Return on equity (ROE) above 20% is a metric that only a limited number of companies can sustain over the long term. In practice, it means that management can work efficiently with shareholder capital and generate above-average profitability without having to continually raise equity. Meanwhile, both McKinsey studies and S&P Global's long-term analysis show that firms with sustainably high ROEs tend to outperform broader indices over a 10+ year horizon, unless their valuations are extremely overvalued.

However, ROE alone is not enough. For some firms, it may be high due to financial leverage or one-off accounting effects. Therefore, it is also key to monitor the ability of companies to generate free cash flow. Free cash flow in billions of dollars creates real room for reinvestment, R&D, acquisitions, deleveraging or share buybacks. According to data from Goldman Sachs Research, it is the companies with a combination of high ROE and strong free cash flow that have been able to outperform the market over the past few decades .

Moreover, the current market environment is very specific. Higher interest rates increase the cost of capital and penalize companies with low returns or weak cash flow. Balance sheet quality and the ability to generate cash are thus becoming more important. In an environment of a slowing economy and selective capital growth, the market is beginning to distinguish more between real profitability and mere book growth.

Micron Technology $MU

Micron Technology is one of the three key global manufacturers of DRAM and NAND memory chips, alongside Samsung and SK Hynix $HY9H.F Founded in 1978, the company is now a strategic player in the memory segment for data centers, servers, mobile devices and AI accelerators. The memory market is a structurally essential part of digital infrastructure - each generation of more powerful processors or AI models requires higher memory capacity and speed.

However, the industry has historically been highly cyclical. The performance of companies like Micron is closely tied to the investment cycle of server, cloud datacenter and consumer electronics manufacturers. Excess capacity leads to sharp price declines, while periods of shortages cause significant margin expansion. It is this cyclicality that often leads to high stock volatility.

In the last cycle (2022-2023), Micron experienced a significant decline in sales and profitability due to overcapacity and weaker demand for PCs and smartphones. The subsequent recovery was and still is driven by the AI boom, which dramatically increased demand for HBM (High Bandwidth Memory) modules used in AI servers.

According to data from the company and S&P Global Market Intelligence, the HBM memory market may expand several-fold in the coming years, fundamentally changing the long-term structural outlook for the segment.

ROE

Micron's ROE has historically fluctuated significantly precisely because of cyclicality. During peak cyclical periods, ROEs have been well above 20%, while during downturns they have fallen into the low single digits or even into negative territory.

The current recovery in profitability, supported by higher memory prices and structural demand for AI servers, has pushed ROE back above 20%. This is an important signal of capital efficiency, but it is also important to stress that this is not a linear trend for memory manufacturers. ROE here is strongly tied to industry pricing discipline and the global investment cycle.

A positive structural factor is that the market is more consolidated than in previous decades. A limited number of producers may contribute to greater price stability, which could reduce extreme ROE fluctuations in the long term.

Free Cash Flow

Free cash flow is a key metric at Micron. Memory production is extremely capital intensive and each generation of production processes requires billions of dollars of investment in new lines. During periods of strong memory price growth, the company is able to generate billions of FCF, allowing it to reduce debt and strengthen its balance sheet.

In the last recovery cycle, Micron returned to positive free cash flow, despite heavy investment in HBM capacity expansion. Stronger cash flow also allows the company to better manage a future phase of a potential slowdown.

According to the company's annual reports (which can be found in its detail on Bulios), management's long-term goal is to keep capital spending in line with the cycle and minimize the risk of excessive capacity expansion, which has led to sharp margin declines in the past.

AstraZeneca $AZN

AstraZeneca is one of the world's largest pharmaceutical companies, headquartered in the UK and with a strong presence in the US, Europe and Asia. The company is primarily focused on oncology, cardiovascular disease, respiratory drugs and immunology. In recent years, it has undergone a significant transformation from a traditional healthcare company to an innovation-driven leader with a robust research pipeline.

The company's revenues have grown steadily in recent years, with the oncology segment accounting for a significant portion, generating more than one-third of total revenues. Key products include Tagrisso and Imfinzi, which are among the most successful drugs in their therapeutic areas.

According to the company's annual reports, AstraZeneca has one of the fastest growing oncology portfolios within the major pharmaceutical groups.

ROE

AstraZeneca's ROE has been consistently above 20% in recent years, a significant indicator of capital efficiency for a pharmaceutical company. The high return is supported by a combination of strong margins, revenue growth and disciplined cost management.

The pharmaceutical sector is characterised by high investment in research and development (R&D), which at AstraZeneca amounts to billions of dollars each year. Despite this, the company has been able to maintain strong operating margins and a stable return on equity, indicating that capital is allocated efficiently and innovation is delivering commercial results.

Compared to the sector average by our analyst team, AstraZeneca ranks as an above-average performer in terms of return on equity, even when higher investment in development is taken into account.

Free Cash Flow

AstraZeneca's free cash flow has long been in the billions of dollars per annum. Stable operating cash flow allows it to fund extensive research, acquisitions of smaller biotech companies and dividend payments.

Pharmaceutical companies generally have high profit-to-cash conversion when their key products are patent protected. AstraZeneca currently benefits from a robust patent portfolio that provides it with relative certainty of income for several years ahead.

The company is also reducing net debt, which is a significant competitive advantage in a higher interest rate environment.

Palantir Technologies $PLTR

Palantir Technologies is a software company focused on data analytics, artificial intelligence and operating systems for working with large data sets. The company was founded in 2003 and has long been associated primarily with government contracts in the defense and security sectors. In recent years, however, it has significantly expanded its commercial segment and has become known to the broader investing public. It is also one of the companies tracked by over 2,500 investors on Bulios.

As our analyst team found from the firm's reports, the commercial part of the business is growing faster than the government segment and increasing revenue diversification. The firm is thus benefiting from the structural trend of digitization and adoption of AI tools across industries.

Palantir operates in a segment with high margins, low variable costs and strong operating leverage, which has a major impact on return on capital. Still, the valuation has been on a high thanks to rocketing growth in recent years and has been declining in recent weeks. Since the peak, $PLTR stock is already down 36%.

ROE

Palantir's ROE has historically been low or negative, which has been linked to heavy investment in business development and expansion. However, the company has achieved steady profitability in recent years and ROE has improved significantly, hovering above the 20% mark.

This is the result of a combination of higher operating margins, growing revenues and a more disciplined cost structure. High gross margin software enables rapid expansion of profitability as revenues grow.

Palantir is now one of the technology companies with the highest gross margins in its segment, creating room for further improvement in return on capital as growth continues.

Free Cash Flow

One of the most significant shifts in recent years has been the company's ability to generate positive and, most importantly, growing free cash flow. Palantir is also already showing billions of dollars of operating cash flow and high free cash flow, which allows it to finance further development without the need for debt.

The subscription-based revenue model generates relatively stable and predictable revenues. This improves the company's cash flow profile and reduces share volatility ahead of earnings release.

At the same time, the company maintains a strong cash position and minimal debt, giving it flexibility for potential acquisitions or expansion into new segments. Debt is only $239 million, while the firm has a cash position of $2.1 billion.

Cisco Systems $CSCO

Cisco Systems is one of the world's largest providers of networking solutions, data center infrastructure and security technologies.

Over the past decade, the company has undergone a significant transformation toward a software and subscription model. The growing share of revenue from higher margin services and security solutions is gradually reducing the dependence on the traditional hardware cycle. This change is improving revenue stability and margin profile.

Cisco today operates in an environment where enterprise digitization, cloud infrastructure, and cybersecurity are growth drivers. According to IDC data, investments in network infrastructure and security remain one of the most stable segments of IT spending.

ROE

Cisco's long-term ROE is above 20%, a significant indicator of capital efficiency for an established technology company with a large balance sheet. The high return is supported by strong operating margins, disciplined capital allocation and extensive share repurchases.

Unlike fast-growing technology companies, Cisco's ROE is not the result of extreme sales dynamics, but rather a combination of stable operating profit and an efficient capital structure. The company has a strong long-term earnings-to-equity ratio while holding solid liquidity.

According to FactSet data, Cisco ranks among the technology firms with the most stable return on equity among large enterprise IT players.

Free Cash Flow

Cisco has long been known for its ability to generate high free cash flow in the billions of dollars per year ($13 billion in 2025). This is despite the fact that it has declined since 2023. Strong earnings-to-cash conversion allows the company to pay a dividend (currently at 2.19% annually), implement large buyback programs, and invest in security and software acquisitions.

According to the company's annual reports, cash flow has been steady at high levels even in periods of weaker revenue growth. This is particularly important in a higher interest rate environment where cash strength represents a competitive advantage.

Cisco also maintains conservative debt and a strong investment-grade credit rating, which lowers the cost of capital and increases financial flexibility.

AT&T $T

AT&T is one of the largest telecommunications companies in the United States with a history dating back to the 19th century. After years of expansion into the media segment (Time Warner), the company has undergone significant restructuring and a return to its core business - wireless and fiber optic networks.

The divestiture of media assets and debt restructuring have greatly simplified the company's structure. AT&T is now focusing on building 5G infrastructure and expanding fiber networks, which are key pillars of future growth. The telecom sector is capital intensive but generates stable and relatively predictable cash flow through recurring subscriptions.

According to company and S&P Global data, the U.S. wireless market is highly concentrated, which supports pricing discipline and revenue stability.

It is also the only company on today's list that is below its fair value as calculated in the Fair Price Index based on DCF and relative valuation.

ROE

Historically, AT&T's ROE has been affected by its high debt and complex capital structure. After restructuring and debt reduction (which is currently $155 billion), ROE has stabilized and is above 20%, a significant shift for a telecommunications company.

Indeed, the sector as a whole generally operates at lower margins than software or healthcare, and therefore ROEs above 20% in this segment are an indicator of improved efficiency and better capital discipline. A key factor has been the reduction of inefficient investments outside the core business and a focus on ROE in network infrastructure.

Free Cash Flow

AT&T has long generated billions of dollars of free cash flow, which is essential to paying down high debt and paying dividends. The company currently pays a 3.87% annual dividend. The subscription-based telecom model generates stable operating cash flow even as capital expenditures on infrastructure remain high.

The company declares a gradual deleveraging, which is a significant positive factor in a higher rate environment. Strong cash flow also allows the company to maintain an attractive dividend yield, which is a key element of AT&T's investment story for many investors.

According to the company's annual reports, the conversion of operating earnings to cash has reached stable levels, further increasing financial flexibility.

Other financial metrics

AT&T benefits from relatively low revenue volatility, as mobile and Internet services are among the basic needs of households and businesses. A diversified customer base and long-term contracts reduce the risk of sharp fluctuations.

The telecom sector may not be a dynamic growth industry, but the combination of stable ROE, billions of dollars of free cash flow, and a gradual reduction in debt makes AT&T an example of a capital-intensive but cash-intensive company.

Deere & Company $DE

Deere & Company, primarily known as John Deere, is a global leader in agricultural, construction and forestry equipment. Founded in 1837, the company is one of the oldest industrially traded companies in the U.S. market.

In recent years, the company has undergone a significant technological transformation. Modern John Deere machines are equipped with precision navigation systems, data analytics and other state-of-the-art features. As a result, the company is gradually moving away from a pure manufacturing model towards higher value-added technology solutions.

Increasing pressure on agricultural productivity, limited land and the need to work more efficiently are creating a long-term structural trend from which the company is benefiting. According to OECD data, global demand for food will continue to grow in the coming decades, encouraging investment in the modernisation of agricultural technology.

ROE

The industrial sector has traditionally been cyclical, yet Deere has a long-term ROE above 20%. This is the result of a combination of strong operating margins, efficient production and optimized capital management.

In recent years, ROE has improved primarily due to higher commodity prices, strong demand for agricultural equipment and disciplined pricing. The company also benefits from a financing division (Deere Financial Services) that supports equipment sales and improves return on capital.

According to FactSet data, Deere is among the industrial companies with the highest return on equity within the heavy equipment sector.

Free Cash Flow

The company generates billions of dollars of free cash flow, even with heavy investment in development and upgrading of production facilities. Strong operating cash flow allows it to fund research, automation and development of digital services without having to significantly increase debt.

The company has long used cash to pay dividends and carry out share buybacks. Capital discipline is also evident in the desire to maintain a balanced ratio between investment in growth and return to shareholders.

According to the company's annual reports, profit-to-cash conversion is stable, which is an important indicator of the quality of the business in a capital-intensive manufacturing business.

Other financial characteristics

Deere combines a cyclical industrial nature with a growing share of technology solutions, which supports higher margins and better pricing power. Diversification between the agricultural and construction segments reduces dependence on a single market.

The company also exhibits strong operating margins within its industry and maintains a long-term investment grade rating, which lowers the cost of capital.

Shares of $DE, like $T, have been very strong this year. They are now up 30% year-to-date.

Conclusion

The combination of a return on equity above 20% and billions of dollars of free cash flow is a strong signal of quality capital management. In an environment of higher interest rates and a more selective attitude to risk by investors, companies that can not only generate profits on the books but also convert them efficiently into cash are gaining ground. Meanwhile, historical data clearly shows that companies with long-term high ROEs are more likely to outperform the broader index, as long as their valuations remain reasonable and growth is underpinned by structural factors.

At the same time, however, it must be perceived that ROE or free cash flow alone is no guarantee of future performance. What matters is the sustainability of returns, the quality of the balance sheet and the ability to respond to cyclical and regulatory changes. In the current macroeconomic environment, where capital is more expensive and growth is less uniform, it is the combination of efficient use of capital and a strong cash position that can be one of the key filters in stock selection across sectors.

Rivian’s Q4 2025 closes the year with a notable step forward: full-year consolidated gross profit turned positive at $144 million versus a $1.2 billion loss a year earlier, and Q4 delivered $120 million of gross profit. But the report also underlines the company’s split personality — automotive remains structurally under pressure and highly sensitive to pricing discipline and cost optimization. For investors, the hinge is the transition from the R1 platform to the upcoming R2, with first customer deliveries targeted for Q2 2026, while software and services — amplified by the Volkswagen Group joint venture — increasingly look like the margin engine that could change what “Rivian profitability” actually means.

Quarterly results

In the fourth quarter of 2025, Rivian $RIVN produced 10,974 vehicles and delivered 9,745 vehicles to customers. Consolidated revenue was $1.286 billion, down from $1.734 billion in the same period in 2024. The main reason was the decline in revenue from the automotive segment, which fell 45% year-over-year to $839 million.

The decrease was primarily driven by lower regulatory credits, which declined $270 million year-over-year, lower shipment volumes due to the expiration of tax incentives, as well as a lower average selling price due to a higher proportion of electric EDVs.

In contrast, the software and services segment accelerated significantly. Sales here rose 109% year-on-year to $447 million, mainly due to the development of electric architecture and software in collaboration with Volkswagen, but also due to remarketing and service.

Group gross profit was USD 120 million. However, the automotive division posted a gross loss of US$59 million, compared to a profit of US$110 million in Q4 2024. Software and services, on the other hand, generated a gross profit of US$179 million, almost triple that of last year. This shows that without the software segment, the quarter would have been deeply in the red again.

• Full presentation with results.

Full Year 2025 Results

For the full year, Rivian produced 42,284 vehicles and delivered 42,247 units. Consolidated sales rose 8% to $5.387 billion.

Automotive sales declined 15% year-over-year to $3.83 billion, driven by lower regulatory credits and lower shipment volume. This was partly offset by higher average selling prices and a higher proportion of R1 models.

Software and services saw dramatic growth of 222% to $1.557 billion. This segment is becoming a strategic pillar of the entire company.

Most significant is the shift at the gross profit level. While Rivian reported a gross loss of $1.2 billion in 2024, it has already achieved a positive gross profit of $144 million in 2025. The automotive segment remains in the red (-432 million USD), but significantly better than the -1.207 billion USD in 2024. Software and services generated 576 million USD in gross profit.

Management commentary

Founder and CEO RJ Scaringe emphasized that 2025 was all about execution and preparing to scale. He said the company has laid the foundation for dramatic growth with its R2 platform and its own autonomous chip, RAP1, unveiled at Autonomy & AI Day.

Management points to very positive early reviews of pre-production versions of the R2 and expects first customer deliveries in Q2 2026. The R2 is intended to be a significantly more affordable model that will enable entry into the mass market segment.

Outlook

A major milestone in 2026 will be the rollout of the R2. The company has completed a validation series with production tools and processes and confirms that the schedule remains unchanged.

Strategically, Rivian seeks to combine vertical hardware integration with a strong software and autonomous platform. If R2 can be launched without major production complications while continuing to expand software revenue, margins could improve significantly.

Long-term results

A look at the 2022-2025 period shows a gradual stabilization but still a very challenging path to profitability. Revenues grow from $1.658 billion in 2022 to $5.387 billion in 2025, more than tripling. However, the growth rate is gradually slowing, which is natural with a higher base.

The biggest improvement is seen at the gross margin level. The gross loss of USD 3.123 billion in 2022 has gradually reduced and the company has already achieved a positive gross profit of USD 144 million in 2025. This shift is a result of higher selling prices, optimization of manufacturing costs, and an increasing share of high-margin software.

However, the operating loss remains high. While it has declined from -$6.856 billion in 2022 to -3.585 billion in 2025, the company is still burning significant capital. So the improvement is noticeable, but the road to operating profit is still long.

Net loss is gradually declining from -$6.752 billion in 2022 to -3.646 billion in 2025. EPS has improved from -$7.40 to -3.07, but at the same time there is significant dilution, with the number of shares increasing from 913 million in 2022 to 1.186 billion in 2025.

So from a macro perspective, Rivian stands between two worlds - no longer a revenue-less startup, but still not a profitable manufacturer.

Shareholder structure

Rivian has a strong insider participation, which amounts to 33.68% of the shares, signaling significant involvement of management and founders. The institution holds approximately 45.5% of the stock and nearly 69% of the free float.

Amazon is the largest shareholder with a stake of approximately 12.96%, underscoring the strategic link between the two firms. Vanguard (6.66%) and BlackRock (4.13%) also hold significant stakes. Amazon's presence is key not only in terms of capital but also commercially thanks to its fleet of electric EDVs.

Fair Price

Market consensus suggests revenue could land near $4.55 billion, while earnings per share are forecasted around $0.20, compared with last reported levels of $0.17, indicating continued momentum if estimates are met or exceeded. This potential EPS growth roughly 18 percent year-over-year would be a strong signal that Nu can sustain profitability while scaling.

Stellar Growth Track Record Sets Expectations High

Nu Holdings $NU has consistently delivered eye-catching results in recent periods. In Q3 2025, the company reported revenue of $4.17 billion with net income of nearly $783 million, representing about 39 percent year-over-year growth for both metrics, as it expanded its customer base to 127 million active users across Latin America. These results reinforced Nu’s position as one of the fastest-growing digital financial platforms globally, outpacing many traditional banks in growth rates and efficiency.

Prior quarters have also demonstrated resilient execution. In Q2 2025, Nu’s revenue expanded to $3.7 billion with a net income of $637 million, while customer growth remained robust, adding millions of new customers quarter after quarter. This consistent operational strength sets a bullish reference point for the upcoming earnings.

What Wall Street Is Watching

In the run-up to this release, analysts have been recalibrating expectations based on macroeconomic factors and credit trends across Latin America. Earnings forecasts are mixed but generally positive, with some analysts highlighting that Nu possesses the combination of rapid growth and improving monetization that historically precedes earnings beats.

Forecast models suggest sales growth near 36–40 percent year-over-year through 2026, with earnings expected to expand at strong double-digit rates, positioning Nu above many global peers in terms of growth trajectory. Beyond raw growth figures, investors are likely to focus on customer monetization trends, such as average revenue per active customer (ARPU), which has historically outsized operating costs and indicates deeper engagement across financial products.

Key Metrics That Will Drive the Market Reaction

Investors and traders will zoom in on several specific data points when the earnings drop:

Revenue vs. estimates: Beating revenue forecasts could reaffirm Nu’s dominance across digital banking markets in Brazil, Mexico, and Colombia.
EPS surprises: Outperforming EPS expectations particularly around the $0.20 range would provide a strong signal of operational efficiency.
Customer growth and engagement rates: Active customer counts near 128–130 million, with activity rates above 80 percent, would underscore product stickiness.
Credit portfolio performance: Trends in credit card receivables and loan performance key drivers of net interest income could influence sentiment.
Forward guidance: Any commentary on 2026 customer and revenue expectations will likely be a major driver of stock sentiment post-earnings.

Strategic Tailwinds: Expansion & Product Diversification

Nu’s business momentum is supported by more than just core banking growth. The company is accelerating efforts in creations of new products such as AI-powered credit models and deepening its presence in high-growth Latin American markets with expansions in Mexico, Colombia, and Peru. These initiatives are designed to increase cross-sell opportunities across credit cards, savings, insurance products, and digital payments a strategic play that could materially boost long-term customer revenue.

Analysts also factor in Nu’s improving operating leverage and capital efficiency, with forecasts suggesting revenue and earnings growth rates significantly above financial industry averages in the coming years; some models predict earnings per share growth approaching 30 percent annually over the next 3 years.

Market Reaction & Investor Sentiment

Over the past year, Nu’s shares have shown strong performance, climbing toward 52-week highs in the mid-$15 to low-$18 range, reflecting both fundamental growth prospects and rising investor interest in fintech platforms with strong unit economics. Wall Street consensus price targets sit near $19 to $20, implying continued upside from current trading levels.

However, sentiment is not unidirectional: some analysts have recently trimmed full-year EPS expectations due to macroeconomic uncertainties, credit conditions and funding costs, reminding investors to weigh growth optimism against economic risks.

Investor Takeaway: A Defining Earnings Moment

As Nu Holdings prepares to report on February 25, the market stands at a potentially pivotal juncture. With record revenues, expanding customer engagement, and robust forecasts for topline and bottom-line growth, the stage is set for a highly consequential release.

Whether Nu simply meets expectations or delivers a breakout performance, the outcomes will shape investor narratives for months ahead especially in Latin America’s rapidly evolving digital finance landscape, where Nu has emerged as one of the most dynamic and fastest-scaling players.

RTX ends 2025 with the kind of visibility investors like: revenue rose 12% to $24 billion, cash flow improved meaningfully, and backlog hit a new high across both commercial and defense programs. But the quarter also draws a line under what still needs fixing: adjusted EPS didn’t match the pace of the top line, with higher costs, tariffs, and a heavier tax burden still eating into the upside.

How was the last quarter?

RTX $RTX delivered fourth-quarter 2025 revenue of $24.2 billion, up 12% year-over-year, or 14% organically. Growth was broadly spread across all three major segments, confirming the return of commercial aviation and the continued strength of defense budgets. GAAP earnings per share were $1.19, but were significantly weighed down by acquisition accounting and restructuring costs. Adjusted EPS came in at $1.55, up only 1% year-over-year, showing that the cost base is still not fully optimized.

Net income attributable to shareholders was $1.6 billion, while adjusted net income rose to $2.1 billion, up 2% year-over-year. The key positive of the quarter was the return of strong cash flow, with operating cash flow reaching US$4.2bn and free cash flow reaching US$3.2bn, a sharp jump from the weak finish to 2024. It is cash flow that is becoming the main argument for RTX's investment story.

Visibility of future earnings has also improved significantly. The company's total backlog has grown to $268 billion, of which $161 billion is attributable to the commercial segment and $107 billion to defense contracts. This ratio confirms that RTX is not unilaterally dependent on government budgets, but is also benefiting from the resurgence of global air travel.

• Full presentation with results.

Segment performance: where value is created

Collins Aerospace reported fourth quarter revenues of $7.7 billion, up 3% year-over-year. But the real strength was in operating profit, which rose 27%, with margin improving 340 basis points. On an adjusted basis, profit growth was more modest, but the segment benefited from strong aftermarket growth, which is significantly more attractive on a margin basis than new aircraft deliveries.

Pratt & Whitney was the growth driver. Revenues jumped 25% to $9.5 billion, mainly due to higher volumes in commercial engines and strong military production. Operating profit rose 53%, although adjusted growth was lower due to higher costs and the absence of one-off items from last year. Still, the segment clearly shows operating leverage on rising volumes.

Raytheon added solid but less dynamic growth. Revenues were up 7% to $7.7 billion, while adjusted operating profit rose 22%. Air defense systems and naval programs play a key role here, where demand remains structurally strong due to geopolitical tensions.

CEO comment

CEO Chris Calio called 2025 a watershed year in terms of operational discipline. In his comments, he emphasized that the growth in revenue, earnings and cash flow is the result of better execution, not simply a cyclical recovery. He said RTX enters 2026 with "significant momentum", underpinned by record backlog and improving manufacturing stability.

