via APIs, up 60% from last quarter - this shows the giant scale of AI usage in real-world applications.

• Waymo: surpassing 500,000 fully autonomous rides per week underscores that Alphabet has "physical AI" (autonomy) in advanced stages alongside digital AI.

Management also suggests that capex on AI and cloud will be high in the years ahead, with the CFO commenting that capex is expected to increase "significantly" in 2027 versus 2026 as the company prepares for even greater demand for AI workloads in the cloud. This wraps up a similar story to what we're seeing at Meta - massive investment today to monetize tomorrow.

Why the stock is up 7% after earnings

• Revenue growth of 22% to $109.9 billion significantly beat consensus, which was around $106.9 billion - a beat of about $3 billion.

• EPS of $5.11 vs. consensus of about $2.63-$2.68 is a huge beat, although a large part of that is a gain from investment revaluation.

• Google Cloud, with 63% growth and almost double backlog, beat market expectations of about 40-45% growth - AI demand is clearly stronger than expected.

• Operating margin rose from 34% to 36%, which the market has not taken for granted in an environment of massive AI investment - showing that Alphabet is managing to balance growth and profitability for now.

• The dividend increase (albeit small) and the relatively conservative use of newly issued debt is being read by the market as a signal of management's confidence in long-term cash flow.

The stock is up roughly 7% post-earnings because the quarter delivers a triple signal:

1. a significant beat on revenue and EPS vs. consensus

2. clear evidence that AI is helping the growth of Search, YouTube and the cloud, rather than cannibalizing them

3. better-than-expected margins despite a significant increase in AI investment

The market is essentially reassessing two fears with this: that AI will destroy the advertising business in Search (so far, it's helping the opposite) and that cloud/AI investments won't translate into growth - Q1 2026 shows that demand for AI cloud and Gemini is very strong in real terms.

Key numbers

• Revenue: $109.9bn (+22% y/y; +19% at constant currency).

• Operating profit: USD 39.7bn (+30% y/y); margin 36.1% (+2 p.p.).

• Net profit: USD 62.6bn (+81% y/y); EPS USD 5.11 (+82% y/y), including USD 37.7bn gain on revaluation of non-tradable securities.

• Google Services revenue: USD 89.6bn (+16% y/y); Search & other USD 60.4bn (+19%), YouTube ads USD 9.9bn (+11%), subscriptions/platforms/devices USD 12.4bn (+19%).

• Google Cloud revenue: $20.0bn (+63% y/y), operating profit $6.60bn (vs. $2.18bn last year); backlog >$460bn, nearly double q/q.

• Capex: USD 35.7bn in Q1; management expects another significant increase in 2027 vs. 2026.

• Cash + securities: $126.8bn; long-term debt $77.5bn; non-traded investments $106.9bn.

• Dividend: up 5% to $0.22 per share per quarter.

The AI business as a standalone area has already reached an annual revenue run rate of $37 billion, up 123% Y/Y, according to Satya Nadella, clearly showing that generative AI and agent-based solutions are not just a "promise of the future" but a real source of revenue.

Q3 FY 2026 results: revenue, profit and margin growth

Microsoft's $MSFT revenue in the quarter ended March 31, 2026 was $82.9 billion, up 18% from $70.1 billion in the same period last year, or 15% when adjusted for currency effects. Gross margin increased from $48.1 billion to $56.1 billion, primarily reflecting strong growth in services and cloud, which carry higher margins than the pure product business.

Operating profit increased from $32.0 to $38.4 billion (+20% y/y, +16% at constant currency), so profit is growing faster than revenue and operating leverage is working. R&D expenses grew 9% (from 8.2 to 8.9 billion), sales and marketing expenses 10% and general and administrative expenses 11%, all at a lower rate than sales, so margins are improving slightly despite continued investment in AI.

GAAP net income rose to $31.8 billion from $25.8 billion, up 23%, and diluted EPS increased to $4.27 from $3.46 (+23%). On a non-GAAP basis (which strips out the impact of the OpenAI investment), net income grew 20% and EPS grew 21% (+18% in constant currency), so the difference between GAAP and non-GAAP is minimal this time - the impact of the OpenAI investment is only -$14 million on net income in the quarter.

Productivity, Intelligent Cloud and More Personal Computing segments.

Productivity and Business Processes

The Productivity and Business Processes segment (Office, Microsoft 365, LinkedIn, Dynamics) earned $35.0 billion, +17% y/y (13% at constant currency).

• Microsoft 365 Commercial cloud revenue grew 19% (15% at constant currency).

• Microsoft 365 Consumer cloud revenue grew 33% (29% at constant currency), reflecting strong demand for Office subscriptions and additional services in the home.

• LinkedIn grew 12% (9% at constant currency).

• Dynamics 365 sales grew 22% (17% at constant currency), an above-average pace for enterprise applications.

Intelligent Cloud

Intelligent Cloud is a key growth driver. Revenue was $34.7 billion, +30% y/y (28% at constant currency).

• Azure and other cloud services grew 40% y/y, or 39% at constant currency, an acceleration from some previous periods of slower growth.

In addition to Azure, the server business and enterprise services are also contributing, but it is clear that the key driver is the adoption of generative AI, agent solutions and cloud services for businesses of all sizes. While segment margins are not explicitly stated in the text, given the company-wide operating profit growth and the high capitalization of Azure/AI, it is safe to say that cloud continues to lift overall profitability.

More Personal Computing

The More Personal Computing segment (Windows, Devices, Xbox, search advertising) earned $13.2 billion, a slight decline of 1% y/y (-3% at constant currency).

• Windows OEMs and Devices: revenues declined 2% (-3% at constant currency).

• Xbox content and services: sales down 5% (-7% at constant currency).

• Search advertising excluding TACs (traffic acquisition costs): sales up 12% (9% at constant currency).

This is a segment where traditional business (Windows, Xbox) is stagnating or slightly declining, but search advertising and services are partially offsetting this decline. In terms of Microsoft as a whole, this segment is already smaller and less growing than cloud and productivity.

• Full presentation with results.

Management commentary and AI news

Satya Nadella puts the entire quarter in the context of "agent computing" - an era where AI agents will actively perform tasks and optimize outcomes for customers. He highlights that the AI business (across products) achieved an annual revenue run rate of $37 billion, up +123% y/y. This means that AI is no longer a marginal add-on, but a significant part of the overall cloud.

Amy Hood points out that the results beat expectations on revenue, operating profit and EPS, thanks to strong demand for Microsoft Cloud. Management also notes that cloud growth is being driven not only by AI, but also by the continued migration of traditional IT workloads to Azure, the expansion of Copilot in Microsoft 365, and the adoption of AI services in Dynamics and other enterprise products.

In terms of strategic news, the quarter includes hundreds of product enhancements, but it's essentially about deepening AI integration across platforms - from Azure (models, infrastructure, security) to Microsoft 365 Copilot to developer tools. At the same time, the company's balance sheet shows sharp growth in invested capital in property & equipment ($283.2 billion vs. $205.0 billion nine months ago), reflecting heavy investment in datacenter and AI hardware.

The outlook and why the stock's reaction is lukewarm

Microsoft doesn't provide a specific outlook in the press release itself - it says it will provide forward-looking guidance on the conference call. But according to subsequent comments from Cal (summarized in analyst articles), management is counting on continued solid growth in Microsoft Cloud, continued strong Azure momentum (though the pace may normalize gradually), and continued high investment in AI infrastructure.

The stock reacts only moderately positively after the results, with virtually no significant movement since:

• the numbers are very good, but broadly in line with what the market was expecting - no surprisingly higher growth rates or dramatically better margins

• AI and cloud metrics are strong (Azure +40%, AI run rate 37 billion), but the market had already largely factored in these numbers after previous quarters and Microsoft's valuation is aligned with that

• the outlook, as investors read it from the call, contains neither a major positive "upgrade" nor a negative surprise - rather, it confirms the current growth trajectory, so there is no significant change in expectations

In other words, Microsoft delivered what it was supposed to: strong revenue and profit growth, accelerating Azure, robust AI numbers, and stable margins. The market is rewarding this with a slight plus, but without much euphoria because it's more about confirming the story than taking it to the next level.

Key numbers

• Revenue: $82.9bn, +18% y/y; +15% at constant currency.

• Operating profit: USD 38.4bn, +20% y/y; +16% at constant currency.

• Net profit: USD 31.8 billion, +23% y/y (GAAP); non-GAAP +20% y/y.

• EPS (diluted): $4.27, +23% y/y (GAAP); non-GAAP +21% y/y.

• Microsoft Cloud revenue: $54.5 billion, +29% y/y; +25% at constant currency.

• Azure and other cloud services: +40% y/y; +39% at constant currency.

• Productivity and Business Processes revenue: $35.0 billion, +17% y/y; +13% in constant currency.

• Intelligent Cloud sales: USD 34.7 billion, +30% y/y; +28% in constant currency.

• More Personal Computing sales: USD 13.2 billion, -1% y/y; -3% in constant currency.

• Return of capital to shareholders: USD 10.2bn in dividends and buybacks in Q3 FY26.

The result is a paradox: the fundamental metrics look great, but the investment and cost commentary is so aggressive that the stock falls roughly 7% after the results.

Q1 2026 results: strong revenue growth and tax effects

Meta Platforms $META revenue came in at $56.31 billion in Q1 2026, up 33% year-over-year from $42.31 billion in Q1 2025. Adjusted for currency effects, revenue would have grown roughly 29%, so growth is not just about rates, it's about real business. In terms of platform metrics, the firm reports 3.56 billion daily active people across the app family (Facebook, Instagram, WhatsApp, Messenger), +4% y/y, though there was a slight decline quarter-on-quarter due to internet outages in Iran and WhatsApp restrictions in Russia.

In terms of advertising, it was a very strong quarter: the number of ad impressions increased by 19% y/y and the average price per ad increased by 12% y/y. In other words, Meta is selling significantly more ads while collecting a higher price for them, which is one of the main reasons for the sharp revenue growth.

But operating costs are rising even faster than revenues. Total costs and expenses rose 35% to $33.44 billion (from $24.76 billion). This is mainly driven by investments in infrastructure (data centers, AI chips, servers) and higher personnel costs, which are reflected in higher revenue and R&D expense items. Still, operating profit increased to $22.87 billion from $17.56 billion, and margins remained at a very high 41% (same as last year), so the company has been able to "roll over" the higher costs with revenue growth and scale so far.

GAAP net income jumped to $26.77 billion, up 61% from $16.64 billion a year ago, diluted EPS came in at $10.44 vs. $6.43 in Q1 2025, +62% y/y. But here's an important detail: the numbers are significantly inflated by the tax effect.

The tax benefit: an unrealized bonus that distorts EPS

In the quarter, Meta reported an $8.03 billion tax benefit associated with last year's tax reform (the "One Big Beautiful Bill Act") and the subsequent clarification by the Treasury Department (Notice 2026-7) that retroactively adjusts the treatment of previously capitalized R&D costs. This benefit partially offsets the huge non-cash tax expense of $15.93 billion that Meta booked in the third quarter of 2025 upon implementation of the new legislation.

The effective tax rate in Q1 2026 is -23% due to this effect, negative because the company booked a net tax benefit instead of an expense. Meta itself reports that if not for this one-time tax benefit, the effective tax rate would be 37 percentage points higher and EPS would be $3.13 lower. This means that "normalized" EPS would have been somewhere around $7.3, not $10.44.

Therefore, an investor looking at profitability going forward would logically not view this tax boost as repeatable. Thus, from a core business perspective, operating profit growth and free cash flow are more important than headline GAAP net income.

Cash flow, capex and balance sheet

Meta generates very strong operating cash flow: it reached $32.23 billion in Q1 2026, up from $24.03 billion a year ago. Free cash flow (after accounting for investments in assets including lease payments) was $12.39 billion. Thus, even with sharp capex growth, the company remains strongly cash-flow positive.

Capex including lease payments was $19.84 billion in the quarter - significantly higher than the $12.94 billion in the same period in 2025. This is related to a giant wave of investment in AI infrastructure - data centers, custom chips, accelerators, networking equipment. CFO Susan Li says the higher capex this year is due to both higher component prices and additional data center costs to create capacity for future years.

On the balance sheet, this is reflected in asset growth: net tangible assets (property & equipment) rose from $176.4 billion to $194.8 billion in three months. At the same time, Meta holds $81.2 billion in cash and marketable securities, so even with massive investments, it has very strong liquidity. Long-term debt is $58.75 billion, so the net cash position is still significantly positive.

The company paid out $1.35 billion in dividends and equivalents in the quarter and did not make any additional share buybacks (unlike in 2025 when buybacks were massive). In the context of such a giant capex, this may suggest that the number one priority now is investing in AI, not maximizing cash returns to shareholders.

• Full presentation with results.

Management commentary and news

Mark Zuckerberg described the quarter as a "milestone" - the company sees strong growth across apps and also unveiled the first model from Meta Superintelligence Labs. The goal, he said, is to deliver "personal superintelligence" to billions of people, clearly framing AI as the company's main strategic direction.

In specific news:

• AI and Meta Superintelligence Labs: Meta says the first model from this new AI unit was launched this quarter and is set to be the cornerstone of a new generation of AI assistants and content creation within the app family.

• Advertising and monetization: management highlights that revenue growth is being driven by a combination of higher engagement (more time in apps), higher impressions, and improving ad effectiveness through AI (better targeting, creative, campaign optimization).

• Infrastructure and capex: CFO Susan Li and team are clear that they are raising the full-year capex outlook for 2026 to $125-145 billion, from the original $115-135 billion, and that this reflects higher component prices and additional data center capacity in the coming years. This is substantially above the 2025 level of $72.2 billion and roughly double the sum of the 2024 and 2025 capex combined.

This sends a clear signal to management: Meta will not skimp on AI infrastructure - it's going in hard, even at the cost of short-term margin and cash flow pressure.

Why the share price is down ~7% after the results

Meta stock is down roughly 7% after earnings, even though the quarter looks great on paper, precisely because of how the market is reading the quality of earnings and investment outlook.

• Some of the gain is one-time: investors can well see that a big chunk of EPS is driven by a one-time tax benefit of $8.03 billion - "real" EPS would have been $3.13 lower. Thus, some of the positivity will not carry forward.

• Capex explodes: Meta raises this year's capex to $125-145 billion, $10 billion higher than previous estimates, and well above 2025 levels. This means lower free cash flow in the coming years and pressure on margins due to rising depreciation.

• Costs are rising fast: total costs +35% y/y, management openly says much of this is structural - infrastructure costs, AI talent, data centers.

So the market is not just looking at the fact that Q1 delivered 33% revenue growth and high operating margin, but more importantly that Meta is willing to invest hundreds of billions of dollars in AI over a couple of years, which can significantly depress earnings per share and free cash flow in the interim. Hence the negative reaction to the results: investors are questioning whether the pace of AI growth and monetisation will be fast enough to justify such massive investment.

Meta's outlook for 2026

Meta confirmed and expanded several key outlook items in its Q1 2026 results:

• Total 2026 Costs and Expenses - The firm expects total annual costs and expenses in 2026 to be in the range of $162-169 billion, unchanged from the previous outlook in Q4 2025. Meta also says that even at this level of costs, it still expects operating profit in 2026 to be higher than in 2025.

• Capex (AI and Infrastructure) 2026 - Highlights: Meta raised its 2026 capex estimate, including leases, to $125-145 billion, up from the previous range of $115-135 billion. CFO Susan Li explains the $10 billion increase by higher component prices and - to a lesser extent - additional data center costs for capacity in future years.

• Cost Growth Structure - Meta notes that most of the cost growth in 2026 will come from infrastructure - i.e., third parties in the cloud, operating costs for its own infrastructure, and hiring and rewarding AI professionals.

• Revenues (implied) - For Q1 2026, Meta previously guided revenues in the $53.5-56.5 billion range and ended up with $56.31 billion, the top end of the range. There is no explicit new revenue band in the release for the rest of the year, but the company declares that at costs of 162-169 billion, it still expects operating profit to be higher than in 2025, implicitly assuming further growth in revenue and margins, although they will be pressured by higher capex and depreciation.

Management's presentation and commentary highlighted in particular the continued acceleration of AWS, growth in AI workloads and strong momentum in the advertising business, but also continued cost optimization in logistics and retail. The overall picture is this: Amazon is banking on a combination of robust revenue growth (c. mid-teens), rising operating margins, and a clear thesis that heavy investments in AI and cloud today are set to deliver significant cash flow in the years ahead.

Q1 2026 results: revenues in the high-teens, operating profit growing even faster

Amazon's net sales in Q1 2026 were $181.5 billion, up roughly 17-18% from the same period last year (c. $155.7 billion). Adjusted for currency effects, sales grew 15% - a solid "high-teens" pace even without currency effects. In terms of structure, the North America segment accounts for the largest portion, followed by International and AWS.

At the trailing twelve-month level, revenue was $742.8 billion, up 14% from $650.3 billion a year earlier (13% after adjusting for FX). This shows that the acceleration from recent quarters is not a one-off, but is dragging full-year metrics as well.

Operating profit in Q1 2026 was $23.85 billion compared to $18.41 billion a year earlier, an increase of roughly 30%. That said, not only is revenue growing, but profit is growing faster than revenue - margins continue to improve, thanks in large part to the higher profitability of AWS and profitable e-commerce. At trailing twelve months, operating profit came in at $85.4 billion, up 19% from $71.7 billion.

Four-quarter net income rose to $90.8 billion from $65.9 billion, up 38% y/y, but the quarterly net income is impacted by a one-time factor - a $16.8 billion gain from the revaluation of the Anthropic investment, which is recorded in non-operating income. That inflates the headline net income number, but it is the growth in operating profit and segment margins that is more important from a core business perspective.

North America, International and AWS segments.

North America

The North America segment generated $104.1 billion in revenue in Q1 2026, up 12% year-over-year to $92.9 billion. Segment operating profit grew from $5.84 billion to $8.27 billion, up 42% y/y, indicating a significant improvement in margins. This is due to a combination of scaling logistics, a better product mix (more custom advertising and higher margin services) and a focus on efficiency. At trailing twelve months, North America generates $437.6 billion in revenue (+12% y/y) and $32.0 billion in operating profit (+42% y/y).

International

The International segment reported sales of $39.8 billion in Q1 2026, up 19% from $33.5 billion a year ago, or 11% after adjusting for currency. Operating profit increased from $1.02 billion to $1.42 billion (+40% y/y), while trailing twelve months International generated $168.2 billion in revenue (+40% y/y) and $5.2 billion in operating profit (+significant growth, over 6% y/y after FX adjustments). Thus, the International business is no longer a "perpetual loss-making expansion" but a steadily profitable pillar.

