China’s biggest tech giants are wasting no time. After President Donald Trump signaled that Nvidia’s H200 accelerator could be cleared for export, ByteDance and Alibaba reportedly approached Nvidia to explore large-scale purchases. According to Reuters, the inquiries could translate into some of the largest Chinese AI-chip orders in a year, driven by the fact that H200 offers a generational leap in training performance compared with the limited hardware China is currently allowed to buy. For companies racing to build and refine frontier AI models, access to H200 would dramatically shift the competitive landscape.

The situation is made even more unusual by the regulatory quirks surrounding it. Beijing still restricts imports of earlier, weaker chips such as the H100 and A100, while Washington may now allow access to a processor that is significantly more advanced. Whether China’s regulators approve these purchases remains an open question, as does Nvidia’s ability to supply enough units in a global market strained by insatiable AI demand. What is clear is that the episode highlights the volatility and unpredictability of the AI hardware ecosystem in an era of geopolitical tension.

Why the H200 is so crucial for Chinese giants

H200 is nearly six times more powerful than the H20, which was the most advanced chip to legally travel to China to date. While Chinese manufacturers have accelerated development of their own accelerators in recent years, they are still significantly weaker at training large language models, according to Reuters sources. Homegrown chips are better suited for inference, not the demanding pre-training that requires thousands of GPUs working in synchronised clusters.

As a result, virtually all of China's large AI infrastructure today is built on Nvidia - from universities to the private models of large tech companies. Some institutions were even trying to acquire the H200 through the grey market before Trump's announcement, according to documents and tenders, showing the market's huge appetite for a more powerful generation of AI chips.

Political reality: China is silent for now, companies are waiting for a signal

Beijing has not yet officially confirmed whether it will allow the purchases. According to The Information, Chinese regulators have summoned representatives of major firms to gauge their exact demand - and have hinted that a decision will come soon. Meanwhile, in recent months, the government has severely curtailed purchases of US AI chips in state-funded projects in an effort to encourage the emergence of a domestic semiconductor industry.

Chinese firms are therefore proceeding cautiously. They are considering large orders, but want a guarantee that the government will explicitly approve the purchases. At the same time, they are also addressing an important practical question - whether Nvidia $NVDA will be able to supply them. Production of the H200 is running in limited quantities as Nvidia focuses on the next-generation Blackwell and Ruby, for which there is record global interest.

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Why the situation is so bizarre: A more powerful chip is less regulated than a weaker one

Biggest paradox:

• H100 and A100 remain subject to strict export controls
• H200which is more powerful, newer and more expensive, got an exemption

The result is a market that resembles a technological anomaly. In practice, this means that Chinese firms can buy product that is far superior in performance to chips that have long been 'banned'.

But this state of affairs may not last long - China plans to assess the intended use for each order, according to sources, as it makes a parallel push to encourage domestic production from firms such as Huawei and Cambricon. For Chinese tech firms, the H200 may thus be a valuable but perhaps short-lived opportunity to regain at least some of the AI computing advantage.

Nvidia between geopolitics and demand boom

For Nvidia, the combination of political decisions and the global hunger for AI chips is strategically crucial. The company has already suffered a significant drop in market share in China following a series of bans on the purchase of its most powerful chips. Thus, the ability to sell the H200 represents a chance to regain some of that giant market. On the other hand, the company cannot even meet demand from the United States or Europe, as most of its resources go into the Blackwell generation.

If Chinese orders were to take off, it is likely that they would be quiet, without publicity and without the disruptive effects that would trigger further political reaction in Washington. As one Chinese executive put it, "Chinese companies will buy a lot, but quietly."

H200 vs. H20 vs. Huawei's home-grown chips

Chinese firms are pushing for the H200 because the difference between that chip and the alternatives is dramatic. The performance differences directly impact how quickly companies like Alibaba $BABA or ByteDancecan train their most advanced models.

What investors need to know:

• The H200 is nearly six times more powerful than the H20which is currently the most advanced model legally available in China.
• The H200 is optimized for training large modelswhile Huawei and Cambricon's home-grown chips are better suited for inference, not training.
• H20 is not enough for training - companies only take it as a temporary replacement due to restrictions.
• Huawei Ascend 910B offers solid performance, but still lags in scaling and efficiency, which are key to developing foundation models.
• Chinese firms stand by Nvidia - without the H200, they cannot compete with the US in the short term in developing high-end multimodal GPT-4/5 generation models.
• Beijing hesitatesbecause it wants to protect the domestic semiconductor industry, but it also knows that domestic chips do not yet have the power or ecosystem needed for high-end training.

Investment implications: what H200 means for Nvidia stock

Investors are watching H200 as a potential catalyst that can temporarily restore some of Nvidia's Chinese revenue and mitigate the negative effect of sanctions. But the impacts are not clear-cut - the opportunities and risks are intertwined.

Key points for investors:

• Possible return of Chinese revenues: If Beijing allows purchases, orders could be in the billions of dollars, even if they are less visible, low-profile transactions.
• The H200 is one of Nvidia's most profitable products: The chip has high gross margins, so even limited supply can significantly boost short-term profitability.
• Capacity constraints remain an issue: Nvidia doesn't have enough production - the top priority is the Blackwell generation. This means that Chinese orders may mean diverting capacity from other markets.
• Political risk is extremely high: The Trump administration's exemption may be revoked or changed. Both the U.S. and China can modify the rules at any time.
• Strategically, this is not a long-term product: For Nvidia, the H200 is just a transitional generation. Future company valuations will be driven mainly by the Blackwell and Rubin families.
• Investor sentiment will be very reactive: every signal from Beijing, every statement from the US administration and every comment from the CEO Jensen Huang could cause significant movement in NVDA stock.

The latest dividend increase did more than nudge the payout higher — it confirmed the strategic discipline of a company, whose financial architecture has been designed for resilience. While many high-yield sectors rely on volatile commodities or leverage-heavy business models, this firm continues to expand its distribution capacity through predictable revenue streams, strong retention and a product suite embedded deeply in industrial and medical infrastructure. A 12% hike is not a marketing gesture; it is a financial statement backed by durable cash flow and long planning cycles.

What differentiates this business is the structural strength of its model. Long-term service agreements, entrenched customer relationships and global exposure allow the company to navigate economic slowdowns with minimal turbulence. Even when cyclical demand cools, the operational core remains intact, margins expand and free cash flow consistently covers both reinvestment and shareholder returns. For dividend-focused investors, few combinations offer this level of visibility, durability and upward trajectory.

Top Points

• A rising dividend is no accident, but a reflection of stable cash flow and over 30 years of dividend discipline.
• The company has once again strengthened margins and significantly increased earnings, increasing the scope for future payout growth.
• The valuation is higher than the sector average but reflects the quality, stability and low risk of the business.
• Strong free cash flow growth ensures that dividends remain safe even in a worse economic period.
• A key driver in the years ahead will be the growth in demand for water management, sanitation and smart industrial solutions.

Company Profile

Company Ecolab $ECL operates in a market segment that is boring at first glance but absolutely critical from a macro perspective: industrial hygiene, water treatment, sanitation and operational safety. These areas are not optional - companies in the food, energy, pharmaceutical, hospitality or healthcare industries cannot simply skimp on hygiene or water systems.

This makes business extremely predictable. Revenues are growing slowly but steadily, while margins remain above average. Very few companies in the market have such a high proportion of repeat contracts and such deeply rooted customer relationships. Companies change hygiene suppliers only in rare cases, because the processes are integrated directly into the operation.

This creates a clean environment for long-term dividend and cash flow growth.

A broad portfoliowhich is built on three pillars

Water & Process Technologies

Solutions for the purification, recycling and optimization of water in production processes.

• Industrial plants, energy, petrochemicals
• Filtration, reverse osmosis, corrosion prevention, water quality monitoring

This segment is growing due to global pressure for more efficient water management and a regulatory environment that is becoming increasingly stringent.

Institutional Hygiene & Cleaning Systems

Comprehensive hygiene systems for hotels, restaurants, hospitals and care facilities.

• Automated cleaning systems
• Disinfection, sterilization, pathogen control
• digital hygiene monitoring

Reliability, compliance and risk minimization are important to these customers. Any misconduct would be extremely costly reputationally and legally.

Food Safety & Sanitation

Solutions for food processing plants, fast food chains or meat processors.

• Sanitation of production lines
• contamination detection
• optimization of chemical and water consumption

Financial performance - quality growth that can be seen and felt

Last year's results show exactly what a dividend investor is looking for: a healthy combination of growth, margin improvement and strong free cash flow generation.

Year-on-year improvement is evident in every key parameter:

• Earnings are up nearly 54%.
• operating margin climbed to 16.9%
• gross margin improved significantly due to better input prices
• FCF increased to almost USD 1.82 billion

But it's not just about the numbers. The important thing is that growth is not driven by aggressive expansions or savings that cannot be repeated. The performance is the result of systematic improvements: modernizing operations, digitizing services, streamlining the supply chain and growing the water management segment.

Valuation - quality simply doesn't come cheap

This company is a classic example of a company that has been growing for a long time, has a high moat and produces stable cash flow. The market values such businesses at a premium - and it shows here.

Key metrics

• P/E: approx. 21×
• P/S: 2.7×
• P/B: 7.5×
• P/CF: 25×

Expensive at first glance, but in fact typical of top "compounders" that can increase capital value even in a recession. So the investor is not paying for revenue growth - they are paying for predictability, stability, low risk and high margins.

Dividend analysis

Dividend up 12%, which is above the long-term average and also confirms that the company has entered a stronger growth period.

• Dividend yield: approx. 1.1% - low but stable
• Payout ratio: 40-45% → well below risk
• Cash flow coverage: dividend covered almost 2x

The strength of the dividend rests on three pillars:

1. Stable contracts with global clientele
2. high margins and cost control
3. cost structure that allows payouts to grow even in bad times

Opportunities - where the company can still grow significantly

• Water Management: The world is addressing water scarcity, the industry is pushing to minimize consumption. This segment will grow double digits.
• Digitalization of sanitation: Sensors, consumption monitoring, automated systems - a new cluster of high margin services.
• Growth in healthcare and pharmaceuticals: Strictest regulation = stable demand.
• Expansion in energy and manufacturing services: Higher operating standards open up space for new products.
• M&A strategy: traditionally successful model of buying smaller technology players.

Management

Strong margin growth, stable dividend policy and consistent expansion are no accident. Ecolab is run by a pair that has deep technical and operational backgrounds and can combine traditional industrial chemistry with digitalization and data platforms.

CEO Christophe Beck - architect of the transformation

Beck took over in 2021 but has been with the company for more than 15 years. His main contributions:

• Redirecting capital to the water segment (highest growth across the portfolio).
• expansion of the Ecolab3D digital platform enabling predictive management of water hygiene and consumption
• stabilisation of margins during periods of chemical input inflation
• focus on long-term contracts with major industry players

Beck's management style is based on the idea that Ecolab is not a chemical company, but an operating partnerto help clients optimise costs. This significantly increases switching costs.

CFO Scott Kirkland - Discipline in costs and cash flow

Kirkland came to Ecolab after a long career at 3M. His footprint can be seen in:

• Improved working capital and higher profit-to-cash flow conversion
• optimizing capital investments
• reducing debt while growing the dividend
• more rigorous measurement of return on investment (ROIC)

The market of the future: the industry outlook for the coming years

Ecolab operates in sectors that are not cyclical but structurally growing. This is a key difference from companies that depend on economic cycles.

The three strongest growth megatrends

Water scarcity and pressure to recycle - Expected growth in the industrial water treatment market: 6.5-7% CAGR to 2030.

• World water consumption growing 2x faster than population
• Industry consumes 40% of all available water
• Regulation in the US, EU and Asia tightens recycling standards

Raising hygiene standards in food and healthcare. Expected growth of food safety market: 6-8% CAGR.

• • Globalization of food chains → higher contamination risks
  • Hospitals and pharmacies introduce automated disinfection systems
  • Emerging standards will not disappear after a pandemic

Automation and digitalization of hygiene processes. Here Ecolab has one of the strongest technological moats with Ecolab3D.

• e-monitoring of water consumption
• sensors detecting microbial contamination
• predictive maintenance and auditing software

These trends are creating an environment in which demand is not growing by leaps and bounds, but steadily and over the long termwhich is the ideal basis for stable dividend and cash flow growth.

Segmented revenue structure: where growth and stability occur

Ecolab's business is diversified across industry, healthcare and institutions. This creates a balanced portfolio with different dynamics.

Revenue distribution by segment:

• Industrial Water & Process - ~45% of revenue
• Institutional Cleaning & Hospitality - ~30 %
• Healthcare & Life Sciences - ~15 %
• Food Safety & Other - ~10 %

What are the growth profiles?

• Fastest growing: Healthcare & Water Treatment
• Highest Margins: Institutional Cleaning
• Lowest cyclicality: Life Sciences & Food Safety

What investors need to understand:

• Core segments (hospitality, institutional cleaning) are holding steady
• Growth segments (water, healthcare) push valuations up
• the entire structure allows the company to grow even in a recession because hygiene and water are not sectors that can be "turned off"

Moat & switching costs: why Ecolab's clients hardly change suppliers

Switching costs are not a marketing concept at Ecolab, but a reality of operations.

Reasons why switching suppliers is extremely costly:

• hygiene procedures are certified for specific Ecolab systems
• dosing and measuring equipment is integrated into customers' operations
• changing the chemical system may require adjustments to process parameters
• switching can mean production downtime (the most expensive factor)
• Ecolab also provides employee training and audit support

Result:

• over 90% of clients have long-term contracts with the company
• Customer retention is among the highest in the industrial sector

Analytical predictions

Analysts agree that Ecolab has a period of steady growth ahead, mainly due to water management and improving margins.

JPMorgan (rating: Overweight)

• Target Price: $260
• Reason: segment growth Water + accelerating margins
• expected EPS growth: 13% annually

Morgan Stanley (Overweight)

• Price target: $255
• Emphasis on: expansion of Ecolab3D, contracts with life sciences customers
• argument: "the most predictable cash flow in the sector"

Bank of America (Buy)

• Target price: USD 270
• ROI on water and sanitation investments well above market average
• FCF outlook: continued growth of 10-12% annually

Consensus for the next 12-month period

• Average target price: USD 255-265
• Expected EBITDA growth: 8-10 %
• Dividend growth: 8-12% per annum

Investment scenarios

Optimistic scenario

In the most favourable scenario, Ecolab would benefit from the continued tightening of industry regulations, which are fuelling demand for advanced water treatment. Under these conditions, the Water & Process segment could grow at double-digit rates as companies in the manufacturing, energy and petrochemical sectors begin to invest in water reduction and recycling. In parallel, the Ecolab3D digitization platform would gain dominance as an analytical tool that helps customers reduce costs and contamination risks. This would bring a further shift in margins - especially as services and digital monitoring carry significantly higher returns than traditional chemical products.

If this scenario were to come to fruition, the company could grow at double-digit earnings rates for several years, boosting free cash flow above the $2 billion per year mark. The market would price in this development by expanding the valuation back to the upper range of premium multiples, approximately a P/E of 30 times. The stock could then move into the $280-300 price range and Ecolab would once again be among the leaders of the quality compounders.

A realistic scenario

The most likely path, however, is the middle ground, which is consistent with the long-term nature of Ecolab's business. In this scenario, the company continues its standard revenue growth rate of around 6-8%, driven by a combination of pricing power, gradual digitization and organic service expansion. The water segment will maintain solid momentum, although not explosive growth, and the healthcare and hospitality hygiene systems will continue to benefit from stringent food safety and cleaning standards.

Such a development would imply a gradual improvement in margins, continuous free cash flow growth towards $1.9 billion and similarly steady dividend growth. The market would value the company as a premium but not a fast-growing business, and the valuation would likely hover around a P/E of 24-26×. Under these conditions, the share price can be expected to rise into the $250-265 area, which represents a modest outperformance relative to the broader market, built on stability, not risk.

Pessimistic scenario

The biggest threat to Ecolab's results is a situation where the global industry slows investment in water system upgrades due to a weaker economy or constrained budgets. This would lead to the deferral of projects that today form the core of the Water & Process segment's growth. Add to this a significant increase in input chemicals and logistics costs that the company could not quickly pass on to clients, and margins would come under pressure. In addition, the Hospitality & Institutional segment would show weaker momentum in a cooling economic environment, which would reduce the overall growth of the company.

Such a combination would slow earnings growth to low single digits, free cash flow would fall to around $1.6-1.7 billion, and the market would begin to value Ecolab as a defensive industrial firm rather than a premium compounder. Valuations could compress to a P/E of around 20-22 times and the stock would fall into the $210-230 range. It would still be a financially stable company, but without the growth momentum that has helped it outperform the market in recent years.

What to take away from the article

• Ecolab is a global leader in hygiene, water purification and sanitation - areas that are not cyclical and whose demand has been growing for a long time.
• Key to the company's strength are recurring contracts, extremely high switching costs and deep integration into clients' operations.
• The biggest opportunities lie in the expansion of the water segment and digital services, which have much higher margins than traditional chemical products.
• The financial results show structural margin growth, a steady increase in cash flow and a very healthy debt ratio.
• The dividend policy is sustainable even in bad times - the company has a payout well below 50% and a strongly growing FCF.
• Valuation is not low, but is consistent with the quality and defensive nature of the business.
• Scenarios suggest slightly asymmetric upside potential, mainly due to the long-term trend of efficient water management.

Latest data from the JOLTS survey shows the number of vacant positions in the U.S. has stabilized — but hiring and turnover dynamics have shifted. With job openings holding around 7.7 million and worker mobility dwindling, the report paints a more sober picture of demand for labor. These trends matter: for wages, inflation, and crucially for how the Federal Reserve might steer its next move. Understanding JOLTS now is key to decoding where the economy — and markets — may head next.

The evolution of Job Openings Total Nonfarm (1M) from 2020

Current state of the labor market according to JOLTS (December 2025)

The latest JOLTS report, released yesterday containing data for October 2025, paints a picture of a labor market that is gradually losing its earlier strength. The number of job openings remained virtually unchanged in October at 7.7 million. Positions. By comparison, even earlier in the year, the number of vacancies was significantly higher, exceeding 11 million at the post-pandemic peak in 2022. There was even a surprising jump of 431,000 vacancies to a total of 7.66 million in September 2025 (the data for which was delayed due to the temporary government shutdown), indicating that labor demand remained unexpectedly strong at that time. However, the October figures did not confirm any further increase - the number of open positions stagnated around 7.67 million.

In addition to the number of openings, JOLTS tracks hiring and separations. In October, the number of hires was 5.1 million, almost as high as the number of separations (the sum of voluntary separations and layoffs) of 5.1 million. In other words, employment was almost unchanged on net. Voluntary separations remained at 2.9 million in October, while layoffs and firings rose to 1.9 million. Both figures were little changed from the previous month.

More important, however, is their trend. The rate at which Americans are voluntarily leaving their jobs to move elsewhere has fallen to 1.8%, the lowest since May 2020. By comparison, it was 2.0% as recently as September and reached a record ~3% during the "Great Resignation" of 2021-2022 (an all-time high was 3.0% in November 2021. Similarly, the job entry rate has fallen to 3.2% - a level last seen roughly 10 years ago (excluding the pandemic spike). In other words, Americans are currently entering new jobs at the slowest rate since 2013 and voluntarily leaving at the lowest rate since 2014. This confirms that the labor market has lost some of its earlier momentum.

United States Jobs Quit (1M) since 2016

In contrast, the layoff rate has increased slightly in recent months, albeit from historically low levels. This is a warning sign. Low hiring means that laid-off workers are having a hard time finding new jobs, so if the layoff rate continues to rise, unemployment could jump very quickly. It is this concern that the analyst mentions Elise Gould: weak hiring combined with rising layoffs increases the risk that the unemployment curve will begin to rise steeply. So far, the rise has not been dramatic, with the layoff rate holding around 1.2%, still low in historical terms, but the trend has taken a turn for the worse.