Calio also openly admitted that investing in new capacity and technology remains a key priority. The company is focusing on expanding production lines, shortening supply chains and delivering orders on time, which is particularly critical for defence contracts. The CEO thus clearly frames 2026 as the period when RTX is to translate strong demand into higher and more sustainable margins.

Outlook for 2026: growth with better quality

For the full year 2026, RTX expects adjusted revenues in the range of $92-93 billion, implying 5-6% organic growth. Adjusted earnings per share are expected to be between US$6.60 and US$6.80, a further acceleration from 2025. Free cash flow is expected to rise to US$8.25-8.75bn, confirming the firm's emphasis on cash returns, not just accounting profit.

The outlook also assumes continued investment in manufacturing and technology, which limits margin expansion in the short term but enhances long-term competitiveness. The market views this approach positively as it reduces the risk of a repeat of the operational problems of previous years.

Long-term results

A look at the last four years shows that RTX has had a significantly volatile period. Revenues grew from $67.1 billion in 2022 to $88.6 billion in 2025, with the greatest acceleration coming in 2024 and 2025. However, profitability fluctuated significantly more than revenues, with operating profit falling sharply in 2023 to increase by more than 33% in 2025.

Net profit reached $6.7 billion in 2025, up 41% year-on-year, and EPS rose by almost 40%. But this jump isn't just cyclical - it also reflects stabilizing costs, an improving order mix and a return of operating leverage. In the long term, this puts RTX back on track towards a model where the combination of defence and commercial aviation generates balanced and predictable growth.

News and capital discipline

During the year, RTX completed the divestment of part of Collins Aerospace, simplifying the portfolio and freeing up capital for key areas. At the same time, the company continues to expand production capacity in engines and defence systems where demand is highest. The record backlog confirms that these investments have real backing in future orders.

Shareholding structure

RTX has an exceptionally strong institutional base - the institution holds more than 81% of the shares. The largest shareholders are Vanguard, BlackRock and State Street, confirming that the title is viewed as a long-term strategic position, not a short-term speculation.

Fair Price

Today, Microsoft isn’t just a software business. It’s a global cloud powerhouse, an artificial intelligence enabler, and a strategic partner to enterprises, governments, and developers worldwide. But that transformation hasn’t been without tension both in the company’s numbers and in investor expectations.

The Cloud Engine That Keeps Gaining Momentum

Since launching Azure, Microsoft $MSFT has steadily built one of the most diversified and profitable cloud platforms in existence. Azure’s rise ranks alongside the most meaningful shifts in the company’s modern history transforming revenues, customer relationships, and future growth trajectories.

In its recent quarterly earnings, Microsoft reported double-digit revenue growth in Cloud, with Azure revenue growth rates that continue to outpace overall corporate performance. While exact figures vary by period, consistent strength in this segment has underpinned much of the company’s market valuation and helped offset slower growth in legacy areas like Windows licensing.

What makes Azure especially compelling is not just its scale, but the mix of workloads driving growth from traditional enterprise computing to modern AI inference and training pipelines. Large language models and AI-optimized workloads tend to consume significantly more storage, memory, and compute, leading to greater revenue per customer engagement compared to simpler cloud tasks.

Analysts now model Microsoft’s cloud revenue as a potential >100 billion dollar annual business within the next few years, a benchmark that would rival some of the largest standalone companies in the world. Whether that projection fully materializes will depend on how well Azure captures AI workloads relative to competitors.

AI Investment: Boon or Burden? An Analyst Perspective

AI has become the defining theme of Microsoft’s growth strategy, but the market’s reaction reflects both optimism and skepticism.

On the optimistic side, Microsoft’s early leadership anchored by its deep partnership with OpenAI and massive investments in AI infrastructure positions it to capture a lion’s share of enterprise AI spend. This includes not only cloud compute but also AI tooling, APIs, developer platforms, and hybrid on-prem solutions.

From a cautious perspective, investors are watching capital expenditure trends and margin behavior. Microsoft has reported historically high capital spending on data centers and AI hardware, which has weighed on near-term profit margins even as these investments build long-term capacity. For some market participants, this raises questions about when not if the heavy lifting will translate into outsized financial returns.

In recent commentary, analysts have emphasized that Microsoft’s AI strategy is less about selling a single product and more about shaping an ecosystem one where Azure provides the foundation for everything from AI-powered apps to business process automation. The consensus among bullish analysts is this: AI monetization could push Microsoft’s cloud revenue growth into sustained double digits for years to come, provided it maintains competitive pricing, performance, and feature innovation.

Beyond Cloud: Productivity, Gaming, and Enterprise Software

While Azure and AI often dominate headlines, Microsoft’s breadth is a major asset:

• Productivity and Business Processes — The Microsoft 365 suite continues to anchor corporate digital workflows. It remains one of the most sticky, revenue-generating portfolios in tech.

• LinkedIn — A professional network that feeds insights into hiring trends, advertising spend, and enterprise behavior.

• Gaming — Through Xbox and strategic content investments, Microsoft has carved out a unique position at the intersection of entertainment, tech, and subscription revenue.

This diversity matters because it provides multiple levers for revenue growth even if one segment softens. For example, if consumer PC demand weakens (a cyclical trend), enterprise software adoption or cloud AI consumption can still carry overall growth.

Stock Valuation: What the Market Is Pricing In

Microsoft’s stock performance in recent months has reflected a recalibration of expectations:

• Past earnings beats lifted sentiment.

• Heavy cloud spending created a narrative of “investment-phase margins.”

• Rising competition from peers like Amazon AWS and Google Cloud adds pricing and strategic pressure.

• Macro concerns around interest rates and global economic growth temper appetite for long-duration tech growth.

Valuation multiples for Microsoft have remained elevated compared to the broader market but slightly compressed relative to the peak “AI hype” era. Analysts describe this as a “growth with discipline” rate not cheap, but not irrationally priced either.

Crucially, future valuation expansion may depend on how fast Microsoft can convert its AI investments into predictable revenue streams instead of one-off commitments. Investors avoid premium multiples when growth feels uneven or lumpy; they embrace them when revenue direction is clearly widening.

What Comes Next — Key Indicators for Investors

For shareholders and prospective buyers, several catalysts will shape the narrative in 2026 and beyond:

Cloud Revenue Trajectory: Continued acceleration in Azure growth, including AI revenue contributions, will likely be the biggest valuation driver.
Capital Efficiency: Reducing depreciation lag and improving operating margins as cloud investments mature.
AI Monetization Progress: Metrics around enterprise adoption of AI tools, APIs, and custom applications built on Azure.
Competitive Positioning: How Microsoft fares against AWS, Google Cloud, and emerging AI platform providers in both pricing and feature sets.
Macro Conditions: Interest rate dynamics, business capex budgets, and enterprise tech spend cycles.

If analysts’ frameworks hold, a scenario where Microsoft’s cloud and AI franchises drive 20 percent+ of incremental earnings growth annually could cement the stock as one of the most reliable large-cap growth engines of the decade.

Analyst Voices and Market Sentiment

Many Wall Street firms have reiterated positive long-term views on Microsoft, citing its strategic relationships, robust balance sheet, recurring revenue streams, and diversified business units as compelling advantages. Even the more cautious voices concede that the company’s scale and capital discipline make it a less risky bet than many peer growth stocks, especially in turbulent markets.

One recurring theme is that Microsoft’s narrative has moved from “cloud scale story” to “AI megaplatform story.” That shift if validated by consistent revenue evidence and margin health could re-rank Microsoft among the elite compounders in global equity markets.

Investor Takeaway

Today’s Microsoft is not the same company that dominated the enterprise software era. It is a cloud and AI juggernaut with diversified revenue engines, broad competitive moats, and a strategic vision that aligns with the future of business technology.

While short-term volatility remains part of its stock behavior, the long-term structural trends supporting Microsoft cloud adoption, enterprise digital transformation, and AI integration suggest that the company’s next decade of growth could be even more consequential than the last.

If you’d like, I can also prepare a data-rich infographic summary or a concise investor brief that highlights the most compelling numeric forecasts and analyst scenarios shaping Microsoft’s outlook.

I looked at this year’s performance of the most well-known REITs, like $O or $VICI, and that growth isn’t bad at all. For example, shares of $O have risen by more than 14% since the start of the year. It’s possible these stocks will do well this year, but for me this sector is uninteresting from a long-term perspective.

At this scale, even incremental percentage gains translate into hundreds of millions in additional sales, reinforcing Vertex’s position among the most financially stable biotechnology firms in the United States. Institutional investors often view these earnings as a benchmark for defensive growth within the healthcare and pharmaceutical sector.

Cystic Fibrosis Franchise Continues to Power the Engine

A central pillar of Vertex’s $VRTX financial strength remains its cystic fibrosis portfolio, which continues to generate billions in recurring revenue annually. Sales from flagship therapies contributed well over 85 percent of total quarterly income, illustrating how a focused therapeutic leadership strategy can still deliver outsized financial returns. Global patient adoption and long term treatment adherence have sustained predictable cash flow streams, making the franchise one of the most profitable drug portfolios in biotech history.

Analysts estimate that annual cystic fibrosis related revenue could approach 10 billion dollars within the next few years, particularly as additional international approvals and patient coverage expansions continue. This consistent revenue base provides Vertex with the financial flexibility to aggressively fund new pipeline innovations without jeopardizing margins.

Expanding Pipeline and Diversification Beyond Core Treatments

Beyond its established therapies, Vertex’s financial release emphasized pipeline diversification, particularly in gene editing, pain management, and rare disease treatments. Research and development spending exceeded 900 million dollars for the quarter, underscoring the company’s commitment to long term innovation rather than short term profit optimization.

Collaborations and advanced stage clinical trials are increasingly viewed as potential multi-billion dollar opportunities, with analysts projecting that successful commercialization of even one or two pipeline assets could add 2 to 4 billion dollars in annual revenue over the coming decade. This diversification strategy reduces reliance on a single therapeutic area and enhances long term valuation stability.

Margins, Cash Position and Operational Strength

Vertex’s operating margin remained impressively high, hovering near 40 percent, a level rarely seen in research intensive pharmaceutical businesses. Free cash flow generation for the quarter was estimated above 1 billion dollars, pushing total cash and marketable securities beyond 15 billion dollars. Such liquidity positions Vertex as one of the strongest balance sheets in the biotech space and provides substantial flexibility for acquisitions, licensing agreements, and accelerated research programs.

The company’s ability to simultaneously invest heavily in research while maintaining premium profitability metrics is frequently cited by analysts as a distinguishing competitive advantage.

Market Reaction and Valuation Metrics

Following the earnings release, trading volumes spiked as investors evaluated updated guidance and forward projections. The company’s price to earnings ratio remained in the mid-20s, reflecting a balance between growth expectations and earnings stability. Market capitalization fluctuated around the 120 to 130 billion dollar range, placing Vertex among the elite tier of global biotechnology companies.

Many portfolio managers consider Vertex a hybrid investment profile combining growth characteristics of innovative biotech with the defensive qualities of mature pharmaceutical cash flow generators. This dual identity often attracts both long term growth funds and conservative healthcare allocations.

Forward Outlook and What Investors Are Watching

Looking ahead, management indicated expectations for continued mid single digit revenue growth, expanding clinical milestones, and sustained margin discipline. Analysts project full year revenue potentially exceeding 13 billion dollars, with earnings per share trending toward 20 dollars annually if pipeline execution remains on track.

Investors are closely monitoring several evolving indicators:

Pipeline trial outcomes that could unlock entirely new revenue streams.
International market penetration and regulatory approvals.
Research spending efficiency relative to commercialization timelines.
Strategic partnerships or acquisitions that accelerate diversification.

Vertex Pharmaceuticals’ financial release ultimately paints a portrait of a biotechnology powerhouse balancing innovation with financial discipline. While many biotech firms oscillate between breakthroughs and setbacks, Vertex’s blend of stable revenue, expanding pipeline potential, and formidable cash reserves continues to make it one of the most compelling and closely watched names in the healthcare investment landscape.

Quarterly results confirm continued cost restructuring and more disciplined expense management. For investors, not only the development of seasonal vaccine sales is now critical, but more importantly the success of regulatory processes and clinical data to determine whether Moderna can transform itself from a "covid company" to a full-fledged mRNA platform with diversified revenue.

How was the last quarter?

In the fourth quarter of 2025, Moderna's revenue was $678 million, down 30% year-over-year from $966 million in the same period in 2024. Covid vaccine sales remained the main source of revenue, with net product sales of $645 million, including $264 million in the U.S. and $381 million in international markets. Other revenues amounted to USD 33 million.

Cost of goods sold was $452 million, including $34 million of royalties to third parties and $144 million of inventory amortization. These costs decreased 39% year-over-year, primarily due to lower contract termination costs and lower inventory write-downs.

Research and development (R&D) was US$775 million, down 31% from US$1.122 billion in Q4 2024. The company continues to reduce spending as it completes large Phase 3 respiratory studies and as part of its portfolio prioritisation. SG&A operating expenses were $308 million, down 12% year-on-year.

Total operating expenses were $1.535 billion, resulting in an operating loss of $857 million on revenue of $678 million. Net loss for the quarter was $826 million, compared to a loss of $1.12 billion a year earlier. The loss per share was USD -2.11 (vs. USD -2.91 in Q4 2024). So while the loss margin is improving, the business remains deep in the red.

Gross margin in the quarter was approximately 33% (US$678m sales minus US$452m cost of sales), reflecting weaker volumes and pressure on manufacturing efficiency.

• Full presentation with results.

Full year 2025 in numbers

For the full year 2025, Moderna generated revenue of US$1.944 billion, down 40% from US$3.236 billion in 2024. Of this, US$1.818 billion was product revenue and US$126 million was other revenue. The US contributed US$1.2 billion and international markets US$745 million.

Cost of goods sold was $868 million (down 41%), R&D expenses were $3.132 billion (down 31%) and SG&A was $1.018 billion (down 13%). Total operating expenses were $5.018 billion.

Operating loss for the year was $3.074 billion, net loss was $2.822 billion, compared to $3.561 billion in 2024. Loss per share was -$7.26 (vs. -$9.28 in 2024). The improvement is noticeable, but the company remains significantly loss-making.

Cash, cash equivalents and investments as of 12/31/2025 were $8.1 billion (vs. $9.5 billion a year earlier). This included a $600 million drawdown on a $1.5 billion line of credit. The decrease in cash is primarily due to continued losses and pipeline investments.

CEO comment

Stéphane Bancel highlighted that the company has reduced annual operating costs by approximately $2.2 billion in 2025, significantly exceeding internal targets. At the same time, it launched a third commercial product and opened three new manufacturing plants outside the US.

Moderna enters 2026 with "strong momentum," according to management, expecting up to 10% revenue growth from mNEXSPIKE expansion and international partnerships. The CEO also points to the potential of several regulatory decisions and clinical data in Phase 2 and 3 that could fundamentally change the company's revenue profile.

Outlook for 2026

Moderna is targeting up to 10% revenue growth from 2025, roughly towards a level of around $2.1 billion. Revenue is expected to be split approximately 50% US and 50% international markets.

Expected Costs:

• Cost of sales: approximately $0.9 billion

• R&D: approximately USD 3.0 billion

• SG&A: approximately USD 1.0 billion

• Capex: USD 0.2-0.3 billion

The company expects a negligible tax charge and an ending cash position of between USD 5.5-6.0 billion at the end of 2026 (without further drawdowns on the credit facility). This implies continued cash outflow, albeit at a slower pace.

Long-term results

The evolution of recent years illustrates the dramatic transformation of the company. In 2021, Moderna $MRNA will reach $17.7 billion in sales and $12.2 billion in net profit, and even $18.9 billion in sales and $8.36 billion in net profit in 2022. EPS at the time was over $20.

The year 2023 marked a sharp turning point: revenues fell to USD 6.8 billion and the company plunged to a net loss of USD 4.7 billion. This was followed by a further drop in 2024, with sales falling to USD 3.2 billion and a loss of USD 3.56 billion.

The collapse in revenue is almost entirely related to the decline in global demand for covid vaccines. At the same time, however, Moderna dramatically increased R&D spending - from $1.8 billion in 2021 to more than $6 billion in 2023.

News

In infectious diseases, the review of the combined influenza and COVID vaccine continues in Europe and Canada. However, for the standalone flu vaccine, the company has received a Refusal-to-File letter from the FDA and has requested a Type A meeting to clarify the way forward.

The norovirus vaccine (mRNA-1403) has a fully enrolled Phase 3 trial, with data expected in 2026. In oncology, a collaboration with Merck continues on a personalized vaccine, mRNA-4157 (intismeran autogene), where the combination with Keytruda reduced the risk of recurrence or death by 49% in a Phase 2b study in melanoma compared to Keytruda alone. Phase 3 data are expected potentially in 2026.

Shareholding structure

The shareholder structure shows strong institutional dominance. Approximately 75% of shares are held by institutions and more than 81% of free float is held by institutions. The largest shareholders include Vanguard (10.6%), BlackRock (8.3%), Baillie Gifford (5.3%) and State Street (4.4%). Insiders hold approximately 7.4% of the shares, which is a relatively high proportion and indicates some alignment of management interests with shareholders.

Analysts' expectations

Analysts are watching two key factors in particular: the success of the combination respiratory vaccine and the pace of cash burn. The consensus focuses on whether the company can actually achieve the promised up to 10% revenue growth in 2026 while stabilizing its operating loss. The stock's valuation thus remains primarily a function of expectations for future clinical milestones, not current profitability.

That’s the tension at the core of today’s setup. After a multi-year run, the stock can look “fairly valued” at first glance, yet the deeper read on valuation, capital returns, and dividend discipline points in a different direction. A roughly 16% gap versus an estimated fair value, paired with a dividend yield close to 2% and a 49-year payout streak, creates a payoff profile that doesn’t require perfect macro timing to be compelling.

Top points of analysis

• Approximately 35% room for revaluation relative to the fair value estimate at the current price of around $217

• Nearly 2% dividend and historically exceptionally long streak of uninterrupted quarterly payouts

• A business built on contract services, operational discipline and strong return on capital

• Clearly readable segments that can grow "without hype" while generating cash

• CEO replacement in 2026 as a potential catalyst for communicating strategy and capital allocation

Company introduction

Ryder $R is an integrated provider of port to door logistics and transportation services. In practice, this means that the company can provide customers with logistics solutions from warehousing to transportation to fleet management, either as an external partner or as a combination of services tied to long-term contracts. This mix is important because it reduces the sensitivity of the business to pure spot transport prices and moves the company closer to a 'service' profile with more stable revenues.

On the fleet side, it relies on commercial vehicle leasing and management, maintenance and service networks, as well as ancillary services that make it easier for companies to own and operate trucks. In addition, it builds on warehousing, distribution, fulfillment and managed transportation. Simply put, the client is not just paying for the truck and driver, but for the availability of capacity, reliability and the ability to "unbundle" complex logistics without having to build everything in-house.

Scale and infrastructure are also important. The company reports managing roughly 250,000 commercial vehicles, approximately 760 service bays and nearly 300 warehouses with more than 100 million square feet of storage space. This creates a barrier to entry and gives economies of scale that smaller players find hard to replicate.

Business segments and where margins are generated

From an investor's perspective, the key point is that it is not "one transport" but three big pillars. Fleet Management Solutions is the engine that typically delivers a combination of volume, repeatability and the ability to manage costs through the service network and asset utilization. Supply Chain Solutions is more about logistics processes, warehousing, contract logistics and transportation management. Dedicated Transportation Solutions is contract transportation where stability and capacity utilization is often more important than maximizing spot price.

Looking at the 2024 results, the segment numbers show well why the market sometimes "misclassifies" a company and therefore undervalues it. Fleet Management Solutions achieved roughly $7.2 billion in revenue and $516 million in pre-tax profit. Supply Chain Solutions did approximately $6.7 billion in sales and $332 million in pre-tax profit. Dedicated Transportation Solutions added about $3.4 billion in revenue and $125 million in pre-tax profit. This mix suggests that margin strength is mainly concentrated in fleet and logistics, while Dedicated Transportation is stable but typically margin-thinner.

From a "where can there be the most room for monetization" perspective, it is the fleet and logistics side that is interesting. For these there is a natural upsell through service, telematics, maintenance management, vehicle utilisation optimisation, and for warehouse logistics there is a natural upsell through automation, added warehouse services and more sophisticated transport management. When a company acquires a client in a contract, the expansion of service scope often happens with significantly better unit economics than the first acquisition move.

Management and leadership transition as a major event in 2026

The company is led by Robert E. Sanchez, who has long been the face of a strategy focused on operational discipline, return on capital and contract stability. For an investor, it is critical that in such a business, the biggest levers are not in the "revolutionary product" but in the details - contract pricing, asset utilization, maintenance costs, warehouse productivity and risk management. And this is exactly the type of management that can lift the value of a company without growing double-digit sales every year.

But the key message is that the company has announced a change: John Diez (the current COO) is to take over as CEO on April 1, 2026, while Sanchez is to move into the role of executive chairman. In such a "process" business, a change in leadership can act as a catalyst - not just for strategy, but also for communicating capital allocation, growth priorities and willingness to make structural moves in the portfolio.

It is also important to read it the other way around: continuity is not lost because the departing CEO remains close to the management. For the investor, this reduces the risk of an "overshot transition" that could damage cash flow or discipline. At the same time, the new CEO may have the space to make visible growth levers that the market often overlooks because it sees the company only as a cyclical transport.

Numbers under the magnifying glass: which segments are pulling profits and where there is room for the future

Ryder stands on three pillars, and it is the mix of these that explains why the firm can operate more defensively than one would expect from a "transport". In fiscal year 2024, the company achieved revenue of $12.636 billion and operating profit of $995 million. The operating margin was roughly 7.9%. At the net profit level, it was $489 million. Earnings per share came in at USD 11.29. That's a good framework, but the segments tell more: they show where the real earnings are and where the biggest leverage is for the years ahead.

The most profitable, and "best quality" part of the business is Fleet Management Solutions. In 2024, this segment made roughly $7.2 billion in revenue and approximately $516 million in sales. USD 516 million in pre-tax profit. This ratio alone suggests that this is the most profitable component of the portfolio: the gross "pretax" margin equivalent comes out to around 7% (516/7,200). For an investor, this is crucial because Fleet Management is the segment where the scale is best monetized: service network, maintenance, leasing, fleet management, customer cost optimization and long-term relationships. When the economy takes a turn for the worse, while clients save money, they also have an incentive to outsource and "professionalize" fleet management, so this segment often holds stability better than pure spot transportation.

The second pillar, Supply Chain Solutions, is very significant in volume and the most "growth-shaping" in the future because it is based on warehousing, fulfillment, distribution services and transportation management. In 2024, it had approximately $6.7 billion in revenue and about $332 million in sales. US$332/6,700 in pre-tax profit, or about 5%. That's lower than Fleet Management, but still solid economics in an industry where labor productivity, warehouse automation, contract quality and the ability to increase "wallet share" with clients all play a role. This is also where the company has the most room to surprise in the years ahead: even a small improvement in margins on such a large revenue base makes a huge difference to earnings per share.

The third segment, Dedicated Transportation Solutions, is the most "transportation" and typically the thinnest in terms of margins, but also stable due to its contractual nature. In 2024, it did about $3.4 billion in sales and about $125 million in revenue. From an investment perspective, this is a segment that often acts as a stabilizer of capacity utilization and long-term contracts, but it is not one that would see a dramatic rerating of valuations. Rather, its role is to "hold the bottom" of the results cycle and give the firm access to customers where it can then upsell fleet or supply chain solutions.

If we make a simple "who bears the profit" map from these numbers, it comes out that Fleet Management dominates in terms of pre-tax profit (roughly over half of segment pretax profit), followed by Supply Chain (roughly a third) and Dedicated (the rest). This is very useful for future expectations because it tells you where to look when you want to see if an investment thesis is coming true: if the stock is to grow over the long term, it must be either through profit growth in Fleet Management or margin improvement in Supply Chain, ideally both at the same time.

Going forward, it makes sense to expect Fleet Management to continue to act as a "cash engine" and a major source of stability - the key is whether the company maintains pricing in the leasing and service economy, as that's where the best quality profit is generated. For Supply Chain, the logic is different: there is the greatest scope for monetization through automation, higher value-added services in warehouses (packaging, kitting, reverse logistics, e-commerce fulfillment) and through a better mix of contracts. If you can move the margin by even one percentage point on billions of sales, it is very significant in absolute profit. Dedicated Transportation is a segment that is typically expected to have stability and incremental rate improvement in contract renewals rather than "explosive" growth.

Long-term financial performance and what recent years say

The numbers over the past few years confirm that the company is not purely cyclical with one engine. Revenues in 2024 are roughly $12.64 billion after $11.78 billion in 2023 and $12.01 billion in 2022. That's a relatively stable base, which in itself is not a small thing - with this type of company, the quality of growth and the ability to translate volume into operating profit is more important than "growth percentages" alone.