AWS

The AWS cloud segment had a very strong quarter. Revenue in Q1 2026 was $37.6 billion, up 28% from $29.3 billion a year ago (26% after adjusting for FX). AWS operating profit grew from $11.55 billion to $14.16 billion, up 23% y/y, confirming that AWS can grow while maintaining high margins even as capital requirements rise in the AI era.

At trailing twelve months, AWS generates $137.0 billion in revenue and $48.2 billion in operating profit. That means AWS carries roughly a third of Amazon's total operating profit, although it makes up a smaller share of revenue than retail. From an investment perspective, AWS is still a key valuation driver - growth of around 25-30% and high margins are exactly what the market wants to see from the "AI cloud" leader.

Free cash flow, investments and shares

Trailing twelve-month free cash flow (operating cash flow minus capex) fell from $25.9 billion in Q1 2025 to $1.23 billion in Q1 2026, down 95% y/y. The reason is not a collapse of the business, but a combination:

• Operating cash flow admittedly rose from $113.9 to $148.5 billion (+30% y/y),

• but investment in assets (primarily data centres, logistics and infrastructure) increased even faster - from $88.0bn to $147.3bn.

So Amazon $AMZN is investing massively in the short term, especially in its AI and cloud infrastructure base, squeezing free cash flow. Management has long declared that the goal is to optimize free cash flow, not maximize it in one year - deliberately investing in capabilities that should bear returns in future years.

The number of common shares outstanding, including converted stock-based awards, is around 10.9 billion, and the presentation shows a desire to manage dilution - stock-based awards are relatively stable, not an uncontrolled dilution scenario.

• Full presentation with results.

Management commentary and key news

Several key highlights emerge from the presentation and management communication(CEO Andy Jassy):

• AWS and AI - Management emphasizes that AWS growth is driven primarily by AI workloads and classic cloud business, with customers accelerating migration while adding new types of workloads. Amazon is building AI not only as a service (models, inferencing services) but also as something that improves its own internal efficiency (logistics, recommender systems, advertising).

• Retail and logistics - management talks about the continued improvement of the delivery network (regional fulfillment, warehouse automation) and the growth of margins in retail, which is particularly visible in the North America segment.

• Advertising and other services - comments suggest that advertising is one of the main drivers of retail profitability as it carries high margins and is linked to growing traffic and engagement.

• Infrastructure investment - the sharp increase in capex is presented by management as a conscious bet on long-term growth in AWS and AI, not a cost issue.

The overall tone of management is confident - Amazon is presented as a company that has moved from the "defense and optimization" phase (2023-2024) to the "invested growth" phase - stable margins, double-digit revenue growth, and targeted investments in AI/chips/datacenter and logistics.

Why the share price is rising by around 3% after the results

Amazon stock is up about 3% post-earnings because the market is seeing a combination of what it wanted: double-digit revenue growth above 15%, accelerating AWS with very strong margins, management's clear focus on AI as an engine for future growth, and continued improvement in retail profitability in North America and internationally. Although free cash flow on a TTM basis is temporarily falling due to aggressive infrastructure investments, investors are reading this as a pro-growth move rather than a problem - operating cash flow is growing and the company has great freedom to allocate capital. Moreover, results are in line or slightly above expectations and the outlook contains no negative surprises, so the market is "rewarding" confirmation of the story, not challenging it, after previous growth.

In its outlook for Q2 2026, Amazon expects net sales to reach $194-199 billion, which corresponds to a 16-19% year-over-year growth from Q2 2025. The company also expects operating profit in the $20-24 billion range, while it achieved an operating profit of $19.2 billion in Q2 2025, so it is projecting a year-over-year improvement on profitability as well. This outlook already incorporates the assumption that Prime Day will fall just into the second quarter this year, and assumes a slightly negative currency effect (about 10 basis points on revenue growth).

The other side of the coin is that headline GAAP EPS of $6.88 is driven by a one-time tax benefit of over $5 billion - without it, earnings per share are around $2.65, down a bit year-over-year. Qualcomm delivered results "in line with expectations" but not above, and the outlook for the next quarter counts on pressure from memory supply constraints and weaker Chinese handset shipments.

• Qualcomm's share price shot up about 12% after the results because the market was expecting a much worse scenario - results were "only" slightly weaker year-over-year but in line with expectations, key automotive and IoT segments are growing at double-digit rates, management clearly outlined new growth engines in AI and data centers, and added a strong signal to shareholders in the form of a new buyback program.

Q2 FY 2026 results: stable revenue, weaker core earnings

Qualcomm's fiscal second quarter 2026 $QCOM revenue was $10.6 billion, down 3% on a GAAP basis, or 2% on a non-GAAP basis, from $11.0 billion in the prior year. In terms of expectations, management says the results were "in line," meaning no significant positive or negative surprises.

GAAP earnings before taxes (EBT) fell to $2.2 billion (-28%) from $3.1 billion, but GAAP net income jumped to $7.37 billion from $2.81 billion, or +162% y/y. The reason is not the boom in business, but the $5.7 billion one-time tax benefit from the release of a valuation allowance on deferred tax assets, as the company expects to actually use these assets following the new interpretation of the minimum tax rules. This inflated GAAP EPS to $6.88 (+173% y/y), but this effect is explicitly excluded from the non-GAAP numbers.

On an adjusted (non-GAAP) basis, which better reflects current operations, the dynamics look more sobering: non-GAAP EBIT fell 12% from $3.69 billion to $3.25 billion and non-GAAP net income fell 10% from $3.17 billion to $2.84 billion. Adjusted earnings per share declined 7% from $2.85 to $2.65. Margins are under pressure - a combination of weaker handset and higher R&D and sales overhead costs as we transform toward AI and data centers.

Segments: weakening handsets, record automotive, solid QTL

At Qualcomm's core is the QCT (chips and platforms) segment, where second-quarter revenue was $9.08 billion, down 4% year-over-year (from $9.47 billion). QCT's pre-tax profit fell 14% from $2.86 billion to $2.47 billion, and EBT's margin declined from 30% to 27%. This was mainly due to a weaker handset business and a costlier environment (development, go-to-market) in new areas.

Detail by QCT sub-segments:

• Handsets: sales of $6.02 billion, down 13% from $6.93 billion.

• Automotive: sales of $1.33 billion, up 38% from $959 million - an all-time record quarter.

• IoT: sales of $1.73 billion, up 9% from $1.58 billion.

Thus, the handset part is still dominant but weakening and the volatility of the smartphone market is showing, while automotive and IoT are generating more stable, structural growth. The combination of automotive + IoT revenues yields 20% year-on-year growth, which management explicitly highlights as evidence of diversification beyond mobile.

The QTL (patents) licensing segment had a good quarter. QTL revenue rose to $1.38 billion from $1.32 billion, up 5%, and EBT was up 7% to $994 million. QTL's EBT margin improved to 72% from 70%, so the licensing business remains very profitable and helps stabilize the company's overall profitability even with the fluctuations in the chip business.

• Full presentation with results.

Cash flow, balance sheet and capital allocation

Cash flow from operations for the first half of fiscal 2026 was $7.4 billion, slightly above the $7.1 billion in the same period of 2025, although net income (excluding the tax effect) was not significantly higher. Inventory rose from $6.53 billion to $7.37 billion, which may be related to preparing for new products (AI, datacenters, automotive), but it also ties up some capital.

As of March 29, 2026, Qualcomm had $5.44 billion in cash and equivalents and another $4.36 billion in marketable securities, or roughly $9.8 billion in liquid assets. Long-term debt is $14.77 billion and short-term debt is $498 million, for a total of about $15.3 billion in debt, while equity is $27.3 billion. The balance sheet remains solid, although the company returns a significant portion of cash flow to shareholders.

In the first half of fiscal 2026, Qualcomm completed $5.44 billion in share repurchases while paying out $1.90 billion in dividends. In the second quarter alone, $3.7 billion was returned to shareholders - $945 million in dividends ($0.89 per share) and $2.8 billion in repurchases of 19 million shares. In addition, the board of directors approved a new buyback program of up to $20 billion, showing confidence in its own long-term story and a willingness to aggressively reduce the number of shares outstanding.

Outlook: pressure in mobile, AI and datacenters as the new engine

In the commentary, management openly admits that the company is going through a "period of profound transformation" where the emergence of AI agents is changing the product roadmap across platforms. At the same time, Qualcomm is entering the data center space - a custom silicon project for a leading hyperscaler is mentioned, with first shipments expected as early as the end of this calendar year. A more detailed presentation of opportunities in datacenters and so-called Physical AI is to come at Investor Day on June 24.

In the short term, however, the numbers will be affected by the problem in the handset segments. In the current outlook for Q3 2026, management is anticipating the impact of limited memory supply and related pricing on demand from several handset manufacturers. It expects total sales in the range of $9.2-10.0 billion, QCT sales between $7.9-8.5 billion and QTL between $1.15-1.35 billion. Non-GAAP EPS is expected to be in the range of $2.10-2.30 per share.

Important detail: Qualcomm says QCT handset revenue in China should bottom out in Q3 and return to sequential quarter-on-quarter growth in the following quarter. That's a key signal - they're actually saying that the current pressure is cyclical and should be transitory, but will still hurt in the short term.

Key numbers

• Revenue of $10.6 billion (-3% y/y GAAP; -2% y/y non-GAAP).

• GAAP EPS of $6.88 (+173% y/y) mainly due to a one-time tax benefit of $5.7 billion; non-GAAP EPS of $2.65 (-7% y/y).

• QCT revenue USD 9.08bn (-4% y/y), of which handsets USD 6.02bn (-13%), automotive USD 1.33bn (+38%, all-time high), IoT USD 1.73bn (+9%).

• QTL revenue USD 1.38bn (+5% y/y), EBT margin 72% (vs. 70% last year).

• Operating cash flow for H1 FY 2026 USD 7.41bn, cash + securities approx USD 9.8bn, long-term debt USD 14.8bn.

• Return of capital to shareholders in 1H FY 2026: buybacks USD 5.4bn, dividends USD 1.9bn; new buyback program up to USD 20bn.

• Q3 FY 2026 outlook: revenue USD 9.2-10.0bn, non-GAAP EPS USD 2.10-2.30, QCT handset sales in China expected to bottom and grow again from Q4.

Apple will report quarterly earnings tomorrow after the close and it will undoubtedly be one of the most important events of the week. My buy price remains unchanged at 245 USD and at this time I see no reason to adjust it before the results. I would really like to hold this stock long-term in my portfolio.

Market expectations:

Wall Street is currently expecting roughly the following numbers:

→ revenues around $109–110 billion

→ earnings per share around $1.95

→ Services revenue near $30 billion

As usual, the guidance will likely be even more important than the headline figures.

Why I’m keeping the entry price for now:

- exceptionally strong balance sheet and ability to generate huge cash flow

- a premium ecosystem with exceptional customer loyalty

- the Services segment continues to support stability and margin growth

- any post-earnings dip could provide an attractive entry opportunity

At the $245 level, in my view the risk-reward ratio improves significantly.

Flexibility is key:

If the results surprise significantly—positively or negatively—I’m ready to reconsider my entry price. This could mean:

→ a higher buy level if fundamentals materially improve

→ a lower entry if there is a meaningful compression in valuation

Discipline is always important.

Impact on the Magnificent Seven:

Apple remains one of the main pillars of the Magnificent Seven and its movement often affects the whole sector:

$MSFT $NVDA $AMZN $GOOGL $META $TSLA

Strong results can boost sentiment across the entire tech sector. Conversely, a disappointment could weigh on the whole Nasdaq. Apple’s results thus rarely affect only $AAPL itself.

What I’ll be watching most:

→ iPhone revenue

→ growth in the Services segment

→ developments in China

→ comments on AI monetization

→ management’s overall outlook

These factors will likely determine not only Apple’s next direction but also the short-term sentiment across major tech companies.

Are you planning to trade the $AAPL results, or will you rather wait for the market to settle?

You can find the English version of this post on my eToro profile. If you want to follow me there or copy my USD portfolio, I’d appreciate it!

In terms of strategy, SoFi continues to push the breadth of the ecosystem: it is entering the digital asset space through its own stablecoin SoFiUSD, rolling out "Big Business Banking" for corporate clients, and innovating end-user products - from investments and cryptos to savings accounts to simplified AI-powered personal loan and home loan applications. This breadth of offerings reinforces the Financial Services Productivity Loop: a customer comes in for one product, but uses multiple services over time, reducing acquisition costs and increasing lifetime customer value.

Q1 2026 results: revenue, profit and profitability growth

For the quarter ended March 31, 2026, SoFi $SOFI achieved record GAAP net sales of $1.10 billion, up 43% from $771.8 million a year ago. Adjusted net revenue, which excludes certain one-time items, was $1.09 billion, up 41% year-over-year from $770.7 million. This continues the company's high growth rate of previous years, but combined with increasing profitability.

Adjusted EBITDA increased 62% to a record $340 million, up from $210 million a year ago. This brings the EBITDA margin to approximately 31%, a very solid level for a fast-growing fintech. At the same time, SoFi reported its 18th consecutive quarter of beating the so-called Rule of 40 with a score of 72% - the sum of revenue growth rate and EBITDA margin, showing a combination of high growth and already decent profitability.

At the GAAP net income level, the company reported $166.7 million, with earnings per common share (diluted EPS) of $0.12 versus $0.06 a year ago - a 100% increase. Adjusted net income and diluted EPS are essentially flat as there were no significant one-time charges in the quarter that significantly distorted GAAP earnings.

Another important source of improvement is the strong growth in net interest income, which reached $693 million in the first quarter, up 39% year-over-year. This was driven by both a 41% increase in average interest-earning assets and a 48bps decline in the cost of funds, even though the return on assets fell 63bps, so SoFi is benefiting more from being able to finance more cheaply. Net interest margin (NIM) rose to 5.94%, up 22bps from the previous quarter.

• SoFi's share price is down after the results mainly because even though the company showed record revenue, profit and member growth, the market was expecting more in the way of outlook - management didn't raise full-year guidance after such a strong quarter, leaving investors feeling that the Q1 momentum may not last for the rest of the year. The stock had been rising strongly ahead of the results, so it went into them with high expectations, and the reaction is typical "sell the news": the numbers are great, but they weren't enough beyond what was already priced in.

Growth in members, products and loans

SoFi continues to rapidly ramp up its client base. A record 1.055 million new members were added in the first quarter, bringing the total to 14.7 million, up 35% from 10.9 million a year ago - and the third straight quarter of 35% membership growth. The number of products grew even faster: the company added 1.8 million new products, bringing the total to 22.2 million, up 39% year-on-year. Another interesting sign of the strength of the ecosystem is that 43% of new products came from existing members, expanding the relationship with the customer.

The credit business experienced a record quarter in terms of origination volume. Total new loans reached $12.2 billion, up $1.7 billion from the previous quarter. Personal loans were the driving force with a record $8.3 billion in new loans, followed by student loans with a record $2.6 billion (2.2 times more than last year) and mortgage loans with $1.2 billion, approximately 2.4 times more than a year ago. Loan Platform Business - that is, third-party lending and referral business - grew 90% year-over-year and added $3.6 billion in commitments with three new partners during the quarter.

Credit quality remains strong and in line with expectations across all loan types, according to management. There was even improvement in personal loans, with annualized net charge-offs down 28bps year-over-year, which looks positive in an environment of higher rates and tight consumer credit. This suggests that scoring, targeting more creditworthy clients and risk management are working and SoFi is not chasing growth at any cost.

Segments: financial services, technology and margins

Financial services (accounts, investments, cards, deposits) are becoming an increasingly important leg of the business. The Financial Services segment reported revenue of $428.5 million in Q1 2026, up 41% from a year ago. Non-interest income (fees, commissions) rose 55% to $200.8 million, while net interest income here rose 31% to $227.7 million, driven mainly by growth in customer deposits. Segment contribution profit was $195.6 million, up $47.3 million from last year, and segment margin was 46%, though down slightly from 49% year-over-year as the firm invests more in growth.

Meanwhile, Financial Products is growing very fast: the number of Financial Services products grew to 19.3 million, +40% y/y. SoFi Money reached 7.3 million products, Relay also reached 7.3 million and SoFi Invest reached 3.7 million products. Total deposits increased $2.7 billion to $40.2 billion in the quarter, primarily driven by retail deposits. This is key to funding the loan portfolio, as the average rate on deposits is 155bps lower than the cost of funding through warehouse lines, which the company says translates into annual interest cost savings of around $622 million.

The technology platform(Galileo and others) had a weaker quarter. Technology Platform segment revenue fell 27% year-over-year to $75.1 million, primarily due to one large client completing its exit from the platform at the end of 2025. Segment contribution fell to $12.0 million and margin fell to 16% from 30% a year ago. The number of "enabled accounts" on the technology platform declined 16% year-over-year to 133 million, however, 4 million accounts were added quarter-over-quarter, suggesting that the large client exit is primarily a one-time shock and the market as a whole continues to grow.

• Full presentation with results.

Innovation, digital assets and brand

CEO Anthony Noto stresses that continuous product innovation is behind the numbers. In the first quarter, the firm started to benefit from SoFiUSD, its US dollar-backed stablecoin, while developing settlement capabilities and interoperability between digital assets and fiat currencies via partners such as Mastercard, which should enable SoFiUSD to be used across global payment networks. It has also launched Big Business Banking - an extension of the platform to enterprise clients, further diversifying revenue from the technology and infrastructure side of the business.

On the retail side, SoFi relaunched cryptocurrency investing (SoFi Crypto) and in April relaunched SoFi Plus with enhanced benefits - such as a 4.5% annual interest rate on deposits up to $20,000 and a 1% match on investment and crypto purchases. In lending, it deployed an AI-built Personal Loan Doc Coach tool to streamline the application process and launched a fully digital home equity line of credit (HELOC) process.

Meanwhile, the brand is clearly going from strength to strength: spontaneous awareness (unaided awareness) has reached an all-time high of 10%. In the J.D. Power 2026 rankings for investor satisfaction in the DIY investing category, SoFi came in first place and was also named the "#1 U.S. Bank" in the World's Best Banks by Forbes. This supports the narrative that SoFi is moving from a "start-up" to an established financial brand with growing public trust.

Capital and Outlook

During the quarter, shareholders' equity increased by $322 million to $10.8 billion, bringing book value per share to $8.44. Even more interesting for shareholders is the development of tangible book value: it increased by $336 million to $9.2 billion and tangible book value per share rose to $7.21 from $4.58 a year ago, up 57% y/y. Thus, the growth in profitability translates in real terms into a strengthening of the capital base.

CEO Anthony Noto in a commentary highlights that growth is "resilient and returns strong" thanks to innovation and brand building. He says entering new areas such as digital assets, along with strong growth in existing businesses, strengthens and diversifies the platform so that SoFi can reinvest in better products and experiences for members and corporate clients over the long term. The firm is also leaning on a combination of strong revenue growth, increasing profitability (on both a GAAP and non-GAAP basis) and an improving capital position, an unusual and attractive combination for investors in this segment.