Thus, the overall picture from JOLTS suggests that the U.S. labor market is cooling: employers are no longer adding jobs at the pace they used to, hiring is more cautious, and employees are less likely to quit because they are less confident of finding a better job. Yet the labour market cannot be said to have collapsed. Rather, the situation is stable. And that brings us to the central bank.

Fed officials probably want to prevent the labour market from weakening further and will therefore proceed to cut interest rates further despite still elevated inflation. Markets are expecting a 0.25ppt rate cut into the 3.50%-3.75% range in response to signals of a slowing labour market.

Predictions for future interest rate movements in the US

How JOLTS data affects the Fed and the inflation outlook

JOLTS data has become a closely watched indicator for Fed monetary policy in recent years. The Fed has dual priorities: price stability (low inflation) and maximum employment. After the pandemic, the U.S. struggled with soaring inflation, and one of the causes was the extraordinary tightness of the labor market. Many vacancies, record numbers of workers leaving for better offers and the resulting rapid wage growth. Central bankers therefore started to raise interest rates to cool the economy, while keeping a close eye on indicators such as the number of new jobs and job losses.

The economic research supports them in this: Studies by Alex Domash and Lawrence Summers showed that job openings and voluntary quits rates are as important, if not more important, in predicting wage growth than the unemployment rate itself. In specifications of models explaining wage inflation, it has been shown that when the vacancy rate or quits rate are included in the equation, their impact often exceeds that of unemployment - especially with a lag (4 to 8 quarters).

In other words, labour demand indicators (vacancies, quits) provide very valuable information on future wage and inflation developments. Summers and Domash warned in 2022 that the then extreme readings of these indicators implied a very tight labor market and would push up wages and inflation, which indeed proved to be the case.

The recently released research by economists at the Federal Reserve Bank of New York came to a similar conclusion. It identified job separations and the adjusted vacancy rate per job seeker as the two best correlated metrics with wage growth across a wide range of labor market indicators. These two indicators (voluntary separations and job openings per job seeker) proved to be the strongest predictors of wage inflation.

Thus, for the Fed, the JOLTS provide an important complementary picture: while the official unemployment rate has remained low and relatively stable (around 3.5%-3.8%) for most of 2023-2024, substantial changes in the balance between labor supply and demand have been taking place beneath the surface, according to the JOLTS. A decline in vacancies from extremes, a decline in voluntary separations, and a modest increase in layoffs are all factors mitigating inflationary pressures. And indeed, inflation in the U.S. has been gradually easing toward the 2% target through 2025.

Unemployment trends in the US from 2023 (1M)

But it has to be said that this is a fine line: the Fed wants a "soft landing" - to tame inflation without sharply rising unemployment. The JOLTS data is reassuring in this regard, in that the overheating has diminished, but it also begins to warn of the opposite risk. If hiring stays this low for too long and layoffs continue to rise, the unemployment rate could run up faster than desired. The Fed therefore needs to respond to waning inflationary pressures by cutting rates, but at the same time not too aggressively while inflation is above target, lest any re-acceleration in wages (or other price pressures) get to the wrong side of the ledger.

Implications for investors and the stock market

JOLTS indicators are not just the domain of economists and central bankers. They have also come to the forefront of investors' minds in the stock and bond markets in recent years, as they provide clues as to how close or far the Fed is from tightening or easing policy. The rule of thumb is that "good news can be bad news for the market" and vice versa - in a context where inflation and the Fed's response is the main concern.

For example, if the JOLTS shows an unexpected increase in job openings (a stronger labor market, potentially inflationary), investors worry that the Fed could respond with a hawkish approach (i.e., higher rates or fewer rate cuts). This typically leads to higher bond yields and downward pressure on equity prices, especially rate-sensitive growth titles. Conversely, a surprising cooling of the labour market (fewer job openings, lower quits rate, more layoffs) can please markets as it signals a moderation in inflation and hence an earlier easing of Fed policy. The result tends to be rising stocks and falling bond yields. However, this pattern is not absolute, as an extreme deterioration in the labour market would in turn trigger fears of a recession.

In December 2025, the situation was particularly interesting. The JOLTS for October came out just before the Fed's rate decision, which we will see tonight. The number of job openings was higher than expected (7.67m vs estimates of ~7.15m) thanks to the aforementioned jump in September and a modest October increase. This did temper the market's euphoria a bit as it suggested that the Fed may not be able to be as accommodative as investors had hoped.

JOLTS data from 2020 (1M)

The S&P 500 index responded with only a slight decline yesterday. The tech-heavy Nasdaq even gained slightly (+0.13%), while the Dow Jones lost slightly. Overall, the market seemed to be rather waiting. Some analysts judged that these numbers would make the Fed less dovish than expected: "It looks like the market is now pricing in a slightly less accommodative Fed because of the vacancies," said Jeff Schulze of ClearBridge Investments. Yet the market still believed the December rate cut would happen (~87% chance) and rather shifted expectations going forward. The likelihood that the Fed will take a pause after this cut has increased. In other words, the JOLTS data reinforced to investors that the Fed may ease the market now (which was already priced in), but further easing may come more slowly if the labor market performs relatively well.

The history of the past two years shows several similar episodes where JOLTS data moved markets significantly. For example, when the number of job openings first began to fall from record highs in mid-2022, the stock market welcomed it - because it meant that inflationary pressures could ease and the Fed would not have to tighten rates. Conversely, in the spring of 2023, when it became clear that the decline in vacancies had stopped and there were still around 9-10 million vacancies remaining, markets nervously looked to the Fed to hold rates higher for longer. In 2024, any significant deviation of JOLTS from expectations triggered immediate movements in yields and indices. JOLTS became almost as closely watched a report as the traditional monthly unemployment statistics.

Conclusion

The JOLTS report has established itself as one of the key indicators of the health of the US labour market and an indicator of future inflationary pressures. The latest data from the end of 2025 presents a mixed but reassuring picture at its core: the labor market has come off the covide shock but is not yet signaling a free fall. Job openings have fallen from extremes and now roughly match the number of unemployed - labor supply and demand are more in balance than they were a year or two ago. The voluntary quit rate has fallen to levels last seen nearly a decade ago, easing upward pressure on wages. However, recruitment rates are also very low, reflecting the caution of firms in the face of economic uncertainties. The Fed may read this data positively and cut rates.

Occidental entered Q3 2025 at a decisive moment in its multi-year transformation, and the latest results confirm a business that is gaining strength across all operating lines. Production exceeded management’s own guidance, operating cash flow moved higher, and debt reduction accelerated for the fourth consecutive quarter. The company also executed one of its most meaningful strategic pivots in recent years by moving forward with the divestiture of OxyChem, a shift designed to concentrate capital on oil, gas and emerging low-carbon technologies — areas that now form the backbone of its long-term competitiveness.

Taken together, the quarter paints a picture of a company that has regained operational clarity and financial discipline. Occidental is not only generating solid free cash flow at current commodity prices, but is also rebuilding balance-sheet flexibility at a speed that could soon allow for a materially larger capital-return program. With debt down by more than a billion dollars in just three months, the company is steadily approaching a new phase of the cycle — one in which strategic reinvestment and shareholder distributions can grow in tandem.

How was the last quarter?

Occidental $OXY entered the third quarter of 2025 in very good shape and the results ended up exceeding most expectations, especially at the level of operations and cash flow. The company reported operating cash flow and operating cash flow of $2.8 billion and $3.2 billion, respectively, before working capital changes, signaling robust performance of key upstream assets as well as continued investment discipline. Capex reached $1.8 billion, and with $39 million of contributions from non-controlling interests, the company generated $1.5 billion of free cash flow before working capital - the resulting FCF thus confirmed Occidental's ability to generate cash even in an environment of relatively stable but not extremely high commodity prices.

The operating side was also very strong. Global production averaged 1,465 Mboed, beating the high end of guidance. Permian remains the dominant pillar of the business with an average production of 800 Mboed, while Rockies & Other Domestic brought in 288 Mboed, Gulf of America 139 Mboed and the International segment 238 Mboed. It was the combination of higher production volumes and slightly better pricing that helped the Oil & Gas segment to a pretax profit of $1.3 billion. Realized oil prices rose 2% to $64.78/bbl, while domestic realized gas prices strengthened 11% to $1.48/Mcf. A persistent headwind was weaker NGL prices, which fell 5% quarter-on-quarter.

Midstream and marketing also beat guidance, although they posted lower earnings than in the previous quarter due to lower Waha-Gulf spreads and higher costs associated with increasing activity in low-carbon projects. Pre-tax profit was $93 million and WES equity income was $156 million. On the other hand, OxyChem was a weak spot, with earnings falling to $197 million due to weaker prices and volumes across the portfolio, albeit partially offset by lower input costs.

At the overall profitability level, the firm reported net income of $661 million ($0.65 per share) and adjusted earnings of $649 million ($0.64 per share). Occidental also continued its aggressive deleveraging, paying down $1.3 billion in the quarter and pushing total debt to $20.8 billion. This move, along with the sale of OxyChem, which management called a transformational milestone, further strengthens financial flexibility and allows the company to increase returns to shareholders.

• Full presentation with results.

CEO commentary

CEO Vicki Hollub highlighted that the third quarter is a testament to the exceptional operating performance, disciplined investments and strength of the upstream portfolio. She said Occidental outperformed targets in both the oil and gas segments while also outperforming in midstream and marketing. A key point is The sale of OxyChemwhich provides the company with capital to further reduce debt, strengthen returns to shareholders and accelerate investment in its highest-return segments. This confirms management's strategic shift towards a company focused primarily on upstream, complemented by low-carbon technologies capable of delivering a steady stream of new opportunities.

Outlook

Occidental enters the next quarters with a resilient production base, relatively stable price realizations and strong capital discipline. Management expects core upstream to continue to be a key source of cash flow growth, supported by efficiencies at Permian as well as continued stability in international assets. The weaker environment in petrochemicals should remain transitory, while midstream will be more sensitive to price spread structures, but still contributing stable results continuing to be complemented by WES dividends.

The company also reaffirms its long-term priority to reduce debt - with room to continue to gradually shift capital allocations towards share buybacks and dividend increases once the $20.8bn debt target is reached. Strategically, Occidental will continue to focus on diversifying its upstream portfolio and developing low-carbon solutions, including DAC projects, which Hollub also highlighted.

Long-term results

Occidental's long-term financial performance confirms the cyclical nature of the oil sector, but also demonstrates the company's ability to offset volatility through cost management and portfolio optimization. Revenue in 2024 was $27.1 billion, down 4.35% year-on-year, following a weaker 2023, when revenue fell 21.85%. However, these results reflect lower oil prices and normalisation after an exceptionally strong year in 2022, when Occidental increased revenues by almost 40%. The main changes were also reflected in margins, with gross profit of $9.6 billion in 2024 virtually flat, indicating successful cost control even with lower commodity prices.

Operating profit fell to $6 billion, down 8% year-on-year, while net profit fell 35% to $3 billion. The results thus remain well below the extremely strong levels of 2022, when net profit exceeded $13 billion. EBITDA fell to $12.7 billion in 2024, a 12% decline, but still a solid figure that gives the company comfort in managing debt. The EPS movement follows the movement in net income - $2.44 per share in 2024 implies a 37% year-on-year decline, but these are figures fully explained by the energy price cycle.

Long-term results thus confirm that Occidental, while not immune to the commodity price downturn, can maintain a healthy balance sheet, high levels of operating cash flow and reduce debt in a cyclical environment, which remains a key strategic objective.

News

The most significant event of the quarter was the announced sale of the OxyChem division, which management describes as a major step in the company's transformation. This transaction will allow the company to further strengthen its balance sheet, accelerate debt repayment and better direct capital to the highest return segments, primarily upstream and low-carbon technologies. Occidental has also continued its extensive deleveraging program, repaying $1.3 billion during Q3 2025 alone, a significant step toward its strategic goal of reducing debt to levels that enable greater shareholder returns. The company also highlighted growing activity in low-carbon projects, which translated into higher costs in the midstream and marketing segments.

Shareholding structure

Occidental has a highly concentrated shareholder structure, with Berkshire Hathaway dominating with nearly 27% of all shares, and has long supported the company's strategy of focusing on upstream, cash returns and disciplined investment. The institution holds over 51% of all shares and more than 70% of the free float, indicating high interest from professional investors. The largest institutional shareholders include Vanguard Group (9.05%), Dodge & Cox (8.11%) and BlackRock (5.02%). In total, more than 1,500 institutions hold Occidental stock, confirming the company's firm footing in the portfolios of long-term investors.

Analysts' expectations

Shares of Occidental Petroleum have come under pressure in recent months due to weakening oil prices and waning confidence across the energy sector. The title now trades at roughly $41 per share, marking a roughly 20 percent decline over the past twelve months, at a time when earnings outlooks have been gradually lowered. Still, some analysts expect some room for growth, backed by solid margins, gradual deleveraging and a disciplined approach to investment. At the same time, Occidental is expanding its carbon capture business through its 1PointFive subsidiary and continuing its long-term efforts to strengthen its balance sheet, showing a desire to balance its traditional oil business with new opportunities in low-carbon technologies.

Wall Street estimates suggest a more moderate outlookreflecting investors' overall caution towards energy titles. The average analyst price target of around $51 implies roughly 20 percent potential over the next twelve months, although the range of projections is wide - from $38 to $63. At the same time, the consensus indicates that Occidental remains more of a defensive headline than a growth story, as revenues are expected to decline slightly through 2027, operating margins are expected to stagnate, and valuations are below long-term averages. According to models based on analyst estimates, the stock could reach about $43 in 2027, implying only a minimal annual return. For investors, this underscores the company's character as a stable energy player focused on cash, dividends and debt reduction, not dynamic growth.

Fair Price

Microsoft has unveiled one of its most ambitious investment rounds to date, committing 23 billion dollars to accelerate its AI footprint worldwide — with India emerging as the crown jewel of this plan. Satya Nadella now positions the country not merely as a major market, but as the future backbone of Microsoft’s global compute capacity. In a world where demand for AI infrastructure outpaces supply, the company is moving to secure long-term dominance.

But the strategy radiates far beyond Asia. Alongside the Indian mega-cluster, Microsoft is expanding Canadian data centers, strengthening AI-native security systems and launching new cloud regions across Europe and the Middle East. The message is unmistakable: the company aims to weave a planet-scale network capable of absorbing the explosive growth of AI workloads for years to come.

India as a future AI superhub

The $17.5 billion investment represents Microsoft's largest-ever Asian $MSFTproject . The company wants to build several new data centers in India, boost capacity Azure and secure a head start in a region where demand for AI computing is expected to grow at one of the fastest rates. The first new centre is due to be launched in mid-2026, kicking off a transformation that could bring India closer to becoming a tech superpower.

This investment builds on an earlier $3 billion plan and gives Microsoft the opportunity to occupy the space before Amazon $AMZN or Google $GOOGdo the same . In a dynamic economy where AI adoption is spreading at a pace that has surpassed analysts' expectations, this is a move that could determine the balance of power for the next decade.

Canada strengthens its role as a research and security hub

Together with an Indian project Microsoft also announced an expansion in Canada, where it will invest more than C$7.5 billion over two years. The new capabilities are expected to be available in the second half of 2026 and will complement the previously announced infrastructure framework, which will reach nearly C$19 billion by 2027.

Microsoft is expanding here:

• Azure on-premises cloud for regulated institutions
• a collaboration with AI startup Cohere, whose models will be available on Azure
• and most importantly, a new Threat Intelligence Hubto enhance cybersecurity, AI forensics research and collaboration with the Canadian government

As a result, Canada will become one of the major North American hubs in AI security - a segment that is as crucial as the data centres themselves.

Microsoft's global AI roadmap is filling up fast

Within months, Microsoft announced billions of dollars of investment in:

• Portugal
• United Arab Emirates
• India
• Canada

This rapid succession of decisions shows that the company is responding to the dramatically increasing demand for AI computing power. At the same time, Microsoft acknowledges that Azure capacity will be scarce until at least 2026. In the last fiscal quarter alone, the company spent a record $35 billion in capital expenditures - and warns that it will grow even more aggressively in 2026.

Why Microsoft is acting so quickly

The main motivation is to keep pace in the race for AI markets, which today are decided by who can offer the most available capacity. Big Tech is experiencing an era of record valuations, but also growing pressure from investors who expect tangible results. Data centers are the most tangible pillar on which the entire AI economy stands today - without them, it would be impossible to train models, run cloud services, or support generative AI for enterprises.

Moreover, Microsoft faces competition:

• AWS, which is investing in its own chips and datacenters
• Google, which is significantly bolstering its Cloud TPU roadmap
• and younger players led by competitors focused on training models

Impact by 2030: A network that can change the dynamics of the AI market

If Microsoft actually completes all the announced projects, it will have a unique advantage by 2030. India would become Asia's largest Azure hub, Canada a major base for AI security and research, and European and Middle Eastern projects would fill strategic regions needed for global distribution of computing power.

By then, Microsoft may have a similar dominance in AI infrastructure as Google had in search fifteen years ago - one that competitors are struggling to catch up to.

The risks and weaknesses of Microsoft's AI expansion

While Microsoft's investment looks monumental, and the company is one of the few actively building global infrastructure on such a large scale today, there are factors that could slow the pace of expansion. The first is the enormous capital intensity of the entire project. Microsoft is already reporting a record CAPEX of over $35 billion for the quarter and announcing further growth, which may weigh on cash flow and sensitively set investor expectations in the long run. For hyperscalers, however, the return on investment in datacenters is a long haul - the results take years to come, and that's only if demand doesn't drop.

Another weakness is the limits in supply chains. The AI boom has caused a global shortage of GPUs, network cards, fibre optic jumpers and transformers for power grids. Microsoft can invest tens of billions, but without enough chips, electricity and materials, construction will slow. The company itself points out that Azure's capacity will be stretched until at least 2026 - suggesting demand outstrips supply by multiples.

The energy intensity of AI datacenters is also a significant risk. Each new Azure region requires massive transmission reinforcements, infrastructure modifications, and often negotiations with local regulators. These processes are slow and often drag on for years. At the same time, regulatory pressures can emerge as governments around the world begin to address how large an environmental and energy footprint AI infrastructure will leave.

Tech Insight: How Microsoft is building next-generation AI infrastructure

Behind the investments in India, Canada and other regions are not just traditional data centers, but a whole new generation of AI infrastructure designed to train and run giant models. Microsoft is building so-called hyperscale clusters with hundreds of thousands of GPUs that connect with extremely fast Ethernet and InfiniBand data networks - the technology needed to train models the size of GPT-4.1, Gemini or Claude. The computational core of these clusters today consists mainly of Nvidia H100 a H200but increasingly, custom chips are also expected to play a role Maia 100 for training and Cobalt 100 for inference.

The power consumption of these centres is measured in the hundreds of megawatts - comparable to a small city. That's why Microsoft is investing not only in data buildings, but also in power infrastructure, transformers, cooling and optimized modular systems. Modern Azure datacenters use extensive liquid cooling systems to keep GPU clusters running, and are also experimenting with new types of server racks designed specifically for AI.

Optimising data links is also an important part of the strategy. Minimal latency between GPUs is essential for training large models. For this reason, Microsoft is investing in the design of "dragonfly+" and "fat tree" network structures that reduce the risk of network congestion. At the same time, it is strengthening its own software layer - Microsoft DeepSpeed - to improve the efficiency of training large models and reduce their computational complexity.

When these elements come together, the result is an infrastructure that is unmatched by conventional cloud datacenters. These are extremely specialized units where a single training cluster can cost over a billion dollars and take years to build. Microsoft is now building this infrastructure in multiple countries simultaneously, a pace that is historically unprecedented from a technology perspective.

American infrastructure is entering a new era of expansion, and one of its clearest signals is the newly approved multibillion-dollar framework for transportation projects in Seattle. Beneath the surface, this marks a moment that could redefine not only regional mobility, but also the competitive landscape for companies operating in transportation engineering. The billion-dollar Sound Transit MATOC framework unlocks access to a capital program exceeding 60 billion dollars — one of the largest infrastructure plans currently underway in the United States. The move highlights not just the scale of investment, but also the priorities shaping U.S. transportation policy: resilience, sustainability, and the modernization of systems whose technical complexity is rising rapidly.