Profitability in 2024 shows improvement: operating profit was about $995 million and net profit about $489 million. Diluted earnings per share were about $11 and growing year-over-year, even as the number of shares outstanding declined. At the same time, we can see that EBITDA is significantly higher than net income, which is common for fleet and logistics companies - a large part of the economics is asset depreciation, while cash performance needs to be read through cash flow.

What the company says about the outlook is also significant. For 2025, the firm communicated expectations for comparable earnings per share in the $13 to $14 range and operating cash flow of around $2.6 billion to $2.8 billion. Should that trajectory materialize, the valuation logic changes: the current earnings multiple may actually be more conservative than it looks in the rearview mirror.

Cash flow, balance sheet and capital discipline

When a company is profiting from asset management and logistics, cash flow is more important than accounting cosmetics. From an investor's perspective, it makes sense to look at the ability to generate operating cash and how that cash translates into room for dividends, buybacks, warehouse and fleet investments, as well as balance sheet safety. In recent years, the company has shown that it can grow its operating profit without "breaking the chain" on costs.

The balance sheet metrics paint a mixed but readable picture. A net debt to EBITDA ratio of around 2.85 times shows that the company is operating with leverage, but it is not an outlier. At the same time, it must be respected that leverage is structurally higher in logistics and leasing because the assets are capital intensive. More important than the debt itself is the interest cover and the ability not to lose flexibility in a worse cycle. Here, an interest cover of around 2.7 times says that the firm has a buffer, but it is not unlimited.

For a dividend investor, the key is that the firm is not presenting the dividend as a "maximum possible" but as a stable commitment alongside growth investments. This is the difference against titles that pay out most of their earnings and then are forced to cut the dividend the first time the year goes bad. For Ryder, the logic revolves around long-term sustainability and the ability to go through a cycle.

Dividend: 49 years uninterrupted, but more importantly, sustainability

Ryder belongs to a very small group of companies that have paid a quarterly dividend consistently for decades. The company announced a regular quarterly dividend of $0.91 per share due March 20, 2026, and mentions that this is the 198th consecutive quarterly payout, which equates to more than 49 years of uninterrupted dividends.

On the face of it, this is not a "dividend machine" with a high yield. At an annualized $0.91 per quarter, the annual dividend comes out to about $3.64 per share, which at a price of about $217 yields about 1.7 percent, or in practice "almost 2 percent" depending on exactly where the stock trades. The point of the dividend here is not to maximize yield, but to signal stability, discipline, and a willingness to return capital even in a cyclical industry.

The payout ratio and the link to profitability are important for sustainability. Simplified: if a company is targeting comparable earnings per share of $13 to $14 in 2025, an annual dividend of around $3.6 would imply a payout roughly in the 26 to 28 percent range. That's a typical setup for a firm that wants to protect the dividend while still having room for investment and buybacks. Here, the dividend story is less about "how much it's carrying today" and more about "how reliably the company can carry it through worse years."

Valuation: why it makes sense to talk about a 16% undervaluation

The fair value estimate is $253.5 per share. At the current price of about $217.5, that implies about 16.6 percent potential for revaluation.

The multiples put this in context. A P/E of around 16.4 is not overblown, especially if the company really is holding a $13 to $14 earnings per share outlook, because then today's price becomes more of a "middling" valuation for a quality service than an expensive cyclical title. A price to sales of around 0.62 is normal for a logistics firm, but could be an argument for revaluation when the market starts to value contract stability and return on capital more.

But enterprise value, the value of the company including debt, is also important. With a market capitalization of about $7.8 billion and an enterprise value of about $16 billion, it is clear that debt and capital intensity are part of the story. Here, the key investment question is simple: will the company be able to maintain profitability and cash flow so that leverage remains a "tool" and does not become a risk. If so, a 16% discount to fair value is a realistic reward for an investor accepting the capital intensity of the sector.

Competition and market position: why it's a tougher business than it looks

Competition is fierce in the fleet management and leasing segment because scale and service infrastructure are expensive and customers are sensitive to reliability. Direct competitors typically build on similar pillars: extensive network, maintenance, telematics, operations optimization and the ability to offer a combination of leasing and services. In practice, decisions are made on details such as downtime, speed of service and the ability to manage the total cost of ownership for the customer.

In logistics and warehousing, the competition is even broader, as pure logistics companies, carriers with their own capacity, specialist fulfilment providers and global integrators are pitted against each other. Here, competitive advantage is less about "having warehouses" and more about technology, productivity, the ability to automate and contract pricing. Each contract has different economics, so management and process discipline is essential.

From an investment perspective, Ryder is interesting because it doesn't just play one game. It combines fleet, contract logistics and dedicated transport. This reduces the risk of one segment just going through a slump and dragging down the whole business. But it also requires strong management, because the company must be able to allocate capital where the returns are highest.

Where the company can grow and what can surprise

Growth levers are less "sexy" at Ryder, but all the more practical. The first is the continued outsourcing of logistics and transportation. Companies have long been grappling with whether to keep logistics and fleet in house or hand it off to a partner who can do it more cheaply and more steadily. In an environment of cost pressures and more complex supply chains, outsourcing typically increases, driving demand for contract services.

The second lever is the monetization of data and productivity. For fleet, this means telematics, predictive maintenance, optimizing vehicle utilization and reducing downtime. For warehousing and fulfillment, it means automation, better labor management, higher throughput and added services such as packaging, kitting or reverse logistics. Each of these steps can improve margins without dramatically increasing market demand.

The third lever is pricing and contract mix. Here it is good to look at segment profit before tax because it shows where the company is actually creating value. If Fleet Management and Supply Chain are moving up in profitability faster than revenue, the investment story may approach a "quality service with high returns" profile and the market is willing to pay a higher multiple for that profile.

What to watch next: specific metrics to show if the story is working

The first set of signals are segment results, especially pre-tax profit in Fleet Management and Supply Chain. If these segments maintain the trend of profit growth faster than revenue, margin expansion and monetization of services are confirmed.

The second group's outlook is for comparable earnings per share and operating cash flow. The firm has estimated a range of $13 to $14 per share and $2.6 to $2.8 billion of operating cash flow for 2025. Once those numbers start to move down, the market would usually quickly reassess the multiples.

The third group is balance sheet and leverage. Practically: net debt to EBITDA, interest coverage, and how enterprise value is trending relative to market capitalization. If a company is able to keep leverage in check while increasing dividends, the likelihood grows that a "cyclical" title will become a more stable compounder.

Investment scenarios and possible share price development

Before we get to the numbers, it's good to acknowledge one thing: for this type of company, the stock price is a function of two variables. The first is earnings per share and cash flow, the second is the market's willingness to pay a certain multiple for the stability of the contracts and for the balance sheet. Therefore, scenarios make sense to build on a combination of the earnings outlook and whether the multiple holds or shifts.

Optimistic scenario: outlook met and revaluation towards fair value

In the optimistic scenario, the company confirms comparable earnings per share in the $13 to $14 range and the market begins to more fully value contract stability, segment mix and long-term dividend discipline. If the multiple stays around 16 to 17 times while cash flow confidence picks up, a price move to a fair value of $253.5 is logical, and that's roughly 16% upside to today.

In such a scenario, it is also realistic for the stock to "overshoot" in the short term and trade in a range of approximately $250 to $270, as the market often responds to a combination of a good outlook and certainty of capital return. The dividend continues to grow in this scenario and remains safe, which acts as a volatility damper.

Realistic scenario: stable business, but the multiple doesn't move much

The base case scenario assumes that earnings grow, but the market continues to view the company as "cyclical logistics" and the multiple remains near current levels. If earnings per share head towards, say, $13 and the P/E stays around 15 to 16, the price would naturally move into a range of around $200 to $220, more of a sideways move with a slight upward bias.

In this scenario, the return to the investor is largely made up of the dividend and gradual earnings growth, not valuation expansion. A stock can act as a "quality holding" in a portfolio, but without a significant catalyst, it may not quickly show that it is undervalued.

Negative scenario: cycle pressure and a return of valuation to caution

The negative scenario comes when economic activity worsens, contracts become more aggressively priced and logistics margins come under pressure. If the earnings per share outlook shifts lower and the market simultaneously lowers the multiple to, say, 12 to 13 times, the price could return to a range of about $160 to $185.

But the important point is that even in a negative scenario, this is not typically an "existential" story. It is a story of slower growth, worse sentiment and a longer wait for a revaluation. The dividend should continue to act as a stabilizer unless there is a significant deterioration in the balance sheet or cash flow.

What to take away from the article

• This is not a bet on hype, but on contractual logistics, asset management and stable cash flow

• At the current price, fair value implies approximately 16% room for revaluation

• Dividend is not high, but exceptionally stable: over 49 years of uninterrupted quarterly payouts

• Biggest "value driver" is ability to hold margins in Fleet Management and Supply Chain and meet 2025 earnings per share guidance

• Risk is not in the product, but in the cycle, interest costs and contract execution

Does anyone here invest in $RIVN?

Valuation multiples above a P/E of 35 have historically signaled that the market is pricing in not only strong growth, but a near flawless scenario for margins, earnings and the macroeconomic environment. Such a valuation is not in itself a mistake. The problem arises when expectations diverge even slightly from reality.

According to long-term studies by Goldman Sachs, stocks trading at extreme multiples have a higher probability of a significant correction when growth slows. The typical risk is not business collapse, but valuation compression, i.e. a return of P/E to its historical average.

The current market is specific in that high multiples are not just concentrated in the technology sector, but across other sectors such as pharmaceuticals.

Each of the following companies has a different growth profile, different cyclicality and different sensitivity to macroeconomic factors. Yet they share one common point: the market is pricing them as if the current growth will last without major fluctuations for many years.

What does the past say about P/Es above 35?

Our team's analysis of long-term S&P 500 index data shows that the average forward P/E has historically ranged between 15-20. Levels above 30 have been particularly common:

• During the dot-com bubble (1999-2000),

• the post-2020 period of extremely low rates,

• high-growth titles in the early stages of expansion.

Interestingly, even quality companies like Microsoft $MSFTAmazon $AMZNonly experienced 30-50% corrections in the past due to overblown expectations, not due to problems in their business.

This creates a key question for 2026:
Is the current premium justified by a structural change in the market and demand, or are we once again in an environment where investors are overvaluing the short-term boom too much?

Nvidia $NVDA

NVIDIA is not just a graphics card manufacturer today. It's a key pillar of the global AI infrastructure. Founded in 1993, the company has gone through several transformations - from gaming GPUs to accelerating computing centers to its current dominance in AI training and model inference. The Data Center segment has become a major source of revenue and profitability and far exceeds the original gaming business.

In recent quarters, the company has reported year-over-year revenue growth in the tens of percentages, with gross margins at extremely high levels of over 70%. Free cash flow is at record levels and the balance sheet position remains very strong. Growth is being driven primarily by massive investments by hyperscalers - Microsoft, Amazon and Alphabet - who are building AI data centers at record scale. Studies by both IDC and Gartner confirm that spending on AI infrastructure will grow at a double-digit rate until at least the end of the decade.

In billions of USD

Source: Bloomberg

Valuation

A P/E above 35 for a company of this size does not represent just a premium paid. It reflects a valuation that assumes the current growth rate will be sustained longer than is historically common in the semiconductor cycle. NVIDIA is already generating tens of billions of dollars in revenue, and the company's market capitalization is the highest in the world. This significantly increases the challenge of continued growth in absolute terms.

Yet the history of the semiconductor sector is characterised by its cyclical nature. Even structurally strong companies have faced periods of sharp slowdown in the past. NVIDIA itself experienced a significant decline in sales and profitability between 2018-2019 and 2022 due to demand correction and inventory overhangs. Back then, it was gaming and cryptocurrencies. Today, it's AI. But the principle of the cycle remains.

The risk is not necessarily a decline in demand, but a slowdown in demand momentum. If revenue growth went from extremes to, say, 20-25% per year, it would still be a very solid pace. However, the market may react by compressing multiples, as current valuations immediately assume exceptional growth and margins over a longer period. Valuation compression for such "expensive" titles can mean tens of percent share price declines even without a fundamental deterioration in fundamentals. Indeed, at current levels they are well above fair value. The Fair Price Index shows that they are as much as 36% above their intrinsic value.

Key risks

The biggest structural risk is the investment cycle of hyperscalers. Historically, we have repeatedly seen that periods of massive CAPEX investment tend to be followed by a phase of optimization and slowdown. If large customers start to defer orders or look for cheaper alternatives, the impact would be immediate.

The second factor is competition. AMD is gradually strengthening its AI accelerators, big technology players are developing their own chips (e.g. Google TPU) and the custom ASIC segment (a chip designed for a specific purpose or a specific company) is growing. While NVIDIA has a strong CUDA ecosystem and a technology edge, pricing power is not guaranteed forever.

Geopolitics also remains a significant factor. Manufacturing is heavily dependent on TSMC $TSMregional risk around Taiwan cannot be ignored. In addition, export restrictions to China may affect part of the addressable market in the long term.

Apple $AAPL

Apple is a very different case than NVIDIA. It is not an explosive growth title, but a global ecosystem with extraordinary customer loyalty, high margins, and one of the strongest cash-flow profiles in the history of corporate America. The company generates hundreds of billions of dollars in annual revenue, has enormous cash on hand, and has a long track record of massive share buybacks.

The key to valuing Apple is not the sale of iPhones alone, but the entire closed ecosystem of services, software and devices. The services segment (App Store, iCloud, Apple Music, Apple Pay and others) has become a stabilizing element of growth and contributes to higher operating margins than hardware alone. In addition, Apple benefits from an extremely strong brand and the ability to monetize its user base repeatedly.

Unlike semiconductor companies, Apple is less cyclical but also significantly more dependent on consumer demand and global economic activity.

Valuation

A P/E above 35 for Apple cannot be interpreted in the same way as for fast-growing technology companies. Apple is not growing at a rate of 50-80% per year. Its growth is much more moderate and in some years even stagnant. The current valuation is therefore based primarily on cash flow stability, brand strength, and the assumption that the company can sustain high margins over the long term.

Historically, Apple has traded at lower multiples, often between 15-25. Low interest rates further encouraged this shift.

The question for the current environment is whether higher interest rates and slowing global growth will limit the market's willingness to pay such a high premium for a relatively low growth rate. If Apple, for example, were to grow at only low single-digit percentages per year, the current multiple may look expensive. According to the Fair Price Index, Apple is closer to its fair value than Nvidia, but still 26% above it.

Key risks

Saturation of the smartphone market remains the biggest risk. iPhones still account for a substantial portion of sales and any slowdown in the device refresh cycle has an immediate impact on results. Consumers are changing devices less frequently today and technological innovations are not as revolutionary as in the past.

Another important area is China, which is both an important manufacturing hub and a key market. Geopolitical tensions and regulations can affect both the supply chain and demand. However, sales of the iPhone 17 have exceeded expectations and the stock has gained solidly over the past week thanks to the strong results.

Regulation of digital platforms is also a growing theme. Both the European Union and the United States are increasing pressure on the openness of ecosystems and the App Store business model. Any restrictions on monetization of services could erode margins.

The structural issue around innovation cannot be ignored either. Investors partly value Apple as a company that will be able to come up with the next big product or monetize AI within its ecosystem. If these expectations do not materialize, valuations may be reassessed. Already, a portion of the market is quite nervous about how Apple is lagging behind on integrating AI into Siri.

Walmart $WMT

Walmart has traditionally been seen as a defensive pillar of American retail. With a history dating back to the 1960s, the company now generates sales in excess of hundreds of billions of dollars a year and is one of the largest employers in the world. Its business model is built on low prices, a massive logistics infrastructure and a strong bargaining position with suppliers.

In recent years, however, Walmart has undergone a significant transformation. It has invested heavily in e-commerce, digitization and logistics, trying to compete not only with traditional chains but also with Amazon $AMZN. The online segment is growing faster than brick-and-mortar stores, while the company is also expanding its activities in advertising, marketplace platforms and fintech services.

This evolution has led investors to partially value Walmart as a hybrid between a defensive retail giant and a technology-driven platform. And this is where valuations start to get interesting.

Valuation

A P/E of over 35 for a company operating in a retail sector where margins are low has historically been uncommon (it's even over 50 for Walmart today!). Retail has traditionally been characterized by high competition, sensitivity to consumer spending, and relatively tight margins. While Walmart has long exhibited stable cash flow and resilience in recessions, its growth rate (in terms of business) has typically been in the low single digits of percentages.

The current premium valuation reflects several factors:

• investors value stability of income in an environment of heightened economic uncertainty

• higher share of e-commerce and advertising services is expected to gradually increase operating margins

• Walmart benefits from the fact that in an inflationary environment it often wins customers seeking cheaper alternatives

However, the question remains whether this combination is enough to justify such a high multiple in the long term. Historically, Walmart has traded at significantly lower P/Es, often between 15-25. If growth slows or margin expansion fails to meet expectations, valuation compression could be gradual.

Key risks

One of the key risks is margin pressure. Retail is an extremely competitive segment and a price war can quickly erode profitability. While Walmart has a strong cost structure and logistical advantage, it operates with very low margins where even small changes can have a significant impact on results.

Another factor is sensitivity to the macroeconomic environment. Although Walmart is considered a defensive title, weaker consumer confidence or a decline in real household income can affect the shopping structure and margin mix.

The capital intensity of transformation or competitors such as Target $TGT is also a risk. Investments in technology, warehouse automation and e-commerce infrastructure are high, and returns from these projects are dependent on the long-term growth of the online segment.

Not to be overlooked is the structural pressure from Amazon and other digital players who operate with different cost and innovation dynamics.

Eli Lilly $LLY

Eli Lilly is one of the most dynamic pharmaceutical companies of recent years. It has grown from a traditional drugmaker to one of the most watched companies in the global market in a short period of time. Primarily due to its breakthrough products in the field of obesity.

Drugs like tirzepathide (Mounjaro/Zepbound) have opened up a huge market. Obesity and metabolic diseases are a global structural problem and the potential of these therapies goes far beyond the original diabetes segment. Analyses by Morgan Stanley $MSGoldman Sachs $GSthat the market for GLP-1 drugs could reach hundreds of billions of dollars annually within a decade.

Eli Lilly's revenue growth has accelerated significantly in recent periods, margins are expanding, and the market has begun to value the company as a winner in the new pharmaceutical era. The traditional pharmaceutical company has become a growth title.

Valuation

The current P/E of over 50 for this company means that investors are valuing not only current earnings, but more importantly, expected long-term market share in GLP-1 and other innovative therapies.

The market assumes that:

• Demand for these drugs will continue for many years,

• the company will be able to increase production capacity without major problems,

• competitors (in particular Novo Nordisk $NVO) will not fundamentally disrupt the market with their drugs,

• regulatory pressure will not significantly constrain margins

However, the pharmaceutical sector is specific in its dependence on patent protection, clinical trials and regulation. Even highly successful companies can face a sharp change in sentiment in the event of unexpected trial results, safety issues or pricing pressure from governments. This can currently be seen in Novo Nordisk $NVO, once Europe's most valuable company, whose shares have already fallen 67% since the peak.

Key risks

If there is a slowdown in GLP-1 drug adoption, production capacity issues or price regulations, valuations could react very sensitively.

Another factor is competition. Novo Nordisk is a strong player with its own successful products and global pharmaceutical companies are investing massive resources in the development of alternative therapies.

In addition, regulatory pressure in the US is a long-standing theme. Debates on drug pricing and healthcare reform can affect the margin profile of the sector as a whole.

The risk associated with extreme expectations cannot be overlooked. Should revenue growth gradually slow from very high rates to more standard levels, multiple compression could occur even with solid fundamentals.

ASML $ASML

ASML is one of the most important, perhaps the most important, companies in the global semiconductor ecosystem. It is not a chip manufacturer, but a supplier of a key piece of equipment - lithography systems - without which the most advanced processors cannot be produced. Its EUV (Extreme Ultraviolet Lithography) technology represents a technological barrier that competitors have not yet been able to overcome.

The company has a de facto monopoly in the segment of the most advanced manufacturing processes. Its customers include TSMC $TSM, Samsung and Intel $INTC. Every advanced chip for AI, data centers or high-end mobile devices today is indirectly dependent on ASML technology.

This unique position creates high margins, strong bargaining power and long-term structural demand. The outlook for the semiconductor sector, supported by the AI boom and geopolitical pressure to localize chip production (US, Europe, Japan), is driving increased investment in manufacturing capacity. And every new fab means potential orders for ASML.

EUV machine demonstration

Source: CNBC

Valuation

ASML's current P/E ratio of 49 is a reflection of its almost irreplaceable position. Investors appreciate the technological dominance, high barriers to entry and long-term growth of the addressable market.

At the same time, it is important to note that ASML is strongly tied to the semiconductor industry's investment cycle. Although it has a unique technology, its revenues are dependent on CAPEX spending by chip manufacturers. These have historically shown significant cyclicality.

In the past, we have seen periods of rapid growth followed by a slowdown or temporary decline in orders. If investment in manufacturing capacity slows, for example due to overcapacity, weaker demand for end devices or geopolitical constraints, results can fluctuate significantly.

Key risks

One of the biggest risks is geopolitics. Export restrictions to China have already affected some orders in the past. As China represents a significant market for the semiconductor industry, further tightening of regulations may impact the company's growth profile.

Another factor is the cyclicality of chipmakers' investments. Should there be excessive capacity building during the AI boom, a period of consolidation and weaker orders may follow. This could lead to fluctuations in sales and margins.

Technological evolution is also a risk. Although ASML is virtually indispensable in the EUV segment today, long-term development of alternative technologies or changes in manufacturing architectures could theoretically reduce dependence on extremely expensive lithography systems.

Micron Technology $MU

Micron is probably the most cyclical player on today's list. The company is a key manufacturer of DRAM and NAND memory chips, which are essential components of servers, data centers, mobile devices, and AI accelerators. However, the memory segment has historically been characterized by extreme volatility. Periods of scarcity have been interspersed with periods of excess inventory and sharp price declines.

In the last cycle (around 2000), Micron went through a deep slump (up to 92%) when memory prices came under pressure and the company showed a significant deterioration in profitability. But then came a recovery in demand, fuelled by the AI boom, which is increasing memory capacity requirements in data centres. High Bandwidth Memory (HBM) modules have become a key element of AI infrastructure and Micron is one of the suppliers in this segment.

This turn in the cycle has led to a sharp improvement in expectations and a rise in the share price.

Valuation

A P/E above 54 for a memory manufacturer has historically been the exception rather than the norm. The memory sector tends to be more conservatively valued precisely because of its cyclicality. The high multiple today reflects that expectation:

• The AI boom will create higher structural demand for memory over the long term,

• Industry pricing will be stronger than in the past,

• Capital intensity and market consolidation will reduce the risk of overproduction.

The question is whether this time it really is a structural change or just another phase of the traditional memory cycle. The history of DRAM and NAND sales shows that periods of high prices motivate manufacturers to increase capacity, which in turn leads to oversupply and pressure on prices.

Memory companies are usually the first to experience a slowdown in investment in servers, PCs or mobile devices. In the event of a weakening of global demand or a temporary saturation of AI investment, the response can be swift.

This week, however, the $MUshare price target was raised to $600. That would correspond to a rise of up to 50% from current levels. But this is at odds with the Fair Price Index, which now reports that Micron's stock is already significantly overvalued.

Key risks

The biggest risk remains memory price volatility. Even small changes in supply and demand can significantly affect average selling prices and margins. While Micron has technological quality and a strong position, it operates in a segment where pricing power is more limited than, for example, ASML $ASMLNVIDIA $NVDA.

Another factor is the capital intensity of production. The investment in new production lines is extremely high and the returns depend on steady growth in demand. Any slowdown can negatively affect cash flow.

The geopolitics and export restrictions that have affected some US semiconductor companies in the past cannot be ignored either. The memory market is global and sensitive to trade tensions.

Conclusion

The current environment shows that the market is willing to pay a significant premium for growth, stability and future prospects. High multiples, however, automatically increase the sensitivity of stocks to any disappointment, whether it be a slowdown in growth rates, margin pressure, regulatory intervention or a change in macroeconomic conditions. The history of capital markets repeatedly confirms that periods of valuation expansion tend to be followed by valuation normalisation without necessarily worsening the business itself. Thus, the risk is often not a fundamental collapse but a compression of multiples.

It is therefore crucial for investors to perceive the difference between a quality company and an attractive price. Premium valuations can be sustainable over the long term if supported by stable real growth and a strong competitive advantage. However, if expectations begin to exceed realistic earnings scenarios, volatility becomes a natural part of the stock's evolution. Thus, in an environment of elevated rates and geopolitical uncertainty, disciplined valuation work remains one of the most important factors in managing risk across the equity market.