Key numbers

• Net revenue (GAAP) $1.10 billion, +43% y/y; adjusted net revenue $1.09 billion, +41% y/y.

• Adjusted EBITDA $340mn. USD, +62% y/y; margin approx. 31%.

• GAAP net profit 166.7 mln. USD 0.12 vs. USD 0.06 a year ago (+100%).

• Total new loans USD 12.2bn: personal loans USD 8.3bn, student loans USD 2.6bn (2.2x y/y), mortgage loans USD 1.2bn (2.4x y/y).

• Membership 14.7m, +35% y/y; total products 22.2m, +39% y/y, of which Financial Services products 19.3m, +40% y/y.

• Total deposits $40.2bn (+2.7bn q/q), NIM 5.94%, +22bps q/q.

• Technology Platform sales of 75.1 mil. USD (-27% y/y), margin 16%, enabled accounts 133mn (-16% y/y, +4mn q/q).

But in the financial statements so far we see more of a "startup in defense clothing" than a finished cash-cow: revenues of $1.35 billion in 2025 with organic growth of 16-17%, but gross margin only around 20%, operating margin of 1.9-2%, net income of around $22 million and EPS of $0.13. Today's share price stands virtually entirely on expectations of significant margin expansion - if Valkyrie, Ragnarök and hypersonic programs switch from demonstrators to full production.

Company introduction

Kratos $KTOS is a mid-sized defense technology player with roughly 4k employees, focused on the "high-end, low-cost" segment - developing jet-powered combat drones, low-cost guided munitions, missile and hypersonic systems, microwave electronics, and specialized C5ISR and space products. This is not a traditional prime contractor like Lockheed $LMT or Raytheon $RTX, but rather someone who fills a niche where the big players are not motivated to sell cheap, "attritable" (low-cost) systems on a mass scale.

The business is divided into two main segments:

• Kratos Unmanned Systems (KUS) - autonomous and unmanned systems, including the flagship XQ-58A Valkyrie, target drones for PVO training, and other tactical platforms.

• Kratos Government Solutions (KGS) - hypersonic & rocket systems, turbine technologies, microwave products, space & satellite ground systems, training & simulation and other C5ISR solutions.

The sustainability of the defense business stems from the fact that once a particular product becomes part of an approved program, it typically stays there for many years - despite changes in political priorities. Certification, integration into complex systems, and long program lifetimes mean high "switching costs" for the customer, even if the beginning is often a long, loss-making pilot.

Business and products

Unmanned Systems - Valkyrie and "massed autonomy"

The XQ-58A Valkyrie is the center of the story. It is the product that:

• takes off from a rail launcher and does not need a conventional airfield

• can fly autonomously or as an escort for the F-35, F-16 or future platforms

• has a modular open mission systems architecture - can carry sensors, EW, communications relays or weapons

At AUSA 2025 and other events, the company introduced the Valkyrie as a platform for "mass precision" - carrying smaller low-cost munitions and a cluster of weapons to saturate adversary defenses. This is followed by the Ragnarök, a low-cost cruise missile designed as a precision weapon that can be launched in large numbers from drones or other platforms.

The portfolio also includes jet-powered target drones (BQM-177, BQM-167, etc.) used by the U.S. Navy and other services for air defense training, and other tactical platforms. In 2025, this segment earned $292 million, up 7.9% from 2024 - growth driven primarily by higher activity around Valkyrie and tactical drones. Meanwhile, KUS's operating profit is very low ($2.6 million in 2025) as much of the gross margin is "burned" in R&D and ramp-up costs.

Government Solutions - hypersonic, microwave and space

KGS is a larger revenue driver by volume today. The segment will earn $1.055 billion in 2025, a 19.3% organic growth from $865.8 million in 2024. Fundamental growth pockets:

• Defense Rocket Support & Hypersonic - 56.3% organic growth in 2025 vs. 2024; the company supplies missile targets, boosters and components for a number of hypersonic programs; management expects hypersonic revenue could double to $400 million by 2026.

• Microwave Products - specialized RF/microwave modules, antennas, radar elements - organic growth of 17.1% in 2025.

• Space, Training & Cyber - ground segment for satellite communications, simulators and cyber solutions, organic growth of 13.6%.

At KGS, program transitions from R&D to LRIP (low-rate initial production) are key to margin expansion - each shift to higher volume typically results in better fixed cost absorption and higher gross margin. The company already generates most of its gross margins here, although Unmanned Systems carries more weight.

Market and addressable potential

Autonomous warfare and the hypersonic race

• Collaborative Combat Aircraft (CCA) and loyal wingman - The USAF, USMC, and allies want fleets of drones to fly manned machines, augment their weapons and sensor capabilities, and absorb much of the risk in conflict against near-peer adversaries. Valkyrie is one of the first realistic systems in this category to be flown and tested.

• Hypersonic Weapons - The US is investing massively in hypersonic offense and defense, with the goal of not falling behind Russia and China; this means a large market for missile targets, test systems, boosters, and components.

• Cheap precision weapons and drone swarms - Conflicts in Ukraine and Gaza are accelerating demand for cheap, low-cost assets that can be deployed in large numbers. This is exactly the segment where Kratos is building its portfolio.

Organically, the company grew 16.6% (overall) and 18.5% (including the Norden Millimeter acquisition in the microwave space) in 2025, well above the average growth of traditional defense primes. Q4 2025 delivered 20% organic revenue growth on revenue of $345.1 million, with book-to-bill of 1.3 and backlog of $1.573 billion, pipeline of 13.7 billion.

How big is the market share?

With annual revenues of $1.347 billion in 2025, the company still has a marginal share of the U.S. defense budget, but sits in segments with above-average growth. Realistic TAM:

• Hundreds of billions of dollars for CCA/loyal wingman programs and follow-on munitions over a decade

• similar order of magnitude for hypersonic R&D and follow-on production

• Growing budgets for satellite communications, space ground segment, microwaves and training

The company's goal is not to "take 30% of the market" but to maintain positions in key programs - a couple of big wins in CCA, Valkyrie exports, a hypersonic ramp-up, and a few larger space/microwave contracts can easily double revenues by the early 30s without the need for massive acquisitions.

News and strategic moves of recent years

• US Marine Corps CCA / MUX TACAIR - In January 2026, the USMC selected the Northrop Grumman + Kratos (Valkyrie) team as one of two finalists for a new program of autonomous "loyal wingman" drones designed to accompany the F-35 and other platforms. This is a qualitative leap - Valkyrie is no longer just a demonstrator, but a real candidate for a long-term program.

• German Air Force - In 2025, Airbus and Kratos unveiled a joint Valkyrie offering as a loyal wingman for the German Air Force, including options for integration with existing and future European platforms.

• Ragnarök and AUSA 2025 - At AUSA 2025, the company introduced the Ragnarök low-cost munition as part of an end-to-end "affordable mass" solution.

On the M&A side, the company acquired certain assets of Norden Millimeter to strengthen the microwave product line at KGS - this translated into higher growth in the microwave segment and capacity expansion. It also expanded its footprint in the Secure SATCOM space (acquisition of Orbit Communication Systems), giving it direct access to Israeli and other regional requirements in the Levant.

2025-2026: capital andoutlook

The company announced the following targets in 2026:

• Full-year 2025 revenue of $1.347 billion, +16.6% organically

• 2026 revenue of $1.59-1.675 billion (12.7%-18.5% organic growth) with Q1 as the weakest quarter due to seasonal effects in defense contracts

• doubling of hypersonic revenue by 2026

• Continued double-digit organic growth in both KUS and KGS

At the same time, increased investment in R&D - nearly $9.8 million of spending in Q4 2025 alone, which directly reduces near-term profitability but is necessary to maintain technology leadership in the Space, Unmanned and Microwave segments. Thus, from a capital perspective, the company is knowingly sacrificing margin now for potentially higher profits later.

Competition and market position

Kratos stands between:

• The traditional primes - Lockheed Martin, Northrop Grumman, Raytheon, Boeing - who have enormous political and industrial power but are often not motivated to make cheap, expendable systems

• specialized drone and electronics companies - General Atomics (MQ-9 and others), AeroVironment (tactical drones), a number of smaller RF/EW players.

In the autonomous/CCA space, Lockheed (Skyborg/CCA), Boeing (MQ-28 Ghost Bat), General Atomics, and just Kratos with Valkyrie appear to be key players today. Kratos' advantage is:

• A focus on mid-size jet-powered drones that are cheaper than large HALE/MALE platforms but more capable than small tactical drones

• open systems architecture and more agile development

• willingness to "play on the edge" with concepts of affordable mass and attritable design

Management and CEO

https://www.youtube.com/embed/nJVkHT5_r50?rel=1

Eric DeMarco is the President and CEO of Kratos Defense & Security Solutions. Since joining Kratos, Mr. DeMarco has played a key role in leading the company's efforts to successfully transition from a commercial communications business through the sale and divestiture of assets to organically and strategically build a leading provider of national security-focused technologies, products and systems to the U.S. and its allies.

Eric DeMarco has repeated three key messages in recent quarters:

• we are the first mover in the mid-size attritable jet drone segment

• we have concrete programs and contracts, not just concepts

• our opportunity pipeline (13.7 billion) and backlog (1.57 billion) have never been stronger

From a capital perspective:

• Hold very low debt and high Z-score

• invests aggressively in R&D, even at the cost of weaker short-term margins

• Does not pay a dividend and buybacks are not a key theme - everything goes into growth and technology leadership

In earnings calls, management is relatively transparent about which programs are at what stage and what margins can be expected as they transition to higher volumes - this is important to investors because without these transitions, today's valuations are untenable.

Financial performance

Revenue, margins, profitability

Over the past three years:

• Revenue: 1.037 billion (2023) → 1.136 billion (2024, +9.6%) → 1.347 billion (2025, +18.5%, 16.6% organic)

• Q4 2025 revenue: 345.1m (+21.9% y/y, 20% organically)

• KUS 2025: 292.0m (7.9% organically), KGS 2025: 1.055bn (19.3% organically)

Margins:

• Gross margin around 19-21% (gradual growth as the mix moves towards higher value)

• Operating margin of 1.9% - operating income of $25.6m for full year 2025 and $8.2m in Q4 2025

• Net margin 1.6% - net income $22.0m for the full year, $5.9m in Q4

EPS:

• 2022: $ -0.29, 2023: $ -0.07, 2024: $ 0.11, TTM / 2025: $ 0.13.

• Adjusted EPS in Q4 2025: $0.18 (above expectations), showing that some "heavy" R&D is depressing GAAP results so far.

Balance sheet and debt

The balance sheet is extremely strong within the defense sector:

• debt/assets 0.06, debt/equity 0.07, long-term debt/cap 0.06

• current ratio 4.06, quick to cash ratio 1.8 - high liquidity, working capital $952 million

• net debt/EBITDA -5.91, Altman Z-score 17.1

This means the company has a realistic "runway" for several years of aggressive R&D and ramping up without having to worry about financial distress. In an environment where a lot of growth names are operating with a leveraged balance sheet, this makes a big difference: here the main risk is whether the programs will get off the ground, not whether they run out of money first.

Valuation and valuation interpretation

Current multiples:

• P/E ~504, P/S 9.11, P/B 6.15

• Market cap ~12bn, EV virtually flat (low debt)

P/E is virtually unusable - with EPS of 0.13, any movement in nominal earnings is a huge percentage jump. Better to look at:

• EV/Sales ~9

• EV/EBITDA ~100 (with EBITDA ~$120 million)

The fair value of $35.7 is based on the conservative assumption that the company will be able to increase margins, but not to the level implied by today's price. Simplified framework:

• If they make $2B in sales, 12% operating margin and 8% net margin in 5 years (earnings ~$160M, EPS ~1.0-1.1), then a P/E of 35-40 would be appropriate; today's P/E 500 would imply that the market has "outpaced" fundamentals, but not catastrophically

• for today's price to make sense at a P/E of 25-30, you'd need EPS of more like $2-3 (net income of $300-450 million), which requires more than doubling sales and significant margin expansion

In other words: the valuation is purely "option on success" - it buys the scenario that CCA/autonomous and hypersonic succeed in getting large, high-margin programs. If not, multiples will fall, even if the company remains growth.

Growth catalysts and outlook

Key catalysts:

• Specific program moves: confirmation of Valkyrie in MUX TACAIR, potential USAF CCA contracts, first export orders.

• Doubling of hypersonic revenue, first LRIP phase with improved margins

• Further growth in Rocket Systems, Microwave and Space & Cyber - now growing 17-56% y/y

• Confirmation of 2026 outlook (1.59-1.675bn revenue, 12.7-18.5% organic growth) and gradual shift of operating margin towards higher units

For an investor, it makes sense to track four numbers each quarter:

1. Book-to-bill (≥1.1 indicates a growing backlog)

2. organic growth in both segments (KUS, KGS)

3. gross and operating margins (a signal of whether R&D and pricing are starting to work)

4. backlog and pipeline (whether the 13.7 billion pipeline is actually converting into orders)

Risks

• Programmatic - the valuation story rests on a few key programs; delaying, curtailing or cancelling them can stall growth for years.

• Valuation - P/E >500, EV/Sales ~9; any disappointment in outlook, margins or orders can lead to a sharp price correction.

• Execution - transition from prototypes to mass production in defense is difficult: quality, supply chain, certification, cost stability. If they don't make it, margins may never get to the level the market expects today.

• Competitive - primes can enter the same segments more aggressively, get a bigger piece of the CCA/hypersonic pie, and relegate Kratos to a lower margin role.

• Political-budgetary - changes in Congressional or Administration budget priorities may shift "new war" money back to traditional programs, at least for a time.

Investment scenarios

1) Optimistic scenario - "from prototype to pillar of defense"

• Valkyrie and Ragnarök will become part of serial programs (USMC MUX TACAIR, CCA, export to Germany and other countries) and hypersonic/rocket business will grow to 400+ mil. USD sales around 2026.

• Total revenues grow 15-20% per year, swinging over USD 2 billion per year in 5-7 years.

• Gross margin will rise above 25%, operating margin into the 10-12% range, net margin 7-9% - net profit of 150-250mn. USD, EPS 1-1.7 USD.

• Market gradually reprices the stock from a "story" to a "growth defense title" with P/E 25-30, EV/markets 4-5.

This branch is what sits in the price today - essentially buying a call option on Kratos being one of the main architects of autonomous systems in the West.

2) Realistic scenario - "solid growth, limited margin expansion"

• Valkyrie stays in the programs, but ramp-up is slower and competitors manage to grab a big piece of the CCA pie; hypersonic and microwave continue to grow, but not as aggressively as the plan.

• Revenues are growing at 10-15% per year and will reach roughly $1.8-2 billion within a few years.

• Margins will improve, but more towards 5-8% operating, 4-6% net margin - net profit of $80-120m. EPS somewhere between USD 0.5-0.9.

• P/E drops to 25-30 range, EV/markets to 3-4. Total return for the current investor will depend on the entry price: at today's multiples, even in this relatively decent scenario, we may end up with only an average return if rerating eats up some of the EPS growth.

3) Negative scenario - "good product, bad valuation"

• Some of the key programs will be delayed, narrowed, or lose priority - Valkyrie will remain more of a technology demonstrator and "niche" solution, hypersonic/rocket will grow but slower than management promises today.

• Revenue will grow 5-8% per year, margins will improve but only to 4-5% operating, net margin 3-4% - net profit 40-70mn. EPS around USD 0.25-0.45.

• The market will stop being willing to hold "dream" multiples and P/E will compress into the 20-25 range, EV/markets 2-3 - at least for a while.

What to take away from the article

• The company is a small but technologically significant player in defense - with realistic flying autonomous drones (Valkyrie), cheap precision munitions (Ragnarök), and rapidly growing exposure to hypersonic and missile systems.

• The numbers are very "early stage" so far: revenue $1.347 billion, gross margin ~20%, operating ~2%, net ~1.6%, ROIC and ROE around 1% - profit exists but is small relative to the story.

• Backlog of ~$1.57bn, pipeline of ~$13.7bn and double digit organic growth in both major segments show there is interest in their technology, but it remains to be seen how much of this will turn into volume programs with normal margins.

• The balance sheet is extremely strong - minimal debt, high liquidity, Altman Z-score over 17 - so the main risk is not bankruptcy but that we pay too much for too distant a profit.

• Valuation (P/E >500, P/S ~9, P/B >6) is purely a "forward story"; for it to make sense, a combination of significant revenue growth, margin expansion, and success in several key programs (CCA, hypersonic, affordable mass) must come.

How does a company become a dividend aristocrat

The Dividend Aristocrat designation is applied to S&P 500 companies that have increased their dividends every year for at least 25 years in a row. It's an exclusive group that now numbers fewer than 70 members out of thousands of stock market titles. Meeting this condition means surviving the dot-com crash, the 2008 financial crisis, the COVID-19 pandemic, and all the sector pivots that have accompanied them, while increasing the payout to shareholders year after year.

For investors, this category makes sense for several reasons. A company that has sustained dividend growth through a recession must have very stable free cash flow, low debt, or the ability to generate revenue regardless of the economic cycle. Thus, dividend increases act as management's annual message to shareholders: business is good, we have plenty of cash and we have confidence in the future.

In 2026, when the market is experiencing increased volatility tied to geopolitical tensions, tariff unpredictability and uncertainty around the future direction of interest rates, these titles are gaining renewed appeal. A solid and growing dividend income can offset some of the exchange rate loss and reduce the psychological pressure on the investor in down periods. As a result, many of these companies have also seen strong share price growth this year.

Walmart $WMT

Walmart, a company that has raised its dividend continuously for over 53 years. In 2024, the company raised its annual dividend by 9%, the largest increase in more than a decade.

A business model that continues to grow

Behind Walmart's ability to increase its dividend over the long term is a combination of several structural advantages. The first is the extremely stable demand for its products. Walmart sells everyday goods that people buy regardless of the economic cycle. In a recession, customers don't turn away from buying groceries or drugstores, they just pay less. This helps Walmart in bad times and adds customers.

The second advantage is the diversification of the income mix. The e-commerce segment, the Walmart+ program, and the retail media business (an advertising platform within the ecosystem) bring higher margins than traditional brick-and-mortar sales. It is this shift that reduces dependence on low-margin retail and strengthens the stability of free cash flow.

Dividend and valuation

Walmart's payout ratio is around 33%, which is unusually low for a dividend king. This conservative policy provides a large cushion for any economic downturns. While the dividend yield of around 0.8% looks modest at first glance, it should be read in the context of the stock's significant appreciation in recent years. An investor who bought Walmart stock 10 years ago now has an appreciation in excess of 460%. But in recent months, there have already been concerns about the current valuation, which is high for such a defensive title.