From an investor’s perspective, contracts of this nature are far more than administrative procedures. They function as indicators of trust, technological capability, and the ability to participate in multi-decade urban transformation. As U.S. infrastructure moves toward long-cycle capital programs, participation in MATOC frameworks becomes one of the strongest predictors of future awards and revenue growth for engineering firms.

Top Points

• Framework contract has a ceiling $1 billion and covers a period of 5-7 years.
• It is part of a gigantic $60 billion modernization program of public transportation in the Seattle area.
• The projects include light-rail expansion, system resiliency, digitization, climate resiliency and infrastructure repair.
• Selection into the MATOC framework is a ticket to dozens of high-tech subcontracts.
• The Seattle region is one of the fastest growing transportation markets in the U.S. and serves as a model for other U.S. cities.

Why MATOC is critical to Parsons $PSN and what the firm gains

Parsons' selection to the billion-dollar MATOC Sound Transit framework is not just another contract in a long list of engineering projects. It's an acknowledgement that the firm is among the few entities that can design and integrate the most complex transportation systems in the U.S. MATOC is the framework that Sound Transit uses to procure dozens of separate projects under its $60 billion public transportation development program. By earning a spot among the major design and engineering contractors, Parsons opens up access to work on expanding the light-rail network, digitizing operations, enhancing climate-resilient infrastructure, and upgrading existing transit hubs.

For Parsons, this means two key things: A steady flow of high-margin design work a a strong position in one of the most dynamic transportation markets in the U.S.. In addition, MATOC acts as a multiplier for future opportunities - the firm behind the design of lines, stations or control systems is very often involved in other phases of the project, from construction supervision to technology integration. In an environment where the U.S. is launching the largest infrastructure investment in decades, this is a strategically significant input that can determine Parsons' growth for many years to come.

• Sound Transit announced that Parsons has been awarded a place on the billion-dollar framework MATOC - which means access to contracts with an overall cap of $1 billion over the period 5-7 years. This is not a guaranteed amount, but historically, companies participating in similar frameworks have been able to 10-25% of the total volumewhich would mean potential revenue for Parsons in the range of USD 100-250 million spread over several years.

What is the significance of a billion-dollar MATOC?

At the heart of the framework contract is the design and technical preparation of key infrastructure - lines, bridges, electrification, stations and digital control systems. In transport projects, the design phase is of particular value because the design firm is very often also involved in supervision, systems integration and long-term modernisation phases. This means that input into the MATOC framework can deliver much more than task orders alone. It is the start of a long-term technology partnership that evolves as the region increases the capacity of its transport network.

Another micro element is the structure of the projects: Sound Transit is expanding light rail, upgrading existing lines, and investing massively in climate-resilient infrastructure.

Strategic significance: why Seattle is becoming America's mobility lab

Pacific Northwest region faces challenges that are increasingly common in the U.S.: congested roads, growing population pressure, urbanization, and climate extremes. Transportation investments here are not cosmetic fixes - they are responses to a structural problem. At the same time, Seattle is one of the most technologically advanced markets in the U.S., which means higher demand for digitized control systems, predictive maintenance, and traffic automation. Thus, selection into a program like this carries with it a reputational value-add: being present in a "model" U.S. transportation system.

Competition and market environment

The engineering and design services sector is experiencing a boom driven by the federal IIJA and IRA. However, public contracting remains extremely competitive, especially in transportation hubs such as Seattle, Los Angeles, and San Francisco. Master contracts are a way for individual transit agencies to protect themselves from price shocks while gaining confidence that they will have sufficient qualified capacity.

The main competitors in such contracts tend to be:

• Jacobs $J
• AECOM $ACM
• WSP Global
• HDR
• Stantec $STN

All of these players rely on years of experience, quality references and the ability to deliver large scale projects. Once in MATOC, whoever gets the job gets access to the elite league of American engineering.

Project risks

• Slow assignment of task orderstypical of Sound Transit.
• Cost escalationwhich occurs frequently in the region (historically up to +40% on some projects).
• Political cycles and changes in city or state priorities.
• Lack of qualified engineers in the U.S., which can limit the pace of performance.
• Potential delays associated with geotechnical complications. (common with Seattle light rail - tunnels, slopes, coastal geology).

How MATOC will affect cash flow and when it will show up in the company's numbers

Framework contracts of this type have specific financial dynamics that are often misunderstood by investors looking only at the overall value of the contract. MATOC is not a one-off contract - it is a multi-year stream of design and integration work that unfolds incrementally as Sound Transit issues individual task orders. This means that the benefits don't come in leaps and bounds, but are layered into the backlog and with it the cash flow.

From Parsons' perspective, design projects have two important characteristics: they require almost no capex and most costs are variable. This creates a very clean cash-flow that can lift operating margins even when the construction part of the projects has not yet started. Historically, the first revenues from MATOC programs appear 6-12 months after signing the frameworkwith the largest volumes coming in the second and third years. This is key for investors looking for companies with a long-term predictable and stable order flow.

Comparing margins in the AEC sector and why Seattle has the potential for above-average profitability

Engineering firms are often perceived as a low-margin sector, but the reality is different for transportation projects. Design-build contracts for public agencies - especially in areas with complex geology and high technology requirements - achieve margins that vary significantly by project type.

Typical margins in the AEC sector:

• Standard design: 8-12 %
• system integration, digitisation, resiliency: 12-18 %
• high-complexity rail projects (Seattle, LA, Bay Area): 15-20 %

Seattle is one of the regions with the highest technical complexity of projects in the whole USA. Link Light Rail extensions require tunnels, bridge structures, advanced control systems and integration with legacy parts of the network. This is exactly the environment where Parsons has traditionally achieved above-average margins.

For investors, this means that the billion-dollar MATOC is not just about volumebut about the quality of revenuethat can significantly improve the profitability profile.

Pipeline of US transportation investments: why this deal comes at the best possible time

Sound Transit's billion-dollar framework doesn't win Parsons in isolation - it comes at a time when the United States is unleashing the biggest wave of transportation investment since the 1950s. IIJA (Infrastructure Investment and Jobs Act) makes more than $1 trillion in funding available, but the reality is even more interesting: most transportation agency budgets won't be competed until 2026-2030.

Why is this important?

• Cities are just finalizing project documents
• Transportation agencies have shifting budgets due to pandemics, inflation and revisions
• federal money is released gradually and late
• competition in some segments is weakening due to lack of capacity

So Seattle is not a lone victory. It is a pilot ticket to a multi-year wave of contractsthat will come from metropolitan areas like Denver, Dallas, the Bay Area, Phoenix, Atlanta and Chicago.

Investors can thus read Sound Transit MATOC as a signal that Parsons is well positioned for the next five to 10 years.

The technology trends that are changing transportation infrastructure - and why Parsons is benefiting from them

Transportation projects are no longer just about bridge and track construction. Modern public transport operates on the principles of digital management, predictive maintenance and resilience to weather extremes. This fundamentally increases the value of companies that combine engineering with technology.

The most important trends include:

• digital twins - digital replicas of entire transport systems for traffic simulation
• ATO (automated train operation) - technology used in the world's most advanced metro projects
• cyber-resilience - defending critical infrastructure against cyber-attacks
• energy optimisation - working with energy recovery and advanced traction systems
• climate adaptation - integration of flood, earthquake and erosion resistant elements

Parsons is on the cutting edge of these trends due to its historical focus on defense systems, cybersecurity and intelligent transportation technologies. Sound Transit's MATOC contract covers these sectors - meaning that technologically advanced companies have a clear competitive advantage.

Investment scenarios

Optimistic scenario

The framework will be fully utilized, task orders will come in quickly and will be above average in size. Technical complexity of projects will increase margins and the firm will gain advantages in other regional contracts (LA Metro, RTD Denver, Bay Area Rapid Transit). Combined with the U.S. infrastructure wave, backlog will increase significantly and valuations will approach the upper range of the sector.

Potential impact on the stock: +35-50% in 12-24 months.

Realistic scenario

Contracts will be awarded incrementally and the importance of the contract will be mainly reflected in backlog, not immediately in earnings. Nevertheless, this is stable and high-quality growth that will support valuations and reduce the risk premium.

Potential impact on the stock: +15-25% over 12 months.

Pessimistic scenario

Task orders will be slow in coming, Sound Transit will face political pressures or cost escalations, and some projects will be deferred. The framework will remain strategically valuable but financially less significant.

Possible impact on the stock: stagnation or -5 to -15%.

What to take away from the article

• The billion-dollar MATOC is not a one-off contract, but a ticket to a long-term investment program.
• Seattle is one of the most ambitious transportation systems in the U.S. - participating in the program is both a prestige and a strategic advantage.
• The high technical complexity of the projects increases the engineering firms' margins.
• For investors, it is an indicator of future backlog growth, cash-flow stability and risk reduction.
• Transportation infrastructure in the US is at the beginning of the largest investment wave in decades.

Wall Street seems calm, volatility is at multi-year lows, and the S&P 500 continues to rally. But market history teaches us one thing: extremely low VIX levels often come before sharp corrections. Is this serenity a sign of strength — or just the calm before a storm?

How the VIX works

The VIX volatility index, often dubbed the fear index, measures the expected volatility of the S&P 500 stock index over the next 30 days. It is calculated from the prices of option contracts on the S&P 500 index, and therefore reflects the degree of fear or uncertainty investors have about the future direction of the market. Typically, the VIX has an inverse relationship with the S&P 500 Index.

When stocks fall sharply and fear grows among investors, VIX values rise, and conversely, when stocks rise, VIX values fall. In other words, increased volatility and nervousness in the markets will result in a higher VIX, while a calm, stable period means a low VIX. In practice, therefore, VIX levels are often interpreted as a measure of sentiment.

Values above 30 typically indicate significant market nervousness and fear, while values below 20 signal a relatively calm and optimistic environment. Historical data support this negative correlation. The daily percentage changes in the S&P 500 Index and the VIX show a strong negative correlation of around -0.7 over the long term. However, it is worth adding that on roughly 20% of trading days, both indices can move in the same direction, so this is not an absolute law). The typical long-term level of the VIX is around 17-20 (the historical average of the VIX is roughly 19.6), which helps us compare current values to the past. The more significantly the VIX is below this level, the more calm the markets are in terms of expected volatility.

Historical view

As a sentiment indicator, the VIX has played a significant role during major market cycles. In times of financial crises and panics, we typically see a sharp rise in the VIX. For example, in October 2008 (the height of the financial crisis) or March 2020 (the beginning of the pandemic panic), the VIX rose to extreme heights (above 50), reflecting the peak level of fear in the market. Such moments of maximum panic often coincided with market days when the S&P 500 index reached a local low followed by an upward reversal.

In other words, history shows that an extremely high VIX tends to be a contrarian signal of impending improvement. When fear peaks, stocks tend to have the worst behind them. Analysts point out that VIX readings above 50 are very rare (in the past two decades, the VIX has only crossed the 50 mark a few times), but each time occurred during the sharpest sell-offs when the market was nearing its bottom.

In these situations, the market values risk so highly that, paradoxically, from a long-term investor's perspective, it can be a good time to buy undervalued stocks. Conversely, in periods of exceptionally low volatility, when the VIX remains well below its long-term average, markets can become overconfident. We saw such investor sentiment in 2017, for example, when the VIX oscillated near historic lows (around 10) for most of the year, or in 2021, when the VIX held around the 15 level for a prolonged period. Unfortunately, these extended periods of calm often preceded later corrections in equity markets once a new source of uncertainty emerged.

A low VIX does not mean that markets are risk-free. Quite the contrary. Very low or abnormally low VIX readings can indicate investor complacency and potentially signal that a market decline is imminent.

Authors of this study even found that extreme VIX levels are often used by investors as a contrarian indicator for market timing. A high VIX indicates capitulation (and therefore a buying opportunity), while an unusually low VIX indicates a possible threat of a correction.

Practical examples confirm this. Without major fluctuations, 2017 ended in early February 2018 with a sudden sell-off (that's when the VIX shot up and the S&P 500 index plunged within days - an event known as the "Volmageddon"). Similarly, after a calm end to 2021, the market went into a sharp decline in early 2022, as it became clear that the persistent low volatility of the previous period did not mean an absence of risk. Inflation and monetary policy tightening gradually escalated, eventually carrying the VIX higher and the S&P 500 index headed lower. At the time, it even fell into bear market.

So history reminds us that the calm before the storm in the markets is often discernible precisely through unusually subdued volatility.

The current environment

So far, 2025 has looked good for US equities, with the S&P 500 index rising for most of the year. Although there was a minor wobble in mid-November, with a spike in uncertainty and the VIX jumping to around 30 at one point (marking a short-term spike in concerns to levels comparable to a major sell-off), the situation soon calmed down. The markets showed resilience, and despite that spike, November eventually ended more or less flat for the S&P 500, and the longer-term uptrend remained intact.

The VIX quickly returned to normal. At the beginning of December, it was around 15 points, roughly in line with the average of recent months. Such low VIX readings suggest that investors are entering the year-end relatively calm and without significant concerns. The macroeconomic environment is also contributing to this. Currently, the market is mainly focused on the upcoming meeting of the US Federal Reserve, the results of which will be known tomorrow, i.e. on 10 December, and which is expected to a 0.25 percentage point cut in interest rates.

The prospect of looser monetary policy has traditionally had a rather positive effect on equities, calming volatility. Investors believe that lower rates will boost the economy and corporate profits. Moreover, December has historically been supported by seasonal factors. The term "Santa Claus rally", which refers to the tendency of the stock market to appreciate at the end of the year (especially in the final week of December and the first two trading days of January). Statistically speaking, December tends to be a really strong month for stocks.

Over the last 35 years, the S&P 500 has averaged around +1.3% in December, one of the best months of the year. So far this year has not deviated significantly from historical trends. Equity markets are up 0.12% since the start of the last month of 2025. Barring unforeseen events, there is a decent chance that the typical year-end rally will occur.

Interestingly, even volatility has its typical behavior in December - although many investors associate the Christmas season with calm, data shows that December tends to see a slight increase in volatility. Specifically, the VIX index has historically risen slightly in December, averaging roughly +1.2% (since 1990). This is not a dramatic jump, but it does signal that even during a mostly positive December for equities, there can be minor fluctuations and uncertainty, typically in early December while awaiting Fed results, for example, or due to various adjustments to investors' portfolios before year-end.

This year, in fact, we saw one episode of increased volatility just before December (the aforementioned November VIX spike). But so far, the market has absorbed all of these fluctuations quickly and the overall VIX trend remains low. According to StoneX analysts the potential for unexpected shocks, such as geopolitical ones, is of course still in play, but as long as investors only react to any bad news with a short-term increase in nervousness followed by a return to calm, the VIX is likely to remain at generally low levels.

Outlook

What does all this mean for the future? The low VIX in early December generally supports bullish sentiment. It indicates investor confidence and willingness to buy stocks, which is supportive of continued growth in the S&P 500. The current combination of positive seasonality (anticipation of a Santa Claus rally), accommodative monetary policy (possible rate cuts) and low volatility creates conditions in which stocks could strengthen further by year-end.

Technical analysis also supports this. The situation on the charts looked promising in early December. The S&P 500 index has climbed out of the previous consolidation and broken through resistance, which, together with the aforementioned fundamental and seasonal factors, provides a basis for potential continued growth. In other words, so far it appears that the market could repeat its historical pattern and end the year on a positive note.

On the other hand, caution should be exercised. As we discussed above, too low volatility may hide the seeds of a future storm. According to this study the gradual rise in the VIX is one of the warning signs that the market may be about to take a turn for the worse. In late 2021, for example, the VIX began to rise modestly, reflecting growing uncertainty from inflation. And early 2022 actually saw a sharp decline in equities as the negative news materialized.

In the context of December 2025, then, the VIX and its impact on the S&P 500 can be summarized as follows: the currently low VIX supports continued growth in stocks and reflects investor confidence. Meanwhile, at the end of 2025, all indications are that the stock market could end the year successfully under the tutelage of a Santa Claus rally in an environment of relatively low volatility.

Airbnb entered the third quarter with a clear mission: accelerate growth while strengthening its position as one of the most profitable companies in global travel. The results show a company operating at full momentum. Revenue and bookings grew faster than expected, margins expanded to record levels, and user engagement continued to rise, powered by a strong mobile ecosystem and improved personalization. Q3 ultimately became one of the most profitable quarters in Airbnb’s history.

At the same time, Airbnb is laying the foundations for a much broader transformation. The introduction of AI-powered tools, expansion beyond traditional lodging, and early steps toward building social layers into the platform signal a long-term ambition to redefine what a travel marketplace can be. Combined with exceptionally strong free cash flow, these developments reinforce the company’s position as one of the most resilient and forward-looking players in the sector.

How was the last quarter?

Airbnb $ABNB entered the third quarter with an ambition to accelerate growth after several quarters where comparative fundamentals made it difficult to interpret developments. However, the results showed that the platform is on solid footing. Revenues of nearly $4.1 billion represent solid double-digit growth in an environment where global travel demand is gradually normalizing. Airbnb has been able to combine steady growth in bookings with a modest increase in average nightly rate, while changes in product mix - the growing importance of longer stays and a higher proportion of mobile bookings - have contributed positively to improved overall monetisation.

One of the strongest signals is the development of Gross Booking Value, i.e. total bookings, which increased by 14% year-on-year. This growth not only outpaces revenue growth, but also demonstrates that Airbnb still has significant room for expansion in key regions. The fastest growing markets were outside of North America, which posted double-digit year-over-year growth in Nights & Seats Booked. In addition to traditionally strong Europe, the situation in Asia improved significantly, where new features, localised marketing campaigns and flexible payment options are increasing penetration.

It was an exceptional period in terms of profitability. Adjusted EBITDA reached a record $2.1 billion and margins of 50% are now among the highest in the global technology sector. This confirms that Airbnb's model has enormous operating leverage: new bookings are delivering significantly higher margins than traditional OTA platforms because the fixed cost base is not growing at the same rate as transaction volume. Investments in customer support automation have also had a positive impact, with the new AI-assistant significantly reducing the demands on human operators.

The cash flow profile has also improved strongly. Free cash flow of $1.3 billion clearly shows that the company is generating capital in excess of investment needs. This provides it with high flexibility to fund growth in new verticals (Services & Experiences), potential acquisitions and when considering future capital return programs. The fact that the travel player's FCF margin is 33% is unique to the sector.

Product enhancements have also been significant. The 'Reserve Now, Pay Later' option has led to an immediate increase in bookings, particularly among younger users. Updated cancellation policies reduce barriers to booking and increase trust on both sides of the transaction. Improved mapping cues deliver higher conversion and flexible carousels allow relevant offers to be displayed outside of the original guest filter. All of this has translated into a strong rebound in organic demand.

• Full presentation with results.

Management commentary

Management (CEO Brian Chesky) emphasizes four main priorities: product improvement, expansion into new markets, broadening the offering, and deep integration of artificial intelligence. Features Reserve Now, Pay Later has significantly increased the number of bookings and will be further scaled globally. Changes to cancellation policies reduce booking barriers and improve conversion, while new mapping cues and flexible search results bring more relevant options to guests.

A strategy to diversify beyond the accommodation itself is also evident. Airbnb Experiences & Services attract not only new hosts, but also users who do not use accommodation services. This creates a new growth vertical that can change the revenue structure in the long term. At the same time, the company is moving strongly towards AI-native platformthat will personalise search, provide instant support and, in the future, allow users to plan their journey in a conversational way.

Outlook

• Revenue: USD 2.66-2.72 billion
  - Year-on-year growth 7-10 %, slight positive FX effect
• GBV: Growth low-double-digits year-on-year
  - driven by higher price level (ADRs) and a steadily increasing number of bookings
• Nights & Seats Booked: Growth mid-single-digits
  - Significantly challenging comparative base after strong Q4 2024
• Implied take-rate: YoY stable, no major changes
• Profitability: Adjusted EBITDA will be approximately flat or slightly lower year-over-year,
  as Airbnb invests in new features and development of Experiences and services.