Context, however, matters. Year-over-year comparisons are becoming tougher, regulatory pressure on short-term rentals is increasing in several major cities, and competition within online travel remains intense. Against that backdrop, a roughly 30% EBITDA margin, nearly 40% free cash flow margin for the year and renewed booking growth form the backbone of the investment case. The question is not about demand resilience, but about how durable this margin structure remains as growth scales.

How was the last quarter?

The fourth quarter of 2025 was the strongest in terms of momentum in two years. Revenues reached $2.8 billion, up 12% year-over-year (11% excluding the impact of foreign exchange rates). The company beat the high end of its guidance.

Gross Booking Value (GBV) rose 16% to USD 20.4 billion, or 13% excluding FX. This is the fastest growth rate in more than two years and a clear signal of accelerating demand compared to previous quarters. The number of nights and seats booked reached 121.9 million, up 10% year-on-year and a sequential acceleration from Q3.

Average rate per night (ADR) reached USD 168, +6% y-o-y (3% ex-FX). Growth was driven by both price appreciation and a favourable mix. This means that Airbnb is not only growing in volume, but also in quality of revenue.

Profitability remained very strong:

• Net profit: USD 341 million

• Net margin: 12%

• Adjusted EBITDA: USD 786 million

• EBITDA margin: 28%

• Free cash flow: $521 million

• FCF margin: 19%

Airbnb $ABNB thus reaffirmed its ability to generate strong cash flow even with investments in product, AI and expansion.

• Full presentation with results.

Management commentary

Management highlighted that Q4 was the result of improvements to the core product - better search, more flexible payments, adjusted cancellation terms and greater local relevance in expansion countries.

CEO Brian Chesky openly communicated that 2026 is set to be an acceleration year. The company wants to further improve the user experience, expand its service offerings (including hotel pilots) and massively integrate AI into search and customer support. The goal is to increase conversion and reduce customer service costs.

Outlook

Q1 2026

Airbnb expects:

• Revenue of $2.59-2.63 billion

• Year-on-year growth of 14-16% (including approx. 3 p.p. FX upside)

• GBV growth in the low double-digit percentages

• High single-digit bookings growth

• Stable EBITDA margin year-over-year

Full year 2026

The company expects:

• Acceleration of revenue growth into the low double digits at a minimum

• Stable Adjusted EBITDA margin

• Continued strong cash generation

In other words, management does not expect a slowdown, but rather a further acceleration in growth.

Long-term results

A look at the last four years shows a significant transformation of the company. In 2021, revenues reached $5.99 billion. A year later, they rose to $8.40 billion, in 2023 to $9.92 billion and in 2024 to $11.10 billion. Airbnb has thus almost doubled the size of its business in three years.

Gross profit rose from $4.84 billion in 2021 to $9.22 billion in 2024. Operating profit increased from $429 million to $2.55 billion. Adjusted operating profit before depreciation and amortization increased from $276 million in 2021 to $2.62 billion in 2024. This shows a significant improvement in operating leverage, with revenue growth delivering above-average profit growth.

Net income has moved from a modest loss in 2021 to strong profitability. 2023 was particularly strong, with net profit reaching $4.79 billion, while 2024 brought in $2.65 billion. Despite normalization, the company remains steadily profitable and generates strong free cash flow.

The gradual reduction in the number of shares outstanding is also a significant factor, supporting earnings per share growth. The combination of revenue growth, improving operating efficiencies and strong cash flow is creating a more stable financial profile than in the post-pandemic period.

News

Airbnb significantly expanded its offerings beyond traditional short-term rentals during the year. The Airbnb Services and Airbnb Experiences project is gaining momentum, and nearly half of experience bookings in the fourth quarter were not tied to accommodation bookings, suggesting the emergence of a separate demand segment.

The company has also begun piloting with boutique and independent hotels in select cities where the supply of apartments is limited by regulation. The goal is to expand the addressable market, capture some of the demand that would otherwise go to traditional hotel platforms, and increase the frequency of return users.

The integration of artificial intelligence remains a major strategic priority. AI customer support already works in multiple languages and regions, significantly reducing the time to resolve requests. In the future, Airbnb wants to use AI in search as well, so that users can describe what they are looking for in natural language and get a more personalized offer.

Shareholder structure

Airbnb has a strong institutional base. Approximately 85 percent of shares are held by institutional investors, while insiders hold roughly one and a half percent. The largest stakes are held by Vanguard, BlackRock, and State Street, all long-term global asset managers. Such high institutional participation typically means a greater emphasis on capital discipline, return on capital and steady growth in profitability.

Analyst expectations

Analysts will primarily be looking at the sustainability of double-digit bookings growth in 2026 and the firm's ability to maintain high margins while continuing to invest in product and technology. Regulation of short-term rentals in major cities and its impact on supply is also a key theme.

The market expects Airbnb to be able to maintain a growth rate above ten percent even in a slowing global economy. If the company manages to confirm acceleration in the first half of 2026 while maintaining an EBITDA margin of around 35 percent on an annualised basis, this could boost investor confidence in its long-term growth trajectory.

Fair Price

Microsoft $MSFT I’ve had on my watchlist for a while with a clearly defined entry price of 390 USD. It’s one of those “must-have” stocks I don’t currently hold in my portfolio. I’m prepared to invest 1.8% of the total value of my USD portfolio once it reaches that level. My long-term target price is 520 USD.

Two main positives for MSFT

1. Dominant position in cloud and AI Azure continues to gain market share and the integration of OpenAI technologies supports accelerating growth in the Intelligent Cloud segment. Growth of around 15–18 % year‑over‑year is expected in the coming quarters.

2. Exceptional financial strength Stable double-digit earnings growth, operating margins around 45 %, massive free cash flow and an extremely strong balance sheet make Microsoft one of the highest-quality long-term “compounder” stocks on the market.

Two potential drawbacks

1. Premium valuation Even at 390 USD the stock trades at roughly 32–33× forward earnings, which means a smaller margin of safety if growth slows or macroeconomic conditions worsen.

2. Regulatory and competitive pressures Antitrust scrutiny, especially in cloud and AI, and strong competition from AWS and Google Cloud could gradually put pressure on margins and growth.

For now I’ll patiently wait for the 390 USD level before opening a position. This approach fits my disciplined, value-oriented strategy—buying quality companies when they’re available at a reasonable entry price.

How do you view $MSFT at current levels? Are you waiting for a better price or do you already have a position open? What is your target price?

The more important shift lies in business quality. BAT added 4.7 million smokeless users, bringing the total to 34.1 million, while smokeless products accounted for 18.2% of group revenue, up 70 basis points year over year. This is no longer just a transformation narrative; it is a measurable and steadily growing share of revenue that is reshaping the earnings profile of the company.

How was the last quarter?

$BTI publishes preliminary results for the full year, but some key trends are evident in just how the firm describes the second half of the year and the regional drivers. In 2025, "new category" momentum improved - particularly modern oral products - while the firm also mined surprisingly strong performance from traditional cigarettes in the U.S. thanks to price and mix. That's the combination investors paradoxically want in tobacco companies: a transformation toward smokeless products, but without breaking up the traditional cash cow faster than the new business can grow.

At constant currencies, group sales grew 2.1%, and the driver was clearly in the US, where sales grew 5.5%. BAT says the US was helped by a combination of a strong price/mix effect in cigarettes, and a very strong ramp-up of Velo Plus, where modern oral products jumped 310% year-on-year to £327m. That's an extremely high rate, which in tobacco often means two things at the same time: firstly the 'launch effect' and rapid share gain, and secondly that the company is investing in promotion and distribution and looking to make this a long-term category.

Vaporizer performance, on the other hand, is the weaker part of the story. The company admits a decline in vaporizer sales, mainly due to the proliferation of illegal products in the US and Canada and also due to regulatory and tax changes in some European countries. This is important because vaporizers have historically been seen as the main "alternative" to cigarettes. BAT is now effectively saying: our Vuse product has good potential in the long term, but in the short term the category is distorted by the illicit market and without better enforcement of the rules we cannot expect smooth growth.

• Full presentation with results.

Top points:

• Revenue: £25.610bn.

  • -1.0% YoY

  • +2.1% at constant exchange rates

• New categories - revenue: £3.621bn.

  • +7.0% at constant exchange rates

• Smokeless products as a proportion of sales: 18.2% (+70bps)

• Operating profit (reported): £9.997bn.

  • +265 %

• Adjusted operating profit: +2.3%

• Reported operating margin: 39.0%

• Adjusted operating margin: 44.0% (stable y/y)

• Earnings per share (diluted EPS, reported): 349.1p

  • +157 %

• Adjusted earnings per share: +3.4%

• Net cash flow from operations: £6.342bn

CEO comment

Tadeu Marroco is building the whole 2025 story on "accelerating momentum" and the fact that the company delivered results at the top end of its outlook. In practice, this is communication like: we have the traditional part of the business under control, growth and margins are improving in smokeless products, and cash is giving us room to both invest and pay out.

What he says is most valuable is a specific detail from the US: the Velo Plus had triple-digit sales growth, the Velo brand was second in volume and value share and - crucially for the market - achieved 'categorical profitability' within a year of launch. This suggests that it is not just a costly acquisition phase, but that the product can generate a profit contribution relatively quickly.

With Vuse, the tone is more cautious but structured: the performance improvement is encouraging, it's just that the whole segment is hampered by illegal supply. Marroco is essentially betting that, in time, tougher enforcement of rules will come at the federal and state level, and legal players will benefit. That's a significant "regulatory bet": without it, vaporizer growth may stall further.

Regionally, the CEO says AME (Americas and Europe) continues to pull more product categories, while APMEA (Asia-Pacific, Middle East, Africa) has been hit by fiscal and regulatory issues in Bangladesh and Australia.

Outlook for 2026

The outlook is written fairly straightforwardly, and at the same time the firm has its back: it expects to perform at the lower end of its medium-term outlook.

For 2026, BAT expects global cigarette market volume to fall by around 2%. Yet it is targeting constant-currency sales growth of 3-5%, with new category sales expected to grow at a low double-digit rate. Operating profit on an adjusted basis is expected to grow 4-6% and be "second half of the year stronger than the first", which usually means that some of the investment and costs will come earlier and the benefit will come later. Adjusted earnings per share is expected to grow 5-8%, but again at the lower end.

Currency-wise, the company says outright that it expects about a 1% negative impact of the transaction rate on earnings and about a 3% headwind to adjusted EPS growth from currency translation. This is exactly the type of thing that may seem like a detail, but for a global firm, it often determines whether or not the headline numbers "look good" even though the operating reality is fine.

From a balance sheet perspective, the important thing is the commitment to reduce debt to the 2.0-2.5× net debt to EBITDA range by the end of 2026. The company is currently around 2.48×, so already virtually inside the target, and plans to achieve this thanks to very high operating cash conversion, where it is targeting over 95%. That's more important to the dividend title than one-time revenue growth percentage: the ability to generate cash while keeping leverage in check.

Long-term results

The four-year track record confirms the company's structurally strong but accounting-volatile profile. Revenues rise from GBP25.684bn in 2021 to GBP27.655bn in 2022, then fall slightly to GBP27.283bn in 2023 and GBP25.867bn in 2024. Gross profit holds steady above GBP21bn. GBP 21.087 billion in 2021, GBP 22.851 billion in 2022, GBP 22.392 billion in 2023 and GBP 21.431 billion in 2024, reflecting the strong pricing and high margin of the traditional tobacco business.

The largest fluctuations are at the level of operating and net profit. Operating income was GBP 10.234 billion in 2021 and GBP 10.523 billion in 2022, but fell to - GBP 15.751 billion in 2023 due to massive exceptional items, before returning to positive territory in 2024 at GBP 2.736 billion. We see the same picture for net profit: GBP 6.801 billion in 2021, GBP 6.666 billion in 2022, a loss of GBP -14.367 billion in 2023 and a return to profit of GBP 3.068 billion in 2024. This confirms that it is crucial to separate structural operating performance from accounting one-offs when assessing BAT.

What has really changed in the mix of the business in 2025

The strongest structural signal is the shift in smokeless products to 18.2% of sales and growth in users to 34.1 million. This is important for three reasons. Firstly, it increases the share of growth categories in total sales, reducing the reliance on declining cigarette volumes. Second, the company explicitly says it is investing in the most profitable markets and the priority is to grow profit contribution, not just chase sales. And third, 'new categories' are no longer just an expense but are starting to be a significant profit chapter - category contribution from new categories rose 77% to £442m and contribution margin rose to 11.8%.

This is exactly the point at which the transformation changes from marketing story to accounting reality: revenue growth is fine, but profit contribution growth is what can protect the dividend and buybacks in the long term.

Shareholder structure

Compared to US blue chips, BAT is less "institutionally loaded". Institutions hold roughly 13.5% of the stock, insider holdings are minimal. The largest institutional holdings include Capital International Investors (c. 2.96%), GQG Partners (1.31%), Capital Research Global Investors (1.03%) and FMR (0.94%). For UK titles, this is often related to the holding structure through various nominee accounts and specifics of recordkeeping, but the point for investors is more practical: the exchange rate may be more sensitive to capital flow with a smaller "hard" institutional core than is common with, say, Coca-Cola.

Capital allocation and shareholder return

BAT for 2026 confirms two things that dividend investors want to hear: dividend growth and buybacks. The dividend per share is rising 2% to 245.04 pence, while the firm plans a £1.3bn share buyback in 2026. To this it adds a commitment to get debt into the 2.0-2.5x target range by the end of 2026 and to hold a very high cash conversion. This is the typical "cash return" profile of tobacco companies: earnings growth tends to be moderate, but return on capital is the main investment thesis.

What to watch in 2026

Most importantly, there are three specific monitoring points that tell us if the investment thesis is being met.

The first is the growth rate of advanced oral products, particularly in the US, not just at the level of sales but at the level of profit contribution. If Velo maintains a high pace while improving profitability, it will be the fastest way to move the smokeless mix towards a higher share.

The second thing is the Vuse vaporizer and the evolution of the illicit market. This is not so much about marketing as it is about regulatory enforcement. Once the market starts to clear of illegal products, the legal players have a chance to step up. If that doesn't happen, vaporizers may remain the weak link.

The third is APMEA and regulatory risk. The company itself says Bangladesh and Australia hurt it in 2025. If the environment stabilises, the region may make a partial comeback. If not, it will continue to hamper consolidated growth.

Fair Price

What Wall Street Is Predicting

Ahead of the release, consensus estimates suggest Vale is likely to post earnings per share around $0.56 to $0.58 for the quarter, a figure that analysts will be keen to see beat or miss relative to expectations. These forecast figures will be juxtaposed with broader production data and commodity pricing to determine whether Vale’s net income reflects operational execution or continues to show sensitivity to iron ore, copper and nickel market pressures.

Vale’s trailing valuation metrics including a price-to-earnings ratio near the low teens highlight the company’s cyclical nature and create the potential for sharp moves on positive or negative earnings surprises.

Production and Sales Strength in Q4

Vale enters the earnings release with strong operational metrics already reported for the quarter, which could underpin a solid top-line performance irrespective of commodity price volatility. According to the company’s own production and sales release, iron ore output in Q4 reached 90.4 million tonnes, a 6 percent year-over-year increase, while iron ore sales hit 84.9 million tonnes, up 5 percent, illustrating robust operational momentum. These production gains come amid Vale’s strategy to prioritize quality iron ore products and optimize cost structures.

Beyond iron ore, Vale has also been increasing output in other base metals. Recent reports indicate that copper production climbed to roughly 108,100 tonnes in Q4, alongside a 2 percent rise in nickel output, suggesting diversified contributions from multiple commodity streams.

Commodity Prices, Guidance and Strategic Shifts

Commodity price fluctuations remain a key influence. Iron ore and base metals markets have seen mixed signals this year, with global steel production and Chinese demand dynamics shaping realized pricing environments. A strong production backdrop may offset weaker price realizations, but margins will remain sensitive to unit price changes.

Investors are also watching capex guidance and cost expectations for 2026, with Vale previously trimming investment plans for growth segments to focus on high-return assets. A leaner capital expenditure profile may support improved free cash flow generation, particularly if realized commodity pricing stabilizes.

Dividend and Shareholder Returns

Vale’s commitment to returning capital has been another focal point for investors. The company’s Board approved shareholder remuneration packages in 2025, with dividends and interest payments totalling approximately R$ 3.58 per share scheduled for early 2026 a yield notable in the materials sector. A strong dividend, combined with a potential share buyback program, may help cushion share price volatility post-earnings and attract income-oriented investors.

Broader Market Context and Sector Rotation

Vale’s earnings come at a time when cyclicals and value stocks are gaining attention amid a rotation away from pure tech growth stocks toward commodity-linked names and basic materials. This backdrop could amplify reactions to Vale’s reported numbers, with iron ore producers often acting as bellwethers for global industrial demand.

$VALE shares have already seen heightened volatility in early 2026, navigating swings tied to production news, permit risks and broader macro sentiment. A positive earnings surprise particularly one tied to stronger revenue or guidance could reinforce bullish narratives and position Vale among cyclical outperformers in materials.

What Investors Will Be Watching After the Print

When Vale’s earnings are released, several data points and narrative cues will influence market reaction:

Revenue and EPS Beats: Whether net sales and earnings per share exceed expectations, especially in light of recent production strength.
Cost Metrics and Margins: Impact of realized commodity pricing and unit cost trends on operating margins.
Guidance and Forward Outlook: Management’s commentary on 2026 production targets, pricing expectations and capex plans.
Dividend and Capital Return Plans: Clarity on dividend sustainability and potential enhancements to buybacks.

This earnings release could serve as a pivotal moment for Vale’s stock trajectory, offering investors clarity on how operational execution is translating into financial results amid an evolving commodity cycle.

Marvell Technology sits firmly in that second category. It is not the face of AI hype, but embedded deep inside hyperscale infrastructure—where the focus is on moving data faster, cheaper and more efficiently between compute clusters. The long-term opportunity is substantial, yet near-term visibility is inherently limited. That tension explains why analysts can simultaneously point to significant structural potential while trimming ratings. The debate is not about the relevance of the technology, but about the gap between total addressable market and reliably modelable cash flow—and whether that gap narrows over time or remains a structural feature of the business.

Top points of analysis

• Marvell is not the direct beneficiary of AI demand, but the supplier of the optimization layer

• Custom silicon can generate hundreds of millions of USD per year per project, but with a limited lifespan

• Company's results are more sensitive to timing than absolute market size

• Networking and electro-optics are not a bonus, but a necessary counterbalance to ASIC volatility

• Current valuations imply that the market is pricing in continued uncertainty

• True rerating requires a reduction in the dispersion of results, not more "one-off wins"

Company profile - Marvell as an engineering partner, not a product vendor

Marvell $MRVL cannot be analyzed in the same way as a standardized chip manufacturer. The company is inherently project oriented. Most of its value is not created by selling a finished product, but by participating in the design of a solution that becomes part of the customer's internal infrastructure. This has several implications that are key for investors but often overlooked.

First, the development cycle is long. A typical custom project involves 24 to 36 months of intensive R&D, during which Marvell bears the cost but generates no revenue. These costs show up on the books immediately, while the benefits come with a delay. This creates a time mismatch between investment and revenue that complicates the interpretation of margins and cash flow in each year.

Second, successful integration does not mean automatic continuity. Once one generation of chip is deployed, work on the next begins almost immediately. Each generation, however, is a new customer decision - they can continue with the same partner, split the order, or change the architecture altogether. This means that lock-in exists, but it is limited in time.

Third, project economics are extremely asymmetric. A single successful project can generate $300-600 million per year at its peak. However, if the next generation does not follow, the revenues from that project can drop to zero within 12-24 months. This profile is fundamentally different from companies with recurring contracts or a subscription model.

Market breakdown, breakdown of numbers, breakdown of expectations

The addressable market for custom AI chips is often presented in the order of $30-50 billion per year over a few years. Even if Marvell only captures 3-4% of this market in the long term, this would mean USD 1-2 billion in annual revenues from this single area alone. This is a number that in itself justifies the investment interest.

The problem is not the size of the market, but the pace of its monetisation. Revenues do not accumulate linearly. On the contrary, they come in shock waves. If one project peaks in 2025 and the next project does not take off until 2027, there is a 'gap' in 2026 that will show up in the accounts as stagnation or even a decline. This is exactly the scenario that more conservative analysts are working with.

TD Cowen therefore assumes in its models that ASIC revenues will be roughly flat year-over-year in 2026, while the consensus still expects growth in the high single digits to low single digits of a percent. The difference between the two views could mean a difference of $400-600 million in revenue and $0.60-1.00 in EPS over a two-year horizon.

From an investment perspective, that's a huge difference. Not because one view is "right" and the other is "wrong," but because it shows how wide the range of possible outcomes is.

Data-center networking and electro-optics - why they must work flawlessly

If custom silicon is not contributing to growth in a given year, all the pressure shifts to the rest of the data-center portfolio. TD Cowen estimates that networking, DSP and electro-optics account for approximately 50% of non-ASIC data-center revenue. For Marvell to meet market expectations with ASICs stagnating, this segment needs to grow 18-22% per year.

This is not an "optimistic scenario". That's the minimum necessary to keep the overall story together. Any shortfall - technological, competitive or price - will immediately show up in the overall numbers. For example, a loss of 3 percentage points of market share in this segment can mean $80-120 million in lost revenue per year, which directly impacts EBIT and EPS.

Moreover, this segment is in the midst of a technological transformation. The move to 1.6Tb transmissions is increasing pressure on power consumption and opening up space for new architectures such as linear pluggable optics. These changes are not marginal - they could rewrite the competitive map within a few years. For Marvell, this means the need to continuously invest in R&D, which further increases the fixed cost base.

How to perceive all this?

Most investors are now fixated on Marvell that the key to the stock's performance is the success or failure of custom AI chips. This view is understandable but incomplete. In fact, there is a second, less visible part of the datacenter business that plays a critical role in how stable the company's future results will be - networking and electro-optics.

These segments address data transfer within AI clusters, latency, energy efficiency, and infrastructure scalability. These are not one-off projects, but a technology layer that must be refreshed and expanded with each incremental increase in computing power. That's why their growth is slower but significantly more predictable than custom ASIC solutions.

If the custom business were to stagnate in any given year, while networking and electro-optics were to grow at a rate of 15-20% per year, which is consistent with realistic AI datacenter expansion scenarios, with these segments accounting for roughly 50% of Marvell's datacenter revenue, this would mean a $400-600 million increase in revenue over two to three years. That's a volume that has a real impact on the company's overall picture.

At an operating margin of around 15%, this growth translates into an additional $60-90 million of EBIT, which equates to roughly $0.20-0.25 of annual earnings per share. In other words, even without a "win" in custom chips, the company can generate visible EPS growth if it maintains its technology and market position in this infrastructure tier.

Operating leverage - the math that both scares and entices

Marvell has a high proportion of fixed costs, especially in development. This is inevitable - without massive investment in R&D, the company would lose relevance. But it also means that its financial results are extremely sensitive to relatively small changes in revenue.

Put simply:

• +10% of sales can mean +25-30% of EBIT

• -5% of sales can mean -15-20% of EBIT

This asymmetry is key to understanding why the stock behaves so volatile. It's not that the business is weak. It's that the dispersion of possible outcomes is wide and investors are unwilling to pay premium multiples without clear visibility.

Why the market is paying for uncertainty, not technology

Marvell's current valuation is best understood as a weighted average of scenarios. The market is allowing for the possibility of the company becoming a stable pillar of AI infrastructure, but it is also hedging against a scenario where it remains project volatile.

If volatility could be reduced and predictability increased, the implications for valuation would be dramatic. Not because the technology would change, but because the expectation interval would narrow. That is the main driver of rerating - not the growth of the AI market itself.

Forecasting the markets in which Marvell operates

1) Broader megatrend: AI servers and AI chips (context for why the whole chain is picking up)

• AI servers: growth estimate of roughly $140bn (2024) to $800-850bn (2030), a CAGR of over 30%. This is the "fuel" that drives networking and optics (no AI cluster scales without it).

• AI chips for data centres and cloud: forecast ~$453bn by 2030 (IDTechEx), with a reported CAGR of ~14% (2025-2030). This is an extremely broad category (GPU/CPU/ASIC/memory-adjacent), but it anchors well that this is not a short shot.

What Marvell is taking from this: not primarily a "GPU story" but an infrastructure story - data transfers (switching/optics) and custom silicon for hyperscalers.

2) Custom silicon / datacenter ASICs: most direct "Marvell leverage" on AI capex

• The TAM of datacenter ASICs (custom accelerators / custom silicon) is estimated to be ~$50-70 billion, according to MediaTek's CEO's statement related to AI (and this is exactly the type of space where the "build vs buy" in hyperscalers is addressed).