ExxonMobil $XOM

ExxonMobil is one of the most compelling examples of how a company can sustain dividend growth in a cyclical business. Oil prices have ranged from under $10 per barrel to over $120 over the past 43 years, and ExxonMobil has raised its dividend every year without fail. In 2025, the annual dividend was $4.12 per share, a yield of approximately 2.7% at current price levels.

The secret to ExxonMobil's consistency lies in a combination of low production costs and disciplined financial policies. The company has some of the lowest production costs in the industry, allowing it to remain profitable even with low oil prices. At the worst stages of the cycle, the company has been drawing cash from the balance sheet or raising debt to maintain the dividend. However, these episodes were always short-lived and preceded by a stronger balance sheet.

In the current environment, ExxonMobil benefits from two factors:

1. record production

2. interest in oil as a hedge in a geopolitically tense world.

The company has announced a target of 13% annual earnings growth through 2030 and plans to pay $17 billion a year in dividends, plus a $20 billion buyback program.

Dividend and cash flow

Exxon's free cash flow has far exceeded its dividend obligations in recent years. The payout ratio to free cash flow is below 50%, leaving room for both investment in new production and further dividend increases.

Johnson & Johnson $JNJ

Johnson & Johnson is one of the few companies in the world that can demonstrate several decades of uninterrupted dividend growth. In April 2026, the company announced its 64th consecutive quarterly dividend increase, up 3.1% to $1.34 per share. That means JNJ has raised its dividend during every major crisis of the past half-century: the Vietnam War, the oil shocks of the 1970s, the collapse of the dot-com bubble, the 2008 financial crisis, and the COVID-19 pandemic.

The pharmaceutical model with defensive cash flow

After spinning off its consumer division under the Kenvue brand, Johnson & Johnson is focusing on pharmaceuticals and medical devices. This model has a major advantage for the dividend investor: demand for pharmaceuticals and medical devices does not rely on the economic cycle. People don't stop taking medicines even in a recession.

The company has an extensive pipeline in oncology, immunology and neurology that supports long-term revenue growth. It also maintains a high credit rating, giving it a low cost of capital and flexibility in allocation.

Dividend in numbers

The annual dividend is $5.36 per share for a yield of approximately 2.35%. The payout ratio is below 55%, a comfortable level for a company with such stable cash flow. In addition, $JNJ regularly conducts share repurchases of its own stock, which increases total shareholder value beyond the dividend alone.

Caterpillar $CAT

Caterpillar is a manufacturer of machinery for the construction, mining, and energy industries. It is a business that is sensitive to the economic cycle, infrastructure investment and commodity markets. Therefore, sustaining dividend growth in this business for 32 consecutive years is an extraordinary feat. The company belongs to the S&P 500 Dividend Aristocrats index and has a significantly lower payout ratio than most comparable industrial companies.

Financial discipline

In 2025, Caterpillar increased its quarterly dividend by 7% to $1.51 per share. This brings the annual dividend to $6.04, with an FCF payout ratio of around 27%, one of the most conservative among all aristocrats. Earnings payout ratio is around 32%, which leaves a huge cushion in case the economy worsens.

CEO Joe Creed emphasized in the Q4 2025 quarterly report a commitment to return "substantially all of MP&E's free cash flow to shareholders over time." In doing so, management openly affirms that the dividend is a top priority for capital allocation.

Dividend yield and valuation

Caterpillar's dividend yield of 0.74% looks modest, but it needs to be seen in combination with the price appreciation. Caterpillar shares have appreciated significantly over the past five years. If you bought the stock in 2021, it would be 352% higher today.

Chevron $CVX

Chevron performs all three stages of the petroleum value chain: production, refining, and distribution. This integration is one of the reasons the company has been able to maintain 39 years of uninterrupted dividend growth despite huge swings in oil prices. At the beginning of 2026, Chevron raised its quarterly dividend by 4% to $1.78 per share, for an annual dividend of $7.12 and a yield of around 3.8%.

Record production and CapEx

In 2025, Chevron achieved record production at both the global and U.S. levels. The company replaced 158% of its produced reserves in 2025, signaling a strong long-term position. High oil prices in the first quarter of 2026, pushed by geopolitical tensions in the Middle East, play into Chevron's hands.

Meanwhile, a disciplined approach to CapEx is a key part of dividend growth. Chevron is investing in capacity, but not crossing the threshold beyond which free cash flow would not be sufficient to cover dividend obligations.

Comparison with ExxonMobil

ExxonMobil $XOM has a longer dividend payout history (43 vs. 39 years) and higher average dividend growth (5.8% per year over 43 years). Chevron, on the other hand, has offered stronger production performance and a higher dividend yield in the current environment.

Procter & Gamble $PG

With 70 years of uninterrupted dividend growth,Procter & Gamble is the group's absolute record holder. The company has been raising its dividend continuously since 1956 and has never interrupted it since. In April 2026, it announced its 70th consecutive increase, up 3% to $1.09 per quarter ($4.354 per year).

Portfolio of defensive brands

P&G owns a portfolio of brands such as Tide, Pampers, Gillette, Oral-B, Crest, Febreze and Old Spice. These names sell their products regardless of the economic cycle: a consumer may cut back on vacations, a new car, or restaurants, but not on laundry detergent, diapers, and toothpaste. This is how P&G achieves stable free cash flow even in the worst stages of a recession.

The company plans to pay out more than $10 billion in dividends and another $5 billion in buybacks in fiscal year 2026. Total value returned to shareholders will reach approximately $15 billion.

Payout ratio and financial health

P&G's payout ratio of around 61% is higher than Caterpillar's $CAT or Walmart' s $WMT, but still in the comfort zone. The company's free cash flow covers dividend obligations with a margin. The company trades at a forward earnings multiple below its 10-year average, which makes it a relatively attractive entry point from a sector risk perspective compared to historical norms.

Comparison table: 6 dividend aristocrats

Strategic view

These 6 companies do not represent the performance of the entire market. We distinguish three sector blocks: consumer (Walmart, P&G), energy (ExxonMobil, Chevron) and defensive specialties (Johnson & Johnson in healthcare, Caterpillar in industrial). Each market segment has a different dividend yield, different dividend growth, and different sensitivity to the macroeconomic environment.

For dividend growth-oriented investors (regardless of current yield), a key indicator is the sustainability of free cash flow relative to payout ratio. Caterpillar, with its FCF payout ratio below 30%, has the largest margin of the six. P&G with its 61% is at the other end of the spectrum.

What to watch next

• Free cash flow trends tied to Q2 and Q3 2026 results for energy companies: if oil prices remain high, Chevron and ExxonMobil have room to raise their dividends above historical averages.

• Johnson & Johnson's pipeline in oncology and immunology: pivotal phase clinical trials in 2026 could significantly impact the revenue growth outlook for the next 5 years.

• Walmart's e-commerce and retail media growth: if margins from these segments start to show up in total payout ratio, the company may increase its dividend growth rate above the current 9%.

• Demand for heavy equipment at Caterpillar: the decline/growth in US production and global investment in mining infrastructure will determine the rate of increase in the latest quarter.

• US pharmaceutical price regulation: potential tighter pharmaceutical price regulation could impact $JNJ margin.

• Price stability of $PG products in an inflation-sensitive consumer environment: market share trends in key categories will show whether consumers remain loyal to premium brands even in the face of economic pressure.

The dividend aristocrats and dividend kings of this selection are not just a conservative refuge for difficult times. They are proof that some business models can generate such stable cash flow that management can deliver on the promise of growing payouts year after year, regardless of external shocks.

Yet each of these six companies achieves this result in a different way.

The common denominator, however, remains management's ability to treat the dividend as a commitment to shareholders, and that is what sets these six apart from most other companies in the market.

In terms of strategy, Visa continues to strengthen its role as a "payments infrastructure": expanding Visa as a Service, adding AI and stablecoin capabilities, while also strengthening its presence in emerging markets such as Argentina through acquisitions. The company is thus building a position not only in consumer cards, but also in commercial payments and business-to-business and institutional cash flows, giving it a broader base for growth in the years ahead.

Q2 2026 results: growth across all major lines

In the second fiscal quarter of 2026, Visa's net sales grew to $11.2 billion, up 17% year-on-year, or 16% after adjusting for currency effects. This was driven by a combination of higher payment volumes, strong cross-border traffic and growth in the number of processed transactions, with constant currency payment volume up 9%, total cross-border volume up 12% and the number of processed transactions reaching 66.1 billion, up 9% from a year ago.

The profitability shows a double effect: solid revenue growth, and the normalisation of extraordinary litigation costs. GAAP net income increased 32% year-over-year to $6.0 billion and GAAP earnings per share jumped 36% to $3.14, with last year's quarter burdened by a significantly higher litigation provision. Filtering out these one-time items, non-GAAP net income was $6.3 billion (+17% y/y) and non-GAAP EPS was $3.31 (+20% y/y), growing slightly faster than revenue alone.

The revenue structure shows that Visa $V is growing not just "on volume" but also in value-added services. Revenue from services related to payment volume grew 13% to $5.0 billion, data processing revenue grew 18% to $5.5 billion, and international transactions added 10% to $3.6 billion. The fastest growing category was other revenue, which shot up 41% to $1.3 billion - typically newer services and higher value-added solutions. Client incentives, which partially dampen these revenues, grew 14% to $4.2 billion, slower than total revenues, which is positive from a margin perspective.

On the expense side, GAAP operating expenses fell 4% to $4.0 billion, mainly due to lower litigation provisioning - $329 million this year versus $1 billion a year ago. On an adjusted basis, however, operating expenses were up 17% as Visa added money in people and marketing to drive payment volume growth and adoption of new services. As a result, operating profit rose significantly to $7.2 billion and maintained very high operating margins, among the most attractive in the financial sector.

• Results Presentation.

Key Figures:

• Net revenue was $11.2 billion, up 17% year-over-year, or 16% when adjusted for currency effects.

• GAAP net income rose to $6.0 billion (+32% y/y), GAAP earnings per share (EPS) to $3.14 (+36% y/y).

• Adjusted for extraordinary items (litigation, acquisition amortization, investments), non-GAAP net income was $6.3 billion (+17% y/y) and non-GAAP EPS was $3.31 (+20% y/y).

Key volume metrics behind the revenue growth:

• Payments volume grew 9% in the quarter at constant currency.

• Total cross-border volume increased by 12%.

• Processed transactions amounted to 66.1 billion, 9% more than a year ago.

The revenue structure shows that growth is very balanced:

• Service revenue: USD 5.0 billion, +13% y/y - based on the previous quarter's payment volume.

• Data processing revenue: USD 5.5 billion, +18% y/y - benefiting from higher transaction volumes and more complex services.

• International transaction revenue: USD 3.6bn, +10% y/y - growth mainly driven by cross-border payments.

• Other revenue: USD 1.3bn, +41% y/y - growing rapidly, likely due to value-added services and new solutions.

• Client incentives: USD 4.2bn, +14% y/y - growing but slower than revenue, which is positive for margins.

Cash flow, balance sheet and capital allocation

Visa remains exceptionally profitable at the cash flow level:

• For the first six months of fiscal 2026, the company generated net income of $11.9 billion and operating cash flow of $9.8 billion.

• As of the end of March 2026, it had cash, equivalents and investment securities of $14.2 billion.

The balance sheet structure remains very strong, although there has been a significant increase in debt and a concurrent reduction in cash:

• Long-term debt increased from USD 19.6 billion to USD 22.4 billion (thanks, among other things, to the new USD 3 billion of senior notes with fixed rates of 3.8-4.7% and maturities of 3-10 years).

• Cash and cash equivalents fell from USD 17.2bn to USD 12.4bn, partly due to aggressive share buybacks and dividend payments.

Capital allocation is strongly pro-shareholder:

• Visa repurchased approximately 25 million Class A shares for $7.9 billion in the quarter, at an average price of $320.66 per share.

• Total dividend and buyback spending reached $9.2 billion in the quarter alone.

• As of March 31, 2026, the company still had $13.2 billion under its existing buyback authorization, and in April 2026, the board approved a new multi-year buyback program for an additional $20 billion.

• At the same time, a quarterly dividend of $0.67 per A share was declared, payable on 1 June 2026.

Also of interest is the $125 million dividend. A USD 125 million deposit into a litigation escrow account to protect the company and Class A shareholders from the impact of select litigation - the account has a similar effect to the buyback by reducing the number of Class B-1 and Class B-2 shares.

Strategic moves, acquisitions and capital structure

Visa continued to pursue strategic transactions during the quarter:

• It completed the acquisition of Prisma Medios de Pago S.A.U. and Newpay S.A.U. in Argentina, strengthening its role in card processing, real-time payments and ATM network (Banelco) and payment gateway (PagoMisCuentas).

• The aim is to modernize the payment infrastructure and strengthen its position in emerging markets where there is a large scope for a shift from cash to digital payments.

Another structural step is the offer to exchange Class B-1 and B-2 shares for a combination of Class B-3 and C shares and possibly cash for fractional shares. This move has implications for the shareholder base structure and may gradually increase the liquidity and transparency of the capital structure, although for the average investor this is more of a technical issue.

Management commentary and outlook

CEO Ryan McInerney described the 17% revenue growth as the fastest since 2022 and highlighted that it was driven by resilient consumer demand as well as the success of the strategy in consumer payments, commercial solutions and money movement and value-added services. From management's perspective, this is therefore broad-based growth, not a one-off effect of one segment or region.

In addition, Visa further developed its "Visa as a Service" services in the quarter, adding agent-based AI and stablecoin functionality. The aim is to consolidate its position as a payments "hyperscaler" - a global platform on which an increasing proportion of the world's payment flows run, both in traditional cards and new forms of digital payments.

In terms of outlook (guidance), the company mentions two main lines in the materials presented:

• Short-term: continued growth in payment and transaction volumes, although the pace may be sensitive to macroeconomics, travel and consumer confidence.

• Long-term: expanding from a pure card network to a role as a comprehensive payments and cash flow infrastructure, including collaboration with fintechs and banks.

What's in it for the investor

• Fundamentally, the quarter was very strong: double-digit revenue growth, significantly higher profits, high margins and solid volume growth across all key metrics.

• In addition, the company is showing great confidence in its future - massive buybacks, a new $20 billion authorization, a steadily growing dividend and investment in technology.

• Higher non-GAAP expenses (+17%) suggest Visa is consciously investing in people, marketing and innovation to stay ahead in an environment where competition from fintechs, alternative networks and regulation is growing.

From an investment perspective, the results support the thesis that Visa remains a quality growth stock with elements of blue-chip defensiveness - the business is highly profitable, capital-light and has a long structural growth story. The short-term trajectory will depend largely on market expectations for volume growth and regulation, but the Q2 2026 numbers alone tend to make the case for why Visa can afford to combine earnings growth with generous capital returns to shareholders over the long term.

UPS is undergoing a major transformation that doesn't look good at first glance - revenues and profits are down year over year. The company is deliberately stepping back from its cooperation with Amazon because that business was high-volume but low-margin.

This is the key to the whole strategy. UPS is reducing the volume of shipments from Amazon and instead focusing on higher-margin segments, such as small and medium-sized businesses and healthcare logistics. That pushes results down in the short term, but should significantly improve profitability in the long term.

Management also expects the second half of 2026 to be a turning point. The company should return to revenue and profit growth as cost savings and the change in business structure begin to take full effect.

It's the classic trade-off between short-term pain and long-term gain. UPS is already closing facilities, cutting costs, and changing its entire logistics model so it won't be dependent on low-margin e-commerce volume.

From an investment perspective, this is not a growth story today but a multi-year turnaround. If the strategy works, UPS could become a significantly more profitable company than before. If it doesn't, it will lose a large volume of business without adequate replacement.

And you? Does it make sense to give up a large customer for higher margins, or do you think it's too risky a move?

Profitability improves even faster than sales. Operating income rises close to 19%, pushing the operating margin up from about 32.9% to 35.0%, as concentrate economics, moderating input costs and ongoing refranchising benefits add operating leverage on top of revenue growth. Diluted EPS increases about 18% to 0.91 dollars, or 0.86 dollars on a comparable basis, meaning investors are effectively getting high‑single‑digit organic growth and high‑teens earnings growth from a business that still converts roughly 90–95% of its profit into free cash flow and guides to around 12.2 billion dollars of FCF for the full year.

Q1 2026 results

For the first quarter 2026, Coca-Cola $KO reported:

• Net sales of $12.5 billion (+12% y/y)

• Organic sales +10% (analysts expected approx. +7%)

• Global unit case volume +3%, driven by China, US and India

• Concentrates sales growth of 8% and price/mix improvement of 2%

Operating margin improved from 32.9% to 35.0%, comparable (non-GAAP) margin improved from 33.8% to 34.5%. Operating profit growth of 19% is a combination of strong sales, improved cost discipline and favourable exchange rate which added about one percentage point.

Net earnings per share (EPS) rose 18% to $0.91, while comparable EPS was $0.86. In both cases, EPS also benefited from the currency impact, which added about 3-6 percentage points to the growth, but even after filtering out the currency impact, it was still a double-digit increase. This is important: profitability growth is not just based on rates or accounting items, but on real business.

Cash flow from operations in Q1 was US$2.0 billion, free cash flow US$1.8 billion. This is a typical Coca-Cola picture: even with a relatively weaker seasonal quarter, it generates very solid cash, which it uses to fund the dividend, investments and buyouts.

• Full presentation with results.

Management commentary

New CEO Henrique Braun describes Q1 as a "strong start to the year", building on three pillars: being close to the consumer, execution at a local level and the ability to manage the complexity of the global portfolio. He stresses that even in an environment where beverage prices are at record levels globally, Coca-Cola can sustain growth in both volume and revenue.

Management talks of "more balanced growth": after a period where much of the growth was driven by price, the company wants to build more on volume and mix - that is, bringing in new consumers, new products and new packaging formats, and only then building value on top of that.

Braun also mentions that Coca-Cola is targeting "culturally significant moments" - Chinese New Year, Ramadan, Carnival in Brazil, March Madness in the US - and connecting them with digital campaigns, AI and personalised marketing. This isn't just pretty marketing speak: the company says directly that it has increased the number of weekly consumers and gained value share globally in NARTD (non-alcoholic ready-to-drink beverages) as a result.

Regions and product mixes

Results by region:

• EMEA: sales +13%, organic +11%, volume +2%, price/mix +5%. Profitability grew double digits, with the company gaining share in Germany and Nigeria.

• Latin America: sales +14%, organic +9%, volume +1%, price/mix +1%. Higher sales and profitability, supported by strong positions in Brazil and Argentina.

• North America: sales +12%, organic +12%, volume +4%, price/mix +1%. Operating profit in the region up 20%, up 17% on a comparable basis, driven by strong execution and cost discipline.