Long-term results

Airbnb's long-term development shows the structural transformation of the platform from a pure growth player into one of the most efficient and profitable digital companies in the world. Revenues have grown at a consistent rate since 2021, reaching $11.1 billion in 2024, representing nearly 12% growth. This development is all the more remarkable given that the company has had to absorb the normalization of pandemic peak demand, tightening regulation in some major cities, and increased competitive pressure in key markets.

Meanwhile, the cost structure has improved significantly. Gross profit rose to $9.2 billion, and its growth far outpaced that of cost of sales. This confirms that both technology investments and process automation are lifting the platform's operational efficiency. Over the past few years, Airbnb has overhauled its internal infrastructure, improved antifraud systems, and deployed AI in both support and recommendation algorithms - and these steps are now delivering long-term margin improvements.

Operating profit rose to $2.55 billion in 2024, up 68% year-over-year. This result is due to a combination of savings, higher monetization of the service, a strong global brand and a shift in user behavior as they increasingly use the mobile app. EBITDA of $2.62 billion represents a significant shift from earlier years, when the company was just stabilizing its post-pandemic model and facing increased investment demands.

Today, Airbnb is a company with a very clean capital profile: reasonable debt, no significant equity investments, a stable number of shares outstanding and a high level of cash flow generated. This is a fundamental difference from traditional travel companies that carry high fixed costs in the form of property, aircraft or hotel infrastructure. Airbnb's platform model is one of the most efficient in the entire consumer sector in terms of return on capital.

News

• Global feature launch Reserve Now, Pay Laterwhich significantly boosted conversions in the US.
• Expansion of cancellation policy with a positive impact on customer experience and support utilization.
• New social features - Who's Going, Connections, direct messaging between Experiences participants.
• AI-assistant can resolve a portion of requests in seconds and reduces operator intervention by 15%.
• More than 110,000 new host requests for Experiences & Services.
• Local growth campaigns in Brazil, Korea and Japan resulted in double-digit increases in bookings.

Shareholding structure

Institutional shareholding exceeds 85%, which is typical of strongly established technology companies. The largest shareholdings are held by:

• Vanguard Group - 9.00%
• BlackRock - 7.56%
• State Street - 4.23%
• Harris Associates - 3.63%

The stable institutional base provides long-term support for the stock.

Analyst expectations

DA Davidson reaffirmed the recommendation Buy for Airbnb stock and set a price target of $155, representing nearly 27% potential upside from current levels. The analysts highlight the extremely rapid growth of Airbnb's new Services division , which was only officially launched in May 2025. The number of available services in the 84 cities tracked is up 129% since June and 81% since September, with supply already slightly outpacing Experiences. This segment is growing fastest in the US and Europe, where Services already significantly outperform Experiences.

Fair Price

Hollywood is waking up to one of the most dramatic media clashes in decades. Just days after Netflix emerged as the apparent winner of the long-running auction for Warner Bros. Discovery, Paramount Skydance has detonated the narrative with an unexpected twist: a hostile takeover bid worth $108.4 billion. The offer aims to stop what was poised to become the largest acquisition in streaming history. Until now, the market had largely accepted that Netflix would secure Warner’s studios, television assets and HBO Max for roughly $72 billion — a combination that would give it unprecedented control over the entertainment landscape.

But the Paramount bid reshapes the battlefield entirely. The company is pushing to become a media powerhouse capable of competing with Netflix as well as tech giants like Apple and Amazon. At the same time, Paramount argues that Warner Bros. skewed the sale process by favouring Netflix from the beginning, unfairly disadvantaging other bidders. The political dimension is also intensifying: President Trump publicly questioned whether Netflix and Warner Bros. should be allowed to merge and hinted he may intervene. At stake is power, content ownership, and the future structure of Hollywood itself.

Paramount pulls out its biggest weapon: $108 billion and the desire to become a media hegemon

Paramount Skydance $PARA has been pushing its "all-in" strategy since September, when it sent its first unsolicited takeover bid to Warner Bros. After a series of rejections, it is now taking an aggressive tactic, offering $30 a share, more than Netflix $NFLX, whose bid values $WBD at about $28 a share. The difference could be decisive - especially considering that Paramount, backed by the Ellison dynasty fortune, is probably the only strategic player that can offer Warners a combination of capital, synergies and Hollywood roots.

Although Paramount has a turbulent history of rivalry with Disney, Universal and Warner Bros., its new management sees the deal as an opportunity to build a conglomerate with a huge catalog of IP that would include both Paramount Pictures and Warner Bros. Discovery. For Netflix, on the other hand, the goal is to strengthen its own streaming business, while Paramount is looking to strengthen its entire media empire. It is this divergent motivation that is now creating the biggest strategic clash in modern Hollywood history.

Netflix is not giving up: A historic offer and an unusually high breakup fee

Netflix is sticking to its original strategy. Its offer includes a shocking breakup fee of $5.8 billion - the largest ever offered by a streaming platform. In doing so, Netflix is showing that it is prepared to risk everything to gain control of HBO, its vast film library and its historic Burbank studios. For a company that has so far grown up without its own studio and without a vast archive, this is a strategic change that fundamentally defines its future for the next 20 years.

Netflix argues that the acquisition will bring lower prices to consumers by bundling services. But critics see the opposite: the giant combination could lead to higher prices, reduced competition and the loss of thousands of jobs. Hollywood unions are also stepping in, warning that the "superstreamer" could further disrupt the entertainment industry's job market.

• Don't overlook: Netflix to acquire Warner Bros. studios and HBO Max in groundbreaking $72 billion deal

Politics enters Hollywood: Trump, the Senate and the antitrust storm

Although the acquisition is proceeding at an extraordinary pace, regulation remains the biggest hurdle. A potential Netflix + Warner Bros. conglomerate would have over 450 million subscribers, control two of the largest libraries of film and television content, and become the largest commercial player in streaming history. This immediately raised concerns on Capitol Hill.

President Trump saidthat "Netflix and Warner Bros. may have a problem with market dominance" and that he himself would have "a say in what happens". Republican Senators Darrell Issa and Mike Lee called on regulators to stop or severely limit the transaction. Hollywood thus finds itself in the midst of a political storm like the one it last experienced with the Disney-Fox merger.

Paramount vs. Netflix: two visions of the future of content collide

Beneath the surface, these are fundamentally different strategies. Paramount wants to create a traditional media conglomerate that will link two historic studios and their cinematic universes. Netflix, on the other hand, wants to use IP to expand into new areas - gaming, live streaming or merchandising.

With the giant Warner Bros. catalog, it would get an immediate head start in gaming strategy, where it is only gaining experience so far. The acquisition would also open the way for him to enter entirely new areas such as theme parks, licensed products or major film events.

Whoever wins the battle, one thing is certain: This marks the end of an era in which streaming platforms operated separately from traditional studios. Now begins an era where the lines between Hollywood and the tech world will be definitively erased.

Future scenarios: who can win the battle for Warner Bros.

Events surrounding Warner Bros. have now reached a stage where three fundamentally different scenarios are possible. Each of them would determine the shape of the Hollywood and streaming market for many years to come. The first, and simplest, is that Paramount's hostile attack succeeds. If Warner Bros. accepts a higher offer and investors push to maximize value, Paramount Skydance may indeed take control of the studio. This scenario would combine the two traditional Hollywood brands and create a conglomerate built on the old studio model - with fixed franchises, licensed content and a production structure close to what Hollywood has known for the last hundred years.

The second scenario assumes that Netflix will defend its position and eventually complete the acquisition. This would mean a cleaner, simpler and faster transaction for Warner Bros. as Netflix also offers a record breakup fee and as a global streaming platform, it understands well how to monetize content in the digital environment. Unless regulators present an insurmountable obstacle, this scenario would be the least complicated in the short term - and revolutionary for Netflix in the long term.

A third, increasingly realistic scenario is that regulation stops both transactions. The heightened political tensions, concerns about the concentration of power, and the attention the case has received on Capitol Hill could lead to Warner Bros. finding itself at an impasse: it will not be able to access either Paramount or Netflix. In that case, a spin-off of assets, a restructuring, or a search for an entirely new buyer that does not raise antitrust concerns would likely follow. This scenario is the least predictable - and the most destabilizing for investors and Hollywood as a whole.

When investors debate the fastest-growing stocks, few would expect to find a company whose success is built on a spray invented more than half a century ago. Yet this business has become one of the clearest examples of enduring value: minimal capital needs, stable demand, exceptional profitability, and a brand with longevity more typical of a financial institution than a consumer-goods manufacturer.

Its flagship product has turned into a cultural icon — and from that icon stems an investment story that resists traditional cycles. The company can sell the same item generation after generation while maintaining virtually untouched margins. Markets reward that kind of resilience with a premium valuation. Still, one question continues to follow the business: can this brand sustain its elevated multiples, or is its long-term growth ceiling drawing dangerously near?

Top points:

• Steadily growing sales in the range of 4-10% per year and an exceptionally high gross margin of over 54%.
• Free cash flow well above the level needed for reinvestment, giving the company room to reward shareholders.
• ROIC around 44%, a level surpassed by few publicly traded companies in the world.
• Very conservative balance sheet - almost no long-term debt, high liquidity, Altman Z-Score of 11.8.
• Dependence on one product despite gradual diversification - a potential weakness and strength at the same time.

Company profile: How a category-busting phenomenon is emerging

WD-40, originally known as Rocket Chemical Company, is an American manufacturer of household and multi-purpose products, including its signature WD-40 brand, as well as 3-In-One Oil, Lava, Spot Shot, X-14, Carpet Fresh, GT85, 1001, Solvol, 2000 Flushes and No Vac. It is headquartered in San Diego, California.

WD-40 Company $WDFC is not based on a technological revolution, but on a capitalization logic that is difficult to replicate. Its position can only be understood when we dissect the structure of its business more deeply than as "a single spray brand".

Three pillars, three sources of competitive advantage

1. Iconic product with extraordinary loyalty - The core Multi-Use Product is a symbol of trust. People buy it reflexively - not because they compare parameters, but because they know it works. This "brand inertia" is why competitors, while they exist, are virtually no threat to market share.

2. Simple production, low costs, high margins - Raw materials are not extremely expensive, production is standardised and the product is logistically simple. This combination allows the company to generate margins at the level of technology companies - an anomaly in the consumer goods segment.

3. Diversification beyond the core product - The brand has gradually expanded its portfolio to include professional lines (Specialist), household products and specific lubricants or cleaners. These segments are growing faster than the core and increasing the resilience of the whole.

Where the business can grow fastest in the next 5 years

This business looks like a stable "one-product company" at first glance, but the reality is more complex. Beneath the surface, there are several growth vectors that can fundamentally change the trajectory of the business - and explain why the market dares to value the business at a premium multiple.

Explosion in demand for professional maintenance products

Segment Specialist is growing twice as fast as the consumer arm.
This market includes:

• Industrial maintenance sprays
• automotive lubricants
• machinery and equipment maintenance products
• cleaners and degreasers for professionals

What's the key?

• Higher unit price
• higher recurring consumption
• less price-sensitive customers

This segment has potential double sales in 5-7 years.

Pricing without losing demand

When a business gets more expensive, customers stay. This is the purest definition pricing powerthat an investor could wish for.

High loyalty makes it possible:

• revenue growth without volume expansion
• stable margins even as costs rise
• strong cash flow from year to year

Herein lies the money machine that competitors find hard to replicate.

Geographic expansion outside the U.S.

Brand penetration is low in many countries. Yet the business:

• has a global brand
• doesn't need massive R&D
• is based on simple production chemistry
• already has a functional distribution network

Latin America and Southeast Asia can bring additional tens of percent growth.

E-commerce as a new driver of margins

Online sales enable:

• Higher margins (without distributors),
• more efficient cross-sell and upsell,
• testing of new products with minimal costs.

Pricing and elasticity of demand: why it can afford to get more expensive

The power of this business is best demonstrated by one thing: when input costs rise, the company simply adjusts pricing - and demand runs away. For most consumer companies, this would lead to a visible decline in volumes, but here historical experience shows that customers react only minimally. This is a typical example of a product that people buy because "it works" and they have a good long-term experience with it.

In practice, this means that the firm has very low price elasticity. A rise in price of a few percent will usually translate directly into sales and margins, not a drop in volume sold. This is one of the reasons why it can grow profits faster than sales - part of the growth is purely a result of the ability to pass on higher costs to end prices. There is a limit, of course: in a severe recessionary environment, or with the aggressive emergence of cheap private labels, elasticity could increase. So far, however, history shows that brand is above price - customers are more concerned with having the product on hand than a few dollars higher price.

Management

The strength of this business rests not only on the brand, but also on exceptionally stable management. The WD-40 Company's management has long been seen as one of the most disciplined in the entire consumer sector. The company relies on consistency, low management turnover and clear strategic direction.

CEO: Steve Brass

Steve Brass has been the CEO and President of WD-40 Company since 2022. He joined the company in 2019 as Chief Operating Officer, so he is familiar with the internal processes and global distribution infrastructure.

What's important to investors:

• Prior to joining WD-40, he spent more than 28 years at SC Johnsonone of the largest players in the consumer products industry.
• He has deep experience with building global brandspricing power and distribution in the US, Europe, Asia and Latin America.
• At SC Johnson, he was responsible for the growth of a number of brands that worked similarly to WD-40 - low product complexity but high margins due to the strength of the brand.
• Brass is a proponent of the "moat first, growth second" philosophy - protect the core, strengthen the brand, and add growth incrementally through new regions and professional products.

Analyst expectations

DA Davidson reiterated a Buyrating and $300 price target on WD-40 stock after its analysts met with the company's senior management. The stock is now trading around $195, implying a potential upside of about 54% to the target. According to analysts, this is a "high-quality best-of-breed story" that still has multi-source potential for both revenue growth and further expansion of its already strong gross margins. These factors should support steady profit growth over the long term in an environment where the company faces very limited competition, according to DA Davidson.

InvestingPro data confirms that WD-40 maintains an impressive gross margin of over 55% and has increased revenue by nearly 5 %. Despite this strength, the stock has fallen since its 52-week high by 31 % and are trading at around 29 times earningswhich is significantly lower than the peak 43 times in May 2025. the lowest relative level since 2011with the PEG ratio at 0,94 suggests that growth prospects are sufficiently strong relative to the current price.

DA Davidson therefore views the current valuation as an attractive buying opportunity. Its target price of $300 is based on a valuation equivalent to 45 times estimated earnings for fiscal year 2027.. The meeting with management representatives - CEO Steve Brass, CFO Sara Hyzer and VP of Investor Relations Wendy Kelley - reinforced analysts' confidence in the company's medium-term growth profile, according to the research report.

The positive outlook is supported by the latest fiscal fourth-quarter 2025 results, which exceeded Wall Street's expectations. Earnings per share came in at $1.56 versus the forecast $1.26 and revenue was $163.5 million, also above estimates. WD-40 increased sales by approximately 5% year-over-year and saw further improvement in gross margins and acceleration in earnings growth. As a result, analysts at DA Davidson reaffirmed their "Buy" recommendation and view the company's continued improvement in profitability as a key argument for a long-term positive outlook.

Market outlook and future demand: why this 'boring' category still has room to grow

The company's business is based on a simple fact: the world will continue to need to lubricate, loosen, clean and maintain everything from domestic locks to industrial lines in the decades to come. The global market for lubricants and maintenance products is huge - various estimates place it somewhere between $150 billion and $190 billion a year - and while it's not growing at an explosive rate, it's hovering around 3-4% a year over the long term. For a company that maintains a strong brand and above-average margins in this space, it's an ideal environment: it doesn't need "hype", it needs steady, broad-based demand.

The structure of the end markets is also important. Part of the business is based on the household, DIY segments and small workshops, where brand recognition and availability on the shelves of hobby markets or e-shops play a role. Another large block consists of industrial applications, maintenance of machinery and equipment, automotive or generally MRO (maintenance, repair & operations) in factories and plants. Analyses of the MRO market show that industrial maintenance spending is expected to grow at a rate close to 8% per year until 2030, mainly due to digitalisation and pressure to reduce downtime. This is an environment in which the professional line of maintenance products - an area where companies target higher margins - can benefit from the "more maintenance, less replacement" trend in the long term.

Another layer of the story lies in the home and construction segment. Long-term studies of home renovation and maintenance show that household spending on home repairs and improvements in the U.S. has been steadily increasing, fueled by an aging housing stock, higher home prices, and pressure to improve energy efficiency. Any trend toward "keep, don't throw away" plays into the hands of businesses - from renovating older homes to extending the life of equipment in small businesses. Add to that the brand's gradual penetration of markets in Latin America, Asia, and other regions where penetration is still lower than in the U.S. or Western Europe, and you have a combination of moderate but very broad-based growth that can accumulate over many years.

Financial performance

If there is one company that defies the idea that attractive returns cannot be achieved without high growth, it is this one.

The year 2025 showed a typical trend:

• Revenue grew by less than 5%.
• gross profit grew faster than sales
• operating margins remained high
• EPS strengthened by more than 30% mainly due to margins and stable share count

This dynamic shows that profit growth is not dependent on revenue growth - a key advantage for a company that has limits to expansion.

A look at the numbers confirms several key qualities:

• Stability - variability in results is minimal.
• Margin leverage - lower sales growth leads to faster profit growth.
• Low investment requirements - capital expenditure is small relative to cash flow.
• Debt reduction and equity growth support long-term sustainability.

All of this points to a model that does not try to outperform the market, but to outperform it with stability.

Valuation: quality has a price, the question is whether it is too high

High multiples are not new to this company. The market is willing to pay a premium because it knows that this is an extremely efficient company without cyclical volatility. Still, it is worth discussing the valuation in more detail.

Multiples:

• TTM P/E: 16,5× - Relatively reasonable.
• Forward P/E: 37× - Reflects the expected decline in earnings growth in the coming quarters.
• P/B: 9,85×which is very high for a consumer company.
• P/CF around 18×consistent with established premium brands.

Why the market tolerates high price:

• ROIC almost 45 % - the market pays for excellent capital work.
• Low bankruptcy risk - Altman Z-Score of 11.8.
• Low debt, high liquidity, stable demand.
• Brand strength comparable to Coca-Cola, Hershey or Clorox.

What could be the problem:

• Valuation assumes growth that may not come.
• Revenue momentum is declining, the company is not a growth story.
• Any slowdown could mean a revaluation multiple.

In other words, investors are buying quality, not growth.. And quality has a price - the question is whether it's too high.

Moat brands and distribution: why this is a hard business to replace

For many companies, "moat" is referred to more as marketing hyperbole. But here the competitive moat is quite concrete. The brand is so ingrained in everyday use that the product has become almost generic for the entire category. When someone needs to lubricate something or loosen a rusty joint, they often automatically reach for this product without thinking about what alternatives are available. That level of habit and trust is extremely hard to break.

The second layer of the moat is distribution and relationships with retail chains and professional channels. Product is everywhere - from large hobby markets to e-tailers to small hardware stores. It's not a problem for a competitor to produce a similar spray, the problem is getting it to the same place on the shelf and convincing the customer to reach for something different than what they've been using for years. And thirdly, the simplicity of the portfolio means that the company doesn't have to spread its marketing power across dozens of brands. All of the firm's energy is concentrated in reinforcing one central name, which deepens barriers to entry in the long run. For the investor, this means that any competitive pressure is likely to be slow to materialize and the firm's position is more likely to be eroded by a structural change in the market than by a single new player.

Risks: where the story may hit

Although the firm looks undaunted, there are relevant warning signs:

1) Growth is slowing - and the valuation is built on an optimistic outlook.
2) Iconic product accounts for 60% of revenue - concentration could be a threat.
3) Cost of production pressures may gradually erode margins.
4) Broad valuations in the sector can lead to re-rating if sentiment changes.

Opportunities: real factors that can move the business higher

• Expansion strategies in emerging markets.
• Strengthening the Specialist professional range with higher unit value.
• Price increases due to exceptional customer loyalty.
• Marginal market share growth in regions where the brand is not yet fully established.