How to apply this to projections for Marvell (illustratively, scenario-wise):
If TAM was $60B and Marvell was a long-term buy:

• 2% share → ~$1.2 billion per year

• 4% share → ~$2.4 billion per year

• 6% share → ~$3.6 billion per year

3) AI "back-end" networks: a giant spend that defines the need for switches and optics

• Dell'Oro reports that the AI back-end switch market is set to exceed US$100 billion by 2030.

Important for the article: this number is a bet on network infrastructure/switches, not pure "silicon TAM". But it's extremely relevant to Marvell because:

• the more AI fabric is built (both scale-out and scale-up)

• the more there is a growing need for switch ASICs, retimers/DSPs, optical modules, coherent solutions

4) Optics for AI clusters: the fastest growing "visible" layer

LightCounting describes a new segment of optics for AI clusters (optical transceivers + LPO + CPO):

• ~$5 billion (2024) → more than $10 billion (2026), a doubling in 2 years, with growth to slow briefly after the first wave and then return to double-digit growth again 2028-2030.

What Marvell takes from this: this is exactly the "electro-optics" space (retimers, PAM4 DSPs, possibly parts around optical modules), a layer that needs to grow even if custom ASICs are just "waiting for the next generation".

5) Optical communication chipsets (PAM4 + coherent DSP)

This is a key one for Marvell:

• LightCounting expects the IC chipset market for optical communications to grow from roughly ~$3.5B (2024) to >$11B (2030), at a CAGR of ~17% (2025-2030).

How to translate this into "stock" math:

• If the market is at $11 billion in 2030 and Marvell should:

  • 10% → ~$1.1 billion.

  • 15% → ~$1.65 billion

  • 20% → ~$2.2 billion

Investment scenarios 2026-2029: three paths for Marvell

For Marvell, the main question is not "will the AI market grow?", but how smoothly the custom business will build on next-generation projects and whether networking + optics will maintain momentum in years when custom chips don't exactly "contribute". The scenarios below are not clear predictions - they are three realistic "maps" of how the story may unfold depending on whether the company can reduce the volatility of results.

Optimistic scenario: results settle down, "gaps" between projects disappear and the market overvalues the company

What's happening in the business: Marvell continues to win and, more importantly, advocate for next-generation custom chips at hyperscalers. While growth is not perfectly linear, there are no annoying "holes" between generations. At the same time, networking and optics are growing so fast that they act as a stabilizer in the worse quarters. This makes the company more predictable for investors - and that's exactly what unlocks higher earnings multiples.

What has to fit:

• Custom projects follow on (there is no significant "overflow" of earnings between generations)

• networking + optics keep the pace high (simplified "AI clusters are growing and need to connect")

• mix gradually improves and operating leverage starts to work (better margins on revenue growth)

• Most important: the market starts to see the company less as a "project lottery".

Projections (indicative):

• 2026: revenue ~$6.8 billion, operating margin ~15%, EPS ~$2.40

• 2027: revenues ~ USD 7.6 billion, operating margin ~ 16%, EPS ~ USD 2.90

• 2028: sales ~ USD 8.5 billion, margin ~ 17%, EPS ~ USD 3.40

• 2029: sales ~ USD 9.5 billion, EPS ~ USD 4.00

What this may mean for valuation: once uncertainty is reduced, the market is typically willing to pay a higher earnings multiple. In an optimistic scenario, a range of roughly 22-25x earnings makes sense as the company operates more stably. This is a scenario in which "rerating" towards higher price levels (typically the upper teens, or even $85-100 in the long term, depending on how much the market values predictability) can be defended.

Realistic scenario: AI grows, but Marvell remains project volatile - without much "repricing"

What's happening in the business: AI infrastructure continues to expand, it's just that custom projects aren't coming in at the "right pace". Sometimes they help, sometimes they shift, or some of the volume gets diluted. Networking and optics are growing, but not flawlessly - sometimes competition or price pressures hit. So the company grows, just more slowly and with occasional swings that still make the market refuse to pay a significant premium.

What needs to fit (to be a "base", not a bear):

• networking + optics continue to grow, though not extremely

• custom business is not a disaster, more "flat" in some years

• margins are improving only slowly, but not getting worse structurally

Projections (indicative):

• 2026: revenue ~$6.2 billion, EPS ~$2.00

• 2027: sales ~ USD 6.6 billion, EPS ~ USD 2.20

• 2028: sales ~ USD 7.0 billion, EPS ~ USD 2.45

• 2029: sales ~ USD 7.4 billion, EPS ~ USD 2.70

What this may mean for valuation: here, the market usually remains cautious and keeps the company more in the "normal" multiple range (say around 16-19x earnings). Earnings then stand more on the company working off growth than a big jump in valuation.

Pessimistic scenario: timing fails, custom projects create a "hole" and networking doesn't cut it

What's happening in business: it's not that AI is going away. It's about a few key customers shifting or reshuffling projects in a way that creates a generation gap for Marvell - and revenue from custom chips visibly weakens. Networking and optics may be growing, but not fast enough to make up for the shortfall. Price pressure can add to this, and the company bears high fixed development costs - so even a small revenue shortfall will hit profits uncomfortably hard.

What goes wrong (typical triggers):

• A custom project gets delayed by 6-12 months (looks like "stagnation/decline" in accounting)

• customer splits the contract or changes the architecture

• networking/optics slow down (competition, pricing pressure, slower rollout)

• fixed costs remain, so margins and profits fall faster than sales

Projection (indicative):

• 2026: revenue ~$5.8-6.0 billion, operating margin ~10-12%, EPS ~$1.40-1.60

• 2027: revenues ~ USD 5.9-6.2 billion, EPS ~ USD 1.50-1.80

• 2028: sales ~ USD 6,2-6,6 billion, EPS ~ USD 1,80-2,10

• 2029: sales ~ USD 6,6-7,0 billion, EPS ~ USD 2,10-2,40

What this may mean for valuation: In a pessimistic scenario, the market typically "punishes" uncertainty and depresses multiples (e.g. 12-15x earnings). Even if the company continues to make sense technologically, the stock may behave like a title without clear visibility - i.e., long "trapped" in a low valuation.

Final framework

Marvell is not a bad company in the right market. It is a complex company in the toughest part of the right market. Its potential is real, but the path to monetizing it is fraught with disruption, delay and uncertainty. That's why investors are hesitant - and why this title is of interest to those who want to go beneath the surface.

On Tuesday, we addressed the rotation of capital out of software companies in this analysis and how investor attention in 2026 is starting to expand beyond a narrow group of the biggest growth and AI titles. Today, we'll pick up on that specifically through the lens of the Dow Jones Industrial Average $^DJI, which is holding near all-time highs and has outperformed the S&P 500 for a number of periods this year.

And it's no coincidence. In fact, performance is based directly on the index's construction, its sector composition, and what types of stocks the market currently favors in an environment of higher rates, pressure on investment returns, and heightened uncertainty.

The most important thing to understand is that the Dow does not represent the entire U.S. market. It is a collection of 30 large blue-chip companies, and it is price-weighted. That means that stocks with higher absolute prices have a higher weighting in it, not companies with higher market capitalizations. In practice, this means that the movement of a few more expensive titles can pull up (or sink) the index significantly more than their size in the economy would account for. This is a fundamental difference from the S&P 500, which is market cap-weighted and therefore often dominated by the largest megacaps. They currently hold over 33% of the value in it.

This is one of the reasons for the surprising strength of the Dow Jones this year. In an environment where investors are more interested in cash flow, pricing power, stable margins and defensive profiles, sectors such as industrials, health care, consumer staples and some financials - areas that typically play a bigger role in this index than, say, the tech-oriented Nasdaq - are starting to perform better. In addition, Reuters noted in January that market leadership is starting to expand beyond pure technology names and that some portfolio managers are rebalancing growth to the value component, which is where the industrials and financials are heavily represented in the $^DJI index.

During sharp sell-offs in technology titles, the S&P 500 can suffer due to the weight of the megacaps, while the Dow has held relatively steady due to the composition and construction of the weight distribution among the titles. Particularly if it is propped up by defensive and industrial companies. This effect has been seen the most this year. It's even so strong that the Dow has risen faster than the S&P 500 in some periods, and the Nasdaq has beaten both indexes by a wide margin since the beginning of the year. Yesterday it even attacked new all-time highs.

Why the Dow Jones is now on top and beating the S&P 500

The Dow Jones is an index of just 30 blue-chip companies, and most importantly it is price-weighted. That means the stocks with the highest absolute prices have the biggest impact on the index, not the companies with the largest market capitalizations. The performance of the index is calculated as the sum of the prices of the 30 stocks divided by the so-called Dow Divisor, which is continually adjusted for splits and other corporate actions.

The practical impact: when one expensive stock moves, it can move the index significantly, even if it is a smaller company than some of the giant companies in the S&P 500.
You can see this in practice: according to the analysis of our team that tracks index performance, it often turns out that two particular titles can make tens or hundreds of points of index movement in a single day, because with the Dow, the movement is recalculated through the share price.

The S&P 500, on the other hand, is a float-adjusted, market capitalization-weighted index. Here, size dominates. The largest companies have the most influence, and so at certain times the performance of the S&P 500 is largely determined by a narrow group of the largest companies. The calculation methodology is based on a freely tradable flow of stocks and a committee that decides the composition of the index. This results in the S&P 500 currently being much more heavily influenced by giant technology stocks.

The Nasdaq Composite then naturally tends to be even more technologically exposed. When investors are worried about reducing multiples on expensive stocks, or dealing with the return on giant AI investments, the technology portion of the market is more sensitive than the industrials, defensives or value segments. Analyst commentaries describe this shift into defensive stocks as a typical rotation in an environment of uncertainty around rates and AI.

Why is the Dow Jones stronger now?

Its composition is more tilted towards companies that benefit from pricing power, stable demand and robust margins in an environment of higher rates and volatile sentiment (industrials, some healthcare, consumer defensives, financials titles). And because it's price-weighted, a few specific names that have a high share price and are currently driving can help it significantly in the short term.

Continuing Tuesday's theme of capital rotation, the Dow is now a practical example of how the market is gradually shifting from a narrow growth part of the market to a broader, more balanced range of sectors. The key is its sector composition.

The Dow Jones Industrial Average has a higher relative representation compared to the S&P 500:

• Industry

• healthcare

• consumer defensives

• Selected financial titles

Conversely, it is less concentrated in pure technology megacaps (in relative terms).

What sectors are contributing to current growth:

Industrials have benefited from a combination of factors in recent quarters:

• Stabilization of supply chains

• higher price premiums (pricing power)

• investment in infrastructure and energy

• structural demand for production modernisation

According to Bloomberg Intelligence analysis from the turn of the year, the industrial sector has begun trading at a higher premium precisely because of order visibility and a better ability to pass through higher costs into prices. Investors are seeing backlog (the value of orders already contracted but not yet delivered or invoiced by the company), margins and contracts.

When macro uncertainty increases (rate discussions, geopolitics, pressure on growth valuations), capital tends to migrate in part to segments that:

• have stable demand regardless of the cycle

• generate strong cash flow

• pay dividends

Healthcare is a classic example. The consumer defensive is similarly a case in point. These are not sectors that explode 40% in a bull market in a year, but they can keep the index "afloat" when tech stocks are selling off. In fact, they have significantly lower volatility and thus higher stability.

Select financials are benefiting from the higher interest rate environment. Higher net interest margins combined with a stable credit environment mean that banks and insurance companies are generating solid profits.

The year 2026 is characterised by a gradual rotation of capital from technology to more stable parts of the market. This means:

• less euphoria around net growth

• more emphasis on profitability

• greater sensitivity to return on capital

• a preference for stable cash flow

This corresponds exactly to the construction of the Dow Jones Industrial Average.

All companies in the Dow Jones Index - an overview

An overview of the companies included in the index can be found in the portfolio, which was created by our research team as a sample. You will find all mentions of these companies along with their performance, dividend payout dates and much more.

Simply put - the S&P 500 is more dependent on the megacaps being able to deliver high growth with huge investments in AI. The Dow benefits more from companies generating cash today.

If we look at this year's developments, it's clear that the Dow is not built on tech optimism. On the contrary. A portion of tech names, including Microsoft $MSFT, are undergoing a significant correction due to a reassessment of AI investment returns and pressure on valuations. This only confirms that the Dow's strength this year is not coming from AI euphoria, but from a very different type of leadership.

By the way, Microsoft has already lost over 27% of its value since the peak and its market cap has fallen below $3 trillion.

What's driving the Dow Jones Industrial Average

The drivers of the $^DJI s rise are primarily industrial and defensive titles. Companies like Caterpillar $CAT, Honeywell $HON and other industrial conglomerates are benefiting from a visible order backlog, stabilizing supply chains and continued investment in infrastructure and energy. Investors see a combination of pricing power, operational discipline and solid cash flow. This is what the market is valuing most this year.

Another mainstay is healthcare companies, which traditionally act as a stabilizing anchor for the index. Stable demand, relatively predictable margins and robust cash flow are exactly what the market values in a period of heightened uncertainty. While the growth segments are sensitive to changes in sentiment, the healthcare and consumer staples portion of the index keeps the index afloat even as the technology sector fluctuates.

The construction of the Dow itself also plays a significant role. Because it is price-weighted, a move in a few higher-priced titles can have a more pronounced point impact than a broader but less pronounced rise in the rest of the market.

Interestingly, this structure creates something of a contrast: while the S&P 500 is heavily influenced by the performance of a few megacap technology companies, the Dow today is more reflective of the performance of the real economy - that is, companies connected to industry, infrastructure, healthcare and traditional consumer goods. This is one of the main reasons why the two indices have diverged in performance this year. But it tells us that the economy as a whole is still on the rise.

Conclusion

While previous years have been dominated by growth technology and valuation expansion, this year's trend shows a shift towards more traditional companies. Industry, healthcare and parts of the defensive sector now benefit from a combination of operational discipline, pricing power and relatively predictable demand.

Thus, the Dow acts as an indicator of capital rotation. Investors are more wary of extremely capital-intensive AI stories and more appreciative of companies where ROI is more visible in the numbers. This is not a rejection of technology growth per se, but a reassessment of risk and timing of returns.

From a macroeconomic perspective, the current divergence between indices is typical of later in the cycle, when capital is shifting away from pure growth to value and quality. Should the economic slowdown be confirmed or pressure on AI investment returns further intensify, this trend could continue in the months ahead. Conversely, a return of strong growth sentiment could again move the market in a different direction.

The rise of the Dow Jones index today does not say that technology is ending. It says the market is more selective. And it is selectivity that will be a key factor in the performance of individual sectors and entire indices in the coming quarters.

I've been investing for just under a year and my portfolio is mostly made up of Google, Amazon, Novo Nordisk, and SoFi. I recently bought more Grab. In recent weeks some stocks have been falling, so I decided to add to my positions—mainly Amazon and SoFi.

I want to further diversify and "secure" my portfolio, so I'd like to buy something. I thought of $WMT, $KO, $PEP, $CAT. But I think these mentioned stocks are already pricier and it might be better to wait for a dip. I also thought of $MC.PA or the Vanguard FTSE All-World High Dividend fund, into which I would regularly invest a set amount each month. I’d appreciate if you could share your opinion or suggest other stocks. Thanks 🫡

The key takeaway is operational resilience. Global comparable sales increased 5.7%, with US comps up 6.8%, supported not only by higher ticket sizes but also by positive guest traffic. In the quick-service restaurant segment, traffic growth carries particular weight. It signals that value positioning, marketing execution and menu innovation remain effective even as consumers scrutinize spending more closely. With plans to open 2,600 new restaurants in 2026, the focus now shifts to how expansion and same-store momentum translate into sustained earnings growth.

How was the last quarter?

Q4 was a mix of strong demand and very good execution for McDonald's $MCD. Global comparable sales were up 5.7% and US comparable sales were up 6.8%, with management explicitly talking about positive traffic trends. This is important because in recent years many chains have been growing mainly through price and mix, but losing customers at the same time. McDonald's, on the other hand, says it narrowed its "gap" with competitors on visitation levels in the quarter to its best level in a long time.

The bottom line numbers were also solid. Revenue of $7.01 billion was above market expectations and adjusted EPS of $3.12 as well. When translated into investment parlance, this means the company can still monetize the strength of its brand, price and franchise model without having to dramatically "buy" growth through margin-busting discounts.

The fast-food giant reported fourth-quarter net income of $2.16 billion, or $3.03 per share, up from $2.02 billion, or $2.80 per share, a year earlier.

Running in the background is another important thing: the pace of expansion. For all of 2025, the company opened 2,275 restaurants and is targeting an acceleration to about 2,600 gross openings for 2026. That's a key structural driver of system sales growth alongside comparable sales. This keeps McDonald's on a trajectory toward its goal of 50,000 restaurants by the end of 2027.

• Results Conference Call.

Management commentary

CEO Chris Kempczinski frames the strategy with the repeated mantra of "three out of three": strong pricing, breakthrough marketing and menu innovation. It's not just a pretty slogan. In the US, management describes that Extra Value Meals packages and other pricing programs were supposed to be successful by two metrics: gaining share of traffic from low-income customers and improving perceptions of affordability. On both counts, they say they got where they wanted to be in Q4, and even gained share with the low-income group in December.

It's also interesting to see management talking openly about franchisee cash flow. Kempczinski says that despite a more aggressive value proposition, U.S. franchisee cash flow improved year-over-year, suggesting that the value proposition was not "underpriced" but well balanced - it pulled in volumes while not destroying restaurant economics.

CFO Ian Borden then highlights digital and loyalty as the most important metric. In the U.S., the company reports roughly 46 million active users in the last 90 days. He described two big campaigns in Q4 specifically: Monopoly, which drove massive digital acquisition, and "Grinch Meal," which he said set records, including the highest sales day ever. These are exactly the moments when McDonald's shows its global marketing "machine" - it can take a brand, pop culture and merchandising and translate that into footfall.

Outlook

The outlook is quite specific in the data even without the classic financial guidance type EPS band. McDonald's is counting on system sales growth to be driven in part by expansion. The company is talking about a contribution of around 2.5% from new restaurant openings alone, with a target of 2,600 new locations for 2026.

On the profitability front, the firm expects operating margins to be in the mid to upper 40% range (within the adjusted metrics McDonald's often uses for its model), and estimates 2026 capital expenditures at roughly $3.7 billion to $3.9 billion. At the same time, management acknowledges that comparable sales growth in Q1 2026 is expected to slow from Q4. That's exactly the type of signal that explains why the stock fell after the results - the market immediately switches from "beat" to "what will the pace look like in future quarters".

Long-term results

Looking at the last four years, McDonald's is an example of a company that can hold very steady profitability while gradually optimizing its cost structure, even as consumer demand fluctuates.

Revenues in 2021 were roughly $23.22 billion. In 2022, they were virtually flat at 23.18 billion, reflecting a more complex macro environment and a phase where consumers have begun to skew more heavily between "I want a brand" and "I want to save". But there was a visible shift in 2023: sales rose to $25.50 billion, up nearly 10% year-on-year, and continued to $25.92 billion in 2024, with a more modest 1.7% growth. In practice, this means that after a post-pandemic jump, the top-line has stabilised and McDonald's has had to work harder with mix, price and footfall.

Gross profit grew consistently: from $12.58 billion in 2021 to $13.21 billion in 2022, $14.56 billion in 2023 and $14.71 billion in 2024. This is important because even with relatively stable sales, the company was able to maintain and increase gross profitability, which in a franchise model is often related to a better mix of fees and higher monetization of digital channels.

The level of operating profit shows how strong operating leverage is in good years. Operating profit was around $10.36 billion in 2021, dropped to $9.37 billion in 2022, but jumped to $11.65 billion in 2023 and held steady at $11.71 billion in 2024. Translated: after a weaker year in 2022, McDonald's returned to a higher profitable level and held it.

Net income and EPS show a very similar story. Net profit was $7.55 billion in 2021, $6.18 billion in 2022, $8.47 billion in 2023, and $8.22 billion in 2024. EPS in 2024 was $11.45 (diluted $11.39). That's important context for today's investor sentiment: McDonald's is not a "turnaround" but a stable cash generator where the market is arguing mainly about what growth rate is realistic in the years ahead.

Another structural layer is working with the share count. The average number of shares has been declining: roughly 746 million in 2021 to 736.5 million in 2022, 727.9 million in 2023 and 718.3 million in 2024. This is typical of a company that returns capital to shareholders over the long term and supports EPS growth even in years when revenue growth is not dramatic.

EBITDA was in the range of approximately $12.18 billion (2021), $10.90 billion (2022), $13.86 billion (2023) and $13.95 billion (2024). Here we can see that 2022 was a weaker year, but since then performance has stabilized at a higher level.

News

There are several recurring themes in the quarter and within management commentary. The first is pricing strategy and perceptions of affordability. McDonald's doesn't want to give way to competitors on who offers the "best value". The second is marketing as a global machine, where big campaigns work across markets and can transfer creative concepts between countries. The third is menu innovation to be more anchored in taste, quality and "McDonald's identity" so that it's not just short promo items with no long-term impact. And the fourth is digital and loyalty, where the company openly says loyalty is a key digital metric and will continue to push for active user growth and engagement.

Shareholder structure

McDonald's is a heavily institutional stock. The institution holds approximately 75.5% of the stock and a similar proportion of the free float. The largest holders include Vanguard (roughly 10.16%), JPMorgan (9.61%), BlackRock (7.31%) and State Street (4.92%). Insider share is low (0.22%), which is typical for a large established corporation.

Analysts' expectations

In this type of quarter, analysts typically address less "did it turn out well" because the numbers were above expectations, and more "what's next." The main lines of debate revolve around three things.

The first is the sustainability of comparable sales growth when management itself admits to a slowdown in Q1 2026. The market will want to see if the value proposition continues to drive traffic or if the effect wears off and it becomes all about pricing.

The second thing is the economics of franchisees. If a company is pushing value and also wants to open new restaurants quickly, the returns must still be attractive to franchisees. Management says franchisee cash flow has been growing even with a stronger value mix, which is a positive sign, but analysts will want confirmation in the quarters ahead.

The third is expansion. 2,600 openings in 2026 is not just a number for a presentation. It's a commitment to capital, capacity, and site selection where returns must still be "McDonald's standard." If expansion succeeds, it will add structural growth to system sales even in an environment of weaker demand. If not, the market will begin to address whether the company is approaching saturation in key regions.

Fair Price

What matters more than the headline growth is the consistency beneath it. Shopify has now delivered double-digit free cash flow margins for ten consecutive quarters, a notable achievement for a company still expanding at this pace. The newly announced $2 billion share repurchase program reinforces management’s confidence that the current growth trajectory is durable and not dependent on temporary tailwinds.

How was the last quarter?

The fourth quarter of 2025 was very strong in terms of numbers. Gross merchandise volume (GMV) sold through the platform reached $123.8 billion, up from $94.5 billion a year ago, representing approximately 31% year-over-year growth. This growth is important because GMV is the basis for revenue from payments, financing and other services.

Revenue for the quarter was $3.672 billion, compared to $2.812 billion in the same period in 2024. Gross profit rose to $1.693 billion from $1.352 billion. Operating profit was $631 million, up from $465 million a year earlier. This further improves operating margins and confirms Shopify's scaling model is working.

Free cash flow for the quarter was $715 million, a 19% margin. This continues the company's streak of ten consecutive quarters with double-digit free cash flow margins. This is a major change from a few years ago when the business was heavily investable and volatile.

In terms of revenue structure, Subscription Services and Merchant Solutions reached $777 million and $2.895 billion, respectively. Merchant solutions, i.e. fees from payments, financing and other services, remain the main driver of growth. Costs grew slower than revenue, which translated into better operating leverage.

Net income for the quarter was $743 million. Adjusted for the impact of equity revaluation, adjusted net profit was $594 million, better reflecting the actual performance of the core business.

For the full year 2025, Shopify then earned $11.556 billion compared to $8.880 billion in 2024. Operating profit rose to $1.468 billion from $1.075 billion. Free cash flow for the year reached $2.007 billion at a margin of 17%.

• Full presentation with results.

Management Commentary

President Harley Finkelstein called 2025 a "full-throttle" year, with Shopify $SHOP not only accelerating growth but also building the infrastructure for the AI-powered commerce era. He stressed that 2026 is set to be "the year of the makers" and Shopify wants to be at the heart of their business from first order to global expansion.

CFO Jeff Hoffmeister praised the combination of 30% revenue growth for the full year and a 17% free cash flow margin. He said the company was able to invest in key projects - the product catalog, Sidekick assistant, a new universal commerce protocol and other tools - and still maintain strong profitability. He also highlighted strength across regions, merchant size and sales channels.