• Asia Pacific: sales +6%, organically +5%, volume +5%, price/mix -6%. The region grew in volume, but the company had to work more with price and availability here, so margins are under more pressure.

In terms of categories, Coca-Cola Zero Sugar performed best, growing 13% across all regions in Q1.

Long-term numbers

Revenues have been growing for four years in a row: from roughly $38.7bn in 2021 to $47.1bn in 2024. That's a cumulative growth of around 22%, but the pace has gradually slowed - after a strong 11% in 2022 came around 6% in 2023 and less than 3% in 2024. So the company is still growing, it's just not accelerating anymore, rather it's riding in the stable, low single-digit range that's pretty typical for a mature global brand.

Gross profit is growing faster than revenue itself: from roughly $23.3 billion to $28.7 billion. This means that gross margins are gradually improving - Coca-Cola is able to increase price, shift the mix towards higher margin products, while keeping direct costs under control. Simply put: for every dollar of sales, it's making a little more in gross profit than it did a few years ago.

Operating profit, however, is a slightly different story. It stays in the $10-11.3 billion range from 2021, but drops from $11.3 billion to $10.0 billion in 2024. Yet gross profit continues to grow. This means that the problem is not "at the top" (prices, volumes) but "in between" - in operating costs.

On a net level, the picture is surprisingly calm. Net profit is around USD 9.5-10.7 billion, without much fluctuation. EPS lies roughly between $2.2 and $2.5. We see one stronger year (2023) where EPS jumps due to a combination of higher earnings and slightly lower share count, and 2024 where EPS falls slightly despite still very decent absolute numbers.

Outlook for 2026

Coca-Cola updated the outlook only slightly after Q1, but basically confirmed it:

• Organic sales growth continues to be expected in the 4-5% range.

• Comparable earnings per share are expected to grow 8-9% this year from last year's $3.00.

• Currencies should add about 3% to EPS growth, while acquisitions and divestitures should take about 1% off.

• The company expects free cash flow of about $12.2 billion ($14.4 billion from operations minus $2.2 billion CAPEX).

New to the outlook is a more detailed description of the impact of the pending sale of Coca-Cola Beverages Africa (CCBA), which is expected to close in the second half of 2026. This will reduce revenue in the short term (about 4% headwind to comparable sales) but should improve capital efficiency and slightly boost margins.

Shareholders

Coca-Cola is one of the most classic "institutional" titles, but with a significant anchor in the form of Berkshire Hathaway. According to data from Yahoo Finance:

• Insider the stake is about 9.9% of the stock.

• The institution holds about 66.6% of the stock and about 73.9% of the free float.

• The stock is held by more than 4,400 institutions.

Largest shareholders:

• Berkshire Hathaway: about 400 million shares, about 9.3% of the company.

• Vanguard: about 375 million shares, about 8.7% of the company.

• BlackRock: about 319 million shares, about 7.4%.

• State Street: about 168 million shares, just under 4%.

Fair Price

Just three days ago I shared the activation of a trailing stop-loss on my position in $ARM at a price of $218. The initial stop was set at my original target of $175.

I entered the position on January 7, 2026 at a price slightly below $115.

$ARM then shot up sharply, but a correction came just as quickly. Today my position was automatically closed in the premarket at a price of $201.20, as the trailing stop-loss gradually moved to that level.

Result - profit +75% in less than four months.

Why I’m very satisfied with this trade:

Discipline paid off: From entry to exit I stuck to the predefined plan.

High-quality entry: Buying below $115 offered a very attractive risk-reward ratio from the start.

Trailing stop-loss worked exactly as expected: It allowed me to participate in further upside while effectively protecting the gains already achieved.

This is exactly the kind of trade that confirms risk management is more important than trying to hit the absolute top.

What next?

Recent volatility shows how quickly sentiment can change for growth semiconductor names. Similar moves can be expected not only for $ARM, but also for other companies such as:

$AMD

$AVGO

These stocks can deliver extraordinary moves in both directions.

Next plan for $ARM:

I would consider re-entering if it falls below $150. Quality companies usually offer more opportunities. You just need enough patience.

For now, I'm glad I realized a very solid profit and freed up capital for other investment opportunities.

How do you approach sharply rising names? Do you prefer a trailing stop-loss, a fixed target, or gradual selling?

The English version of this post is available on my eToro profile. If you want to follow me there or copy my USD portfolio, I'd appreciate it!

Today’s Blackstone collects management and performance fees across private equity, real estate, private credit, infrastructure and multi‑asset strategies, and runs them through an operating model that routinely produces gross margins in the high 90s, operating margins around 50% and net margins close to 30%. With distributable earnings per share north of 6 dollars, a stated intent to pay out roughly 85% of those distributable earnings and a trailing dividend yield in the mid‑3% range, investors are effectively paying a “quality premium” for a high‑ROE, capital‑light compounding machine rather than for a traditional, balance‑sheet‑heavy financial.

Top points of the analysis

• Blackstone is an asset-light alternative investment platform with AUM around $1.3 trillion, extremely high profitability (operating margin ~52%, net margin ~29%) and ROE over 47%.

• Fees are the main driver of the business: fee-related earnings in the order of units of billions of USD per year and distributable earnings of over USD 7 billion, which directly translate into dividends.

• A classic P/E of around 30 is of limited predictive value for Blackstone - more important is the relationship of valuation to fee-related earnings, distributable earnings and the quality of the fee business.

• A dividend of around 3-4% is tied to distributable earnings, so it fluctuates, but over the long term it reflects AUM and fee-income growth; it is not a "fixed aristocrat" but a dynamic cash flow payout.

• The balance sheet is robust for this type of company: leverage is visible (debt-to-equity ~1.4) but backed by stable fees, with a solid Z-score and high interest coverage.

• The structure of the business (PE, real estate, credit/insurance, infra) breaks down the cyclicality - when one asset class isn't doing well, other segments often run better.

• The key question for shareholders: how long can Blackstone sustain high growth in assets under management and fee-based profitability in an environment where more and more money is flowing into alternatives.

How Blackstone makes money

Blackstone $BX today is not one "black box" but several relatively distinct pillars that together form a fee-based alternatives machine. It is important for the reader to understand where the stable fees are coming from and where the more cyclical portion of the profits sit instead.

Private Equity

Private equity is the historical core of Blackstone. It manages tens of billions of dollars in classic buyout funds and growth strategies. PE is one of the largest pillars in AUM, but it is the most cyclical in terms of returns:

• Management fees are stable (long fund life, locked-in capital)

• Performance fees and carried interest depend on when exits can be realized and at what valuations. In good years, PE can make an above average contribution to distributable earnings, while in weaker years (fewer IPOs, worse M&A valuations) it can significantly drag down the volatile part of the result.

Real Estate

Real estate (real estate) is the second major pillar - from office and residential portfolios to logistics and specialty assets. Real estate combines several product types: classic closed-end funds, core and core-plus strategies, and more open-ended BREIT-type structures.

• The fee profile is robust: rental cash flow and long-term contracts support stable management fees.

• The cycle is strong for revaluations and sales - in a higher rate environment and weaker valuations, performance fees dampen, but fee-income runs on. Real estate is one of the segments where Blackstone has a long history and brand that helps attract additional capital.

Credit / Insurance

Credit and related insurance platforms (for example, through partnerships with insurers that invest premiums in credit strategies) are perhaps the most stable source of fees today.

• Private credit is benefiting from a long-term trend where banks are pulling back from some lending and institutions are seeking yield in credit funds.

• Insurance capital (e.g., life insurance company investment portfolios) provides long-term, predictable AUM with stable fee flow. In terms of fee-related earnings, the credit/insurance business is often the biggest driver of stability - margins are solid, the cycle exists but is not as sharp as PE.

Infrastructure and other strategies

Infrastructure, renewables, specialist strategies in secondary buyouts, growth equity or tactical opportunities round out the main pillars.

• Infrastructure funds are typically based on very long-term assets (energy, transportation, telecom), which means a long investment horizon and stable fees.

• Returns are less dramatic than PE but less cyclical. These segments add to Blackstone's overall resilience - when PE has a weaker period, infra or credit often hold the numbers.

Who is pulling fee-related earnings and where is the greatest cyclicality

• The biggest steady driver of fee-related earnings today is a combination of real estate and credit/insurance. That's where much of the AUM, locked-in capital and long-term contracts sit.

• Private equity and some opportunistic real estate strategies have the greatest cyclicality in terms of performance fees.

What has changed: from a "PE fund" to a fee machine

A few years ago, Blackstone could be seen as a large private equity house where the key was a successful exit from portfolio companies. Results for years reflected whether a few large investments had been sold or floated, GAAP earnings were flying up and down, and the stock had a reputation for being cyclical, dependent on market sentiment.

Today, the company looks different. A substantial portion of revenues are long-term management fees and fee-related earnings, which are based on locked-in capital in funds with lives of 8-10 years or more. Private equity, real estate, credit/insurance and infrastructure have their own funds that collect fees from AUM virtually regardless of daily market fluctuations. Realization and performance fees add a cyclical component on top, but the underlying engine (FRE) is much smoother.

Another change is in the target clientele. Blackstone has long been not just a partner to large pension funds and sovereign wealth funds, but is increasingly going after wealthier individuals and the semi-retail segment. Structures such as BREITs and private credit funds are opening up alternatives to a wider group of investors, boosting capital inflows and increasing the diversification of AUM sources.

From a shareholder perspective, Blackstone today thus stands somewhere between a "premium asset manager" and an "alternative infrastructure platform": margins and return on capital are consistent with a very high-quality business, while still carrying the volatility associated with the valuation and execution of non-traded assets.

What needs to work for this model to work for shareholders

• the company must maintain and ideally accelerate AUM growth

• fee-related earnings should grow steadily over time, even if there are a few weaker years for performance fees

• capital structure must remain under control so that leverage does not turn a quality fee business into a systemic risk

How it becomes money

1) Management fees and fee-related earnings

A core component of the business is the management fees that Blackstone collects from AUM across the funds. This return is relatively predictable: as long as the funds are open and the capital is invested, the client pays fees regardless of whether there is a sell-off in the equity index. The management fees generate fee-related earnings - operating profit net of volatile investment revaluations.

Here's the hidden value: once AUM moves tens to hundreds of billions higher, there is no need to adequately increase fixed costs. Each additional dollar of assets thus generates a disproportionately higher share of FRE over time. This is why Blackstone has margins in excess of 50% and why it can afford to send a significant portion of its profits as dividends.

2) Performance fees, carried interest and the cycle

The second layer is performance fees and carried interest - a share of the funds' profits if they exceed certain rates. This is the cyclical, volatile component that makes distributable earnings a "jagged" chart. In good years (bull markets, successful exits, IPOs) performance fees inflate DE and the dividend significantly. In bad years, they are noticeably smaller.

Importantly, Blackstone now has so many funds and such a broad portfolio that exits and realizations are spread out over time and across asset classes. Even if private equity slows for a time, real estate or private credit can make up some of the shortfall. As a result, DE does fluctuate, but much less than in one-dimensional fund structures.

3) Dividend payouts and potential buybacks

Distributable earnings fund dividends. Blackstone opts for a variable model - it pays out most of the DE, but not a fixed increasing amount at all times. This means that the dividend yield varies over time: in strong years it jumps above 4%, in weaker years it may fall closer to 3%, and some of the capital stays within the firm for new funds or potential share buybacks.

For an investor, it's a combination of: current cash yield from dividends + long-term value growth if AUM and fee-income continue to grow. Compared to traditional dividend titles, Blackstone is more volatile but potentially more interesting in terms of total return if the business continues to expand.

Figures

• Gross margin of around 97%, operating margin of around 52%, net margin of nearly 29%.

• Return on assets around 8%, return on equity around 48%, ROIC over 17%.

• AUM in the order of USD 1.3 trillion, with a long-term growth trend and record inflows in recent years.

• Fee-related earnings and distributable earnings in the aggregate around units to upper units of billions of USD per year, with a clear link to the growth of the fee business.

• Healthy balance sheet: reasonable debt levels relative to the size of the fee-based business, decent interest coverage, solid Z-score.

This profile is consistent with a company that is able to deliver a high return on capital over the long term while returning a significant amount of cash to shareholders.

Dividend and sustainability

Blackstone is one of the firms that overtly "tells" the distributable earnings story with a dividend. The payout is not linearly increasing as in traditional dividend aristocrats, but follows the market and fund performance cycle. What this means for the investor is that they can look at the dividend not as a fixed benefit, but as a share of the success of the entire alternative empire.

The dividend cover is comfortable when viewed through a DE. The company pays out the vast majority of DE, which makes sense in an asset-light model - it needs relatively little equity to continue to grow. The risk lies more in cyclicality: in years when there are few realisations and weaker performance, DPS will be lower. But if fee-related earnings and AUM are rising, the average dividend should move higher in the medium term.

A simple stress-test: if markets weaken for a couple of years and DE falls by 20-30%, Blackstone has the ability to adjust dividends appropriately, but the underlying business would remain profitable and fee-strong. The problem would only arise when structural capital outflows from alternatives combine with fee-rate pressures and poor fund performance - this would impact not only the DPS but also valuations.

Valuation - what is included and what is not

On the face of it, Blackstone does not look like a cheap stock: the earnings or revenue multiples are higher than those of mainstream financial institutions. However, if we look at valuation through the prism of earnings quality and return on capital, the situation is different. An investor today is buying a stake in a platform that:

• earns high, predominantly fee-based margins

• grows as the world turns to alternative investments

• has the discipline to pay out capital and can generate double-digit percentage returns over a long period

What may be undervalued is a combination: long-term AUM growth, the strengthening role of private credit and infrastructure, and Blackstone's ability to continue to expand its client base beyond the purely institutional world. Should this scenario play out, the current valuation may be an entry into a long-term growth and dividend story, not a "one-cycle position."

Why metrics confuse (P/E, P/B, EPS)

At first glance, Blackstone's classic screener metrics can throw off. High P/E, high P/B, volatile EPS - and investors tend to lump it in the same bag as an "overpriced financial stock." But for an alternative asset manager, these metrics often distort more than they explain.

GAAP EPS is volatile because it reflects fund revaluations, not just current operations
Blackstone's income statement includes unrealized gains and losses on portfolio investments (private equity, real estate, credit revaluations).

• In years when asset valuations move up, GAAP earnings get "inflated"

• In years when the markets correct, the same position translates into statistical EPS deterioration, even as fee cash flow rides on. That's why EPS can jump by tens of percent from year to year without changing the underlying quality of the business. Metrics like fee-related earnings and distributable earnings, which try to separate normal operations from market noise, are more relevant for evaluating a company.

P/B for an asset-light manager does not make the same sense as for a bank

For banks and insurance companies, P/B tends to be important because much of the value is carried on the balance sheet (loan portfolio, investments, reserves). Blackstone, on the other hand, manages outside capital - its own balance sheet is more of a tool to manage fund holdings and working capital, not a "store of value" like a bank.

• The high P/B for an asset-light firm that generates a net margin of nearly 30% and an ROE of around 48% is not a warning sign, but rather a reflection of its ability to extract multiples of the sector average from each dollar of equity.

• Therefore, comparing Blackstone's P/B to that of a regional bank does not lead to a useful conclusion.

How to think about valuation better

For a similar firm, it is more useful to look at the relationship between:

• FRE (fee-related earnings) and share price - what multiple of stable, fee-related earnings the investor is paying.

• DE (distributable earnings) and the share price - what multiple of "distributable" earnings is paid when DE tracks cash that can be distributed to shareholders over the long term.

• AUM and fee structure - how fast the assets under management are growing and what fees Blackstone charges on them. AUM growth at reasonable fees means future growth in FRE and DE.

• Quality of cash flow - how much of the revenue comes from recurring management fees vs. cyclical performance fees.

With that perspective, a P/E of 30 may no longer look incomprehensible if the company can grow AUM over the long term, maintain high margins, and return a large portion of distributable earnings to shareholders. A screener who only knows GAAP EPS and book value doesn't see this nuance - which is why they "confuse" mostly asset-light alternatives managers.

Why Blackstone doesn't look expensive right now

Blackstone is still showing a P/E of around 26-31, depending on whether you take trailing or forward estimates. On its own, it doesn't look cheap until you compare it to its own history and how fast distributable earnings and dividends are growing. Back in late 2024/early 2025, the P/E was still around 40-45, which means today's multiple is roughly a third to a quarter below the average of recent years, even though Blackstone has reported record results in the meantime.

In 2025, the firm achieved distributable earnings of $7.1 billion, or about $5.57 per share, which represented roughly 20% year-over-year growth in DE and was the best year in the company's history. Still, the stock trades somewhere in the range of $110-130 during 2026, with a trailing P/E of ~26-31 and a forward P/E in the lower 20s (16-19 on estimates). Simply put: the market today is paying a multiple for Blackstone that is only slightly above the long-term median, but at the same time it is getting a company with record DE, still-growing AUM, and double-digit "redeemable" earnings growth.

The other piece of the puzzle is PEG - the ratio of P/E to expected earnings growth. For Blackstone, the PEG, according to some sources, is around 0.9, below the 1.0 that is often taken as an indication of a fair to cheap valuation for growth companies relative to the growth rate. In other words, the earnings multiple an investor is paying is in line with or slightly below what would make sense given the current growth in DE and EPS. When you add in a dividend yield of around 3-4% and the fact that Blackstone is returning some capital despite the variable DPS, the total expected return (DE growth + dividend) comes in slightly above what the average large financial title offers.

The juxtaposition of the two numbers is also interesting: valuation models and consensus estimates often frame the fair value of the stock significantly above the current price - for example, some analyses frame the fair value at around $160 per share versus a market price of around $110-120, with the potential for a double-digit percentage gap. This is not a "guarantee" of course, but it does show that at today's price, the market is not valuing Blackstone as a hyper-premium growth story, but rather as a quality, slightly above-average financial title. Given the structure of the business (fee-based cash flow, high return on capital, record DE), this is more of an argument for a "reasonable to attractive valuation" than for the label "overpriced."

Investment scenarios

Optimistic scenario - AUM continues to grow at a higher single-digit to low double-digit rate, fee-related earnings grow steadily, and performance fees regularly materialize in strong exits. Dividend grows on average, total return combines 3-4% dividend yield with double-digit value growth.

Realistic scenario - AUM grows at a rate of around 5-8% per annum, earnings structure remains healthy but performance fees are volatile. Dividend fluctuates but holds solid on average, stock provides a combination of decent cash yield and moderate capital appreciation.

Conservative / negative scenario - AUM growth slows significantly, fee pressure and weaker fund returns reduce DE. Dividend is reduced, valuation is closer to mainstream financials and total return is more average or below average relative to risk.