Investment scenarios

Optimistic scenario: the brand confirms its exceptional strength

Time horizon: 12-24 months
Probability: 25-30 %

What would have to happen

• The company sustains revenue growth between 7-10 %, which is well above the historical norm.
• Pricing would remain strong - even after further price increases, there would be no decline in sales volume.
• Gross margins will shift above 56%due to a better mix of professional products and more favourable input prices.
• The consumer segment will grow more slowly, but the professional segment will grow double digits.which will boost overall profitability.
• The company will accelerate expansion in Europe and Latin America, where brand penetration is still low.

What this will do to the numbers

• EPS can grow 12-15% annually.
• Free cash flow will jump to 140-160 million. USD.
• ROIC will remain above 40 %which is extremely high.
• The company may increase share buybacks - which further increases EPS.

Price target $260-300.

Realistic scenario: stable compounder, slow but sure growth

Time horizon: 12-24 months
Likelihood: 50-55 %

What would have to happen

• Revenue grows 4-6 %, which is consistent with the company's historical norm.
• Gross margins remain stable between 53-54 %.
• The professional segment will grow solidly, but not explosively.
• The consumer market will remain strong thanks to customer loyalty.
• Chemical input inflation will be moderate.

What this will do to the numbers

• EPS will grow 6-8%.
• Free cash flow oscillates around 120-135 million. USD.
• ROIC will remain between 35-40%.

How will the market react

The market will value the company as a classic consumer goods producer with a high-quality brand but without significant growth. This means. 30-35×. Price target of USD 220-250.

Pessimistic scenario: Costs grow faster than prices

Time horizon: 12-24 months
Probability: 15-20 %

What would have to happen

• Raw material prices (lubricants, oils, additives, metal packaging) start to rise due to commodity markets.
• Company will not be able to immediately reflect new costs in prices - 2-3 quarter delay.
• Consumer segment will slow down due to weaker US consumption.
• Professional segment will become more competitive - pressure on margins.

What this will do to the numbers

• Gross margin will drop to 49-51 %.
• EPS will fall by 10-15%.
• Free cash flow will drop to 90-100 mil. USD 100-100.

How will the market react

The market begins to value the company not as a "growth premium" but as a a classic defensive consumer product. This means a significant drop in valuation. 22-26×. Price target $160-190.

What to take away from the article

• The company stands on One of the strongest brands in the entire consumer sectorallowing it to maintain premium prices over the long term without losing demand.
• Its Margins are among the highest in the industry - gross over 54%, operating over 16%, net over 13%.
• ROIC over 40% is extremely rare and confirms that every dollar invested in the business generates a very high return.
• Revenue growth is steady, not explosive - it is a quality business, not a fast-growing businesswhich shapes the expected valuation trend.
• The company generates strong free cash flowwhich allows it to combine investment, dividend increases and buybacks.
• Valuation is highwhich increases the sensitivity to any slowdown in growth or decline in margins.
• The key driver of growth is international expansion and faster scaling of the professional segment.
• The biggest risks are input costs, consumer price elasticity and the potential weakening of the premium P/E multiple.
• Investment scenarios are significantly asymmetric - upside potential is driven by growth, downside potential comes from valuation compression.
• The firm is a typical "quality compounder"which is valued in the portfolio for stability, not short-term momentum.

What do you think about the recent developments around Netflix? Are you buying the stock?

$NFLX announced the takeover of rival company $WBD, which includes, for example, the streaming platform HBO. Paradoxically, this has had a negative effect on the stock and over the past month it has fallen by approximately 10%. Netflix shares hadn’t experienced any significant decline for a long time, but now it’s finally starting to get interesting.

Perex: While Wall Street celebrates new highs, JPMorgan CEO Jamie Dimon issues a stark warning: investors may be dangerously blind to the risks building beneath the surface. From inflation to geopolitical instability and unsustainable debt, the market’s optimism could quickly unravel. Are we sleepwalking into the next financial shock?

In a recent speech, J. Dimon warned against excessive complacency on the part of investors and politicians. He said the world is in a phase that may be far riskier than most investors acknowledge - which is why it is important to be cautious. Dimon's words are not to be taken lightly. The man has successfully led the largest US bank, $JPM, through the 2008 financial crisis and the pandemic shock of 2020, so when he warns that a combination of geopolitical risks, inflation, debt and structural problems could destabilise the global economy, it is appropriate to at least listen to him.

Dimon has openly criticized that current markets rely too heavily on a "soft landing" scenario, i.e. that central banks can tame inflation without triggering a recession. This outlook is now built into the valuations of many assets - from US stocks to bonds. Investors are calculating that the Fed will soon begin a rate-cutting cycle, inflation will remain under control, and corporate profits will begin to rise again. But Jamie Dimon reminds us that the reality is much more complicated. For example, he points to rising geopolitical tensions - be it the war in Ukraine, the strained US-China relationship, or the ongoing threat in the Middle East region. He also points out that inflation may not be as transitory as many would like, and that structural factors such as demographics, deglobalisation or environmental transformation may continue to push corporate costs upwards.

Moreover, Dimon believes that central banks, led by the US Fed, may be underestimating the real inertia of inflationary pressures. Although price growth has slowed considerably in recent months, some key components (such as utility, healthcare or insurance costs) remain high. If inflation stabilises in the 3-4% range, expectations of a rapid and deep rate cut may be misplaced. Dimon also expressed concern that excessive fiscal stimulus and extreme central bank balance sheets have created a systemic dependence on cheap money. If the economy does not receive this support for a prolonged period of time, turbulence in the markets could emerge in the form of sharp swings.

According to Dimon, inflation cannot be relied upon to remain under control permanently when the structure of the world economy is undergoing such fundamental changes. He reminds us that globalisation, which has pushed costs down for decades, is on the wane. Logistics chains are shortening, manufacturing is moving back to the West and governments are intervening in markets more often than ever before. Add to this the green transformation, which requires huge investments and increases the cost of energy production. These themes are also discussed in the recent World Economic Forum reportwhich warns that geopolitical fragmentation can raise inflationary pressures for years to come.

Inflation in the United States between 2000 and 2025

Another key issue is debt. The United States will pass the USD 33 trillion public debt threshold in 2023 (the current US debt is above USD 38 trillion). Debt servicing expenditures (i.e. interest) already constitute one of the fastest growing expenditure blocks of the federal budget. According to the Congressional Budget Office, interest spending will reach $1 trillion per year by 2030. In such an environment, any further crisis may be politically and fiscally difficult to manage. And as the a study by the Bank for International Settlements from 2023, in a high interest rate environment it is unsustainable in the long run to finance rising debt without adjustments to fiscal policy or tax increases.

The evolution of the US federal debt since 2000

From an investor perspective, it is important to understand what such a warning means for asset allocation. If a hard landing does indeed occur, valuations of current markets could be very optimistic. The S&P 500 index is currently trading above 30 times forward earnings, which historically corresponds to an environment of low inflation and stable growth. However, if a stagflationary scenario (i.e., stagnant growth + persistent inflation) were to occur, these multiples would be unsustainable.

Evolution of the S&P 500 P/E since 2011

Dimon's words can also be seen as a criticism of the system of "permanent support" of the market by central banks. Since the 2008 financial crisis, investors have become accustomed to the idea that when a downturn comes, the Fed and other central banks will immediately intervene, either by cutting rates or by massive quantitative easing. This belief was reinforced during the pandemic. However, the current environment shows that monetary policy options are not limitless. Inflation has limited the scope for intervention, and the fiscal deficit limits further budgetary stimulus. In this sense, Dimon warns that the next crisis may have a very different dynamic than previous ones, and investors should be prepared for scenarios in which central banks will not have as much room to act.

How to respond to this situation? Is it appropriate to reduce exposure to equities? Shift funds into cash, gold or government bonds?

The answer is not straightforward. It depends on the individual investor's profile, time horizon and risk tolerance. In general, however, in times of heightened uncertainty, diversification across asset classes, sector diversification and greater attention to the quality of companies in the portfolio make sense. Strong balance sheets, stable cash flows and the ability to pass costs through to prices (pricing power) are likely to be key attributes of future returns.

It is important to note, however, that Dimon's view is not entirely pessimistic, but rather cautious. He warns that the world faces perhaps the largest set of risks in decades, but he also acknowledges that the US economy is still robust at its core. Consumers are spending, the job market remains strong, and technological advances, particularly in artificial intelligence, are opening up new sources of productivity. In other words, the world is not directly plunging into a crisis today, but the possibility of one is more real than investors now acknowledge.

A similar conclusion has been reached a Harvard Business School studywhich highlighted the asymmetry in market perceptions of risk. According to this study, investors tend to underestimate the likelihood of negative scenarios in periods of low volatility, which is exactly what is happening in today's environment.

For investors, this means one thing: staying informed, being prepared for different scenarios and not getting caught up in euphoria.

After all, as the old rule goes: "The biggest risk is believing there is no risk."

Moderna’s third-quarter results paint the picture of a company still navigating the long shadow of its pandemic-era success. While demand for COVID-related products continues to fade, the company is working aggressively to build a more diverse revenue base by scaling its respiratory vaccine portfolio and slashing operational costs. The result is a quarter marked by sharply lower sales but noticeably improved operational efficiency, signaling that Moderna is gradually regaining financial stability even as headline numbers remain volatile.

At the same time, the updated full-year guidance gives investors a clearer sense of direction. Moderna is shifting from a single-product pandemic beneficiary to a multi-platform mRNA developer, with programs in flu, RSV, oncology and rare disease advancing through the pipeline. Q3 is therefore less about revenue contraction and more about whether the company can redefine its long-term identity in an increasingly competitive biotech landscape.

How was the last quarter?

The third quarter brought in revenues of $1 billion, a deep 45% year-over-year decline. The main factor was lower sales of COVID vaccines in the US, where public interest weakened again and where the 2024 comparative base included positive one-time adjustments of $140 million. However, despite the downturn, Moderna was able to benefit from the launch of the commercialisation of mNEXSPIKE, its next generation COVID vaccine, which has expanded the target population and opened up new clinical and commercial opportunities.

Gross margin improved thanks to significantly lower inventory write-downs and a reduction in unused production capacity - this was one of the most problematic areas in the previous eight quarters. Cost of goods sold declined 60% to $207 million, although it included $67 million of amortization. The biggest structural change, however, came from a dramatic reduction in R&D spending, which fell 30% year-over-year. The company continues to strictly prioritize clinical programs, with the biggest savings coming from improved trial efficiency and deferral of select projects. Nevertheless, the operating loss widened as the revenue base was too low to absorb fixed costs.

The net loss of $200 million contrasts with a modest profit last year. Nevertheless, the company closes the quarter with $6.6 billion in cash, a sufficient cushion to fund its extensive clinical infrastructure as well as further investment around seasonal respiratory vaccines. The upgraded year-end outlook confirmed a strong focus on cash discipline, with expected cash reserves raised to $7 billion.

• Full presentation with results.

CEO commentary

CEO Stéphane Bancel highlighted that the company's Q3 performance was underpinned by "strong commercial performance of its next generation COVID vaccines and deep reductions in operating costs". Bancel said Moderna "remains fully committed to operational excellence, financial discipline and progressive portfolio building beyond COVID-19". Crucially, his comments confirm that Moderna no longer plans to grow through massive investment, but through precise allocation and phased pipeline launches.

Outlook

Moderna $MRNA has narrowed full-year revenue guidance to $1.6-2.0 billion, a slight increase on the low end and a slight narrowing on the high end. The trend shows that the company is already better at estimating the seasonality of demand for COVID vaccines and the impact of international contracts. Operating costs are expected to be reduced by up to $700 million from original plans, one of the most aggressive hits to the cost base across the sector.

As a result, the expected year-end is shaping up to be more stable - the cash position should reach $6.5-7 billion. The company's capitalization is thus not at risk, which is key given that full commercialization of future vaccines (flu mRNA-1010, combination mRNA-1083 and norovirus mRNA-1403) will not come until 2026 at the earliest. The outlook thus rests on two pillars: a short-term stabilizer in COVID vaccines and a long-term driver in the form of a diversified pipeline.

Long-term results

Moderna's long-term financial trajectory shows the extreme volatility that has arisen since the end of the pandemic period. Revenues for 2024 were $3.2 billion, a decline of more than half from 2023. This follows a decline of nearly 64% in 2023, when mass demand for COVID vaccines was ending and the company did not yet have alternative revenue sources. 2022 was the last "pandemic" year with nearly $19 billion in revenues.

Cost of sales dropped drastically between 2022 and 2024, but only 2025 shows that the restructuring of production is having the desired effect. R&D costs were rising until 2023, when the company funded a massive pipeline, but they start to stagnate from 2024 onwards and drop significantly in 2025. This means only one thing: the firm has adapted to the post-pandemic reality and moved from expansion mode to disciplined optimization mode.

Net income has declined in three consecutive years, with 2024 delivering a deep loss of $4.7 billion. The loss in 2025 is smaller, showing that the combination of lower operating investment and better working capital is starting to work. EBITDA is still negative, but the reporting structure shows that the closer new vaccines get to commercial approval, the more room there is to return to positive cash flow.

News

• Moderna strengthens commercialization of COVID-19 portfolio including new mNEXSPIKE
• Company further expanded approval of RSV vaccine mRESVIA in more than 40 countries
• mRNA-1010 (seasonal influenza) to be submitted for approval in the US and EU by January 2026
• Combination vaccine mRNA-1083 awaits FDA and EMA decision
• Norovirus vaccine mRNA-1403 extends phase 3 due to lack of cases
• mRNA-1647 (CMV) has been discontinued after failure in Phase 3
• Oncology studies of mRNA-4157 and mRNA-4359 continue

Shareholding structure

Institutional investors own over 71% of the shares, a solid long-only capital base for a high volatility biotech company. Vanguard Group remains the largest shareholder with a 10.5% stake, followed by BlackRock (7.6%) and Baillie Gifford (5.6%), which holds one of the most consistent positions in Moderna since 2021. Approximately 7.2% of the stock is held by insiders, which is relatively high and demonstrates management's strong commitment to the long-term development of the company.

Analysts' expectations

The most recent available analyst commentary comes from JPMorganwhich reaffirmed a 2025 rating on Modern on November 4. Neutral and a target price $90. The analysts said the Q3 results "provide clear evidence of a disciplined transformation" but also cautioned that "the commercialization of the mRNA-1010 influenza vaccine is a key catalyst for 2026, without which valuation will remain capped by the COVID portfolio's fundamentals." JPMorgan also highlights that the arrival of combination vaccines could create a new revenue peak in 2027-2028.

Fair Price

Yesterday it was announced which companies will be added to the S&P 500. Carvana was also added to the index. The company's shares are extremely volatile and have risen by more than 8,000% since 2023, which is crazy. The company currently meets all the requirements for inclusion, but that can change quickly.

What do you think about Carvana getting into the S&P 500? Do you have shares $CVNA in your portfolio?

It seems like an interesting buy $DSY.PA, I don't yet have the software segment well represented in my portfolio.... could you please send me a counterargument on this stock? Thank you.....

Hollywood has been shaken by one of the most consequential deals in its modern history. Netflix announced a definitive agreement to acquire the studio and streaming assets of Warner Bros. Discovery in a transaction valued at $72 billion plus assumed debt. The deal unites the world’s largest streaming platform with one of the most storied studios in entertainment, handing Netflix its first major production empire complete with iconic franchises, decades of film and TV archives, and the premium HBO and HBO Max brands. For Netflix, long dependent on licensed partners and outsourced production, the acquisition marks a strategic transformation that positions it as a fully integrated entertainment giant.

According to the announced timeline, the transaction will close after Warner Bros. Discovery completes a corporate restructuring planned for summer 2026. Before the deal is finalized, WBD will spin off its Global Networks division — including CNN and a portfolio of cable channels — into a separate public company called Discovery Global. Netflix will acquire only the studio and streaming operations, the segments considered the future drivers of media growth. Market reaction was swift: WBD shares jumped 6%, while Netflix dipped nearly 3%, reflecting both enthusiasm about unlocking asset value and concerns about leverage and regulatory scrutiny.

What Netflix actually wants to buy: The content that defined an era

The deal would give Netflix $NFLX not only production capacity for the first time, but more importantly, key elements of its Hollywood identity. Warner Bros. $WBD has iconic studios in Burbank, hundreds of thousands of hours of film and television archive, and brands that generations of viewers have come to regard as cultural symbols. HBO delivers prestigious, world-class productions. Combining these assets with the distribution power of Netflix would create an unmissable media entity that would make it very difficult for competing players to compete.

And while Netflix has long built original programming from the ground up, it has never had its own extensive library of legacy content. That may be the reason the company committed to the largest acquisition in its history. For Disney or Paramount, such a combination would further escalate competitive pressure, as Netflix could redefine its distribution and licensing strategy with the newly acquired rights.

Regulation as the biggest obstacle to the whole deal

The acquisition raises immediate antitrust concerns. The combined company would have around 450 million subscribers and control two massive content libraries. Some U.S. lawmakers are already warning that such a move could harm consumers because Netflix could gain too strong a bargaining position and limit competition. Netflix, on the other hand, argues that the deal would allow it to lower prices through bargain packages and that its real competitor is YouTube, not the traditional Hollywood studios.

The fight for regulatory approval is likely to be long and complex. Paramount Skydance $PARA even sent Warner Bros. a legal letter calling the whole process unfair and tilted in Netflix's favor. Even more pointedly, some politicians have commented on the situation, openly expressing concerns about the erosion of media plurality.

Why Warner Bros. is backing down: Traditional TV is in decline

Warner Bros. has gone into selling mode at a time when the traditional television business is going through the biggest slump in history. Their cable division is reporting a 23% year-over-year drop in revenue, and the outflow of subscribers and advertising continues to accelerate. The streaming war that Netflix unleashed more than a decade ago is now hitting the original media houses hard. Selling the studio for tens of billions of dollars may be the last chance for Warner Bros. to stabilize its finances and restructure its entire portfolio.

Netflix is benefiting from this competitive weakness. The company enters the negotiations in an exceptionally strong position: it ended 2024 with more than $39 billion in revenue and a market value of over $430 billion. Its subscriber growth and financial discipline also position it as one of the best-managed media companies today.

What could the merger mean for Hollywood?

This deal would redefine the rules of the game. Netflix would cease to be an "outsider" and become a full-fledged studio giant with the ability to produce, archive and distribute content in the manner of traditional studios - only with a huge data base and algorithms that can predict viewing behaviour. A future strategy could include exclusive premieres, more aggressive licensing, and new models of collaboration with creators.

Hollywood, on the other hand, has traditionally relied on theatrical releases, and Netflix has so far refused to put movies into theaters on a larger scale. This merger may further increase tensions between filmmakers, movie studios and platforms. A scenario in which Netflix is owned by Warner Bros. would have been unimaginable just five years ago - and yet it's within reach today.

The financial structure and logic of the deal

If Netflix had indeed completed its acquisition of Warner Bros. Discovery, it would be one of the largest media transactions of the century - and the first purchase of this magnitude in Netflix's history. Early information available suggests that negotiations are underway with a value of around $30 per share, which would value Warner Bros. at approximately $70-75 billion. In addition, Netflix is offering a record "breakup fee" of $5 billion, which Warner Bros. would receive if the deal is blocked by regulators. Such a high guarantee alone shows how serious Netflix is about the deal and that it is prepared to absorb significant regulatory risk.

From a financial standpoint, it is crucial for Netflix that it buys primarily assets, not cable networks. Warner Bros. plans to spin off CNN, TNT and TBS before the deal closes, clearing the portfolio of the traditional TV business, which is in steep decline. Netflix will thus take the most valuable things on the balance sheet - movie and TV studios, the content library, HBO Max and the rights to premium franchises. The company has ample market capitalization (over $430 billion), robust cash flow and very stable subscription revenue, allowing it to structure the deal with a combination of cash and new bonds without jeopardizing its investment-grade rating.