Outlook for 2026

For the first quarter of 2026, the company expects to:

• Revenue growth in the low 30 percent year-over-year, similar to the fourth quarter of 2025

• gross profit growth in the upper 20 percent

• operating costs at 37-38% of sales

• free cash flow margin in the low to mid-teens percentages, slightly below Q1 2025 levels

An important step is the announced share buyback program of up to $2 billion. The company doesn't have a fixed pace of buybacks, but the authorization itself signals that it is generating enough cash while seeing long-term value in its own stock.

Long-term results

In 2021, sales were $4.6 billion, operating profit was $269 million and net income exceeded $2.9 billion, thanks in part to one-time effects. The year 2022 was dramatic: while sales rose to $5.6 billion, the company posted an operating loss of $822 million and a net loss of $3.46 billion. It was a period of high investment and a slump in technology valuations.

The year 2023 marked a stabilization. Revenues were $7.06 billion, but operating profit was still negative (-1.418). Net profit was only $132 million, significantly affected by the revaluation of investments.

The turning point came in 2024. Revenues rose to $8.88 billion, operating profit reached $1.075 billion and net profit was $2.019 billion. The company significantly reduced operating costs and restored discipline.

Year 2025 accelerated this trend: $11.556 billion in revenue, $1.468 billion in operating profit, and over $2 billion in free cash flow. EBITDA rose to $1.338 billion. This transformed Shopify from a growth but loss-making company into a scalable and highly cash generative business.

GMV growth from $292 billion in 2024 to $378 billion in 2025 confirms that the platform is gaining market share. The company now holds more than 14% of the US ecommerce market.

News and strategic moves

In addition to strong financial results, Shopify continues to expand its role in the commerce ecosystem. Key drivers include:

• 36% growth in international sales.

• 27% growth in offline sales

• 62% growth in Shop Pay volume

• B2B business volume growth of 96%

The company is investing heavily in AI-based tools to simplify store creation, marketing and catalogue management. This helps it build an edge over smaller competitors and traditional platforms.

Shareholding structure

The institution holds approximately 75.5% of the shares. The largest institutional investors are:

• JPMorgan Chase with a 5.5% stake,

• Capital World Investors with approximately 4.4%,

• Vanguard Group with more than 4%,

• FMR (Fidelity) with almost 3.8%.

The low share of insiders (0.19%) means that the ownership structure is highly institutional and the stock is sensitive to movements of large funds.

Analysts' expectations

Analysts view Shopify as one of the top growth companies in the digital commerce infrastructure space. The consensus focus is on maintaining revenue growth above 25% annually and gradually expanding operating margins by scaling payment and financial services.

The combination of high growth, robust cash flow and share buybacks is viewed positively. High valuations and sensitivity to a macroeconomic slowdown that could impact merchant volumes remain a risk.

Fair Price

The report underscores how McDonald’s remains one of the most cash-generative consumer companies on the market, supported by its franchise model, pricing power, and broad international footprint spanning more than 40,000 locations worldwide. Even modest percentage growth at this scale translates into billions in additional sales, a dynamic that continues to attract long-term institutional investors.

Comparable Sales and Regional Performance Drive the Narrative

A key highlight of the release was global comparable sales growth of roughly 4 percent, with the United States segment advancing near 3 percent, while international operated markets delivered closer to 5 percent growth. These figures demonstrate that even in an environment of cautious consumer spending, McDonald’s continues to capture traffic and maintain brand loyalty across demographics.

Operating income expanded to over 2.7 billion dollars, supported by improving restaurant level margins and disciplined cost control. The company’s operating margin hovered around 43 percent, a figure that stands out even among top tier consumer brands and illustrates the efficiency of its franchised structure. Analysts frequently point to this margin strength as a primary reason McDonald’s maintains premium valuation multiples relative to peers.

Pricing Power, Digital Growth and Loyalty Programs

Another central theme in the earnings release was McDonald’s ability to balance pricing actions with volume retention. Average menu price increases in key markets ranged between 2 and 4 percent, yet digital ordering and loyalty programs continued to expand engagement. The McDonald’s mobile app now supports tens of millions of active users, with digital sales representing over 35 percent of systemwide revenue in certain regions.

Delivery partnerships and self service kiosks also contributed to higher average ticket sizes, while loyalty membership surpassed 150 million active users globally, creating recurring customer touchpoints that competitors struggle to replicate. These digital channels are increasingly seen as long-term profit levers rather than experimental features.

Cash Flow, Dividends and Shareholder Returns

From an investor perspective, McDonald’s remains a powerhouse of capital returns. Quarterly free cash flow exceeded 2 billion dollars, enabling the company to maintain its reputation as a dividend aristocrat with more than 45 consecutive years of dividend increases. The annual dividend yield continues to hover near 2.2 to 2.5 percent, a level that appeals to both growth and income oriented portfolios.

In addition to dividends, share repurchase activity remains substantial, with billions allocated annually to buybacks that gradually reduce share count and enhance earnings per share growth over time. This dual return strategy often positions McDonald’s as a defensive anchor within broader equity portfolios.

Forward Outlook and Analyst Expectations

Looking ahead, management signaled expectations for low to mid-single digit comparable sales growth and continued margin stability despite inflationary pressures and wage adjustments. Analysts currently project full year revenue approaching 28 to 29 billion dollars and annual earnings per share moving toward the 13 to 14 dollar range, figures that suggest steady rather than explosive expansion but with exceptional consistency.

Price targets across major investment banks frequently land in the 320 to 350 dollar range, implying moderate upside while emphasizing the company’s defensive characteristics in uncertain macroeconomic cycles. McDonald’s ability to perform during both economic expansions and slowdowns remains one of its strongest investment narratives.

What Investors Are Watching Next

Investors following the stock are paying close attention to several evolving indicators:

Traffic versus pricing balance as menu adjustments continue across regions.
Digital and delivery penetration and its influence on margins.
Commodity and labor cost trends that may affect profitability.
International expansion pace particularly in emerging markets.

McDonald’s financial release ultimately reinforces a familiar theme in global equities: a mega-cap consumer brand that combines scale, predictability, and disciplined capital allocation. While growth percentages may appear modest compared with technology disruptors, the sheer magnitude of its revenue base and dependable cash generation continue to make McDonald’s one of the most closely watched and widely held stocks on the market.

In my opinion these companies will be much more important in the coming years than they are today, because with the rise of AI the number of cyberattacks will also grow and companies will want to keep their data as well protected as possible. I'm betting on $CRWD, but I also find $PANW , $FTNT or $S interesting.

Even more compelling than the dividend is the margin profile and operating leverage. While investors often debate the cyclical nature of market activity, a substantial portion of revenue is recurring and tied directly to capital markets infrastructure. The combination of steady revenue growth, a high share of subscription-like income and strong cash conversion explains why the stock can remain attractive despite a relatively low headline yield.

Top points of analysis

• Dividend was increased by 8.3% to $0.52 per quarter, raising the annualized payout to $2.08

• Operating margin of around 38% and net margin of around 25% indicate an exceptionally profitable "infrastructure" model

• Revenues jumped 18.8% year-over-year to $11.76 billion in 2024, while operating profit grew 16.7%

• Free cash flow in 2024 is about US$4.20 billion, giving the dividend a high safety cushion

• The core investment story is based on recurring data, clearing and technology infrastructure, not one-off market euphoria

An introduction to the company and why it's an "infrastructure", not an ordinary financial stock

Intercontinental Exchange $ICE is, at its core, a financial infrastructure operator. It does not sell a product like a traditional bank, nor does it rely on a pure transaction model with no barriers to entry. It operates exchanges, markets and clearing, manages trading and data infrastructure, and in some parts of the value chain acts as a backbone that the modern capital market cannot do without.

This is a fundamental difference from "conventional" financial firms. If a bank misprices risk, the problem will manifest itself in credit losses. If exchanges and clearing work well, their value grows with market volume, regulatory complexity, the need for data, and as investors and institutions move more and more activities into the electronic environment.

This is why this type of business often behaves differently from cyclical financial titles. Yes, some of the revenue is related to trading activity and volatility, but much of it is structural: infrastructure fees, data, indexes, listing, clearing and services tied to long-term contracts. This is why the firm can hold exceptionally high margins even in weaker macro phases.

The products and services that really make up the margins

The first pillar consists of exchange and derivatives markets, including clearing. This is where the highest operating leverage is usually generated, as the technology platform and regulated processes have high fixed costs, but other transactions already carry a very high contribution to profits. The important thing about infrastructure is that it is a network effect: liquidity attracts liquidity and market participants want to be where the deepest market is.

The second pillar is data and information services. This is key from an investment perspective, as it is revenue that is subscription-like in nature: institutions pay for feeds, reference data, analytics packages, index licensing and other layers of information. In an environment of increasing regulatory complexity, automation and the need for fast data flows, data is becoming a "necessary expense" for customers, not an optional luxury.

The third pillar is technology platforms tied to financing and data processing in the real economy. This is where the biggest structural growth story typically takes place, as the digitization of financial processes is not complete and each additional integration increases the customer's transition costs. And transition costs are one of the most valuable assets in this business.

Customers and competitive advantages that are hard to replicate

The customer base is typically institutional: banks, brokers, asset managers, insurance companies, market makers, issuers, clearing members and large firms that need to hedge risk. These are the clients who are not just concerned with price, but more importantly with stability, regulation, market availability and minimising operational risk. In practice, it is "cheaper" for them to stay on a robust platform than to migrate critical infrastructure elsewhere.

Competition exists, but barriers to entry are extremely high. It is not just about technology. It is about licensing, regulation, clearing frameworks, cybersecurity, historical market confidence and liquidity that cannot be bought overnight. This is also why the biggest players tend to strengthen their position through acquisitions and ecosystem expansion, rather than fighting a pure price war.

Diversification across products and economies is also important. A company is not built on a single commodity or asset class. Part of the revenue benefits from higher volatility and volumes, while another part is "all weather" due to data and infrastructure. This reduces the risk of one weak segment breaking the entire cash flow.

Management

The company is led by Jeffrey C. Sprecher, a longtime leader who is closely associated with the firm's story and is typically viewed by the market as the architect of expansion into key infrastructure assets. In this type of business, continuity of leadership is important because the regulated environment penalizes chaos and rewards discipline in managing risk, investments and integrations.

Capital allocation in infrastructure companies must balance three objectives: invest in the technology platform, maintain balance sheet credit quality, and return capital to shareholders. Recent numbers show that the return of capital is more conservative than typical "cash cow" titles, but more importantly, the stability of the payout and the gradual growth of the dividend.

The dividend increase in February 2026 fits squarely into this framework. This is not an aggressive "yield play", but a signal of confidence in its long-term ability to generate cash. For an investor, this is typically better news than a one-off high payout, which would limit investment in the platform and weaken competitive advantage in the long run.

Financial performance and what recent years say about the quality of the business

Revenues between 2021 and 2024 grew from roughly US$9.17bn to US$11.76bn, equivalent to a roughly 8-9% average annual rate. The breakout year is 2024, when revenues jumped 18.8%, showing that the company can grow at a larger scale when a combination of organics and product base expansion come together.

Operating profit is even more important than sales because with infrastructure, quality is seen in margins. Operating income reached $4.31 billion in 2024, growing 16.7% year-over-year. This means that growth was not "bought out" by a deterioration in efficiency; instead, operating leverage continued to work.

Net income and EPS are more "scattered" in historical series, which is typical for large financial groups due to one-off items, acquisitions, revaluations and tax effects. The data shows an extremely strong 2021 and a much weaker 2022, but from 2023 to 2024, EPS moved from $4.20 to $4.80 and profitability stabilized. It is therefore rational for an investor to rely more on operating profit, EBITDA and cash flow than isolated year-over-year jumps in net income.

Cash flow as the most compelling argument for a dividend

Free cash flow in 2024 was approximately USD 4.20 billion, up 37.7% year-on-year. This is key to the dividend story because FCF is the "fuel" that pays the dividend, buybacks and debt. If a company can grow FCF faster than the dividend, the safety cushion and room for further payout growth grows.

At the same time, we need to understand the specifics of cash flow at exchange and clearing houses. There are huge cash movements in the financial statements that are related to collateral, margin and client funds. These items can inflate "cash position" numbers by tens of billions of dollars and, without context, give a confusing impression. Investors should therefore be looking primarily at sustainable operating cash flow, FCF and ability to cover liabilities, not the absolute amount of cash in any one year.

It is also important that the company can turn earnings into cash over the long term. In 2024, operating cash flow is USD 4.61bn and FCF is USD 4.20bn, implying a very strong conversion. This is exactly the type of profile that dividend investors like: cash flow is not a "promise" but a visible reality.

The dividend, its growth and sustainability in numbers

The increase in the quarterly dividend from $0.48 to $0.52 implies an annualized dividend of $2.08 per share. From a dividend investor's perspective, it is important that growth is regular and rather conservative, which makes sense for an infrastructure model. The company is not trying to compete with a high yield, but with stability and gradual increases.

Sustainability is key. If we take the 2024 EPS of $4.80, the payout ratio comes out to about 43%. That's a level that feels reasonable: high enough to make the dividend relevant, but low enough that the company has room to invest, make acquisitions, reduce debt, or strengthen the technology platform.

Even more compelling is the view through cash. At roughly 576 million shares, the annual dividend corresponds to about $1.2 billion. Against that, FCF stands at around US$4.2 billion, or about 3.5 times the dividend cover in free cash. That's a very comfortable position to say that the dividend is not paid "in blood" but out of surplus. In a dividend stress test, this is a major advantage.

Balance sheet, debt and financial stability

Debt to equity of around 0.68 and interest coverage of around 6 show that the company is servicing debt without dramatic pressure and interest is not a dominant cash flow sucking item. This is important for dividend stability because in a higher rate environment, it is usually the interest bill that destroys earning power.

At the same time, it is fair to say that some universal indicators of stability in financial and infrastructure companies are losing their telling value. For example, the Altman Z-Score is often low for similar structures and can unnecessarily scare investors without a deeper understanding of accounting relationships. Realistically, liquidity, a regulated framework and the quality of cash generation are more important in this type of business than the school "bankruptcy model".

The practical question for the investor is whether the company can sustain investment momentum and dividend growth at the same time. The numbers suggest that it can. FCF covers the dividend by a large margin while leaving room for investment. This is where the decision often comes down to whether the title will be "boringly" stable over the long term or whether it can surprise with faster dividend growth.

Valuation and what it really tells you about market expectations

At first glance, valuation does not look like "deep value". A P/E around 29 and a P/S over 7 imply that the market is willing to pay a premium for stability, margins and recurring revenue. In other words, the investor is not paying for a cyclical broker business, but for infrastructure that has the hallmarks of a quality compounder.

A P/B of around 3.2 is less important in such a model than for banks, as book value can be distorted by acquisitions, goodwill and capital structure. For an investor, what matters more is whether the high multiples are consistent with the actual ability to grow earnings and cash, and whether the firm can maintain margins in the face of weaker market activity.

From a dividend investor's perspective, the fundamental question is whether the current price has already "eaten" future dividend growth. The dividend yield is low, so the return is mainly based on EPS growth, dividend growth, and potential multiple expansion. That said, this is more of a title for an investor who wants quality infrastructure with a growing payout, not a pure income stock for immediate income.

Where the company can grow and why it's not just a bet on higher trading volumes

The first growth layer is monetizing data and indices. Institutions can't do without good data and their willingness to pay for stable feeds is growing as trading speeds up, automation increases and regulation tightens. In such an environment, data revenues often behave more stably than the transactional side and have a better margin profile.

The second layer is the expansion of the ecosystem around clearing and risk management. Clearing is typically a segment with very strong barriers, as the transition involves interference with the client's critical infrastructure. Any additional product that adds value in margin, collateral and risk management increases transition costs and enhances long-term return on capital.

The third layer is a technology platform tied to the real economy and financial processes. As the market enters a phase of lower rates and higher activity in lending, refinancing and real estate, demand for digital workflow and data typically increases. For the investor, this creates an asymmetry: even if stock trading volumes slow down, other parts of the ecosystem may accelerate.

What to watch next so that investors don't have to "hunt" for signals on a report-by-report basis

Start with simple logic: what needs to happen for dividends to grow faster than today. The most important metric is the growth rate of free cash flow and its stability across the cycle. If FCF maintains the trend of recent years while payout remains conservative, there is a high probability that the dividend will continue to grow.

The second set of signals relates to the quality of earnings. Investors should monitor how the recurring data component is growing and what the trend of operating margins is. If margins remain in the high 30 percent range and the company continues to grow, this is evidence that competitive advantage is not being eroded by pricing pressure.

The third set of signals relates to capital allocation. For firms like this, it is critical whether acquisitions actually increase long-term returns on capital and whether integration is destroying margins. Watch where the capital budget is going, how debt is trending, and whether the firm can both invest and increase the dividend. This is where you decide whether you will have "just" a stable payout in five years or a stable payout with a significantly higher growth rate.

Risks that make sense to take seriously in this type of business

The first risk is regulatory and systemic. The exchange infrastructure only exists because of trust and the regulatory framework. Any significant change in rules, increase in capital requirements or pricing pressure can change the economics of certain products. This is not a risk of "tomorrow's crash" but a risk of long-term erosion of returns in specific segments.

The second risk relates to technology and security. For a platform that the market uses as critical infrastructure, cybersecurity and service availability is an investment necessity, not a choice. High margins are great, but part of that must permanently fund defenses against technology and operational risks. Failure in this area has an asymmetrically negative impact on reputation.

The third risk is valuation. When you buy stable infrastructure at a premium multiple, you give the market a lot of room to punish you if growth slows or if there is a one-off deterioration. The dividend yield is low, so the "cushion" against a price decline is not as strong as it is for high-yield titles. Therefore, an investor must be confident that the company will increase cash flow and dividend over the long term, otherwise returns can deteriorate even when business is good.

Investment scenarios and how the dividend and share price could evolve

Optimistic scenario

In the optimistic scenario, the company maintains a double-digit revenue growth rate for several more years through a combination of expanding recurring data revenue and strengthening technology platforms. Operating margins will remain around current levels, possibly improving slightly due to operating leverage, so EPS will grow faster than revenue. The dividend can then continue to grow at mid-single digits, and due to the low payout, the payout growth rate can comfortably outpace revenue growth.

Priced in, this would typically mean that the market will sustain a premium multiple. For example, if EPS grows at a rate of around 10% per year over a two to three year horizon and the multiple remains similar, the share price could grow at a roughly single-digit to low double-digit rate per year. In such a scenario, investing is less about dividend yield and more about the long-term compounding effect.

A realistic scenario

The base case scenario assumes that revenue growth normalizes to mid single-digit to low double-digit rates after the 2024 jump. Margins remain high, but without significant further improvement. EPS will grow more conservatively and the dividend will increase at a similar pace to now, in the mid-single digit growth range.

The share price would likely replicate earnings growth in such a case, as the current valuation already includes a premium for quality. Investors would thus get a combination of a moderately rising dividend and a stable return on capital, but without the "wow" moment. This is exactly the profile of a title that lends itself as a quality core portfolio, not as a speculation for a quick re-rating.

Negative scenario

The negative scenario is not about the business collapsing. Rather, it's about growth cooling, the revenue mix deteriorating, regulatory pressure emerging, or technology and security costs increasing. In such a situation, margins may fall slightly and EPS growth may slow. The dividend would likely remain sustainable as cash cover is strong, but the pace of payout growth could slow to low single digits.

Price compression is the biggest threat to multiples. For a stock with a low dividend yield, a market in negative sentiment could drive down valuations faster than the business deteriorates. An investor could then see a period of poor performance even if the company remains quality. In such a scenario, it makes the most sense to think about the entry price and whether you are buying quality at a premium or quality at a reasonable margin.

What to take away from the article

• The dividend is growing, but the core investment story is based on stable infrastructure and recurring revenue

• High margins and strong earnings-to-cash conversion make the dividend a very well-covered payout

• Yield is low, so returns are mainly based on EPS growth, dividend growth and maintaining a premium valuation

• The biggest value add for the investor is in data, clearing and technology platforms with high barriers to entry

• The key is to track free cash flow, margins and quality of growth, not just short-term trading volumes

The software sector has entered a phase in recent weeks that resembles a much deeper market reset than just short-term waves of volatility. After decades of tech titles dragging the markets higher, being priced as growth stocks and their PE multiples skyrocketing, the situation has turned sharply. In both January and February 2026, stock prices of software companies plunged so sharply that some analysts are talking about a software massacre that wiped out hundreds of billions of dollars of market value in a matter of weeks and hit the entire segment across the board. A detailed discussion of the reasons behind this, including our team's analysis, can be found in yesterday's article that directly addresses this topic.

What the market is punishing most today is not necessarily a fundamental collapse in revenue growth or a sudden failure of business models. Many companies are reporting strong results, but the fear that artificial intelligence will radically transform or replace traditional software models,and is stronger. These fears are weighing on valuations so intensely that an index of software stocks, as measured by the iShares Expanded Tech-Software Sector ETF $IGV, for example, has fallen significantly not only relative to the broader market but also to historical averages, even as fundamentals remain relatively stable.

Such a sharp change in market sentiment is often referred to as an overreaction to investor sentiment. It arises when the market not only overestimates the risks associated with AI, but also takes into account the future of the sector in its pessimism, regardless of the differing qualities of individual companies. According to our team's analysis, the current sentiment towards software is extreme and parallels with the post-internet bubble or financial crisis period are emerging, with many software titles down more than 40% from their peaks, while some are still posting double-digit revenue growth.

On the one hand, investors are increasingly sending capital towards segments that are growing organically thanks to AI, such as chipsets, data centre infrastructure and cloud platform solutions. On the other hand, the fear is that AI will make it easier for competitors to create and develop and lower the barriers to entry. This is pushing valuations high.

This creates an environment in which sentiment not only disadvantages weak players, but also those companies that have long considered themselves resilient or with a clear vision of the future monetisation of the technology.

In the context of this biggest software correction in recent years, it is therefore worth shifting the focus from overall sentiment to specific companies that:

• have fallen more than 40% from their peaks,

• continue to generate revenue growth and solid cash flow,

• are trading below their historical average valuations,

• and yet they are under panic pressure.

It is these companies that present investment opportunities today. Our team has selected those that are worth noting in the context of the current situation and are currently being punished a lot by the market.

Adobe $ADBE

Adobe shares are down more than 40% since their peak .

Adobe has long been considered one of the best software businesses on the market. It combines high margins, an extremely strong brand, global product adoption, and most importantly, very high customer retention. Creative Cloud has become the de facto standard for professional work with graphics, video and digital content. Document Cloud has a dominant position in PDF workflow and digital documentation. Experience Cloud targets enterprise marketing tools and personalization.

This is important because the market today values Adobe as if its model is easily replaceable.

But in terms of numbers, there has been no fundamental collapse. In fiscal 2025, the company reported revenue growth of around 15-17% year-on-year. That's still a very solid pace for a company with over $20 billion in annual sales. Operating margins remain high and free cash flow is in the billions of dollars per year. The subscription model means high revenue predictability and stable cash conversion. All these numbers and more can be found in the share details.

This is a fundamental difference from cyclical software companies. So the problem lies not in the actual numbers, but in the expectations.

The market has begun to massively price in the scenario that generative AI will dramatically simplify content creation and thus dilute the value of professional tools. If a user can create a graphic or video through a simple prompt, why would they pay a full subscription to complex tools?

But the company has integrated Firefly's own generative model directly into Creative Cloud. AI features aren't a separate product - they're part of the workflow. So the user isn't getting a replacement for Adobe, but a more efficient Adobe.

While part of the market is worried about software disruption, Adobe is using AI to increase productivity for its existing customers. If AI speeds up a designer's work by 30-50%, it can increase the value of a subscription, not destroy it. Additionally, Adobe operates in the professional segment, where output quality, workflow integration and compatibility play a significantly larger role than AI image generation alone.

Valuation-wise, Adobe today trades at multiples well below its historical average. Forward P/E is lower than during most of the past decade, although revenue growth has not fallen to stagnant levels. Thus, the compression in multiples is not a reaction to a drop in profitability, but to a change in sentiment.

Even according to the Fair Price Index on Bulios, $ADBE stock is currently being punished too much. Indeed, they got below their fair value some time ago and are currently trading 10.5% below it.

This is exactly what we discussed in yesterday's article on the software sector. The market today is pricing in a worst-case scenario as a base case in many cases. The question is whether such a scenario is realistic for a company with such a strong ecosystem.

Of course there are risks. If generative AI tools outside of the Adobe ecosystem become both high enough quality and significantly cheaper, the push for pricing power would be real. The enterprise side of the business may also be more sensitive to slowing investment in marketing technology. And it can't be ignored that growth rates may gradually head lower.

On the other hand, Adobe generates strong free cash flow, has a healthy balance sheet and the ability to fund innovation without dramatically increasing debt. This is very important in an environment where investors are addressing the return on giant AI investments at hyperscalers. Because growth is not impossible.