What to take away from the article

Blackstone today is not "just another financial stock" but a global alternative investment platform that combines:

• high and scalable profitability

• long-term fee-based cash flow from AUM

• a flexible but attractive dividend model

• and structural wind in its sails as the world continues to shift towards private equity, real estate, private credit and infrastructure

For an investor willing to accept higher dividend and earnings cyclicality in exchange for higher quality and growth potential, Blackstone may be an interesting portfolio building block.

Today USMCA allows cars to be assembled in Mexico or Canada and, thanks to the rules of origin, sold in the U.S. without crippling tariffs. Once that bridge falls, the cheapest car segment will suffer the most — which has already been disappearing from the lineup after waves of tariffs and rising costs: the share of new cars under $30,000 has dropped in a few years from just under 40% to roughly 14% of the market. Without USMCA or an alternative regime, a "normal" new car could become even less attainable for the American middle class, because those cheapest models will no longer make economic sense to produce and import.

The most vulnerable are primarily:

- Japanese and Korean manufacturers, who today extensively use Mexico for lower-cost models (Toyota $TM, Honda, Nissan, Hyundai, Kia) – from small sedans to cheaper crossovers.

- some European brands that use North American assembly plants to keep more affordable models (Volkswagen $VWAGY, some Stellantis models $STLA – Fiat/Jeep/Dodge, and possibly cheaper BMW $BMW.DE/Mercedes $MBG.DE from Mexico); VW and Stellantis have already warned that higher tariffs and stricter USMCA conditions are forcing them to rethink what they will offer in the U.S.

The year 2026 will go down in software sector history as one of the toughest in the memory of modern investors. Analysts have begun calling it the "SaaSpocalypse": a wave of sell-offs that hit companies quite independently of the quality of their businesses. A global macro environment fraught with geopolitical tensions, elevated rates, and an impending technology paradigm shift brought about by the advent of artificial intelligence created a perfect storm for growth-oriented titles. The S&P 500 Software and Services Index is down more than 16% since the beginning of the year, but the situation is significantly worse for some specific companies. The following five companies have posted losses in 2026 that are among the most painful in the history of these companies.

Atlassian $TEAM

Atlassian is the maker of some of the most widely used software project management tools in the world. Jira, Confluence and Atlassian Service Management are deeply embedded in the workflows of tens of thousands of companies. Yet Atlassian is among the stocks hardest hit by the 2026 software selloff, with shares down more than 57% since the start of the year, bringing the company down to levels from pandemic-era lows.

The main trigger was a combination of two concerns:

• Shareholders have begun to increasingly discuss the threat of records called "seat compression": artificial intelligence may be reducing the overall number of employees at companies, which translates directly into lower licensing revenue for Atlassian, which charges per-user fees.

• Technology tools like GitHub Copilot or Cursor theoretically allow teams to create custom solutions and bypass the company's tools.

Both threats are burdens are primarily hypothetical, but the state of the market is now such that even a hypothetical risk is enough to cause a massive reassessment of premium multiples.

Restructuring and fundamentals

In March 2026, the company announced it would lay off approximately 1,600 employees, roughly 10% of its workforce, and shift resources toward artificial intelligence and enterprise sales. CEO Mike Cannon-Brookes admitted that AI is changing "the composition skills and number of roles in certain areas". On the other hand, the company's fundamentals remain surprisingly strong.

In fiscal Q2 2026, revenue reached $1.586 billion, above analysts' expectations, cloud revenue grew 26% year-over-year, and net revenue retention rate (NRR) per customer increased to 120%. In other words, existing customers were paying 20% more for Atlassian's services than a year ago.

Barclays $BCS cut its price target from $165 to $100 but maintained a (buy) recommendation. The key date for investors will be May 7, 2026, when the company releases results.

Flutter Entertainment $FLUT

Flutter Entertainment is the largest global sports betting and online gambling operator in the world. Under its wing are brands including FanDuel, Paddy Power, Betfair and PokerStars. It's a company with a solid business that has lost over 65% of its market value some since last summer. Last week the share price stabilized around $111, well below its 52-week high of over $313.

The key reason for the drop was the earnings shock on February 26, 2026. Flutter reported full-year 2025 revenue of $16.4 billion, which was below its own target of $16.7 billion. Far more painful, however, was the outlook for 2026: management issued a forecast of $18.4 billion, while analysts were expecting $19.3 billion. The stock immediately wrote off 13.8%.

Problems and margins

There are specific operational factors behind the company's earnings numbers:

• CEO Peter Jackson openly admitted that the company "failed to execute its generosity playbook as effectively as it should have" in Q4 2025. Throughout the 11 weeks of the NFL season, the company held unusually high gross margins on betting earnings, which, while boosting earnings in the short term, discouraged throwers from actively betting and led to them leaving for competitors. The operating margin fell to 5.4% from 7.4% and the free cash flow margin fell from 12.1% to just 2.9%.

Analysts at both Citizens $CFG and Stifel $SF lowered their price targets, commenting that the second quarter brought seasonal lows with no reason for new growth. The key test will be the earnings announcement, which is scheduled for May 6, 2026.

Ironically, 20 of the 26 analysts covering $FLUT stock still recommend the stock as a buy, with a consensus target price of $206, representing upside potential of more than 80% from current levels. The bears, on the other hand, point out that iGaming covers only 11% of the U.S. population, which brings both huge upside potential and significant earnings unpredictability.

CoStar Group $CSGP

CoStar Group is the dominant provider of data and analytics for commercial real estate in the US and internationally. The company operates the CoStar, LoopNet, Apartments.com, and most notably the residential portal Homes.com, which it seeks to position as a direct competitor to Zillow $ZG.

In late 2025, CoStar released full-year 2026 guidance with $3.78 billion in revenue and EBITDA in the $740 million to $800 million range, but also disclosed that Homes.com expects to reach positive adjusted EBITDA only in 2030. The word "2030" was the impetus for the restatement. The stock lost dozens of percent in a single week. In February 2026, another shock was added: Homes.com's monthly traffic fell 8% year-over-year, significantly weakening the company's narrative.

Activist investors and reassessed valuations

Complicating matters was the entry of activist investors. Hedge fund DE Shaw published an open letter to CoStar's board criticizing the reduction in transparency of earnings reporting. Dan Loeb's Third Point fund entered the action and questioned the excessive marketing budget. In April 2026, however, Third Point announced the sale of the entire stake, arguing that the strategy to change CoStar's direction was not feasible. The stock is trading in a range of $34 to $40 in April.

CEO Andy Florance still believes in the Homes.com story and personally bought shares during the panic drop. In addition, the company has authorized a $1.5 billion share buyback and the free cash flow outlook for 2026 calls for $490 million, up from just $40 million in 2025.

13 analysts hold a Buy rating with an average target price of $75.54, implying upside of more than 80%. The bears counter that without evidence of an improving economy Homes.com's valuations remain on paper only.

Unity Software $U

Unity Software operates one of the most widely used game and interactive content development platforms in the world. The platform covers the development of mobile games, PC and console titles, including AR and VR apps, and is used by developers in more than 193 countries. During 2025, the stock recovered from the scandalous sell-off following the introduction of the controversial Runtime Fee scheme, rebuilding the confidence of investors and developers alike.

The trigger was the Q1 2026 outlook published on 11 February. While Unity beat estimates for Q4 2025 (revenue of $503 million vs. expectations of $490 million and EPS of 0.24 vs. expectations of 0.21), the quarterly guidance of $480 million to $490 million fell short of the consensus of $492 million. As a result, the stock fell more than 25% in a single trading day.

Revenue air pocket and Vector platform

The decline in outlook is not the result of a collapsing business, but a conscious strategic focus. Management voluntarily terminated legacy ad network IronSource and forced customers to migrate to a new AI-powered system , Unity Vector. This transition causes what is known as a revenue air pocket, a short-term hole in revenue while the old revenue is fading and the new revenue has not yet reached its full potential. Vector, meanwhile, achieved 15% sequential revenue growth in the third quarter since its launch. January 2026 was the best month in the product's history, with 72% year-over-year growth, and management estimates Vector's annual performance will exceed $1 billion by the end of 2026.

Also contributing to the market panic was Google, which in January 2026 introduced Project Genie: an AI tool capable of generating interactive 3D worlds from text or images. Market sentiment immediately assessed that this type of tool could undermine the very reason for the existence of game engines.

CEO Matthew Bromberg counters this interpretation: such tools expand creative possibilities, but are not yet capable of replacing a full-fledged game engine. With Unity 6, the platform is experiencing the fastest adoption in the company's history, and the Chinese business has grown by nearly 50% in 2025.

ServiceNow $NOW

ServiceNow is clearly the world's most powerful enterprise task automation platform. The company serves more than 85% of Fortune 500 companies, has a 98% contract renewal rate, and closed 244 deals exceeding $1 million in the last quarter of 2025. Still, 2026 brings a decline of approximately 43% in $NOW stock.

Adobe $ADBE is down 31%, Salesforce $CRM is down 31%, and ServiceNow has lost 41% in the first three months of the year. The SaaS sector as a whole is experiencing huge losses, which analysts attribute primarily to concerns about agent AI. After Anthropic released add-ons in February 2026 to allow AI agents to take over entire workflows, there was a sharp sell-off in the sector.

Acquisition, margin and geography

Adding to the sector pressure were factors specific to the company itself. ServiceNow acquired cyber specialist Armis for $7.75 billion and bought other AI tools including Moveworks for $2.85 billion. The integration of these applications is causing near-term margin compression, which translated into a gross margin of 81.5% in Q1 2026 versus the 82.1% expected. This was compounded by slippage on some large enterprise contracts that were not closed on time. Management attributed this slippage mainly to the geopolitical situation in the Middle East where promised deals were prematurely stalled.

Although Q1 2026 results beat analysts' earnings estimates and the company raised its full-year subscription guidance, the stock wrote down 18% in a single day. Goldman Sachs $GS, Jefferies, and Piper Sandler subsequently cut their target prices, but the vast majority of analysts maintained a Buy recommendation.

Comparison table

Strategic view

Five distinctly different stories. And yet each has common denominators that help investors understand why 2026 has been so painful for premium growth stocks.

• Sensitivity to the per-seat SaaS model: At both Atlassian and ServiceNow, there were concerns that AI agents would replace the work of human workers, reducing the number of active users paying for the platform. Both management teams are challenging this narrative and announcing a shift to AI token-based performance and consumption models. In the medium term, this transition is potentially more profitable for companies than the current model, which ties all growth to recruitment.

• Rethinking premium multiples: as recently as 2025, Atlassian was trading at more than 20 times revenue, ServiceNow at more than 15 times. In an environment of higher rates and uncertainty about the future of business models, markets are willing to pay significantly less for these stories. Analysts call this phenomenon multiple compression and it is a structural component of downturns that cannot be explained purely in fundamental terms.

The year 2026 has shown that even the strongest business models are not immune to the change caused by the result of a combination of agency AI, macroeconomic uncertainty, and reassessment of premium valuations.

At the same time, it is important to note one phenomenon: the vast majority of these companies do not have collapsing businesses. Atlassian is still growing at 26% per year, ServiceNow is closing a record number of billion-dollar contracts, and Flutter Entertainment has a 41% underweight share of the US FanDuel market.

Big companies are affected by changing sentiment and rethinking their business models more than actual results. And it is for patient investors who can distinguish the reasons for a sensible sell-off from a genuine structural degradation that this exceptional situation can present a potentially interesting opportunity.

The answer to the question of whether this is a worthwhile opportunity or a harbinger of a far-reaching capital rotation will only be answered by further results and the evolution of the monetization of AI offerings that these firms are building in their own platforms at a record pace.

According to the organisers of the letter, the document has garnered over 580 signatures (other sources put it at "around 600"), with roughly two-thirds agreeing to release their names and a third wishing to remain anonymous.

What specifically are the employees demanding

In the letter, which was delivered to Pichai on Monday, the employees write that they are troubled by ongoing negotiations between $GOOG and the U.S. Department of Defense over the deployment of Gemini/AI systems in classified projects. As AI experts, they warn that these systems "centralize power and make mistakes" and that their proximity to the technology gives them a responsibility to point out the most dangerous and ethical uses.

A key passage in the letter, according to published quotes, says that "the only way to ensure that Google is not associated with such harms is to reject any classified workloads" for the military. The employees warn that AI could otherwise be used in autonomous weapons or mass surveillance without their knowledge or ability to intervene.

The authors of the letter also argue reputational risk: a bad decision at this point, they say, could "irreversibly damage Google's reputation, its business and its role in the world". The company has not yet commented publicly on the letter, but according to media reports, it has been considering a deal with the Pentagon for several weeks, which would build on the department's dispute with Anthropic.

Context: the Pentagon's dispute with Anthropic and the "open space" for other AI firms

Tensions over the use of AI in the military have escalated after the US Department of Defense branded Anthropic and its Claude model a "supply chain risk" and began pushing the firm out of military projects. The designation meant that the Pentagon and its contractors were not allowed to use Claude in military contracts, and Anthropic is fighting back in the courts, arguing that it is retaliation for refusing to allow the use of AI "for all lawful purposes", including fully autonomous weapons.

So far, the court has temporarily blocked the department from taking some action, but Anthropic is currently effectively shut out of defence contracts, which creates space for other big players - typically Microsoft $MSFT, OpenAI or just Google. According to The Information, the Pentagon is in talks with Google to deploy its AI (Gemini) in a classified environment, which would partially fill the hole left by Anthropic.

Now the staff is responding: in a letter, they explicitly say they "do not want to fill the void left by Anthropic" if it means using AI for questionable military purposes. According to Gizmodo, the signatories include people from DeepMind, Google Cloud, and other teams, i.e., those directly working on large-scale models and infrastructure.

Flashback to Project Maven in 2018

The current petition picks up on an earlier, very sensitive chapter in Google's history: the 2018 Project Maven protest. That's when thousands of employees opposed a collaboration with the Pentagon to use machine learning to analyze drone footage and improve strike targeting, with some of them leaving the company because of it.

A 2018 letter at the time asked Google to "not be in the business of war" and to adopt a clear policy of not developing technology for the purpose of conducting combat operations. After strong internal criticism, the company did not renew Maven's contract and promised stricter AI ethical principles - it is this tradition that today's signatories refer to.

The current letter thus tests how serious Google is about these principles in the era of generative AI, where models can be deployed much more broadly - from intelligence processing and operations planning to potentially autonomous weapons systems.

What's in play for Google

From a business perspective, it's a delicate balance between the lucrative but reputationally risky "defense AI" segment and the image of a company that wants to operate as a "responsible" player in AI. Military and government contracts in AI can bring long-term contracts and stable revenues, but they also open the company to harsh criticism from employees, the public and some foreign partners.

Repeated internal revolts can:

• Complicate the recruitment of top researchers, who often choose employers based on project ethics as well

• push management to turn down some lucrative contracts, thereby "ceding" part of the market to competitors

• set a precedent: once management relents, employees will use similar tools (open letters, petitions) more often

For Alphabet shareholders, it is therefore essential to follow two parallel lines: how the Pentagon-Anthropic dispute develops (i.e., how big is the overall "window of opportunity" in the AI defense) and what conclusion Pichai and management will draw from the current internal pressure. The combination of regulation, reputation, and internal culture here may be as important to the value of the company as the technology itself.

New worries on Wall Street suggest that artificial intelligence could fundamentally disrupt traditional software companies. Investors are starting to reassess the valuations of firms like Microsoft, Salesforce and ServiceNow, because AI tools are gradually taking over the tasks these companies have long profited from.

The result is growing nervousness in the market. The software sector has fallen sharply this year, and some investors fear that AI could "eat" part of its business much like the internet once disrupted traditional industries.

On the other hand, the situation isn't black and white. Some analysts point out that the market often overestimates who will be the real "loser" of the tech revolution, and that many of these companies have strong data, customer relationships and regulated environments that protect them.

So the story isn't that software will disappear, but that the rules of the game are changing. Companies that quickly integrate AI can actually strengthen their position. Those that don't risk losing relevance.

And you? Do you think AI will really threaten these companies, or is it just an overblown market fear?

Customer numbers show that the trend is turning in mobile and broadband. Verizon is reporting positive Q1 postpaid phone net adds for the first time in more than a decade, broadband is adding hundreds of thousands of new connections, and mobile/broadband service revenue is growing in a range the company only hinted at as a target at the beginning of the year. All this on top of a quarter weighed down by the January network outage.

Q1 2026 results

For the first quarter of 2026, Verizon $VZ revenue reached approximately $34.4 billion, representing year-over-year growth of around 3%. Service revenue from mobility and broadband are the main drivers, while device revenue added a few percent thanks to higher sales volume.

Net profit rose to USD 5.1 billion, up about 3% y-o-y, and earnings per share increased several percent, growing faster than sales alone. This reflects a combination of improved margins, savings and lower taxation. Adjusted EBITDA grew to an all-time high of around US$13.4 billion, an increase of almost seven percent year-on-year and a clear signal that the company is maintaining discipline on the cost side.

In terms of cash, Verizon generated about USD 8.0 billion from operations in Q1, slightly more than last year. Capital expenditures were around US$4.2 billion, bringing free cash flow up to around US$3.8 billion. This is a solid result for the first quarter of the year, which tends to be seasonally weaker for telcos.

The balance sheet shows the impact of the Frontier acquisition. Total debt increased to over USD 140 billion and net debt to EBITDA jumped in the short term. However, management stresses that it has already repaid about half of the debt assumed with Frontier during Q1 and aims to bring debt back to target by the end of 2026.

• Full presentation with results.

Management commentary

Verizon management describes Q1 as further evidence that the company's transformation toward simpler products, better customer experience and more efficient operations is working. CEO Dan Schulman highlights three key points.

First, the improving momentum in mobile services. The firm achieved its first positive Q1 postpaid phone net adds since 2013, despite the fact that traditionally the start of the year is a weaker period for mobile operators. Management interprets this as confirmation that it is managing to attract new customers without extreme promotional aggressiveness while better retaining existing ones.

Second, continued growth in broadband, particularly fixed wireless and fibre. Verizon $VZ added over 300k new broadband connections in the quarter, and management emphasizes that the combination of FWA and fiber is one of the key growth legs of the business for years to come.

Third, the ability to lift profitability despite one-time negative impacts. According to the company, the January network outage reduced service revenue growth by about 0.8 percentage points, yet in March, mobile and broadband service revenue growth was in the middle of the target range. Management is using this as an argument that the fundamental trend is better than the quarterly number alone would suggest.

Transformation, news and strategic moves

Verizon has been operating under a clearly stated transformation plan in recent quarters. This has several specific pillars that translate into numbers and news in Q1.

In mobility, the company continues to simplify its tariff offerings, reduce excessive promotions and focus more on customer value than net volume at any price. This improves ARPU structure and reduces churn. At the same time, investments in the 5G network and capacity expansion continue, which is necessary to maintain quality of service amid rising data demand.