In practice, the acquisition would not only strengthen Netflix's ownership structure, but also dramatically change its cost base: the company would stop spending billions a year licensing outside content and become the de facto owner of one of the most valuable Hollywood libraries ever. At the same time, it would gain direct control over production and distribution, allowing it to dramatically reduce long-term operating costs and increase margins.

Why Netflix is doing it: The strategic motivations that are changing its future

The acquisition of Warner Bros. Discovery would represent a major strategic change that comes at the exact moment when the streaming market is starting to slow down. Netflix has been looking for several years for additional growth engines beyond traditional subscriptions - introducing an advertising plan, expanding into the gaming business, investing in live streaming and sports. Yet the company is missing one key pillar that competitors like Disney or Paramount have: an extensive library of legacy content that has held its value for decades. Warner Bros. addresses this weakness in one fell swoop.

Another theme is independence from licensing. Netflix has historically depended on temporary licenses of other studios' movies and series, costing it billions of dollars a year while reducing the stability of its catalog. A Warner Bros. acquisition would mean permanent ownership of the hits that have defined television culture. The company would gain IP that it can adapt, expand, sell or combine across media - just as Disney does with its franchises.

In terms of the future of the streaming economy, it's also a defensive move. Netflix doesn't want to wait for competitors to complete their own consolidations and create a counterweight to its global dominance. A merger with Warner Bros. would give the company not only content, but also the prestige of a traditional movie studio, physical production capacity, experienced creative teams, and infrastructure that it would have had to build itself over years and at multiple costs.

At first glance, this company hardly resembles a high-growth story. A long-time specialist in spinal implants, surgical robotics and technologies for musculoskeletal disorders has traditionally been viewed as a steady, slow-moving player in the med-tech sector. But the last two years have rewritten that narrative. The company has entered one of the most explosive growth cycles in its history: revenue and assets are accelerating, margins remain elevated, and analysts have been forced to revise their models upward. Such synchronized strength is rare — and it’s the reason investors are suddenly paying much closer attention.

Behind the scenes stands a powerful combination of factors: rapid expansion of the product portfolio, strong traction in surgical robotics, rising demand for orthopedic solutions, and one transformative acquisition that shifted the entire scale of the business. Even more intriguingly, the stock still trades below its historical highs, while analysts now estimate roughly 25% upside as target prices climb faster than the broader market. For a traditionally conservative healthcare name, to see expectations rise this sharply is nothing short of remarkable.

Top Points

• Revenues between 2021-2024 grew from $958 million to $2.52 billion.
• Gross margin steadily above 45%, operating margin 13%.
• Analysts raise target prices - Truist to $105, BofA $91, Piper Sandler $90.
• Nevro acquisition significantly strengthened portfolio and growth momentum.
• Altman Z-score over 11 - extremely robust financial stability.
• Minimal debt, high operating cash flow, balance sheet with no weaknesses.
• Highly scalable business with a combination of robotics, implants and neurostimulation.

Company profile

Globus Medical $GMED is one of the world's leading manufacturers of spinal implants, orthopedic devices and robotic surgical systems. Today, the company operates at the intersection of three rapidly growing areas of medical technology: spinal surgery, musculoskeletal implants and robotic-assisted procedures. This combination creates a powerful advantage - a robust portfolio that can grow both organically and by acquisition, while reducing dependence on one segment like many competitors.

The company's transformation began several years ago with the introduction of a robotic system ExcelsiusGPS, then expanded to include imaging platforms, intelligent operations planning and minimally invasive technologies. The result is a comprehensive "surgical ecosystem" strategy that offers customers a complete solution - from implant to navigation to robotics. This business model is extremely powerful because surgeons and hospitals prefer a single system that reduces the risk of errors, saves time and increases the success rate of procedures.

The year 2023, however, was a watershed year. The company made one of the largest acquisitions in its history, changing not only its size but also its long-term strategic direction. As a result, today Globus Medical stands among the fastest growing medtech players in the world.

Product portfolio and pipeline: Where Globus Medical really makes money

Globus Medical is one of the most comprehensive players in spinal surgery, robotic navigation and orthopedic implants. The company has built a unique position by combining hardware, implants, software and robotic systems into one integrated surgical ecosystem. This model allows it to win long-term, high-margin clients because hospitals typically migrate to the entire platform, not just individual products.

The foundation of the portfolio is spinal surgery implants, which have been a stable source of revenue over the long term. However, in recent years, the fastest growing robotic system ExcelsiusGPS, one of the most powerful disruptors in minimally invasive surgery. Combining navigation, 3D imaging, precision instrumentation and software integration, the system is becoming the backbone of the entire surgical workflow. Globus is also expanding the pipeline with new implants, orthopedic systems and AI tools for surgical planning. This breadth of portfolio creates a network effect: once installed, the system generates recurring revenue from both implants and software licenses.

Nevro acquisition: A strategic move with high potential and risk

The acquisition of Nevro was one of the most important moves in the history of Globus Medical. The merger brings the company into the neuromodulation segment, a market worth over $6-7 billion annually and with a long-term growth rate of 8-10%. In addition, neuromodulation implants are an area where customers stay with one supplier for years due to the complexity of integration into hospital systems.

Nevro brings cutting-edge technology HF10, one of the most effective chronic pain therapies on the market. For Globus, this means entering an adjacent clinical segment that complements spine surgery as some patients move from orthopedics to neuromodulation therapy. Synergies are expected especially in sales, marketing and cross-selling - spine surgeons often refer patients for neuromodulation.

Integration is a risk - Nevro has been loss-making for a long time, with higher operating costs and weaker margins. However, Globus is one of the most efficient companies in medical devices, and analysts expect synergies to come within 12-24 months. The acquisition has the potential to propel the company into the next growth cycle, but will require precise execution.

Competitive position: the battle for the surgical market

Globus Medical competes with giants like Medtronic $MDT, Stryker $SYK, Zimmer Biomet $ZBH, and Boston Scientific $BSX. Yet the company has long grown faster than most competitors thanks to a strategy focused on innovation, rapid product development and aggressive robotics expansion. In the spinal surgery segment, Globus has become a viable alternative to Medtronic Mazor X thanks to the power of ExcelsiusGPS, with some hospitals citing lower overall costs and a shorter learning curve for surgeons.

The difference is that Globus is a clean technology company. It doesn't have a gigantic portfolio from other segments, so it can channel all its energy into spine and navigation systems. This focus increases the speed of innovation and allows it to respond quickly to clinical needs. In addition, in the acquisition Nevro takes over the neuromodulation segment, where it will compete with Boston Scientific and Abbott - companies with bigger budgets but slower innovation cycles.

Financial performance: growth that cannot be ignored

Globus Medical's financial results over the past few years show an exponential shift. Revenues have jumped from about $1 billion to more than $2.5 billion, a pace that is exceptional in medtech. But it's not just the pace that's important, but the quality of that growth.

The company has been able to maintain high gross margins (46-47%), which means that expansion has not come at the expense of profitability. While operating margins have been temporarily weighed down by the integration of Nevro, in the long term it has room to grow back above 15%. Crucially for investors, operating cash flow is strong and liquidity is excellent - the firm is not reliant on debt, which is rare in a sector with high investment.

What differentiates Globus Medical from competitors is an Altman Z-score above 11, which signals almost zero risk of financial distress. This ratio is between 3-5 for most medtech companies. Globus is deep in the safe zone, which boosts investor and partner confidence.

Margins and profitability: what is the real driver of profitability

Globus Medical's margin profile has been very attractive over the long term. Gross margins of over 45% and operating margins of over 13% are well above the average for healthcare institutions. Yet the years 2024-2025 show the company entering a phase of investment expansion - the Nevro acquisition has increased OPEX and reduced net profitability.

The key point is that margins are under pressure not because of weak business, but because of the growth of the business. The development of robotic systems, the expansion of the implant portfolio and the integration of the new acquisition are generating short-term costs that may translate into higher revenues in the coming years. In addition, Globus has one of the best ROICs in its segment, confirming that it is investing capital efficiently and without redundant acquisitions.

Valuation: premium price or fair valuation?

Globus Medical is one of the companies whose valuation is, at first glance, higher than many healthcare companies of the same size. P/E of ~28×, P/S approximately 4,2× and Price-to-Cash-Flow 20× may seem like a relatively expensive valuation, especially when some competitors can be bought cheaper. But medical implants, spinal surgery and robotic navigation are among the most profitable segments of the healthcare market, where quality players typically maintain premium valuations.

The fundamental question is therefore not whether Globus is "cheap", but whether is the premium valuation justified - and whether the company has a sufficient growth profile to "grow" the valuation in the future. The numbers and market trends suggest that the answer is yes in most respects.

Why is Globus Medical willing to value the market at a premium?

Investors are paying for three things with this company:

• an unusually strong balance sheet (virtually no net debt, Z-score of 11.2)
• the growing share of roboticswhere margins and growth are multiples higher than implants.
• the ability to grow organically at a rate that significantly outperforms the segment average

This puts Globus structurally closer to companies like Stryker and Intuitive Surgical - companies that have sustained long-term P/Es between 30-45x. Thus, what matters to investors is not the current P/E, but the EPS trajectory.

Growth catalysts: what can lift a stock the most

Globus Medical has some strong catalysts ahead that can push earnings and valuation to new levels:

• Rapid expansion of ExcelsiusGPS robotics in Europe and Asia.
• Successful integration of Nevro and growth of the HF10 product
• Synergistic revenue from the combination of spinal surgery and neuromodulation
• launch of the next generation of navigation systems
• Strong recurring revenue growth (implants + software)
• expansion of the portfolio of high margin biologics

Each of these catalysts can individually support share price growth; their combination creates extraordinary potential.

Key risks: what can spoil the story

Despite strong fundamentals, Globus faces real risks:

• Nevro integration could be more expensive and lengthy
• Neuromodulation market has strong players and high marketing costs
• competitive pressure in robotic surgery is extreme
• Hospitals are limiting capital spending in a time of budget cuts
• Higher OPEX may reduce EPS and FCF in the short term

Wind at least till 2035

The industry in which Globus operates is experiencing a structural boom. An aging population is dramatically increasing demand for spinal procedures, orthopedic implants and chronic pain management. In the US, spinal surgeries are expected to grow 6-8% per year and neuromodulation implants 8-10% per year. Globus thus stands at the center of two megatrends that complement each other.

Another major factor is the automation of operating theatres. Hospitals are suffering from a shortage of surgeons, which is leading to faster adoption of robotic systems. ExcelsiusGPS is one of the few devices on the market that combines robotics and navigation in one workflow, and is therefore growing installations at a double-digit rate. These macro-trends form long-term fundamentals that reduce the cyclicality of the entire business.

Robotics + implants + neurostimulation

Globus Medical is building a broad technology baseranging from traditional titanium implants to sophisticated robotic systems and implantable neurostimulation devices. This diversification enables growth in multiple segments simultaneously.

Key technology pillars:

• ExcelsiusGPS - robotic system for spinal surgerywhich significantly increases the accuracy of procedures.
• Excelsius 3D - imaging platformthat integrates robotics and navigation.
• Comprehensive implant portfolioincluding stabilization systems, cervical implants and interbody fusion devices.
• Neuro HFX neurostimulationone of the most advanced therapeutic systems for pain management.

Globus does not seek to compete on low price, but on technological superiority and clinical value. Its products target the premium segment of the market, where it does not compete on price but on treatment outcomes. And this is where the company is gaining the most share.

Market opportunities

• Aging population and the rise of musculoskeletal diseases.
• Demand for minimally invasive surgery.
• Increasing success rate of robotic-assisted procedures.
• Expansion of neurostimulation due to ongoing clinical trials.
• Consolidation of hospital systems - comprehensive solutions are preferred over single products.

The scope for growth is extremely wide: the market is around USD 10 billion for spinal implants, USD 8 billion for neurostimulation and over USD 5 billion for robotics, all of which are growing faster than the overall healthcare sector.

Analysts' expectations.

Analysts agree that Globus Medical has entered a new growth phase. Truist has raised the target price up to USD 105 - which implies about 25% potential to the current price of $83-84. BofA and Piper Sandler are just a bit lower, but their reasoning is similar:

• the company is beating expectations
• improving margins
• Nevro acquisition boosts growth momentum
• Robotics platform raises barriers to entry

Needham remains cautious and holds Hold, but even here analysts acknowledge the quality of the results. The difference of opinion is therefore mainly about valuation, not the business itself.

Investment scenarios

Optimistic scenario

• Rapid integration of Nevro.
• Revenue growth above 15% per annum.
• Expansion of robotics adoption in hospitals.
  Expected price development: 100-115 USD.

Realistic scenario

• Steady double-digit growth.
• Margins between 12-14%.
• Strong cash flow and minimal debt.
  Expected price development: USD 90-100.

Pessimistic scenario

• Slowing adoption of robotic systems.
• Weaker integration of Nevro.
• Margins fall below 10%.
  Expected price development: USD 70-78.

What to take away from the article

• Globus Medical is experiencing the fastest growth in its history.
• The acquisition of Nevro was a strategic breakthrough that increased the size and potential of the company.
• Margins and balance sheet are among the strongest in the medtech sector.
• Analysts are raising target prices and see up to 25% upside.
• There are risks, but they are primarily short-term.
• GMED is one of the companies that combines the stability of the healthcare business with the growth momentum of technology titles.

Fresh unemployment data in the United States has brought a new boost of optimism to the market, but also a wave of questions. Jobless claims fell to three-year lows, which in conventional models would imply solid consumer demand fundamentals and stable corporate profits. But in the current economic environment, it's not that simple. Investors have to consider whether low claims really mean a strong labor market or just reflect a short-term seasonal distortion. It is this dilemma that will determine how the S&P 500 reacts in the weeks ahead.

The evolution of jobless claims from 2022

Analysis of current data

The most recently released data on new jobless claims in the United States provided an unexpectedly strong boost to the markets. The value of claims fell to 191,000, the lowest level recorded since September 2022. This result exceeded the expectations of analysts, who had been counting on values of around 220,000. Investor reaction was immediate, although a one-off figure may not tell the whole truth about the real state of the US labour market. Stock markets strengthened.

In economic terms, this statistic measures only the number of new jobless claims in a given week and is not the same as the monthly unemployment rate or the number of jobs actually created or lost. Nevertheless, it is one of the fastest available signals of changes in employment dynamics. Yesterday's report, therefore, has generated increased interest in whether the US economy has a period of acceleration ahead of it or whether it is more likely to be statistical noise caused by seasonal factors, including the fact that the week in question included the Thanksgiving holiday, which often skews the statistics with delayed claims.

Why is this data important?

In order to understand the true significance of this number for investors, it is necessary to look at what jobless claims actually measure. It is the number of people filing for unemployment benefits for the first time. That said, it provides a fairly quick indication of whether companies are starting to lay off workers on a larger scale. The lower this figure is, the more it signals stability in the labour market as fewer people are losing their jobs. At the same time, however, it is important to realise that jobless claims say nothing about how many people have found new jobs. That is, they do not tell us about the overall strength of labour demand, but rather inform us about the current rate of layoffs. This nuance is crucial because some economic phases are characterized by firms not laying off but not hiring. The labour market is then neither strong nor weak - it is frozen. This regime is described, for example, by analysis from MarketWatchwhich notes that low jobless claims can sometimes reflect a phase of stagnation, not growth.

A historical perspective

A historical perspective shows that similarly low readings tend to occur during periods of economic expansion. For example, in 2017-2019 (see chart below), jobless claims were below 210,000 for a sustained period of time and the labor market was experiencing one of the strongest expansions in modern history. However, today's situation is different in many ways. The economy is in the slowdown phase of the interest rate cycle, and inflationary pressures remain weaker than in 2022-2023, but still higher than the Fed would like to see in the long run. In addition, the economy is now facing structural changes. From the massive shift to automation, to the growing importance of AI, to the gradual tightening of financial conditions for small businesses. All of this could have a major impact on future employment trends. A study published on arXiv entitled "Identifying Economic Factors Affecting Unemployment Rates in the United States" for example, shows that unemployment is not a short-term indicator but is influenced by long-term economic factors such as productivity growth, technological innovation, and demographic trends.

The evolution of jobless claims between 2017 and 2019

When we look at how continuing unemployment claims, or continuing jobless claims, which measure the number of people who have been receiving benefits for a longer period of time, are performing, it is a different picture than initial claims. In fact, these continuing claims are holding at around 1.94 million, which in turn is a relatively elevated level. This may suggest that, while people are not being made redundant on a mass scale, they are also failing to find new jobs quickly. This tends to be a signal that the labor market is slowing, even if jobless claims look great. This mismatch can affect household demand in the longer term as long-term unemployed consumers gradually cut back on spending.

Continuing jobless claims 2022-2025

And it is US household consumption that is one of the key factors determining the performance of the S&P 500. Consumption accounts for approximately 68% of U.S. GDP, and when consumers feel stable and employed, it supports the earnings of retail, service, manufacturing and technology companies. A strong labor market is therefore one of the most important fundamentals for index and stock price growth.

Historically, there is a clear correlation between falling unemployment and S&P 500 growth. WiserInvestor.com analysis showed that when unemployment was between 3.5-4%, the S&P 500 averaged annual returns of between 10-15%. However, this has not always been the case. In some periods, too low unemployment led to increased fears of an overheating economy, which triggered tighter monetary policy and a subsequent cooling of markets.

Possible market reactions

On the one hand, the developments of recent days have therefore brought some relief to investors. Indeed, if jobless claims continued to rise significantly, this would indicate the start of a period of more massive lay-offs, which in financial history usually heralds a recession or at least a significant slowdown. Yesterday's low figure of 191,000 may thus go some way to dampening investors' fears that the US economy is beginning to slump. Markets often react positively to this information, as better employment means higher consumption, higher demand for corporate products, and ultimately higher corporate sales. This psychological effect can lead to short-term increases in stock prices, especially in sectors sensitive to consumer sentiment.

On the other hand, if jobless claims prove to be an anomaly caused by seasonality, short-term disappointment may follow. Investors should therefore keep an eye on further reports over the next few weeks. If the number returns to above 220k, the current decline could be interpreted as a seasonal blip rather than evidence of an accelerating US economy. Similarly, the payrolls data is also worth watching as it will play an important role in the Fed's rate decision. This is because too rapid wage growth could again fuel inflationary pressures and spark a debate on tighter monetary policy, which would have a negative impact on equity valuations.

The long-term perspective is also interesting for markets. If the labour market remains stable and companies continue to retain employees, this could help the S&P 500 index to overcome some of the short-term turbulence and provide positive momentum. However, it must be acknowledged that the current growth of the S&P 500 is largely driven by just a few of the largest technology firms, which are keeping the index afloat thanks to their dominance and huge investments in AI. If the labour market were to deteriorate, the negative impact would be primarily on consumer-oriented firms, while some tech giants might be relatively more resilient.

Comparison with history

When compared to historical periods, the current level of jobless claims is more consistent with calm economic periods than crisis years. For example, during the 2008 financial crisis, jobless claims moved above 650,000 per week. At the time of the COVID-19 pandemic, they even surpassed the 6 million mark. So, if we look at the latest data, it rather shows that the US labour market is still holding very solid fundamentals. This is good news for long-term portfolio-oriented investors.

Jobless claims 2006-2025

One of the factors that could affect the labor market in the coming quarters is technological transformation. According to some studies, for example from MIT or the Brookings Institution, the growth of investment in artificial intelligence and automation in some sectors may lead to less pressure on hiring. Companies may be able to handle more work with fewer people. On the other hand, technology also creates new jobs, especially in high-skilled sectors. The overall impact on the labour market is therefore still unclear, but investors should monitor this area closely as it may affect both the unemployment rate and the future structure of the US economy.

Impact on markets

From the perspective of the S&P 500, the key factor is whether the US economy manages to stay in the soft landing zone, a process where inflation falls, unemployment remains low and GDP growth stabilises. The Fed is communicating this path as its preferred scenario, and the labor market is crucial in this process. In the past, if the number of jobless claims started to get above 260,000 or more, that would have been one of the first signals of an impending recession. The last time this happened was in 2007-2008 and also in 2001 during the bursting of the dot-com bubble. However, the numbers look more favourable at the moment.