Nemetschek $NEM.DE

If Adobe is an example of a global creative giant, then Nemetschek represents a very different type of software business. The German group, which focuses on software for architecture, engineering, construction and facilities management, is typical of a vertical, highly specialized solution that is deeply rooted in a specific industry workflow.

Nemetschek's stock is down more than 40% since the peak, despite the company's long track record of steady growth and very solid margins (over 17%). The selloff is thus very much part of a broader software reset. The market today doesn't make much of a distinction between horizontal SaaS solutions and specialized industrial software.

From a fundamentals perspective, however, the situation is less dramatic than the share price performance would suggest.

Nemetschek has been growing at around 10-15% per year for a long time, with a high proportion of revenues coming from recurring licenses and subscriptions. Margins have historically been in a very solid range and the company generates stable cash flow. While the move to a subscription model reduces reported growth in the short term (due to the spread of revenues over time), it increases the predictability of future revenues.

The problem is that Nemetschek operates in a sector that is cyclical, namely construction. The slowdown in the real estate market in Europe and higher interest rates in recent years have created pressure to invest in new projects. The market thus combines two negative scenarios:

• cyclical cooling of the construction sector

• potential disruption of software solutions by AI.

The BIM (Building Information Modeling) software that Nemetschek provides is not easily replaced by a generative AI tool. It is a comprehensive solution linking design, calculations, technical standards, collaboration between teams and regulations. These are deeply integrated systems where switching costs are not just about the price of a license, but about changing the entire work process.

AI is unlikely to replace the product here. Rather, it will complement it - for example, through design optimization, cost prediction, energy efficiency or risk simulation. This means that in the long term, AI can add value to the product instead of depriving it of customers.

Valuation-wise, Nemetschek is trading at lower multiples today than in the zero-rate era, when software growth was priced regardless of the macroeconomic cycle. Both P/E and EV/EBITDA have compressed along with the sector. The question is whether this compression is adequate to the company's long-term potential or whether it is overdone due to an across-the-board sell-off. According to the Fair Price Index (FPI), the current sell-off is already overdone because it has gotten the stock below its intrinsic fair value. According to the DCF and relative value calculation that the FPI combines, $NEM.DE stock is simultaneously undervalued by nearly 7%.

There are risks, of course. If construction in Europe remains subdued for an extended period, growth could slow more than the market expects today. Also, the transition to a subscription model must be executed without losing customers. And competition in digital tools for the construction industry is gradually increasing.

On the other hand, Nemetschek is not a generic SaaS tool that can easily be replaced by a cheaper solution. It is a deeply specialized software with regulatory ties and strong integration into work processes. This is exactly the type of business that can benefit from AI without being a victim of it.

SAP $SAP

SAP, one of the largest software players in the world and the overwhelming leader in enterprise ERP systems. If Adobe represents creative software and Nemetschek represents a specialized vertical, SAP is the backbone of the digital infrastructure of thousands of global corporations.

Shares of $SAP have also come under significant pressure in recent years, falling more than 40% from previous peaks. They are currently down 37% from their peak last year. For such a large and established company, this seems dramatic at first glance. However, as with the previous two cases, it is important to distinguish between price developments and fundamental reality.

SAP is in a transformational phase. The company has been transitioning from traditional license sales to cloud subscriptions for several years, which puts short-term pressure on reported margins and profit growth. However, this transition improves long-term revenue predictability and cash flow stability. SAP's cloud revenue is growing at a double-digit rate and the share of recurring revenue in total revenue is gradually increasing. So, from a fundamental perspective, this is not a business decline, but a transition between models.

However, the market is combining several concerns at once. The first is the classic software AI concern. The second is the fear that enterprise customers may slow down investment in new IT projects. The third is related to competitive pressure from hyperscalers and cloud solutions.

But this is where SAP has one of the strongest competitive advantages in the entire software world.

ERP (Enterprise Resource Planning) is not a tool that can simply be replaced by an alternative in a matter of months. SAP implementation is often a multi-year project, deeply connected to accounting, logistics, manufacturing, HR and other key business processes. Moreover, the cost of any change to an established solution is enormous, not only financially but also organizationally.

Moreover, as with previous companies, AI here acts as a potential growth accelerator rather than a threat. Integrating AI into ERP can mean better demand forecasting, optimizing inventory, automating accounting processes or streamlining production management. In the enterprise segment, it is not about replacing software, but about increasing its value.

According to valuations, SAP is trading at much lower multiples today than a year ago. However, the growth in previous years has been so significant that even before the more than 37% current drop, the stock is still above its fair value by almost 20%!

It is also necessary to mention the risks that come to the fore at the current valuation of the stock more than those of the now undervalued companies. However, it should also be added that previous companies have had even bigger price declines than SAP in particular.

The transformation to the cloud needs to be executed. Margins may be temporarily under pressure due to restructuring costs. And if the global economy slows significantly, corporate budgets may be more cautious.

On the other hand, SAP generates strong operating cash flow, has a robust customer base and operates in a segment where digital transformation is still a long-term structural trend.

Bonus: Microsoft $MSFT

Although Microsoft is not one of the companies that have been in a long-term structural decline, even its stock has managed to get more than 30% lower since the peaks as part of a broader technology correction. And it's with Microsoft that the biggest paradox of the entire software story is today.

Microsoft is simultaneously:

• One of the largest investors in AI infrastructure,

• and potentially the most threatened software platform by its own revolution.

Microsoft stands on three pillars:

• Cloud (Azure),

• productivity (Office 365, Teams), and

• enterprise software (Dynamics, LinkedIn, security).

Azure has been growing at double-digit rates for a long time and has become one of the main drivers of the entire group. The integration of OpenAI into products, especially Copilot, was presented as the beginning of a new era of monetization.

Microsoft is among the companies planning to invest in datacenter and AI infrastructure in historically record volumes this year. CapEx is growing significantly and the pressure on free cash flow is higher than in previous years. This in itself is not a problem if the investments quickly translate into higher revenues and margins. But if it doesn't, investors may, as many are now doing, translate that into stock sales.

While in 2023 and 2024 investors valued every AI integration announcement as a signal of future dominance, today they are more concerned with return on capital. Copilot is undoubtedly a technological advance, but the monetization of these features will be gradual, and not as rapid as the market expected. If AI becomes a standard part of productivity, it can add value to the ecosystem. But if it becomes a commodity, the pressure on margins will be higher.

Fundamentally, though, Microsoft is still an extremely strong company. Revenues are growing, the cloud is expanding, operating margins are among the highest in the sector and free cash flow is massive. The company has a healthy balance sheet and a top-notch investment-grade rating. This makes it a different case than a smaller growth software company.

But at the same time, Microsoft is emblematic of the entire AI era. And if the return on its giant infrastructure investment turns out to be slower, it is where the market reaction may be most sensitive.

There is another less discussed aspect. AI can boost the productivity of Microsoft users in the long run. This is by automating document writing, data analysis or programming. It can increase the value of Office 365 subscriptions and Azure services. But it can also reduce the need for some traditional software solutions. So Microsoft faces a dilemma: accelerate disruptive change and risk partial cannibalization, or proceed more cautiously.

Valuation-wise, Microsoft is trading lower today than during the height of the AI euphoria, but still at a premium to most of the sector. This reflects the fact that investors see it as a quality leader, not a threatened business. Yet here too there has been a compression in multiples, confirming a broader reset in software valuations. But according to the fair value calculation, Microsoft is still significantly overvalued. According to FPI, its shares now trade 24% above intrinsic value.

Compared to Adobe, Nemetschek or SAP, Microsoft is the least threatened existentially, but the most exposed to inflated expectations.

While for smaller software firms the market is discounting the risk of the demise of part of the business, for Microsoft it is discounting the risk that investments in AI will not deliver as rapid monetization as originally expected.

In the broader context of the entire software correction, Microsoft thus represents a benchmark. If sentiment stabilizes and AI monetization begins to be confirmed in the numbers, it could be the leader of the next growth phase. But if doubts about returns deepen, the pressure on the entire sector may continue.

Conclusion

The software sector today is undergoing one of the most fundamental changes in a decade. After years of almost constantly increasing valuations for growth, scalability and high margins, the market has reached a stage where it is systematically overestimating risk and underestimating adaptability. AI is a structural change that is rewriting expectations about competition, barriers to entry and return on capital. The result is a compression of valuations across the segment and historically strong relative underperformance relative to the broader market.

From a macroeconomic perspective, however, the digital transformation is not over. Process automation, the move to the cloud, cybersecurity, data analytics and AI integration itself remain long-term trends. So the question is not whether software as a whole will disappear, but how quickly the sector adapts and who can monetise new technologies more effectively than competitors. Historically, periods of across-the-board capitulation often create room for the next growth phase. Not because the risks disappear, but because the market stops pricing the worst-case scenario as the only possible one.

The reason was not concerns about safety or efficacy, but according to the agency an inadequately set comparator in the study—specifically the choice of comparator, which it said did not reflect the “best available standard of care.”

For the company this is an unwelcome complication because expanding the portfolio beyond COVID vaccines is supposed to be a key pillar of future growth. mRNA-1010 met primary endpoints in two late-stage trials and Moderna previously said it showed 26.6% higher efficacy than the approved GSK vaccine. Now it will have to clarify the next steps with the regulator, which could mean delays to entering the U.S. market and additional costs.

On the positive side, the vaccine remains under review in the EU, Canada and Australia, where decisions are expected around late 2026 and early 2027. For investors this is therefore not just a one-off regulatory report but a broader question: how quickly can Moderna turn its mRNA platform into new commercial products and reduce dependence on COVID-related revenues. The pace of that diversification will be key for valuation.

At a time when many tech names struggle with slowing demand, Spotify’s results represent a notable performance beat, highlighting both the strength of its core subscription business and the growing appeal of its diversified content strategy across music, podcasts, audiobooks, and expanding services.

Stellar Top-Line Performance and User Metrics

Spotify reported total revenue of approximately €4.5 billion in Q4 2025, representing roughly 13 percent year-over-year growth and slightly ahead of consensus forecasts, even as macro and currency challenges persist.

The company’s monthly active users (MAUs) climbed to 751 million, up 11 percent year-over-year, while premium subscriber counts reached 290 million, 10 percent above the prior year both figures reinforcing Spotify’s leadership in global audio engagement.

Additional highlights from the quarter include:

• Operating income of around €701 million, showing robust profitability in a business often criticized for cost pressures.

• Gross margin improvement to 33.1 percent, up more than 80 basis points year-over-year, signaling better monetization and efficiency.

• Highest MAU net additions in company history for a quarter, demonstrating sustained global demand.

These numbers follow a multi-quarter trend of accelerating engagement and monetization. Earlier in 2025, Spotify’s third-quarter results already showed MAUs above 700 million and meaningful revenue growth, indicating consistent top-line strength.

Price Increases and Revenue Strategy

Part of Spotify’s success in driving profitability and revenue has come from strategic pricing actions. The company increased its U.S. Premium subscription price to $12.99 per month a move that helps support higher average revenue per user (ARPU) while maintaining subscriber growth in key markets.

These price rises, combined with cost management and enhanced product offerings such as AI-driven features, podcasts, video, and audiobook expansions, have positioned Spotify to capture a larger share of audio consumption globally. A recent expansion into physical book sales through a partnership with Bookshop.org is another example of how Spotify is broadening its content and monetization pathways beyond traditional music streaming.

Outlook for 2026 and Forward Guidance

Looking ahead, Spotify projected continued growth into the first quarter of 2026, with guidance indicating:

• Monthly active users projected near 759 million

• Premium subscribers expected around 293 million

• Revenue forecast of roughly €4.5 billion

• Gross margin projected to remain near 32.8 percent

These forward targets were largely in line with or slightly ahead of analyst expectations — a reassuring signal to the Street that the company can sustain growth momentum as it scales deeper into emerging markets and invests in diversified content offerings.

Spotify’s forecast also includes an operating income outlook of approximately €660 million for Q1 2026, marginally surpassing some Wall Street estimates, underscoring confidence in profitability trends despite competitive pressures in streaming.

Strategic Expansion Beyond Music

In addition to its financial performance, Spotify is making notable moves to expand its platform beyond music. The company recently announced a partnership with Bookshop.org to sell physical books through its app a bold play into adjacent content categories that could deepen user engagement and create new revenue streams. This initiative builds on Spotify’s already substantial audiobook audience and the rapid growth of listening hours in that segment.

Investors are also paying attention to Spotify’s increasing emphasis on AI-powered features and monetization levers, such as improved advertising tools and personalization technologies, which aim to capture more value from both ad-supported users and premium subscribers.

What Investors Should Watch Next

As the market digests these strong quarterly results, there are several key areas that will shape Spotify’s narrative in 2026:

Subscriber growth trends: Continued expansion of both MAUs and premium subscribers particularly in emerging markets will be critical to long-term revenue scaling.

Profit and margin evolution: Sustained improvements in gross margin and operating income will signal that Spotify is translating top-line growth into durable profitability.

New content monetization: Success in areas like audiobooks, podcasts, video, and physical books will help diversify Spotify’s revenue base and reduce reliance on music streaming alone.

Competition and pricing strategy: Maintaining subscriber growth while implementing price increases without adverse churn effects will remain a focus as competitors like Apple, Amazon, and YouTube vie for consumer attention.

Overall, Spotify’s latest financial release paints a picture of a company that is scaling effectively, innovating across audio formats, and improving profitability while expanding its global footprint. With nearly three-quarters of a billion users and ambitions to reach the elusive 1 billion user milestone, the company’s trajectory is shaping up as one of the most compelling stories in media and technology today.

In that context, 2025 was clearly transitional. Revenue growth held up across segments, adjusted operating performance improved and operating cash flow remained strong. At the same time, one-off impairments, legal costs and changes related to Medicare Part D distorted reported operating income and net profit. Understanding the gap between underlying business momentum and accounting results is central to the current investment case.

How was the last quarter?

In the fourth quarter of 2025, CVS Health $CVS achieved total revenues of $105.7 billion, up 8.2% year-over-year. Growth was driven by all major segments - health insurance, health services and retail pharmacy. In terms of business volume, it was a strong quarter, confirming that demand for health services and pharmaceuticals remains robust even in an environment of higher costs and regulatory changes.

Operating profit on a reported basis, however, declined from $2.37 billion to $2.11 billion, down approximately 11% year-over-year. Adjusted operating profit was $2.60 billion, also down slightly from last year. The key negative factor was Aetna's health insurance segment, where the seasonality shift in the Medicare Part D program due to the reform measures resulting from the Inflation Reduction Act had a significant impact in the quarter. These changes led to higher year-end costs and impaired the segment's near-term profitability.

Earnings per share show the typical "double track" of CVS results. GAAP EPS increased to $2.30 from $1.30, driven by tax effects and one-time items, while adjusted EPS declined to $1.09 from $1.19. It is the adjusted numbers that better reflect the true operating trend and explain why the market is reacting more cautiously to the results than revenue growth alone would suggest.

• Full presentation with results.

Management commentary

CEO David Joyner's comments clearly set the results within a broader strategic framework. He emphasized that CVS is progressively fulfilling its ambition to become the "gateway" to U.S. healthcare - from pharmaceuticals to insurance to primary and preventive care. By 2025, he said, the company has taken tangible steps to simplify healthcare, reduce drug prices and improve patient navigation of the system.

From management's perspective, the key takeaway is that the business transformation is proceeding as planned, even if it is putting pressure on results in the short term. Joyner freely admits that regulatory changes and seasonal shifts in Medicare Part D complicate year-over-year comparisons, but emphasizes that the company's structural performance is improving. Thus, management clearly communicates that 2025 is an investment and transition year, while 2026 is intended to be a year of stabilization and a return to more predictable results.

Outlook for 2026

CVS confirmed full-year guidance for 2026, giving investors a clear point of reference. The company expects GAAP EPS in the range of $5.94-6.14 and adjusted EPS between $7.00-7.20. It also lowered operating cash flow expectations to at least $9 billion, reflecting a more cautious view of working capital and timing of payments in the insurance business.

The outlook implicitly assumes that the negative impacts of Medicare Part D reform will become more manageable and that improvements in operational discipline and cost control will help stabilize margins. Importantly for investors, CVS continues to generate strong cash to reduce debt and maintain its dividend policy.

Long-term results

Looking at the last four years, it is clear that CVS Health has gone through an extremely volatile period. Revenues have grown from $292 billion in 2021 to $373 billion in 2024, confirming a long-term growth trend driven by acquisitions, expansion of health services and growth in the insurance tribe. However, this growth has not been accompanied by stable profitability.

Operating profit has varied significantly from year to year, from $13.3 billion in 2021, to a dip in 2022, a strong recovery in 2023, and a significant decline in 2024, when goodwill amortization and restructuring charges impacted results. Net income followed this trend, with EPS ranging between extremes of around US$3.3 and nearly US$6.5.

The long-term picture thus shows a company with growing sales and a strong market position, but also a business vulnerable to regulatory intervention, accounting revaluations and structural changes in the US healthcare industry. It is the ability to stabilize operating margins that will be a key test of the next phase of the CVS story.

Shareholder structure

CVS has a very strong institutional base. Approximately 90% of the shares are held by institutional investors, which increases the emphasis on long-term return on capital and cash flow stability. The largest shareholders are Vanguard, BlackRock, Dodge & Cox, and JPMorgan, who view the firm as a strategic bet on US healthcare with a defensive nature but transformative potential.

Analyst expectations

Analysts are divided on CVS, but a cautious constructive view still prevails. For example, analysts at JPMorgan have long emphasized that near-term profitability pressure is the price of structural change and that a key catalyst will be the stabilization of the health insurance segment in 2026. The price target is in a range that implies moderate upside potential if the company confirms its ability to generate adjusted EPS above $7 and maintain strong cash flow.

Fair Price

That dynamic defined 2025. Organic revenue growth remained solid and earnings per share moved higher, but currency headwinds, higher marketing spending and one-off charges weighed on reported margins. The results therefore require a nuanced reading. The key is separating structural trends from temporary accounting noise when assessing the durability of profitability.

What was the last quarter like?

In the fourth quarter of 2025, Coca-Cola $KO achieved net sales of $11.8 billion, up 2% year-on-year. At first glance, this is a low number, but looking at the structure, it's clear that the core business grew faster. Organic sales, adjusted for currency effects and portfolio changes, grew 5%. This difference is key, as the strong dollar remains one of the main factors holding back Coca-Cola's reported numbers over the long term.

Revenue growth was driven primarily by price and product mix. Price/mix added roughly 1% in the quarter, while concentrate sales rose 4%. Units sold increased by only 1%, confirming that beverage consumption is growing very slowly globally and even stagnating in some regions. Thus, Coca-Cola continues to rely on its ability to increase the value of the portfolio sold, rather than on volume expansion.

Profitability has attracted the most attention. Operating profit fell 32% year-on-year and operating margin slumped to 15.6% from 23.5% last year. However, this decline does not reflect a deterioration in operating performance. The non-cash write-down of the BODYARMOR trademark of USD 960 million and negative currency effects played a key role. Adjusted for these items, comparable operating profit grew 13% in constant currencies, clearly demonstrating that the underlying economics of the business remain sound.

Reported earnings per share rose 4% to $0.53, while adjusted EPS was $0.58, up 6% year-on-year. Here too, the strong dollar had a negative impact, cutting around five percentage points from growth.

• Full presentation with results.

CEO commentary

James Quincey's assessment highlighted in particular the ability of the entire Coca-Cola system to perform consistently across regions even in an environment of heightened uncertainty. He said 2025 confirmed that the combination of strong global brands, locally relevant marketing and disciplined cost management creates a sustainable model for the long term.

Quincey also hinted that the next phase of the company's evolution will be less about portfolio expansion and more about execution quality. The focus is to be on digital transformation, deeper work with data, better marketing targeting and more effective collaboration with fulfillment partners. The goal is not to maximize short-term volume, but to increase value per consumer over the long term.

Outlook for 2026

Management has provided an outlook that can be described as conservative but realistic. Coca-Cola expects organic revenue growth in the range of 2% to 4%, which is consistent with the company's long-term trend. Adjusted earnings per share in constant currencies should grow by 4% to 6%, with currency rates likely to be slightly positive this time around.

Cash handling is an important point. The company plans to keep capital expenditure below 5% of sales and free cash flow conversion above 80%. This creates a comfortable space for further dividend increases and maintaining an attractive payout profile, which is one of the main reasons for investors to hold Coca-Cola.

Long-term results and structural development

A look at the last four years clearly shows how Coca-Cola has moved into a phase of highly stable but low-dynamic growth. Revenues have grown from approximately $38.7 billion in 2021 to more than $47 billion in 2024. The growth rate has gradually slowed, but has remained consistent even during periods of elevated inflation and currency fluctuations.

Gross profit grew faster than sales, confirming the strength of brands and their ability to pass through higher costs to end prices. At the level of operating profit, the trend has been more volatile. The year 2024 brought a decline in operating profit of around 12%, mainly due to higher marketing investments and restructuring costs. However, EBITDA remains stable in the range of USD 14 billion to USD 16 billion over the long term, confirming the high quality of cash flow.

Net profit has been around USD 9 billion to USD 10 billion per year in recent years and earnings per share have been growing only moderately. This is a direct result of market maturity, not brand weakness. Today, Coca-Cola is maximizing return on capital, not volume growth, which is exactly what a conservative investor expects.

News and strategic moves

The year 2025 was marked by a strengthening of local brand relevance. The company invested heavily in marketing platforms targeting younger consumers, sporting events and local consumption opportunities. At the same time, organisational changes were made, including the creation of the Chief Digital Officer role to align data, digital and operational efficiencies across regions.

These moves do not have an immediate financial impact, but are designed to improve the long-term competitiveness of the system and reduce the risk of Coca-Cola losing touch with a new generation of consumers.

Shareholding structure

The shareholding structure remains extremely stable. Berkshire Hathaway holds a significant stake, as do Vanguard and BlackRock. The high proportion of institutional investors supports the company's long-term management horizon and emphasis on dividends rather than short-term capital experimentation.

Analyst expectations

Analyst consensus views Coca-Cola as a defensive title with limited growth potential but a high degree of certainty. Expectations hover around low single-digit earnings growth rates, with currency movements, the ability to maintain pricing discipline and the level of marketing investment remaining key variables.

Some banks have warned that the stock may come under pressure in the short term due to stagnant volumes and fluctuating margins, but the long-term investment story remains unchanged: stable brands, strong cash flow and a reliable dividend.

Fair Price

The setup for 2026 is unusually concrete. Management is guiding toward continued strong member growth, further scaling of deposits and lending, a higher mix of fee-based revenue, and a step-change in profitability. The core question for equity investors is not whether SoFi can grow, but whether the pace and quality of that growth are strong enough to justify a valuation that remains demanding even after the sell-off.

Top points of the analysis

• SoFi showed its operating leverage for the first time in 2025: adjusted EBITDA reached about $1.05 billion and margins moved to 29%.

• Growth is no longer just "about loans": membership grew to 13.7 million and the number of products to 20.2 million, supporting cross-sell and recurring revenue.

• Deposits are a key weapon: member deposits reached $37.5 billion and grew significantly year-on-year, improving loan funding.

• The outlook for 2026 is aggressive: adjusted revenue of around $4.655 billion, adjusted EBITDA of $1.6 billion, adjusted earnings per share of $0.60 and member growth of at least 30%.

• The biggest "macro lever" is a drop in rates: the firm estimates the opportunity in student refinancing is around $400 billion and could be 25% higher if rates drop 0.5 percentage points.

• Valuations remain high vs. traditional financials, so there is less room for error and the market will be keeping a close eye on the quality of growth, credit and any further dilution of the stock.

Why the stock has weakened even as business accelerates

Three things often come together in SoFi $SOFI that can push the price down in the short term even when results are good. The first is purely sentimental: fintech and "higher beta" stocks are extremely sensitive to how the market reads the rate outlook. If expectations shift toward a longer period of higher rates, investors typically switch from growth stories to defensives, and SoFi tends to be among the first to sell in that pack.

The second factor is both technical and psychological: capital moves. SoFi has shown several times in recent years that it can be opportunistic and strengthen its balance sheet, but shareholders are occasionally reminded of an unpleasant fact - that fast-growing fintechs can also choose the dilution path. In earnings materials, the firm openly mentions a $1.5 billion capital raise in December, which may prove to be a "tax on certainty" in the share price in the short term.

The third factor is that SoFi is not a simple one-product story. It has loans, a technology platform, financial services, and now crypto activities. For part of the market this is an advantage, for part a "complexity" that is hard to price in a nervous environment. When investors are scared, complexity is often punished.