In broadband, Verizon is building on the growth of fixed wireless and expanding its fibre network. The goal is to have a combination of high-speed wireless and fiber optics in response to the growing demand for higher-speed home Internet, both for residential customers and smaller businesses. The Frontier acquisition fits here as an opportunity to expand footprint while capitalizing on synergies in operations and infrastructure investment.

On the financial side, cost-saving programmes continue. Verizon has set a multi-year goal to reduce operating costs in the billions of dollars, and Q1 shows that this program is on track. Improved EBITDA margins and earnings per share growth faster than revenue show that this is not just "hyped" results, but a real change in efficiency. At the same time, the company is maintaining a strong dividend policy and adding a buyback of its own shares on top.

Long-term numbers

Verizon's long-term numbers show that the company is not a growth stock in the classic sense, but rather a defensive cash flow generator. Revenues have been mostly stagnant or growing in the low single-digit percentages annually in recent years, in an environment of heavy investment in 5G, spectrum and optics.

Meanwhile, profitability has historically suffered from a combination of high debt, costly spectrum auctions and a highly competitive environment. But over the past two years, we have seen a trend where adjusted earnings per share and free cash flow have been gradually increasing, even if revenues as a whole have not accelerated dramatically. This is exactly the picture of transformation: the company is not adding as much to the top line, but it is improving customer mix, cost structure and capital discipline.

Q1 2026 fits into this story. Rather than a big jump in revenue, it's a visible improvement in profitability, cash flow and customer metrics, on top of an increased outlook for the full year. For an investor looking for a stable dividend title with decent free cash flow and gradually improving fundamentals, these are exactly the kind of numbers they want to see from Verizon.

Shareholders

Verizon remains a heavily institutionally owned stock. Most of the shares are held by large asset managers, including funds like BlackRock and Vanguard, which together control high units of percent of the company. Insiders own only a small stake, which is standard for large telcos.

The company has a long history of stable dividends and regular dividend payment growth. Combined with free cash flow in the tens of billions of dollars a year, this makes it a popular title for income investors. At the same time, Verizon uses buybacks to reduce the number of shares outstanding, which promotes earnings per share growth even in years when earnings add little.

Fair Price

The valuation makes clear that the market is not paying for today’s 437 million dollars of revenue, but for the prospect that sales will exceed 800 million next year and then grow in line with hyperscale AI infrastructure capex. A price‑to‑sales multiple around 32, price‑to‑earnings above 100 and price‑to‑free‑cash‑flow north of 360 would normally only be justified for a small, hyper‑diversified software company with almost no customer concentration risk – not for a vendor that still depends heavily on a small number of hyperscalers and operates in a brutally competitive segment. In that sense the stock is a pure bet on two things: that AI’s hunger for bandwidth and low‑latency interconnects will prove more durable than today’s hype cycle, and that this particular company can defend its position in the data‑center stack against larger rivals and new entrants long enough for earnings to catch up with a valuation already priced for near‑perfect execution.

Top points of analysis

• Revenue grew from roughly $106 million in 2022 to $184 million in 2023, $193 million in 2024 and $437 million in 2025, a 126% growth between 2024 and 2025.

• The company went from a loss of around -$22 million in 2022 through smaller losses in 2023-2024 to a net profit of around $52 million in 2025, with EPS turning from -0.16 to $0.31.

• The balance sheet is extremely strong: net cash in the billions, current ratio over 10, and liquidity ratios point to a huge financial cushion.

• Key growth drivers are optical signal processors for 800G transceivers and active optical cables, where the company has won significant design-wins with large cloud providers and expects significant momentum next year.

• Management expects sales to exceed $800 million in the next fiscal year, which would represent additional growth of more than 80%.

• The valuation is extremely tight: the price is equivalent to approximately 32 times sales and more than 100 times earnings, requiring high growth rates and margins to be sustained for a number of years.

Company presentation

Credo $CRDO is a designer and supplier of specialized chips and system solutions for high-speed data transmission in data centers, telecommunications networks and other demanding environments. It is not a manufacturer of general-purpose processors or memories, but rather the "nervous system" - the chips and modules that ensure that data flows fast enough, reliably enough, and power-efficiently enough between servers, switches, and accelerators.

Earnings are based on the sale of custom integrated circuits (mainly for optical and copper interconnects) and ready-made system solutions such as active cables or transceivers. Customers are mainly network component manufacturers, optical module manufacturers and large datacenter operators, including the largest cloud players. Especially in recent years, an increasing proportion of revenues are driven by hyperscale datacenter requirements, where new AI clusters are being built and internal connectivity is increasing.

The business is interesting because a design-win in a datacenter or system product usually means long-term repeat orders. Once a particular chip is approved and debugged within a module or server, replacing it with a competing solution involves significant cost and risk. This generates relatively stable revenue once a company gets into a particular product. But it also means that getting new design-wins is a tough fight and that losing a key customer hurts.

Business and products

Historically, the core of the portfolio has been copper interconnects - chips and active cables that enable high speed transmission over copper wires over shorter distances. This area is still important, particularly inside racks or in some parts of the data centre, but the key shift in the last two years has come in fibre optics. The company has become one of the leaders in optical signal processors (DSPs) for PAM4 modulation, which are used at speeds of 50, 100 and now 200 gigabits per second per link.

In optics, it offers both full-fledged signal processors, which ensure proper signal shaping, error correction and noise suppression on both sides of the line, and so-called linear receive optics, where part of the path operates without full signal repetition. This allows to reduce both the power consumption and the cost of transceivers, which is critical for giant datacenters - with thousands of ports, every few extra watts means big operating costs.

Products like the Dove and Robin series in 800G optical DSP, as well as the 224 gigabits per link demonstration in 3nm technology, show that the company is at the technical cutting edge. The design wins for 800G transceivers at major cloud operators and module manufacturers suggest that this is not just a lab success story, but a real business story. In addition to optics, the system layer plays a role - active optical cables and complete solutions for AI data companies that integrate the company's chips with high-end switches and network cards.

Pricing power comes from technological excellence and energy efficiency. Large data centers are extremely sensitive to power consumption per port and reliability; if a solution saves a few watts per port while providing better signal integrity, customers are willing to pay for it. The high gross margin of around 68% suggests that the company can price its chips well above the cost of production, even if it also has to fit into a very competitive module and cable environment.

Market and addressable potential

The primary market is datacenter connectivity - primarily between servers, storage systems, graphics accelerators and network infrastructure in the datacenters of large cloud and AI computing providers. The amount of data being transferred has been growing for a long time, but has exploded in the last two years due to AI models that require massive parallel interconnection of chips for training and inference.

The growth in required bandwidth per port and the number of ports in datacenters is leading to a shift from lower speeds (100G, 200G, 400G) to 800G and eventually 1.6T. Each such upgrade means new generations of chips, modules and cables - and thus a new cycle of design-wins. The company is well set in this wave, as its portfolio covers both optical DSPs and active cables and other components for 800G and future 1.6T deployments.

Estimates of the size of the market for AI-linked high-speed datacenter interconnects are in the billions to tens of billions of dollars per year and growing at double-digit rates. The company is still only in a small percentage of that pie with sales of around $437 million - even if it "only" maintains and expands its share in optical DSPs for 800G and 1.6T, it can multiply sales in the medium term.

A realistic "share gain" scenario looks like the company will gain a significant share in the optical DSP segment for 800G and some 1.6T implementations at the 3-4 largest hyperscalers, while remaining one of several vendors in other segments. In such a case, it could serve multi-billion dollar markets with shares in the single digits to low tens of percent, which is ample for growth from today's numbers.

Competition and market position

The company is not alone in the datacenter interconnection business. Its competitors are primarily large players such as Broadcom $AVGO, Marvell $MRVL, and Analog Devices $ADI, which supply a broad portfolio of network chips, retimers, and signal processors. Then come the smaller, specialized chip and IP designers for SerDes who can offer partial solutions. In optical modules and cable solutions, the company then competes indirectly through its customers - transceiver and active cable manufacturers - who also have the ability to blend different chips.

It cannot compete against Broadcom and Marvell on breadth of portfolio, but it can compete on specialisation and speed. It focuses on power-efficient, highly integrated optical and copper chips that are designed specifically for the needs of AI datacenters. Design-wins in 800G optics and collaborations with multiple hyperscalers show it thrives on being seen as a technology leader in at least some sub-segments.

A weakness is the high concentration of revenue on a few large customers - several hyperscalers account for double-digit percentages of revenue each. Should any of them switch to a competitor or decide on a different architectural solution, it would show up in the numbers very quickly. Given the stickiness of design-wins, such a turnaround isn't easy, but it's not impossible either, especially as we move to new generations of speeds.

Management and CEO

The company is led by William J. Brennan, who has a background in semiconductor and networking technologies. His track record has seen the company move from a smaller player focused mainly on cabling and copper connectivity to a pure technology-oriented supplier of chips and systems for high-end datacenters. Under his leadership, the company has aggressively invested in the development of optical DSP, SerDes IP and system solutions that are behind the current growth spurt today.

Meanwhile, capital discipline is a combination of a conservative approach to debt and an aggressive approach to investment. The balance sheet is almost debt free, the cash cushion thick, but most of the profits remain in the company to fund further development. Buybacks or dividends are not an issue for now; the priority is clearly growth and maintaining the technology edge.

Management's priorities for the next few years are: deepen relationships with key hyperscalers (so that the company is seen as a strategic partner, not a "single chip supplier"), expand the optical offering into higher speeds and microarchitectures (200G per line, 1.6T ports), and develop a system solution for AI data businesses where it can offer a complete architecture, not just individual chips. In the context of the market, this makes sense - the company is picking a segment where it can be one of the leaders instead of spreading itself too wide.

Financial performance

The financial lineup looks like a textbook example of a growth technology title. Revenues grow from roughly $106 million in 2022 to $184 million in 2023 (+73%), $193 million in 2024 (+4.8%) and $437 million in 2025 (+126%). The more modest growth in 2024 was more of a pause between product generations, while 2025 reflects the ramp-up of new design-wins, particularly in the optical and hyperscaler space.

Gross profit moved from roughly 64 million in 2022 to 106 million in 2023, 119 million in 2024 and 283 million in 2025. Thus, gross margin has been gradually increasing and is holding around 68%, which is a top level even compared to other semiconductor designers. Operating costs are rising, of course - roughly $86 million in 2022, $127 million in 2023, $156 million in 2024, and $245 million in 2025 - but gross profit growth is faster, taking the company to an operating profit of $37 million, with operating margins around 8% at GAAP levels, or higher on adjusted numbers.

The net loss improves from roughly -22 million in 2022 to -17 million in 2023, -28 million in 2024 (impact of tax and one-time items) to swing to a net profit of around $52 million in 2025. Earnings per share are around $0.31 after years of losses, with the number of shares outstanding gradually rising from around 142 million to 167 million, reflecting a combination of previous capital injections and reward programs.

EBIT and EBITDA are both solidly positive for the first time in the past year, with EBITDA hovering around $37 million. The operating leverage is obvious: once sales "swung" over a certain level, more of the gross profit began to trickle down to the bottom line. If sales do indeed grow towards 800 million in the next year, there is considerable room for further operating margin expansion, even without drastic cost cutting.

The company does not pay a dividend and a share buyback program is not currently at the forefront. Virtually all of its cash flow is being reinvested in growth - both organic and smaller M&A moves, such as its entry into silicon-photonics through the acquisition of smaller technology companies. The return on capital is decent in numbers - ROA around 17%, ROE around 30% and ROIC around 17% - suggesting that the investments are paying off so far. The key will be whether this profile can be maintained in the next stages of growth.

Balance sheet and debt

The balance sheet is luxurious by the standards of a growth technology company. Debt is a mere fraction of assets - around 0.6% - and the debt-to-equity ratio is negligible. It is essentially an all-cash firm that has no need to incur debt. Liquidity ratios are extremely conservative: a current ratio of over 10, a quick ratio and a cash ratio of around 7-8 mean that short-term liabilities are covered many times over by cash and receivables.

Working capital of around $1.6 billion creates a huge cushion for any fluctuations in orders, delays in payments or increased inventory. Synthetic financial health indicators reach values you would expect to see in a relatively risk-free government bond rather than a semiconductor growth bond.

In a stress scenario - for example, a sudden slowdown in AI datacenter investments or the loss of one large hyperscaler customer - the company's survival is self-funded, without the need for drastic action. The weakness on the balance sheet is not debt, but potential shareholder pressure if long-term technology successes and cash cushion fail to convert into corresponding profitability growth.

Valuation

From a valuation perspective, this is one of the most expensive technology stocks on the market. A price to earnings ratio of around 32 means that an investor is paying more than 30 times earnings for every dollar of revenue; a price to earnings ratio of over 100 shows that even with the current high profitability, there is a long growth story written into the price. A price to book value ratio of over 18 only confirms that almost everything is happening in "invisible" intangible assets.

The price to free cash flow ratio of over 360 is extreme, but can be temporarily distorted by the investment phase - if the FCF margin can be increased to approach the net margin, this multiple can fall relatively quickly. EV/EBITDA of around 97 is also outside the comfort zone, but again could fall if EBITDA grows faster than price.

Compared to other players in the datacenter space, such as large network chip or module manufacturers, the valuation is a multiple that is higher. Where competitors have P/Es in the 20-40 range and price-to-sales ratios between 5 and 10, here we have numbers three to four times higher. This can only be justified by a combination: revenues will continue to grow in the high double digits for several more years, margins will remain above average, and the company will retain key positions in AI datacenters.

For "cheap" to turn into "expensive" in this context, in the sense that valuations will look exorbitant, all it would take is for revenue growth to fall below 20% per year and margins to decline due to, for example, a price war or the loss of a major customer. Conversely, for today's multiples to start looking more "normal," the company would need to actually deliver sales above $800 million next year and continue to grow toward a billion.

Growth catalysts and outlook

The catalysts are fairly clear. The first is the ramp of optical DSPs for 800G at mass scale, including design-wins at several large cloud players. These orders are in various stages of implementation and should translate into significant revenue growth next year, particularly in optics. The second is the launch and adoption of 1.6T and 200 gigabit per line solutions, where the company has demonstrated functionality in 3nm technology and is gearing up for commercial deployment.

The third catalyst is the proliferation of system solutions for AI data networks - complete active cables and transceivers that work with the company's chips and integrate into switches and network cards from leading manufacturers. This can lift average revenue per customer and strengthen ties as customers buy more than just one chip.

In terms of numbers, it's important to track:

• the rate of revenue growth - especially if the company can get from 437 million to more than 800 million in one year, as the outlook suggests

• the evolution of gross and operating margins - keeping gross margins around 65-70% and gradually increasing operating margins would signal healthy scaling

• Concentration of revenues - the proportion of individual hyperscalers so that the risk of dependence on one or two customers does not grow to dangerous levels

Investment scenarios

Optimistic scenario

In the optimistic scenario, the company delivers what it's suggesting today: revenue will exceed $800 million in the next fiscal year thanks to the ramp of 800G optical DSPs at multiple hyperscalers, and continue to grow double digits in the years ahead as the 1.6T generation starts to ramp. Gross margin will remain near 65-70%, operating margin will move into the 25-30% range due to better fixed cost absorption, and net margin will stay around 25-30%.

In such a world, net income could reach $250-300 million over 3-5 years and earnings per share somewhere between $1.4 and $1.8 (assuming slight dilution). At a price-to-earnings ratio of 40-50 - still very high, but already within the range of growing technology titles - the current valuation would be supported by real numbers. Investors would benefit from a combination of earnings growth and a possible slow decline in the multiple; overall, the yield could be very attractive.

A realistic scenario

In the realistic scenario, the company thrives, but with some turbulence. Revenues grow 25-35% per year - well above the market average but below the extreme jump seen in 2025 - and get above $1 billion in a few years. Gross margins are around 60-65%, operating margins in the 18-25% range, and net margins 18-22%. That would mean net income of $180-220 million and EPS somewhere between $1.0 and $1.3.

Multiples would likely fall in such a situation - P/E in the 25-35 range, price to sales ratio in the 10-15 range, still reflecting above average growth and margins, but no longer the "hype" premium. For the current investor, this would mean a healthy but not necessarily explosive return: some of the earnings growth would be eaten up by revaluation, the rest would be reflected in the share price.

The negative scenario

In the negative scenario, the current wave of AI investment turns out to have been steeper than the subsequent trend. Revenues grow only 10-15% per year, or in some years virtually stop at the generational transition. Gross margin drops to below 60%, operating margin to 10-15% due to increased competition and pricing pressure, and net margin to 10-15%. Thus, net profit sticks around $100-150 million in better years, but is not guaranteed to grow.

The market will respond by compressing multiples to levels more common for a "solid but not exceptional" technology title - P/E around 18-25, price to earnings ratio in the 5-8 range. If that were to happen from today's levels, the share price could stagnate or even correct significantly, even if the company remains healthy and profitable. In such a scenario, an investor would primarily rely on long-term value growth and patience, not rapid appreciation.

What to watch next

• The pace of quarter-to-quarter revenue growth, particularly whether it is approaching the promised targets of around $800 million per year.

• Gross margin - sustaining around 65-70% suggests successful monetization of the technology without excessive pricing pressure.

• Operating and net margin - a trend towards 20-25% net margin would confirm healthy scaling.

• Share of individual large customers in revenues - ideally a gradual spread, not increasing concentration.

• Number and quality of design-wins in 800G and 1.6T optics - significant new orders and volume in pipeline.

• Free cash flow and relationship to net profit - as the investment phase ends, FCF should not be significantly different from profit.

• Level of competition and any signals of loss of design-win - news of competitor selection in key projects.

What to take away from the article

• The company is betting on the AI datacenter boom and the need for ever faster and more efficient connectivity, not the "average" semiconductor cycle.

• Revenues and profitability are growing extremely fast, margins are extremely high and the balance sheet is almost debt free; fundamentally this is a very good business.

• The valuation is one of the highest in the sector - a price to sales ratio of over 30 and a price to earnings ratio of over 100 means that the market has already priced in a lot of good news ahead today.

• The key is whether it can actually deliver another jump in sales to 800m and maintain high margins in an environment of increasing competition.

• The risks are mainly in the concentration on a few hyperscale customers, the technological pace and the possible cooling of investment in AI infrastructure.

• For an investor, it makes sense to approach the title as a growth bet with significant valuation risk where numbers and program milestones need to be watched very carefully, not as a defensive "hold forever" title.

What does EBITDA say about a company's hidden strength?