Overall, then, yesterday's drop in jobless claims represents a short-term positive for the markets that may help restore investor confidence in the resilience of the US economy. However, it remains to be seen whether this is the start of a new trend or merely a seasonal blip.

Warner Bros. Discovery entered the third quarter at a moment when its hybrid media strategy is being tested more než ever. The company continues to juggle the decline of its traditional TV networks with the growing strength of its streaming platforms and film studios, creating a mixed picture that reflects both the challenges and the long-term opportunity ahead. Even as total revenue dipped year over year, momentum in several high-value segments began shifting investor attention toward the company’s medium-term growth prospects.

The Q3 2025 results highlight this contrast clearly: linear TV and advertising remain structural headwinds, while the studio business delivered a stronger-than-expected performance and the streaming division showed improving profitability and renewed subscriber engagement. Together with a meaningful rebound in free cash flow, these trends suggest that WBD is not merely enduring the industry reshuffle — it is laying the groundwork for a return to sustainable growth.

How was the last quarter?

Third quarter revenues were $9.0 billion, down 6% year-over-year, with weakness primarily seen in advertising and traditional linear channels. Advertising revenue and distribution fell 16% and 4%, respectively, reflecting continued declines in cable viewership and weaker demand in key advertising segments. Still, the results were less negative than the market expected, and some investors see a possible bottom in linear erosion.

Streaming and studios offer a significantly better picture. Streaming revenue remained steady year-over-year at $2.63 billion, the company increased subscribers by 2.3 million, and managed to combine subscription growth with profitability growth for the first time since the pandemic years. The studios segment delivered the biggest surprise, with revenues up 24% year-over-year thanks to strong film and TV production, which partially erased the one-time negative effects of last year's Olympic sublicense.

• Full presentation with results.

At the profitability level, the numbers were even more compelling. Adjusted EBITDA rose 2% to $2.47 billion, despite continued pressure from linear TV. The improvement was underpinned by streaming and studios, which together posted EBITDA growth of 58%. Cash flow also pleased: free cash flow of $701 million was up 11% and the company continued its rapid deleveraging, paying down $1.2 billion of debt in the quarter.

However, overall net income fell into a $148 million loss due to restructuring charges and asset amortization. This is a typical accounting phenomenon for $WBD, while operationally the company is generating solid profitability.

• Don't overlook: Netflix wants to buy HBO Max from Warner Bros.

CEO Commentary

In particular, management highlighted the company's strategic successes in streaming and studios. According to the CEO David Zaslav the growth in streaming profitability is "fundamental confirmation that the model is moving into a mature phase" where it is no longer about maximising subscriber volume, but about monetising through advertising, higher tariffs and cost optimisation. Zaslav also highlighted the performance of the studios, which are once again becoming one of the engines of growth thanks to a better pipeline of movies and TV productions.

On the other hand, management openly admits that linear media will continue to be a source of pressure. The company is therefore accelerating a reorganization to cut costs, simplify the structure and allow for a faster shift of capital toward faster-growing divisions. Zaslav reiterated the need to reduce debt, which he calls "the number one strategic priority" and which should allow the firm greater flexibility in the years ahead.

Outlook

Warner Bros. Discovery $WBD continues to position itself as a hybrid media player, combining the production power of Hollywood studios with global streaming. The company expects streaming margins to continue to grow in the coming quarters while studios benefit from a strong film calendar and stabilizing TV production.

A key question mark is the rate of erosion of linear TV. WBD plans to mitigate this impact through further savings, contract restructuring and greater integration of content between streaming and traditional distribution. The company also announces continued debt reduction to be a key pillar of its improved financial position in 2026.

Long-term results

The long-term numbers show WBD's media transformation in full view. While 2021 was still a period of strong profitability, the massive acquisition of WarnerMedia dramatically increased costs, depreciation and debt. The years 2022 to 2024 were marked by the scale of the integration and high restructuring costs - and also by deep losses caused by the accelerating decline in linear revenues.

Revenues in 2024 were $39.3 billion, down nearly 5% from 2023. While gross margins remained relatively stable, operating expenses rose 44%, resulting in an operating loss of over $10 billion. At the same time, EBITDA fell dramatically from $22.4 billion to $11.6 billion. These results reflect the cost pressures of integration, along with pressure on traditional segments.

It is important to emphasize, however, that WBD has already passed the worst phase of its transformation. The latest quarterly data shows cost reductions, studio growth, streaming stabilization and improving cash flow. Longer term, the key remains the pace of debt reduction - if the company can reduce leverage to 2.5x EBITDA, it will open the way for a return to strategic flexibility.

News

During the quarter, the company grew its streaming subscriber base to 128 million, continued to reorganize its linear business, and paid down $1.2 billion of debt. Studios benefited from a more successful movie season and strong production is expected to continue in 2026. WBD also stepped up cost optimization, which is already delivering positive cash flow results.

Shareholding structure

Institutional investors hold approximately 73.6% of the shares. The largest shareholders are:

• Vanguard Group - 11,35 %
• BlackRock - 7,45 %
• State Street - 6,39 %
• Harris Associates - 3,87 %

Insiders own roughly 5.95% of the company, which is a relatively high share among media companies.

Analysts' expectations

According to Wells Fargo'smost recent report dated October 31, 2025, analyst Steven Cahall reiterates a Buy rating on WBD Overweight and a $16 price target . Cahall argues primarily:

• Stabilization of streaming with growing EBITDA.
• a strong recovery in trials
• continued deleveraging
• the potential to restructure the linear segment

Fair Price

The explosive growth of generative AI has pushed global infrastructure to its limits, exposing a fundamental bottleneck: modern data centers cannot be built fast enough. Every new AI campus requires massive electrical capacity, complex logistics, and synchronized coordination among dozens of public and private entities. Seeing the mounting pressure, Palantir, Nvidia and CenterPoint Energy unveiled Chain Reaction, a platform designed to orchestrate the entire lifecycle of AI-driven construction using real-time intelligence.

Rather than patching individual pain points, Chain Reaction attempts something unprecedented — a unified digital backbone that links chip manufacturers, construction teams, utilities, grid operators, permitting offices and regulators. By fusing those datasets and analyzing them with AI models, the platform is built to detect delays before they appear, propose routing alternatives and automate decision flows that today take months. If successful, it could redefine how physical AI infrastructure is planned and built worldwide.

Solving the problems that are slowing down the entire AI economy today

Building a modern AI datacenter isn't just about concrete, servers and cooling systems. It's about an extremely complex network of vendors, permits, investments, and production capabilities that often fails on the fact that different company departments aren't working with the same data. Any delay in one link in the chain is immediately passed on to the other players: the power company is waiting for the designer, the designer is waiting for the rack supplier, the supplier is waiting for components from TSMC or other manufacturers. There is low predictability and a high level of uncertainty in the whole process.

This is where Chain Reaction. The platform will use AI not only for classic analysis of schedules, but also for reading unstructured data - for example, from email conversations between purchasing departments and subcontractors or from technical notes from project teams. As a result, it can pick up signals of potential delays before standard corporate systems detect them. Palantir $PLTR brings its experience in modeling large-scale operational networks to the system, Nvidia $NVDA adds AI acceleration and data tools, and CenterPoint Energy $CNP brings its knowledge of energy infrastructure and permitting processes.

• Don't overlook: Palantir | Q3 2025: Fastest growth in company history, record contracts and explosion of the US commercial segment

The goal is clear: master the AI boom before it outgrows infrastructure

AI datacenters are being built around the world at a pace that is already outpacing power grids and construction capacity. Many projects today are delayed by months or years - and it is these delays that are critical to the entire technology sector, as they are holding back the growth of cloud services, chip makers and AI model providers. Nvidia itself admits that its biggest limits lie not in a lack of demand for chips, but in the fact that datacentres are not ready on time.

Ultimately, it's not just about new software, but about trying to build a digital backbone that enables faster and more accurate planning for projects with billion-dollar budgets. If Chain Reaction proves successful, it could become the essential tool without which the next wave of AI infrastructure cannot be built. And it will also open up other major market opportunities for Palantir, which with this project is moving from the realm of defense and government systems to the center of global technology transformation.

What is the role of Palantir, Nvidia and CenterPoint Energy

Each of the partners in the Chain Reaction project brings something critical that has been missing from the datacenter construction process. Palantir becomes the brains of the system. Its software connects thousands of data sources, models logistics chains and can predict where a project is likely to be delayed. Nvidia provides the computational layer needed for simulations, predictive models, and the processing of unstructured data that conventional enterprise systems ignore. Through its role in the AI ecosystem, it can connect vendor design information, chip partner manufacturing capabilities, and GPU availability status.

CenterPoint Energy then complements a critical element that technology companies can't address on their own - energy infrastructure and permitting. This is where most of today's delays occur: substations, transmission systems and local grid upgrade processes are governed by regulations that are slow and cumbersome. CenterPoint knows where and why projects are getting stuck, allowing Chain Reaction to work with reality, not just optimistic construction plans.

How Chain Reaction works technically

Chain Reaction isn't just another project software - it's an operating system for building AI infrastructure. At the core is the ability to work with data that is not normally part of any ERP or planning system. AI models can read emails, technical attachments, project documentation, inspection reports, contracts, order interfaces and field notes. The system then creates linked supply chain models and can detect the risk of delays before the subcontractors themselves realise.

Technically, it is a hybrid of Palantir's software modules and fast inference models running on Nvidia's GPUs. Running in the background are millions of simulations that can evaluate in minutes how the construction schedule will change if chip companies announce a production slippage, if the authority extends the permitting process, or if the power company doesn't get the materials for a line upgrade. The result is not a static schedule, but a living model that updates in real time.

This approach is one of the first examples of how AI can manage large-scale infrastructure projects whose complexity exceeds the capabilities of traditional planning tools.

Project risks and limits

While Chain Reaction has enormous potential, it also faces limits that may determine the pace of its adoption. One of the biggest challenges is data quality and availability. Not all companies are willing to share internal metadata, email communications or delivery statuses - and without this, the system cannot fully understand the true bottleneck of the project. Another risk is energy regulation. While software will speed up planning, it won't speed up laws that often hold up the construction of new lines or substations.

Technical risks include overloading the AI infrastructure itself. While Nvidia's models can handle huge amounts of data, for projects involving thousands of contractors and dozens of large partners, the system can become extremely complex. And, of course, there's the cybersecurity risk - a platform that handles sensitive data from power grids and new datacenters can become the target of advanced attacks.

While these risks are solvable, they show that Chain Reaction is not an instant magic solution, but the first step towards digitising a sector that has been driven for decades by paper, isolated systems and human guesswork.

What Chain Reaction can change by 2030

If the project is successful and gains widespread adoption among energy companies, developers and hyperscalersit could fundamentally change the face of the AI economy. Datacenters that take three to five years to build today can be built faster and with greater predictability. Cloud companies could plan expansion more securely, chipmakers would know more precisely when to deliver hardware, and power grids could be upgraded at a coordinated pace.

By 2030, Chain Reaction could become the standard not only for building AI centers, but also for gigafactories, semiconductor factories, power blocks, or building new cloud regions. For Palantir, this would mean entering one of the largest industries of our time, for Nvidia a new application of its AI infrastructure, and for energy companies a significant acceleration of projects that are holding back the entire technology sector today.

If the current AI revolution needs an infrastructure to keep pace with it, Chain Reaction could be just the first true "AI for AI".

Are you changing your strategy before the end of the year? Are you significantly buying or selling any stocks?

In recent weeks/months, apart from $BTCUSD, $META and $TTD I haven't been buying anything else and have mostly just been watching market developments. The next notable event will probably be the Fed meeting, which could change overall sentiment and potentially create new opportunities.

Puerto Rico is moving closer to reshaping its fragile energy system through a conditional seven-year LNG agreement with New Fortress Energy, a deal that could redefine the island’s path to stability. After years of blackouts, hurricane damage and institutional dysfunction, regulators are weighing whether one company should again play a central role in powering the territory. The approval is not final — but it signals that Puerto Rico is willing to trade concentration of supply for the promise of reliable fuel and lower volatility in the grid.

For New Fortress Energy, the proposal represents a pivotal moment. The company is burdened with heavy debt, rising project costs and investor pressure after delays in its floating LNG hub in Mexico. Securing Puerto Rico as a long-term customer could restore confidence in its balance sheet and create a steady stream of cash flow. Yet the agreement comes with strict conditions designed to curb monopolistic power, require shared delivery risk and open port access to competitors. Whether NFE can meet these obligations will determine if the deal becomes a financial turning point — or a new flashpoint in Puerto Rico’s energy politics.

Top points

• Puerto Rico regulators tentatively approved a seven-year contract with New Fortress Energy for LNG supplies worth an estimated $3.2 billion.
• The gas is to flow from a floating NFE LNG facility in Altamira, Mexico, with volumes of up to 75 TBtu per year and a minimum of 40 TBtu, indexed to the Henry Hub at a premium.
• The Supervisory Board's approval is conditional on the revision of LNG "tolling" contracts, opening access to the San Juan terminal to competition, and a mandatory agreement between NFE and an alternative supplier.
• New Fortress carries high debt, offshore FLNG cost issues in Mexico and is dealing with debt restructuring as well as deferral of results.
• The contract has been criticized because of the risk of a de facto monopoly on LNG and the island's dependence on a single terminal, but it may also reduce the cost of power generation in the short term relative to oil and diesel.

What exactly was approved: seven years, billions of dollars and one terminal

The basis of the deal is a seven-year contract under which New Fortress $NFEis to supply LNG to Puerto Rico's electricity system. Volume-wise, we're talking units in the tens to low hundreds of tankers per year - up to 75 TBtu of LNG, with a minimum take-or-pay of around 40 TBtu. The fuel is to flow from NFE's floating facility off Altamira, Mexico, where the company has commissioned a rapidly deployed FLNG project and is seeking to produce gas from it for a number of customers in the region.

Pricing is pegged to the Henry Hub, the benchmark U.S. gas price, plus a fixed markup in the order of units of dollars per MMBtu. For Puerto Rico, it's a step toward greater predictability in fuel costs - the island has long suffered from a reliance on more expensive and environmentally inferior fuels such as heavy fuel oil or diesel. For New Fortress, on the other hand, it's an anchor that can stabilize offtake from its own FLNG for several years and make it easier to finance the entire project.

Why this is a matter of survival for New Fortress

New Fortress Energy has profiled itself in recent years as an aggressive player looking to rapidly build LNG infrastructure in Latin America and the Caribbean. But that strategy is running up against the harsh realities of finance. The company carries long-term debt of nearly $8 billion, has repeatedly delayed earnings releases and is in talks with creditors to restructure its obligations. Ratings agency Fitch recently downgraded its rating to "limited default" after missing an interest payment, a clear indication of just how tight the situation is.

Adding to this is the fact that the offshore LNG project at Altamira in Mexico has faced higher costs and delays. On the other hand, capital, which was supposed to generate stable cash flow, has for a long time been mainly a cash drain. Analytical commentary on NFE has increasingly used words such as "lifeline" or "last chance" - precisely in the context of the Puerto Rico contract. Thus, the seven-year contract is not just an interesting deal, but potentially a key pillar on which the reconstruction of the entire company's balance sheet can stand.

Puerto Rico between stability and dependence

For Puerto Rico, LNG supply from NFE is both an opportunity and a trap. An opportunity because the island can reduce electricity generation costs, reduce emissions, and obtain a more predictable fuel supply compared to petroleum products. The island's energy transformation envisions more gas as a bridge fuel on the path to renewables, and NFE already operates a major LNG terminal near San Juan that supplies key power plants in the system.

But at the same time, any outage at this hub could paralyze much of the island's system. The Board of Supervisors itself warns that the San Juan terminal is a "single point of failure" - if New Fortress curtails supplies or a dispute over payments arises, Puerto Rico could face plant outages. This is exactly what has happened in the past when NFE reportedly held up an LNG shipment over a payment dispute and part of the island's capacity had to be shut down.

Regulators hold back monopoly: conditions that change contract logic

Puerto Rico's Financial Oversight Board (FOMB) has made it clear this time that signing a contract does not mean capitulating to one supplier. On the contrary - the approval is conditional on a move to open the market to competition. In practice, this means three essential requirements:

Revision of the LNG "tolling" contract - The government must modify the conditions under which other players have access to the terminal and infrastructure if NFE is unable to supply gas.

Open access to the port of San Juan - Modify lease and port agreements to allow competitors to technically and legally step in and use the infrastructure for their own supply.

Mandatory backup supplier - NFE must contract with a third party to take over part of the supply in case the company declares "force majeure" or is unable to deliver gas.

This combination changes the original logic of the contract, which the Board of Supervisors strongly rejected over the summer as an attempt to create a de facto monopoly with too long a duration and insufficient consumer protection. The new version is shorter, cheaper, without exclusivity and with clearly defined mechanisms for competitors to access.

How the contract has evolved: from a 20 billion dollar ambition to a more 'realistic' agreement

The original draft contract was significantly larger - there was talk of up to $20 billion and a very long commitment that would virtually assure New Fortress a dominant role in the Puerto Rican LNG business for decades. The Board of Supervisors shot down that proposal over the summer with a clear verdict: too expensive, too long, too dependent on one player. Political pressure, public criticism and a new round of negotiations followed.

The current version is a compromise. The seven-year horizon, the possibility of extension, improved pricing and the removal of exclusive provisions are the result of an effort to bring both the risk of monopoly and the financial burden on the Puerto Rican budget and end consumers under control. From the island's perspective, this is a move towards pragmatism - still a high dependence on a single supplier, but with safeguards that were previously absent. From New Fortress's perspective, perhaps a less lucrative but all the more important contract - without it, the reputational and financial pressure could be even greater.

Financial impact: What a seven-year contract can really do to NFE's numbers

The Puerto Rico contract may have a face value of $3.2 billion, but it is crucial for investors to understand how much of that translates into real operating results. LNG supplies indexed to Henry Hub + premium typically generate 10-18% EBITDA margin for similar projects in the region. If this margin is confirmed for New Fortress, the Puerto Rico contract could generate annual EBITDA of around $45-70 million, depending on the utilization of Altamira's FLNG unit and gas price developments.

Such a contribution would have a dramatic impact on the overall balance sheet. The company has long-term debt in excess of $8 billion, so even an EBITDA increase of tens of millions could improve its Net Debt/EBITDA ratio by 0.1-0.2 points per year. This in itself does not solve the debt, but it sends easy-to-read signals towards rating agencies and creditors, especially if the company starts to report stable and repeatable cash flows.

Importantly, this contract also acts as a "proof of revenue" for the entire Altamira offshore project. As long as deliveries are reliable and free of technical difficulties, NFE could use this data to attract additional buyers of FLNG capacity - which is key, as current utilisation of the project is still below the level needed to make a full return on investment.

This gives investors the first meaningful indicator of whether the costly Mexican unit can become a stable cash flow generator or remain an expensive asset with no clear monetization.

Political and regulatory background: Why Puerto Rico is more complicated than any other LNG destination

For investors to understand the risks and opportunities of the contract, they need to see the broader political-regulatory context. Puerto Rico is unique in that the island's energy sector is under scrutiny U.S. Financial Oversight Board (FOMB)which was established by Congress as part of the restructuring of Puerto Rico's sovereign debt. The board can veto energy contracts, block investments, and oversee any major operational changes at PREPA, an energy company that has been in bankruptcy since 2017.

This means that any contract entered into by Puerto Rico is not only commercial, but also political. Contracts often circulate between the government, PREPA, the Board of Supervisors, the Puerto Rican Supreme Court, and federal institutions. In the past, we have seen a number of cases where contracts for gas, renewables and infrastructure have been approved, then cancelled and rewritten because of regulatory interference.

That is why it is important that the tentative approval of the Puerto Rico contract comes with tough conditions. It is a mechanism to prevent monopolization of the market, but it is also a signal to investors that "regulation will play a major role in LNG contracts, right up to the point of full launch." New Fortress is thus entering an environment that can be both a great opportunity and a very uncomfortable source of uncertainty for investors.

LNG market in the Caribbean: limited competition, high volatility and NFE's strategic location

The Caribbean is a specific region for LNG. It is not a large market in volume terms, but a a market with extremely limited supply options. Most of the islands do not have their own infrastructure or terminals, so any player that builds such infrastructure gains a temporary competitive advantage.

New Fortress has taken full advantage of this, expanding aggressively over the last five years and now has a presence in Puerto Rico, Mexico, Jamaica and the Dominican Republic. But this geography bears two key characteristics:

1) High volatility in LNG prices.

Caribbean countries often purchase LNG through spot contracts or short-term contracts. Thus, prices can fluctuate between US$3 and US$15/MMBtu even within a single year. A company that owns an FLNG unit may be protected from extremely high spot prices, but at the same time is exposed to the risk of low prices that squeeze margins.

2) Few competitors

The region is dominated by a few names - Shell, New Fortress and local energy companies. Infrastructure installation is slow, expensive and politically complicated. If NFE manages to stabilize both Altamira and the Puerto Rico contract, it may reach a position where it has several years of quasi-exclusive access to the smaller Caribbean markets.

3) Geographical proximity to Mexico

Altamira is strategically very advantageous - U.S. pipelines have ample capacity, transportation distances to Puerto Rico are relatively short, and logistics costs are significantly lower than shipping gas from Qatar or West Africa. This can stabilise margins and increase reliability of supply.

Overall, this means that if New Fortress can consolidate Puerto Rico, it can become a regional LNG hegemon - but only if it can manage the financial risks and regulatory challenges.

Valuation and revaluation: How the contract could change NFE's investment profile

New Fortress has been valued as a company in restructuring for the past two years - low EBITDA multiple, high risk premium, extreme volatility and investor mistrust. The Puerto Rico contract could change that optics in two ways:

1) It increases cash flow predictability

Investors and rating agencies love regular and contractually guaranteed earnings. If a stable EBITDA contribution of USD 40-70 million per year is confirmed, NFE can gradually move from the "distressed infrastructure" category to the "regional LNG operator" category.

This could change the EV/EBITDA multiple from the current low levels towards 7-9x where smaller LNG operators in the US and Latin America are trading.

2) Improves bargaining power for debt refinancing

Current NFE financing terms are tough as lenders see high risk of debt default. But if the Puerto Rico contract actually runs and Altamira generates repeatable revenue, the company can refinance some of the debt on less draconian terms.

That could lower interest costs, increase free cash flow and subsequently open up space for other projects - or for debt reduction.

3) It opens the way for a share rerating

If investors start to see NFE as a "regional LNG infrastructure" rather than a "risky startup with giant debt", the stock could be revalued upwards even without dramatic earnings growth. This happens routinely in the energy industry - rerating is sometimes more valuable than growth itself.

What does this mean in practice?

If valuations move from distressed levels to the average of smaller LNG players, it could mean 15-40% rerating within 12-24 months, even without expansion in other countries.

Investment scenarios

Optimistic scenario - Puerto Rico as a stabilizing anchor

In the optimistic version of the story, New Fortress successfully completes all regulatory conditions, signs a back-up contractor, the government adjusts access to the San Juan terminal, and the contract gets off the ground without delay. Deliveries from Altamira run on schedule, the FLNG facility uses most of its capacity, and NFE finally turns a capital-intensive project into a stable cash flow. The seven-year contract will become a reference for other buyers in the region, from the Dominican Republic to smaller Caribbean markets, and New Fortress will gain a better negotiating position with banks and potential partners.

Debt will gradually start to be refinanced on less distressed terms, the credit rating will stabilise and the market will start to see the company less as a restructuring problem and more as a riskier but functional LNG infrastructure. In such a scenario, the stock could gradually revalue the firm from a "distressed asset" to a cyclical player with a higher risk premium but a visible growth pillar. Price-wise, this could mean a significant re-rating rally if it is confirmed that the Puerto Rico contract is indeed generating stable margin revenues and no new technical or political issues arise.

Realistic scenario - Contract runs, but debt and politics keep pushing

The realistic scenario assumes that the contract will run, but the path will not be smooth. The NFE will manage to meet the basic conditions, the government will make the minimum necessary adjustments, but some aspects - opening access to the port, engaging competitors, the practicalities of a back-up contractor - will develop slowly and with constant political noise. The company will still be under the scrutiny of the supervisory board, NGOs and the media, which has criticised it heavily in the past for unreliable supply.

Debt levels will remain high and debt restructuring will take time, but the Puerto Rico contract will bring at least partial stabilisation of cash flow. For investors, it will be a title that can offer above-average returns but with high volatility - any new headlines about problems at FLNG or a dispute with regulators can mean sharp swings. Stocks in such a scenario add slowly rather than rise explosively, and remain suitable for investors willing to accept higher risk in exchange for a potential re-rating over a few years.

Pessimistic scenario - Conditions that NFE cannot handle

In the downside scenario, the combination of regulatory conditions, capital constraints and operational risks prove too much for New Fortress. Delays in the implementation of a back-up contractor, legal disputes around open access to the terminal or potential technical issues at Altamira may lead to the Supervisory Board not approving the contract outright or reconsidering it over time. Without a stable Puerto Rican pillar, NFE finds itself back in its current position - high debt, problematic monetization of infrastructure, and increasing creditor pressure.

In such a scenario, there may be further downgrades, stricter creditor demands, asset sales "below cost" or shareholder dilution due to new share issues. In such an environment, the stock would react with further declines and the market would increasingly price the company as a restructuring story with an uncertain outcome. In addition, Puerto Rico would find itself in the uncomfortable position of having to quickly seek an alternative supplier, which could increase costs and risks to the island's energy stability in the short term.

The moral of the story

• The current approval of the contract is a major but conditional victory for New Fortress - it is not yet a done deal.
• For NFE, the seven-year contract represents a potential lifeline that could stabilize FLNG use in Mexico and improve cash flow.
• For Puerto Rico, the deal is a step toward cheaper and cleaner fuel, but also toward continued reliance on one critical terminal and one major supplier.
• The Board of Supervisors has learned from the original "$20 billion" proposal and set tough conditions to limit monopoly and open the infrastructure to competition.
• Investors should watch less for headlines about the stock's rise after the announcement and more for what's going on behind the scenes: the implementation of the terms, the debt restructuring and the actual operation of FLNG Altamira.

Private sector job growth came in well below forecasts, catching Wall Street off guard. Investors are now recalibrating expectations for the Fed’s next moves — with a weaker labor market potentially signaling a sooner-than-expected rate cut. Could this shift redefine how markets perform in early 2026?

United States ADP Unemployment Change (1M)

But the latest numbers don't look pretty. In November according to ADP (alarge U.S. private firm that compiles payroll and HR data for hundreds of thousands of companies) the U.S. private sector lost 32,000 jobs, the third decline in the last four months and the largest decline since the spring of 2023. That's a signal that is immediately being written into stock prices, bond prices and expectations for how the Fed will behave.

Exactly how this statistic works

The ADP National Employment Report is released every month and measures the change in private nonfarm employment in the U.S. Unlike the official government report (BLS Employment Situation), it is not a survey, but an analysis of actual payroll data from the payroll systems of ADP - the firm that processes payroll for more than 26 million U.S. employees. ADP can see in real time how many people are actually getting paid, in what sectors, how the number of employees is changing, and how dynamically wages are growing or not. The report is produced in partnership with the ADP Research Institute and the Stanford Digital Economy Lab and reflects employment change in the week that includes the 12th day of the month. The same reference logic is used by the BLS, which allows for a good comparison between the two sources. Crucially for the market, ADP comes out roughly two days before the official NFP report from the BLS, so it acts as a preview of the labor market data. Therefore, on the day of the ADP release, we often see elevated volatility in stocks, bond yields and currency pairs with the dollar. Investors and traders thus calibrate their portfolios according to this report ahead of the official government data.

History

Historically, the modern form of the ADP report dates back to the beginning of the millennium. Detailed ADP microdata series are analyzed by Federal Reserve economists, among others. The 2018 studypublished in the Federal Reserve Finance and Economics Discussion Series, for example, shows that weekly employment indexes can be constructed from ADP payroll data that match official data very well and greatly improve the accuracy of real-time measurement. The authors conclude that the scope and coverage of the ADP data is comparable to the sample from which the BLS (Current Employment Statistics) draws, and that these data have high informational value in terms of short-term labour market developments. A follow-up study in 2019published as a chapter in NBER's Proceedings, shows that combining BLS and ADP data provides a better estimate of real-time employment than relying on a single source.

Yet there is an eternal controversy surrounding the ADP report. How much to trust it and how it differs from the official BLS data. Pew Research Center in one of the recent analysis points out that the ADP only covers the private sector, while the BLS reports total employment, including government employees. They account for roughly 14% of all jobs. That means it is methodologically fair to compare ADP only to the private portion of the BLS data, not the total. And when we do that, the picture looks interesting. CME Group analysis indicates that over the last decade there is a numerical correlation of about 94% between ADP and BLS (private portion), which is very high, but at the same time there are often strong monthly deviations. This is exactly the paradox. In the long run, the curves coincide, but in individual months they can send conflicting signals to the market.

An example from June 2025: the ADP reported a loss of 33,000 jobs, while the BLS reported an increase of 147,000 in total employment.

Why do these discrepancies arise in the first place? The Fed's 2022 article summarizes four main reasons why the ADP and BLS numbers often disagree: different data sources (administrative payrolls vs. survey), different definitions and coverage (e.g., gray economy, small firms, changes in corporate structure), different seasonal adjustment methodologies, and revisions the BLS makes retrospectively.

Why markets react to the ADP report

Despite these limitations, in practice, ADP acts as a very important indicator. Why? Because the market doesn't wait for the truth, the market reacts to surprises. When the consensus of analysts expects ADP to show, say, +100k new jobs, and instead it comes in at -30k, they immediately recalculate the probabilities of what the Fed will do, how fast the economy will slow, what corporate profitability will look like, and how stocks and bonds are priced today.

After the latest disclosure yesterday, the Dow rose slightly, but the S&P 500 and Nasdaq were under pressure as investors reassessed exposure to growth and cyclical sectors that are more sensitive to the health of the economy. At the same time, the chances of the Fed cutting rates again at its December meeting were rising. Futures implied a probability of a cut of up to around 90%. This is a typical market reaction to a weak report. Bad news for the real economy translates into good news for liquidity and rates, which can paradoxically help stocks in the short term.

The likelihood of an interest rate cut by the Federal Reserve at its December meeting

Source: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

Figures for November

Looking at the specific November ADP 2025 numbers, the picture is interesting for investors. The private sector lost 32,000 jobs, with small businesses with up to 50 employees bearing the brunt of the losses - they shed roughly 120,000 positions, according to ADP. Larger firms were much more stable, with some segments even adding jobs. Sector-wise, there were losses in manufacturing, construction, information and professional services, while education, health care and hospitality still added jobs.

At the same time, the average annual wage growth rate is still around 4.4%-4.5%, only very slowly declining from post-pandemic highs. This means that the labour market is cooling, but it is still not downright weak - more like stagnant. Companies are hiring less, but not yet firing en masse.

A look at history

Looking at the history since 2000, ADP has become a quiet but respected barometer of the labor market over the years. During the dot-com bubble, the 2008-2009 financial crisis, and the covid shock of 2020, it has portrayed the onset of massive layoffs in the private sector quite accurately.

Studythat worked with ADP data between 2000 and 2017 confirms that it is possible to reconstruct major labour market movements with very high accuracy and that the high frequency of data releases helps to better capture sudden breaks. For example, the sharp falls in employment in spring 2020.

On the other hand, investment firms and analysts have repeatedly warned against reading ADP purely mechanically, i.e. in terms of numbers. Charles Schwab in its detailed text on the divergence of BLS vs. ADPexplains how these divergences can create both short-term opportunities and pitfalls. For example, if ADP comes out extremely weak and the market sells stocks and dollars in panic, but then the BLS data shows relatively solid employment, a sharp reversal of the trend can occur - and those who blindly bet on ADP alone will be left on the wrong side of the move.

The decline in the ADP employment curve in 2019-2020 (covid pandemic)

Source: https://adpemploymentreport.com

Impact on today's markets

What does ADP say about the current phase of the cycle and the impact on markets today? In summary, the picture is that the labor market is weakening slightly. Private sector employment has fallen three times in four months, with November delivering the largest decline since 2023, but outside of small businesses, the situation is relatively contained for now.

The pace of wage growth has slowed but remains above 4% per annum, suggesting that inflationary pressure from the labour market is easing but has not completely disappeared. Sectorally, more cyclical sectors such as construction, manufacturing and professional services are shedding jobs, while more defensive segments such as healthcare and education are still hiring. Combined with the data on new hires, which ADP also publishes, the picture that emerges is that firms are still replacing departing employees, but opening new positions at a significantly lower rate. This is a classic late-cyclical pattern. The economy is not in recession, but the dynamics of the labor market are losing steam.

From the Fed's perspective, all of this shifts the pendulum to the easing side of monetary policy. Weaker labor market data means a higher probability of further rate cuts. The market is already implying the near certainty of a third straight cut at the December meeting.

But at the same time, the central bank cannot ignore the fact that inflation may have fallen, but it has not yet been completely defeated, and that too aggressive easing may re-inflate market bubbles. ADP is one of the key inputs in this equation. The Fed closely tracks not only the headline jobs number, but also the structure by firm size, sector and wage dynamics.

But the absolutely key point is that the ADP report should be taken seriously by investors, but it certainly should not be followed 100% of the time. It is important to read it alongside other indicators. It is essential to look at the longer-term trend, not just the data from the last month.

Devon Energy delivered a far stronger third quarter than the market anticipated, stepping into a period of commodity volatility with performance that outpaced nearly all of its U.S. shale peers. Production climbed to the top end of guidance, supported by efficient development in the Delaware Basin and an aggressive focus on lowering well costs. Instead of the cautious, defensive quarter analysts expected, Devon posted results that signal a company regaining momentum at the operational core of its portfolio.

Even more notable is the company’s improving capital discipline. With spending coming in well below plan and operating costs trending lower for a third consecutive quarter, Devon generated substantial free cash flow that strengthened the balance sheet and enabled continued shareholder returns. In an environment where many producers struggle to balance reinvestment with cash generation, Devon is positioning itself as one of the most operationally consistent and financially resilient operators in the Permian.

How was the last quarter?

Devon Energy $DVN delivered results in Q3 2025 that exceeded its own expectations in almost all key parameters. Production reached 853,000 barrels of oil equivalent per day, breaking the upper guidance limit, and oil production itself climbed to 390,000 barrels per day. This shift was not the result of a one-time effect, but a combination of improved performance in multiple regions, particularly in the Rockies and Eagle Ford, where new drilling exceeded expectations and increased overall production efficiency.

Financial results were also strong. Revenues from oil, gas and NGL sales were $2.8 billion, with improved oil price realization able to partially offset weaker gas prices. Operating cash flow increased to $1.7 billion, representing a nine percent increase over the previous quarter. But even more significant was the growth in free cash flow, which climbed to $820 million. This is one of the most important metrics for investors, as it determines the company's ability to pay dividends, make buybacks and reduce debt.

In addition, Devon was able to maintain capital expenditures at $859 million, about five percent less than planned. This result is a testament to more efficient cost management, better service acquisition pricing and optimized drilling cycles. At the same time, the company was able to reduce unit costs of production, with total operating expenses falling to $11.41 per barrel of oil equivalent. Lease operating expenses along with transportation and processing costs were $8.85 per BOE, three percent below the company's estimates.

At the earnings level, the company reported net income of $687 million ($1.09 per share), while core, adjusted earnings were $656 million. The stability of the results is supported by balance sheet strength - Devon holds $1.3 billion in cash, has no revolving credit facility, and has reduced its net debt to EBITDAX ratio to a very conservative 0.9x through continued deleveraging.

• Full presentation with results.

CEO commentary

Clay Gaspar Called the third quarter "the best this year", not only due to strong production or lower costs, but also due to noticeable progress on the corporate program Business Optimization. The program is expected to deliver $1 billion in cumulative savings by 2026, and more than 60 percent of the goal has already been met. Gaspar emphasized that the next phase of optimization will build on digitizing processes, deploying advanced data analytics and faster operational decision-making.

The CEO also pointed to the fact that thanks to high capital discipline and technological innovation, the company has been able to increase production without the need for dramatic cost increases. Going forward, he expects steady production and a decline in capital in 2026, a unique position compared to the competition in the Permian, where many producers are reporting rising CAPEX due to mining inflation.

Outlook

Devon expects fourth quarter production between 828-844k BOE/d, with oil production expected to be 383-388k barrels. This represents a slight reduction from Q3, but still at a very robust level consistent with a long-term strategy of stable production without excessive CAPEX increases.

Capex will be between $890-950 million, reflecting higher drilling activity before year-end. For 2026, the company projects CAPEX in the range of $3.5-3.7 billion, roughly $100 million lower than 2025, while maintaining production in the range of around 835-855 thousand BOE per day. This outlook is particularly attractive to return-oriented investors as it implies higher future free cash flow.

Long-term results

Looking at the last four years, there are significant cyclical swings characteristic of the oil and gas sector, but also stabilizing elements that Devon has gradually built up. Revenues have stalled at $15.6 billion in 2024, a modest 2.8 percent growth after the significant 2023 decline caused by weaker commodity prices. Thus, in contrast to an extremely strong 2022, Devon has gradually found a balance between production, price and cost structure.

More significant changes can be seen in the cost base. Production costs in 2024 reached $11.3 billion, up 13.6 percent from the previous year. However, the growth partly reflects higher activity, changes in the drilling portfolio and higher service inflation at Permian. Gross profit fell to $4.27 billion, a 20 percent decline. The decline in operating margin is noticeable - operating profit of $3.77 billion is more than 21 per cent lower than in 2023.

Looking even further out, however, to 2021-2022, the huge volatility caused by geopolitical shocks and the rise in oil prices following the Russian invasion stands out. 2022 was an extremely strong year, so it is logical that the 2023 and 2024 results look weaker. However, the company was able to remain profitable despite lower sales, thanks to efficient capital management and a conservative approach to debt.

Devon shows a significant decline in net profit to $2.89 billion in 2024, a nearly 23 percent drop from 2023. However, comparing the results to the period prior to 2022 shows that the firm's overall profitability has improved over the long term, and the current level of results represents a new stable base that the firm is looking to continue to build on through cost optimization and maintaining production volumes.

News

- Achieving 60% of the one billion dollar Business Optimization target
- Closing the acquisition of the remaining interests in Cotton Draw Midstream
-Strengthened position in Permian through the purchase of 60 net locations
- Continued share-buyback program, 13% of all shares repurchased to date

Shareholding structure

Devon Energy's ownership structure fits the profile of a large US mining company and clearly shows the dominance of institutional investors. They hold approximately 80 per cent of all freely traded shares, which is above the industry average. The largest shareholder is the Vanguard Group with more than 13 percent - a significant and long-term holding that is often seen as a stabilizing element. It is followed by BlackRock, State Street and Geode Capital, which together control another ten percent of the company.

Insider ownership remains low, around 0.8 percent, which is common in the energy sector. Thus, the shareholder structure indicates strong institutional support, high liquidity, and that any significant changes in sentiment by large funds can have a rapid impact on the share price.

Analysts' expectations

According to the latest analyst consensus published by MarketScreener and Reuters Estimates there is a positive sentiment towards Devon Energy. Analysts now expect steady free cash flow growth in 2026 due to a decline in CAPEX and stabilization of oil prices in the $75-85 range.

Specifically, analysts at JPMorgan (analyst Arun Jayaram) have affirmed the rating of Overweight with a price target of 67 USD, citing a combination of robust cash flow, continued deleveraging and the benefits of the optimization program. Jayaram highlights that Devon is emerging as one of the best managed producers within Permian in terms of capital discipline and ability to generate above-average margins even in an environment of pressure on gas prices.

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