Earnings before interest, taxes, depreciation and amortization, is one of the key tools for evaluating a company's operating efficiency, regardless of its capital structure or tax environment. That is why investors monitor its evolution over time much more closely than the amount of net income itself. If EBITDA is growing rapidly, it usually signals that the company is improving its operating model, is able to scale revenue faster than costs, and is approaching the point where efficiency begins to spill over into net income.

In 2026, this metric becomes especially important for smaller and mid-sized companies. These are the companies that have invested in product research infrastructure and are now starting to reap the rewards of that work in the form of rapidly improving margins. The market often registers these improvements with a lag, opening a window for investors who can read financial results before the broader market.

The following three companies represent three very different sectors: from healthcare to aerospace to industrial defence. However, they each have one thing in common: EBITDA improvement momentum that has far exceeded that of peers over the past 12 months.

PAVmed $PAVM

PAVmed is a diversified commercial life sciences company that operates through three independently funded subsidiaries. Its most significant subsidiary is Lucid Diagnostics, which markets the EsoGuard test for the early detection of precancerous esophageal changes in patients with chronic heartburn.

The other subsidiary , Veris Health, is focusing on digital health in cancer patient monitoring, while PAVmed itself is now relaunching its medical device portfolio under new management.

EBITDA: dramatic reduction in loss

The context for PAVmed's valuation is that the company operates in the pre-commercial phase of the diagnostics market and its EBITDA therefore remains negative. However, it is the pace of improvement that is attracting analysts' attention. For 2024, the company reported EBITDA of negative $43.3 million. For 2025, however, it was already "only" -$21.7 million.

The key change lies in the radical reduction of operating costs. Whereas in 2023, the group's total operating costs were over $71 million per quarter, by 2025 these costs will have stabilised around $5 million per quarter at the PAVmed group level. This structural transformation means that even small revenues from EsoGuard testing now deliver a dramatically different impact on EBITDA than before.

The main driver of the PAVmed story is the upcoming phase of the Medicare reimbursement process for the EsoGuard test. In September 2025, MolDX's CAC (Contractor Advisory Committee) unanimously voted in favor of Medicare coverage for EsoGuard. This vote represents one of the final steps before obtaining a favorable local coverage determination (LCD) and potentially accessing one of the largest payment bases in the U.S. In doing so, EsoGuard is the first and only commercially available tool for the area-based detection of precancerous esophageal changes in at-risk GERD patients.

Lucid has also won a contract with the US Department of Veterans Affairs (VA) and established a partnership with the Hoag Health network, expanding commercial access to testing. In the last quarter of 2025, 3,664 EsoGuard tests were processed, representing continuous volume growth.

Balance sheet and risks

PAVmed's weakness remains the low cash position at Group level at the end of 2025, with cash of approximately $1.5 million. However, the Company has successfully reorganised its capital with the issue of $30 million of Series D Preference Shares and $15 million of secured debt, using the proceeds to eliminate all previously outstanding convertible securities. This move significantly improves the clarity of the capital structure and reduces risk.

The key risk remains the delay in the Medicare approval process, which could push back the expected revenue jump. At the same time, the company is dependent on external funding sources, which introduces some unpredictability of cash flow at the parent company level.

Summary of key PAVmed $PAVMmetrics

Amprius Technologies $AMPX

Amprius Technologies is a manufacturer of silicon-anode lithium-ion batteries that fundamentally outperform existing graphite-anode cells. The company's flagship products can achieve energy densities of up to 500 Wh/kg, compared to about 250 Wh/kg for traditional cells. This means twice the range for the same battery weight, which is an absolute priority for drones.

The company has fifteen years of research and development of silicon anode, giving it a significant advantage in patent protection. Its customer base includes names such as AALTO/Airbus $AIR.DE, BAE Systems $BSP.DE, AeroVironment $AVAV and the US Army. In 2025, it has delivered cells to more than 550 customers.

Threefold increase in sales and first positive EBITDA

The results for fiscal year 2025 represent a significant milestone. Total annual revenues reached $73 million, up 202% from $24.2 million in 2024. The company then reported fourth quarter 2025 EBITDA of $1.8 million, a $6.5 million year-over-year improvement.

This development is due to a combination of two factors. The first is the rapid increase in the customer base. In the third quarter of 2025 alone, the company shipped batteries to 159 customers, 80 of which were new. The second factor is a shift in product mix toward the SiCore platform, which will offer higher margins than previous generations of batteries while promising 70% revenue growth in 2026 to at least $125 million.

A capital-light model

The focus on a capital-light manufacturing strategy through contract manufacturers by the firm (capacity of over 1.8 GWh in South Korea) significantly reduces the need for captive investment in manufacturing assets. This means that revenue growth is more likely to translate directly into EBITDA improvement than a company with a need to invest in manufacturing and infrastructure.

At the same time, the global drone market is undergoing a structural expansion: increasing militarization in defense, the boom in commercial drones for both logistics and agriculture, and the rise of HAPS (stratospheric aerial data platform) are all expanding significantly. Amprius is one of the few manufacturers with the technological edge and NDAA-compliant status required for U.S. defense programs.

Key risks

The key risk remains the concentration of revenues on a small group of major customers such as AeroVironment or AALTO/Airbus. The loss of a single major partner could quickly be reflected in the revenue line.

Chinese giants such as CATL, which have significantly larger capabilities, are also competitors, although the US commercial and regulatory environment protects Amprius to some extent.

Summary of key Amprius Technologies $AMPXmetrics

Graham Corporation $GHM

Graham Corporation is a company specializing in the design and manufacture of fluid, heat and power transfer technologies for three key segments: defense, energy and space. It is this foundation that significantly protects the company in an environment of economic uncertainty. In a sense, the company is a midstream player in the arms industry: it does not manufacture weapons directly, but technologies without which the operation of defence systems would not be possible.

Its products are used in nuclear and non-nuclear submarine propulsion (such as the Virginia class), torpedoes(MK48), propulsion systems for space missions and small modular nuclear reactors (SMR). This diversification ensures a stable and predictable order flow, which is the basis for a growing backlog.

EBITDA growth and record backlog

In fiscal year 2025 (ended March 2025), the Company achieved record results. EBITDA grew 56% to $19.95 million on an EBITDA margin of 10.7%, up 350 basis points from the prior year. Revenues were up 13% to $210 million. Adjusted earnings per share came in at $1.24, up 97% year-over-year.

More important than the results themselves, however, is the insight into future dynamics: backlog (unprocessed orders) reached an all-time high of $515.6 million at the end of the third quarter of fiscal 2026, representing a 34% annual increase. Of this, the defense sector accounts for 85%. If the company begins to convert these order volumes into revenue, margins will continue to expand due to fixed cost leverage.

Acquisition strategy

Graham is systematically expanding its technology portfolio through acquisitions. In 2025, it acquired the Xdot Engineering division to expand capabilities in the aerospace segment. This was followed in January 2026 by the acquisition of FlackTek, a manufacturer of advanced mixing technologies. These transactions mark the expansion of applications into new areas, with management targeting EBITDA margins in the low to mid double digits by fiscal 2027.

The more general context is the dramatic growth in defense spending in the U.S. and allied countries. Programs such as the Virginia-class submarine or MK48 torpedoes are long-term contracts with well-estimated cash flow. At the same time, the space sector is expanding flexibly: SpaceX, NASA and commercial operators are investing at record levels in space rockets and satellites, where Graham's precision thermal systems are a key component.

Financial strength and risk profile

Graham operates debt-free, with $22.3 million in cash and access to a $43 million line of credit at the end of the third quarter of fiscal 2026. A book-to-bill ratio of 1.3x signals that new order intake continues to exceed backlog-to-revenue conversion, confirming structural growth momentum. Updated guidance for fiscal 2026 calls for revenue of $233 million to $239 million and adjusted EBITDA of $24 million to $28 million.

Summary of key Graham Corporation $GHMmetrics

Comparison of all three companies

All three companies share one common denominator: structural margin improvement stemming from revenue scaling, not one-off cost savings or accounting optimization. This is an important distinction because structural EBITDA improvement tends to persist into subsequent quarters and often signals a point valuation reversal that the market registers months to quarters late.

What to watch next

PAVmed

• CMS/MolDX decision on Medicare LCD for EsoGuard: essential for potentially exponential revenue growth for Lucid Diagnostics

• Expansion into hospital networks and non-Medicare commercial insurers

• Veris Health results in partnership with Ohio State University

• Pace of new equity issuance and impact of stock dilution on shareholders

Amprius Technologies

• Pace of capacity expansion in South Korea

• New military contracts

• Revenue concentration: share of top 3 customers in total revenue

• Gross margin development for SiCore platform: needed to confirm path to stable EBITDA profitability

Graham Corporation

• Converting backlog ($515 million) to revenue in fiscal years 2026 and 2027

• Integration of Xdot and FlackTek acquisitions

• Impact of tariffs on supply chain and margin impact

• Ability to achieve target EBITDA margins in the low to mid double digits by fiscal 2027

These three companies demonstrate that the fastest growing EBITDA may not be in sectors that primarily attract mainstream media attention. Diagnostics, aerial batteries for drones, or thermal systems for submarines are areas outside the mainstream investment radar, yet each of these companies is undergoing a structural transformation that is changing its fundamental profile.

The common theme in each is that EBITDA improvement comes not from one-off cost optimization, but from revenue growth that grows beyond a fixed cost base, or from a breakthrough into a new revenue segment (Medicare for EsoGuard). The market typically registers these changes with a lag of several quarters, opening a window for astute investors.

At the same time he warns of a harsh reality: changing the law and sending a signal to investors isn’t enough — there is also a lack of human capital — the oil industry lost a large share of its skilled workforce over the past decade, who left abroad. Without the return of expats and massive investments to rebuild infrastructure and the supply chain, there will be no quick return to “oil power,” even though Trump is pushing to revive production in Venezuela and is invoking the Defense Production Act to speed up energy projects at home with federal funds. Wirth summed it up soberly: you can’t “turn on” oil on command — it takes projects, contracts, engineers and time.

Sebastian Mackensen, BMW $BMW.DE 's head of North America, stressed that this is not just a conventional facelift. He said the new car represents "a real transformation, not just a refresh", especially with a completely new digital environment in the cabin.

New interior: full-width panoramic display

The biggest changes are inside. The new 7 Series is the first production BMW to adopt the Panoramic iDrive system from the future Neue Klasse platform. This is a digital strip on the lower edge of the windscreen that displays important information for the driver across its entire width, complementing the classic central touchscreen.

The interior features a newly shaped steering wheel, a fully digital rear-view mirror and, for the first time, a separate screen for the front passenger. At the rear, the car can be fitted with a large 'theatre screen' that folds down from the ceiling to watch movies or work while on the move - the overall impression is more of a 'moving lounge' than a conventional saloon.

Producers point out that the new operating system and the multitude of touch and voice controls have significantly reduced the number of traditional buttons, making the car's controls more akin to a modern digital device than a traditional car.

More electromobility

https://www.youtube.com/embed/Blv7trmSM7M?rel=1

Under the bonnet, the new 7 Series offers a mix of fully electric, plug-in hybrid and conventional combustion versions. Two electric variants of the i7, a six-cylinder and an eight-cylinder petrol, are coming at launch, with the 750e xDrive plug-in hybrid due to follow in early 2027.

The biggest news is the new battery pack for the electric versions. The i7 60 xDrive gets a battery with a usable capacity of around 112.5 kWh, using a sixth-generation cylindrical cell with around a fifth higher energy density than existing cells. As a result, BMW estimates a range of over 350 miles (more than 560 kilometers) on the American measuring cycle and the ability to charge the car from 10 to 80 percent in about 28 minutes at a suitable fast charger.

Mackensen describes BMW's approach as "openness to technology". The aim, he says, is for every customer to get a "full-fledged seven" whether they choose pure electric drive, a plug-in hybrid or a six- or eight-cylinder petrol engine. The customer is to choose the type of powertrain according to his or her preferences and capabilities, without compromising on equipment or comfort.

Sales reality: the majority of clients still choose internal combustion engines

Although BMW is pushing the technology and expanding the range of electric cars, management admits that demand for pure electric cars has experienced a weaker period in the US. Mackensen recalled that after government incentives were curtailed, the pace of sales for EVs dropped, with the 7 Series accounting for about a quarter of pure electric units sold in 2025. Another 7 percent or so were plug-in hybrids, so roughly two-thirds of customers still chose a conventional internal combustion engine.

But BMW's North American boss believes this is a temporary blip. He expects the EV market to gradually return to growth after the current "slump" as infrastructure improves and battery costs come down. It is therefore important for carmakers to be prepared for both continued demand for conventional engines and an eventual acceleration of the transition to electric power.

Overall, BMW sees the luxury segment as relatively resilient. Mackensen said that even though overall U.S. auto sales are down year-over-year, BMW has been able to decline less than its competitors and thus gain market share. The company has had three record years in a row (2023-2025) and is aiming for a fourth record in 2026.

When and for how much: production from summer, starting price over $100,000

Production of the new 7 Series will begin in July at BMW's Bavarian plant, with the first cars expected to reach customers in the autumn. The price of the all-electric i7 50 xDrive starts at around $106,200 in the US, while the more powerful i7 60 xDrive starts around $124,700. The 740 gasoline variant is expected to sell from around $99,800, just under the psychological $100,000 threshold.

For BMW, this generation of the 7 Series is a key one: it's meant to show that the automaker can combine traditional luxury and comfort with new digital technologies while offering customers a choice between electric and conventional powertrains. The first months after the launch will show how well the new model will catch on in the market - especially the share of electric versions and the ability to maintain a record sales streak in a segment where some of the competition with large sedans is rather receding.

Policy is reinforcing that momentum. Seoul has introduced special “reshoring” investment accounts that offer reduced or fully exempt capital‑gains taxation on foreign stocks if retail investors later recycle that capital back into Korean equities, effectively rewarding those who bring money home. Since the scheme was launched, the number of such accounts has climbed to around 160,000, with assets surpassing roughly 700 million dollars, while flows from Korean retail into US stocks have noticeably slowed as part of that liquidity is redirected back into the local market. Put together with still‑supportive domestic liquidity, record brokerage deposits and a KOSPI year‑end target that Goldman has lifted to 7,000 (from 6,400 previously), the bank’s view is that Korea can continue to beat the S&P 500 – as long as the chip‑driven earnings cycle holds up and investors are comfortable with higher volatility and policy‑driven market dynamics.

Why Goldman believes $^KS11 can keep beating the U.S.

Goldman analysts put several factors together:

• Index performance - after +76% in 2025, the KOSPI has tacked on another roughly 50% since the start of this year, many times more than U.S. indices, which typically hover in the 10-20% per year range in good years.

• Macro Data and Market Breadth - The KOSPI recently posted a weekly gain of 4.6%, thanks to better-than-expected first quarter GDP growth and broader participation across the market. While pharmaceuticals, insurance and financial houses underperformed, shipyards, engineering and technology all grew strongly.

• Domestic money inflows - Small Korean investors have begun to sell foreign ETFs to a greater extent, especially those tied to US equities, and in turn have been pouring funds into domestic funds and ETFs focused on the Korean market. This supports the demand for stocks in the KOSPI index.

Goldman $GS notes that despite recent sell-offs in technology and automotive titles, foreign investor interest in the Korean market remains strong. According to JPMorgan $JPM, Korea was "the hottest market in the world" before the recent geopolitical tensions over Iran, and the recent rise in the KOSPI suggests that sentiment has recovered and the index is once again approaching all-time highs.

AI, chips and defence: the engine of Korean growth

A major theme in the Korean market is the "AI supercycle" in semiconductors, according to Goldman and other banks. South Korean firms such as Samsung Electronics $SSNLF and SK Hynix are among the world's largest producers of memory and data centre chips, which are essential for running large-scale AI models.

It is the growth in demand for AI accelerators and HBM-type memories that has pushed SK Hynix shares up hundreds of percent in the past year and contributed significantly to the overall index's rise. In addition to semiconductors, the Korean market is also benefiting from a boom in the defence industry, with orders for ammunition, tanks, artillery and air defence systems from Europe and other regions boosting sales at Korean arms companies.

Goldman rates the KOSPI as a market with "higher growth sensitivity" - that is, higher volatility, but also with more potential if the favorable environment for chips, AI and the defense industry continues. Compared to US indices, where many large tech firms are already trading at very high earnings multiples, the Korean market offers a more interesting combination of growth and valuation, according to the bank.

Korean stocks and ETFs available on the NYSE and Nasdaq

If you want to make a bet on Korea through the U.S. exchanges, there are a few avenues. Below are a few examples that can be commonly purchased through brokers with access to the NYSE or Nasdaq:

ETFs and funds on the Korean market

• iShares MSCI South Korea ETF (EWY, NYSE) - The best-known ETF focused on the South Korean market, it tracks the MSCI Korea index, which is heavily weighted toward large companies like Samsung and Hyundai.

• iShares MSCI Korea UCITS (often ticker EWK or similar, depending on the exchange) - European version, but some versions trade in New York; suitable for broader exposure to the Korean market.

Individual South Korean companies traded in the US

• Korea Electric Power Corporation (KEP, NYSE) - Korea's largest power utility, traded directly in New York via ADR.

• For the other big names (Samsung Electronics, SK Hynix, Hyundai Motor), while the main liquidity is on the Korean exchange KRX, their exposure is usually gained through the aforementioned ETFs, which have them among their core positions.

So for an investor who doesn't want to deal with local currency, time zone or direct access to the KRX, one of the big Korea ETFs is the easiest route. This effectively gives you a ride on what Goldman and other houses are describing - KOSPI growth driven by chips, defense and domestic capital inflows.

What does this imply for the portfolio

Goldman Sachs and JPMorgan agree that the South Korean market has all the ingredients to beat the major US indices on a relative basis at this stage of the cycle: strong exposure to AI and semiconductors, support from the government and domestic investors, and still relatively lower valuations than the US. At the same time, it is a market with higher volatility and sensitivity to global geopolitics, making it more suited as a dynamic portfolio component than as a "safe haven."

A U.S. court dismissed a key part of the lawsuit Elon Musk filed against OpenAI and its CEO Sam Altman. Specifically, the fraud allegations were completely removed from the case by a judge in California.

But that doesn’t mean the whole matter is over. On the contrary — the court ruled that other parts of the lawsuit, such as breach of fiduciary duty or unjust enrichment, will proceed and go to trial. In other words, the case has only been “narrowed,” but it is still headed for a full trial.

Interestingly, Musk himself wanted to drop these fraud claims to simplify the proceedings and focus on the main argument: that OpenAI abandoned its original nonprofit purpose and began operating as a commercial company.

The whole dispute is extremely important because it’s not just about a personal conflict between Musk and OpenAI’s leadership, but also about a broader question: who actually owns the future of AI, and whether it should be driven by profit or the public interest.

And you? Do you think this dispute can realistically change how AI companies operate, or is it more of a personal fight without much impact?