What's really happening in the numbers: growth, margins and quality of revenue

The basic point of recent quarters is that SoFi is no longer just "growth at a loss". In Q4 2025, the company reported adjusted revenue of over $1.0 billion and adjusted EBITDA of roughly $318 million, showing a return of operating leverage and the ability to scale costs.

Importantly for investors, growth is not isolated to one corner of the company. Membership has moved to 13.7 million and products to 20.2 million, exactly the type of "platform inertia" that reduces reliance on one-off cycles in lending. What this means in practice is that once a user has kept current finances, savings, investments and a loan on top of that with SoFi, they leave worse off and the long-term value of the client increases.

Deposit growth is a particularly strong signal. Deposits of $37.5 billion are not just a pretty number for a presentation. For a financial institution, it is the "fuel" that determines the cost of funding, the room for loan growth, and how resilient a firm is when the market deteriorates.

Where SoFi can grow next: three engines that support each other

1) The credit engine and refinancing: the biggest lever on rates

SoFi itself says it has a strong position in personal loans, citing a roughly 15% share of US prime volume. This is a double-edged sword for investors: on the one hand, it confirms that the company is no longer a crumb. On the other, it shows that growth going forward must be based on market expansion and on SoFi "pulling" clients out of more expensive revolving-type products.

And this is where the math gets interesting. The firm talks about the real addressable market being the nearly $1 trillion of prime revolving credit card debt that is "waiting to be refinanced at a lower rate." When you put that into the reality of the entire system, credit card debt in the US is at an all-time high and has been in the trillions of dollars in recent years. So SoFi is betting on a simple principle: people with good credit profiles will be more sensitive to interest savings when rates fall (or even stabilize) and will look for cheaper consolidation.

There is even more rate sensitivity with student refinancing. SoFi estimates the opportunity to be around $400 billion, and could be 25% higher if rates fall by 0.5 percentage points. If you want a conservative framework for the size of the "reservoir," student debt in the U.S. is in the trillions of dollars over the long term. Not every portion is refinanceable, and not every borrower is a "prime customer," but the bottom line for an investor is that a potential wave of refinancing can be a multi-year wind in the sails, not a one-time episode.

2) Deposit as a weapon: cheaper fuel, greater flexibility

Deposit growth is not just a "bank metric". It's a competitive advantage because it reduces reliance on more expensive wholesale funding and gives the firm room to do more lending without having to aggressively raise the cost of money. The $37.5 billion in deposits with a rapidly growing member base suggests that SoFi is attracting clients who are not just one-time "bonus hunters" but are gradually moving their day-to-day finances to the platform as well.

In practice, this is also important for risk. In times of stress, cheaper and more stable funding is one of the biggest differences between a company that has to stall and one that can continue to grow.

3) Fee-based and 'platform' revenues: the path to more resilient margins

The market often values SoFi mainly through credit, but in the long run, valuation will be based on how much revenue is recurring and less cyclical. The firm's materials emphasize the growth of financial services and the shift in mix towards fee-based revenue. This is significant because fee income typically carries a higher margin and less sensitivity to interest rate cycles than a pure interest rate spread.

The technology platform fits into this as well. It's not just a "pretty story" but a business that can add revenue without the company having to bear all the credit risk. If SoFi can continue to scale platform revenues, the quality of overall earnings will improve and a higher multiple will be easier to defend to investors.

Catalysts for 2026: what could change sentiment on the stock

A drop in rates or a clearer outlook for easing is the biggest macro catalyst as it increases refinancing activity and can lift volumes. SoFi itself quantifies that leverage in student refinancing.

Next is continued growth in members and products. The firm is targeting membership growth of at least 30% in 2026. This is important because the platform has a "network" effect within its own ecosystem: more members means more opportunities to cross-sell, and thus higher revenue per user.

The third catalyst is profitability. The outlook of 1.6 billion adjusted EBITDA on adjusted revenues of 4.655 billion implies an EBITDA margin of around 34%, a further shift from 2025.

And the fourth, which may move the price in the short term, is the index story. Inclusion in the S&P 500 has clear rules, including the requirement for profitability in the most recent quarter and in the sum of the last four quarters, size and liquidity. If SoFi continues on a profitable trajectory, the index catalyst can be a "bump" in momentum, even if it can't be timed to a specific month.

Growth projections: a simple framework that gives shape to the numbers

SoFi gives the market a fairly ambitious medium-term framework: adjusted revenue is set to grow at a compound annual rate of at least 30% and adjusted earnings per share 38-42% per year 2025-2028. Rewriting that into illustrative numbers and taking it as an anchor for the 2026 outlook, it comes out indicative:

• Adjusted earnings: 2026 $4.655 billion, 2027 roughly $6.05 billion, 2028 roughly $7.87 billion (at 30% run rate).

• Adjusted earnings per share: 2026 USD 0.60, 2027 roughly USD 0.83-0.85, 2028 roughly USD 1.14-1.21 (if 38-42% pace can be maintained).

This is not a "so it shall be" promise, but a practical framework that shows why investors are fighting over SoFi. When this trajectory comes to fruition, the valuation will begin to "cheapen" itself as sales and earnings catch up to multiples.

Valuation: expensive versus banks, cheaper when the plan comes to fruition

By the metrics, SoFi doesn't look like a bank title today. A P/E around 49.7 and P/S around 7.46 makes it clear that the market is paying for growth and for expected margin improvement. At this valuation, the key is to understand what is already "priced in" and what is still upside.

Two useful perspectives:

1) Compression of multiples when a company delivers a plan

If we take a market capitalization of about $33 billion and a 2026 revenue guidance of $4.655 billion, the "gross" forward P/S comes out to about 7 times. With revenue growth towards ~6bn in 2027 and ~7.9bn in 2028, the P/S can compress significantly without a price move. In other words, much of the investment thesis rests on time working for shareholders if the company is delivering growth.

2) EBITDA as a bridge to more mature valuations

The market often punishes growth companies until their profitability looks "stable." The $1.6 billion adjusted EBITDA outlook for 2026 is therefore critical as it brings SoFi into a mode where it can be more meaningfully compared via EV/EBITDA. The moment EBITDA grows faster than sales, the investment story begins to gradually shift from "faith" to execution.

Moreover, when compared to selected fintech peers, it is clear that the market can be extreme: some fast-growing firms have multiples that are many times higher, while more mature players like PayPal have multiples that are significantly lower. This just confirms that for SoFi, the biggest variable is confidence in the growth trajectory and profitability.

Risks: where the investment thesis can break down

The biggest risk is not that SoFi doesn't have growth opportunities. The risk is that the conditions in which it best monetizes those opportunities deteriorate.

• Rates and refinancing demand: if easing comes later, volumes may grow more slowly than the market expects and the stock will remain under pressure.

• Credit cycle: while SoFi emphasizes prime clientele and strong scores, a recession or rising unemployment may eat into loan losses.

• Competition: for personal loans and investment services, the environment is crowded. SoFi's advantage is the ecosystem; the disadvantage is that competitors can "undercut" price.

• Dilution and capital moves: the December capital raise shows that management wants leeway, but shareholders will be sensitive to any repeat episode.

• Regulation and reputation: fintech, bank and investment services mean higher regulatory demands and potentially higher "headline risk".

Investment scenarios: what 2026 may look like and what it will do to equities

Optimistic scenario: rates will help and the platform will start switching into higher gear

In the optimistic scenario, the outlook for rates improves as the year progresses and SoFi starts a "refi wave" in both student loans and personal loans. This will lift volumes, but more importantly improve acquisition efficiency as customers come in for the interest savings and SoFi can continue to monetize them through other products. The key is that margins will move faster than the market expects due to scaling and higher fee income.

In such a scenario, what the company is suggesting with its outlook will start to become real: adjusted revenue of around $4.655 billion and EBITDA of $1.6 billion are not a ceiling, but an intermediate step. The stock may then rise not "just" because of the results, but because sentiment will turn and higher multiples will become acceptable to the market again.

Realistic scenario: execution good, but market wants evidence every quarter

Realistically, SoFi can continue to grow members and products, meet revenue and EBITDA guidance, but the stock will continue to be volatile and macro sensitive. The interest rate environment can only improve gradually, so the biggest volume "boost" will come later while investors address whether growth is being bought out by higher risk or costs.

In this scenario, the return to shareholders will be less about one big jump and more about the company gradually "growing into" valuation. This is a scenario where SoFi operates like a growth bet, but with ongoing quality control: credit, costs, cross-sell pace, deposits.

The pessimistic scenario: rates stay high, credit deteriorates and the stock remains under pressure

The pessimistic scenario is not that SoFi stops growing. It is about growth slowing in the most sensitive segments and the market starting to question the quality of the trajectory. If rates stay higher for longer, refinancing doesn't come in at the expected strength, and credit conditions deteriorate at the same time, an old fear may come back into investors' heads: that with a financial firm, growth is always cyclical and will "pay for itself" later through losses.

In such a situation, valuation is the biggest risk. High multiples mean less margin for error. A company may be fundamentally sound, but the stock may still stay low for a long time because the market switches into "show me you can make it through a worse cycle" mode.

What to watch in 2026: a handy investor checklist

• Growth rate of members and number of products per member

• deposits and their dynamics as they decide the fuel for lending

• loan volumes and quality, especially for personal and student loans

• Meeting the outlook: revenue of $4.655 billion, EBITDA of $1.6 billion, earnings per share of $0.60

• what proportion of revenue is fee income and how the platform business is growing

• any indications of further dilution or major acquisitions

What to take away from the article

• SoFi is no longer just a "growth story" but a story of margins and operating leverage.

• The year 2026 has specific targets that can be checked quarter by quarter.

• The biggest lever is the rate drop because it can unlock refinancing and volumes.

• Deposits are a silent engine that increases resiliency and improves the economics of lending.

• Valuation is still challenging, so growth quality and credit discipline are key.

So what exactly were SPGI’s results and is the stock’s decline justified? We’re reaching unprecedented levels.

Thanks

At the beginning of 2026, the software sector is in a situation that looks paradoxical at first glance. A large number of companies have maintained solid revenue growth, but valuations and share prices have fallen to levels more typical of crisis periods. In many cases we are seeing declines of tens of percent from the peaks, and yet sentiment is so negative that the current capitulation of the software market is historically extreme. Banks are pointing out that roughly 73% of software names have hit record oversold levels and the ratio of the iShares software ETF $IGV to the S&P 500 is more oversold than at any time in history by their metrics.

What's behind this sell-off?

At its core, it's a clash of two big trends. The first is the structural growth of digitization, cloud and automation, things that software has been building on for years. The second is artificial intelligence, which has gone from a growth accelerator to a potential threat in the eyes of the market. Investors have started to see software more often as a segment that AI can partially replace. If the creation of competing solutions accelerates significantly and barriers to entry are lowered, this could push pricing and margins over time. At the same time, companies themselves are figuring out how to integrate AI into products so as not to cannibalize their own business.

Adding to this is another powerful factor, namely an unprecedented wave of investment in AI infrastructure. This year, the market is expecting hyperscale players like Amazon $AMZN, Alphabet $GOOG, Microsoft $MSFT and Meta $META to spend roughly $635-665 billion on CapEx (Capital Expenditures), i.e. datacenters, chips and infrastructure around AI, by 2026.

This has two important implications for software:

• Firstly, there are increasing concerns about whether the return on these investments is fast enough and clearly measurable,

• secondly, the allocation of capital and pressure on free cash flow is changing across the technology ecosystem, which the market typically translates into lower multiples. And software that has long traded at premium valuations takes the biggest hit.

Still, early signs are starting to emerge that the negative scenario may be partially overdone in pricing. Morningstar pointed out in its January analysis that it is software that may offer the greatest upside potential within technology, and in specific cases operates with a significant difference between market price and fair value. You can check this for yourself for any company in the Fair Price Index on Bulios.

What we're seeing in software stocks now is not just a normal correction. According to our team's analysis, sentiment has reached a stage that can be called a capitulation without exaggeration.

Why is this important? Because the historical oversoldness we are currently seeing in this sector is often a signal that the market has stopped discerning quality. At such a stage, the entire segment sells out, even companies that still have solid growth, high retention and healthy cash flow. This is exactly what is happening in the current wave of what Reuters has described as 'software-mageddon': the software and data services index of the S&P 500 has plunged to the point where the sector is set to write off around USD 1 trillion in market value in less than a week.

RSI (Relative Strength Index. It is one of the most widely used technical indicators that measures the pace and strength of price movement. It shows whether a stock or an entire sector is "overbought" or "oversold" in the short term)

Source: Bloomberg

The main trigger for this panic is AI. But not in the sense that it can help these companies, but rather in the sense that AI can break this market. Indeed, the market has begun to massively price in the scenario that generative AI will lower barriers to entry, accelerate the emergence of competition, and automate some functionality over time. Add to that a giant wave of investment by hyperscalers in AI infrastructure, which suddenly looks more like FOMO to investors than disciplined capital allocation. Today, it's common to operate with big players planning to spend around $650 billion on capex in 2026, which puts pressure on free cash flow and increases the market's sensitivity to any signs of weaker returns. And it also further increases pressure on traditional software firms as investors worry about their future struggles with AI.

Interestingly, though, the same AI that's causing fear now may also be the catalyst for a turnaround in sentiment. Many analysts warn that some software may be overly punished and see a significant gap between market price and estimated fair value for select names. Specifically, there have been media mentions of 50% upside for Microsoft $MSFT and 100% for ServiceNow $NOW within their fair value frameworks. However, the media often overshoots prices, so it's always a good idea to do your own analysis and look at other valuations.

But it's not just the companies themselves, it's entire ETFs

One of the purest ways to track sentiment towards the software sector is not to look at individual stocks, but at a whole basket of companies. And that's exactly what the iShares Expanded Tech-Software Sector ETF $IGV is.

Managed by BlackRock $BLK, this ETF tracks U.S. software companies across segments, from enterprise solutions to cloud, cybersecurity to specialized industrial software. It's not a narrow ETF, but a relatively broad exposure to the core of the U.S. software ecosystem.

Why is IGV so important right now?

According to Jefferies analysis, it is $IGV relative to the S&P 500 index that is at its largest relative oversold level in its nearly 25 years of existence. In other words, software as a whole has never been so weak relative to the broader market.

Historically, similar moments of relative capitulation have often preceded significant sector turnarounds - not necessarily immediately, but over the course of several quarters.

ETF Overview

Data as of 6.2.2026

Source: BlackRock

Change in investor position

One of the key reasons for the current sell-off is the change in narrative around artificial intelligence. As recently as last year, AI was clearly seen as the biggest structural opportunity for software in the last decade. Today, however, there is increasing talk that the billions of dollars invested in AI may end up as just money spent without a return of capital to the company.

On the one hand, AI can be a historic catalyst for growth. Companies that can integrate it into their products can dramatically increase customer productivity, improve retention, and open up new pricing models. But on the other hand, AI also lowers barriers to entry. Developing new software solutions is faster, cheaper and more accessible than ever before. This leads to the concern that some traditional software may become automated.

The market today is factoring in the scenario in many companies' valuations that:

• Competition intensifies significantly,

• pricing power weakens,

• margins become thinner,

• companies will be able to develop some functionality in-house with AI tools.

This is a dramatic change from the last decade, when software was able to grow at minimal cost and hold extremely high operating margins.

So the key question is not whether AI will destroy or save the sector. The question is which companies can monetise it faster before it starts cannibalising their existing business. And that will be the focus of tomorrow's company-specific analysis.

Another important perspective is macroeconomic and capital. In recent years, software has systematically outperformed the broader market. The reason has been simple: high growth, a low-cost model, strong cash conversion and high profit multiples.

But now we are seeing a significant shift in capital.

Investors are starting to focus more on companies with tangible assets - industry, energy, infrastructure, chipmakers or companies that benefit from AI through the physical layer such as datacenters, hardware, electricity.

Chart of Micron $MU - a manufacturer of memory for AI (hardware for AI)

The logic is simple: if AI leads to massive automation and productivity gains, the companies that own the infrastructure have the most to gain.

While software used to trade at premium multiples precisely because of its "elusiveness" and high margins, today the market is driving those multiples down. Morningstar points out that some large software firms are now trading at multiples that are well below the average of recent years. This in itself creates not room for a rally, but asymmetry. If sentiment stabilizes, a return to historical multiples could mean significant upside potential.

Historically, extreme oversold segments often precede strong pullbacks not because fundamentals improve overnight, but because the market stops pricing in the worst-case scenario as the only realistic one.

Today we are at the stage where:

• Investors are questioning the return on AI investments,

• they fear software automation,

• overestimate risk and underestimate the adaptability of strong players.

This does not mean that the entire sector is undervalued. But it does mean that it is starting to create some specific opportunities, and also risks for those who cannot distinguish between companies with a strong competitive advantage and those whose business model may actually be disrupted.

Conclusion

The software sector is undoubtedly in an exceptional phase today. Sentiment is at its most negative in many years according to a number of indicators, software-focused ETFs are experiencing historically record oversold levels, and investors are shedding the sector across the board, without much distinction in quality.

At the same time, there is concern that the huge investment in AI infrastructure may not return as quickly as investors would expect. The more capital that flows into data centres and chips, the less there is for buybacks or dividends, and this immediately translates into lower valuation multiples.

On the other hand, there is a second, equally strong argument. The digitalisation of the economy is not over. Process automation, the move to the cloud, cybersecurity, data analytics and AI itself are still long-term structural trends. If fears of a weakening of software prove exaggerated and strong players are able to incorporate AI into their products before it disrupts their business model, current pricing may retrospectively appear as a significant opportunity.

The CEO of Tesla and SpaceX stated on his X account on Sunday that the company has shifted its focus to building a self-sustaining city on the Moon, arguing that it would take more than 20 years on Mars.

SpaceX is still private today, but its valuation on secondary markets already exceeds hundreds of billions of dollars. Starlink alone, according to not only my analyses but others’ as well, could be worth tens to hundreds of billions of USD.

Would you buy SpaceX shares right at the IPO, even though it would likely be one of the largest public listings in history?

The CEO of Tesla and SpaceX said on his X account on Sunday that the company has shifted its focus to building a self-sustaining city on the Moon, arguing that it would take more than 20 years on Mars.

SpaceX is still private today, but its valuation on secondary markets already exceeds hundreds of billions of dollars. Starlink alone, according to not just my analyses but others’ as well, could be worth tens or even hundreds of billions of USD.

Would you buy SpaceX shares right at the IPO, even though it would likely be one of the largest listings in history?

What the results do not offer is a turning point. Revenue momentum remains limited, margin expansion is not the focus, and there is no new catalyst to reframe the investment narrative. For investors, AT&T continues to represent a cash-flow and dividend profile rather than a growth opportunity, with the key question centered on sustainability rather than acceleration.

How was the last quarter?

Q4 2025 confirmed the continued trend of low revenue growth but solid operational performance. Total revenues reached $32.3 billion, up 0.3% year-on-year. This is very limited momentum at the overall level, but a positive signal coming from the core business. Service revenue grew by 1.0% YoY, showing that core telecom services maintained a modest upward trajectory.

Operational performance was stronger than revenue growth. Adjusted EBITDA in Q4 was $10.9bn, up 4.1% YoY. EBITDA margin was 33.6%, slightly above Q4 2024 levels, although well below the seasonally strong Q3. This confirms that AT&T $T can maintain cost discipline, but without significant margin leverage.

At the earnings level, the company reported a net profit of $4.16 billion. Adjusted EPS came in at $0.52, a noticeable improvement from $0.43 in Q4 2024, but also a slight slowdown from Q3 2025. Thus, profitability remains stable, not accelerating.

From a cash perspective, the quarter was solid. Free cash flow was US$4.2bn, down from a strong Q3, but in the context of the full year confirms the company's ability to generate cash even with high investment.

• Full presentation with results.

Q4 2025 Highlights:

• Revenues $32.3 billion, +0.3% YoY

• Service revenue +1.0% YoY

• Adjusted EBITDA USD 10.9 billion, +4.1% YoY

• EBITDA margin 33.6% YoY

• Free cash flow USD 4.2 billion

• Adjusted EPS USD 0.52 (vs. USD 0.43 YoY)

Segment view: where AT&T is gaining and losing momentum

The mobile segment remains a mainstay of stability. Postpaid phone net adds were +421k, a solid result in a highly competitive environment. Postpaid ARPU rose to $56.72 (+0.9% YoY), indicating good customer retention. Service revenue in the mobile segment grew by 2.4% YoY and EBITDA by 3.1% YoY, confirming balanced, profitable growth.

Optical infrastructure continues to perform very strongly. AT&T Fiber added 283k customers in Q4, while Internet Air gained another 221k. Fiber revenue grew 13.6% YoY and Fiber ARPU reached $72.87, well above traditional broadband. Also crucial is the growth in convergence rate to 42%, meaning more customers are using multiple AT&T services simultaneously and increasing their long-term value.

Business Wireline, on the other hand, remains a weak link. EBITDA in this segment declined 6.7% YoY, reflecting the structural decline in traditional business connectivity. While growth in fiber and advanced connectivity cushioned some of the decline, the trend remains negative.

Management commentary

Management emphasizes balanced growth, stability and discipline in capital allocation. Mobile, fibre and customer convergence across the portfolio remain strategic priorities.

Communications indicate that AT&T is not targeting aggressive expansion. Instead, it is focusing on maximizing the value of existing infrastructure, maintaining a quality network and gradually improving financial flexibility. This conservative approach is a key reason why the title is viewed as a defensive investment rather than a growth story.

Outlook

The outlook for 2026 to 2028 confirms a steady but limited growth trajectory. Management expects service revenue growth in the low-single-digit range annually, i.e. without significant acceleration. Adjusted EBITDA is expected to grow 5%+ in 2026, with gradual improvement towards 5%+ by 2028.

Capital investment is expected to remain in the range of $23-24bn per year, implying continued investment in the network without dramatic increases. A key point in the outlook is free cash flow, which is expected to reach US$18+bn in 2026, US$19+bn in 2027 and US$21+bn in 2028. This is critical for both dividend sustainability and debt reduction.

On the earnings front, the firm expects adjusted EPS of US$2.25-2.35 in 2026 and double-digit three-year CAGR through 2028, suggesting gradual improvement rather than leapfrog growth.

Long-term results

The long-term view shows a company that has undergone a painful restructuring and is now in a normalization phase. Revenues in 2025 reach $125.6 billion, representing 2.7% year-over-year growth after a flat 2024. This confirms that AT&T is operating in an environment of very limited structural growth.

Stability is evident at the operating profit level. Operating income was USD 24.2 billion, virtually unchanged from the previous year. EBITDA rose to USD 53.2bn (+20.9% YoY), reflecting a combination of operational discipline and normalisation after previous exceptional items.

The most visible improvement came on the bottom line. Net income rose to US$21.9bn, almost double the 2024 figure, and EPS came in at US$3.04 (+104% YoY). However, this jump should be read as a return to normal after a weaker year, not a new growth trend.

The number of shares outstanding remains stable, which means that EPS changes do indeed reflect profitability trends. AT&T thus confirms the long-term profile of a company that maximizes value through cash flow, not through revenue growth.

News

During the year, AT&T continued to expand its fiber network, increase its convergence rate and gradually reduce debt. The company has avoided large acquisitions and remains conservative in its capital policy, which promotes stability but limits the potential for faster expansion.

Shareholding structure

The shareholder structure is strongly institutional. The institution holds roughly 67% of the shares, with Vanguard (9.3%), BlackRock (8.1%) and State Street (4.6%) being the largest shareholders. The low insider stake is consistent with the mature stage of the firm and the long-term nature of the investment base.

Analyst expectations

Analyst consensus remains cautious but stable. AT&T is viewed as a defensive title with an attractive dividend yield and predictable cash flow. Analysts appreciate the improvement in capital structure and stabilization of results, but also note limited growth potential and sensitivity to macroeconomic conditions. Thus, the market's post-earnings reaction is consistent with reality - AT&T is delivering what it promises, but does not warrant an upward repricing.

Fair Price

AI and Cloud Infrastructure Powering Growth

Oracle’s rebound is rooted in its strategic positioning in the AI cloud infrastructure market, where demand for GPU-heavy compute and high-performance database services continues to accelerate. Recent commentary notes that investors are increasingly confident in Oracle’s ability to capture a slice of rapidly expanding AI workloads, contributing to growth in its core Oracle Cloud Infrastructure (OCI) offerings. Analysts point to remaining performance obligations (RPO) figures in the hundreds of billions a key measure of future contracted revenue as evidence of strong booked demand that underpins revenue visibility for coming years.

$ORCL has also benefited from cloud infrastructure upgrades and rising enterprise software demand, with one report noting a 4.95 percent pre-market surge earlier this year tied to renewed confidence in its hybrid cloud and database modernization strategies across sectors such as healthcare and finance.

Strong Backlog and Ambitious Long-Term Outlook

Another driver cited by investors is Oracle’s extraordinary backlog of contracted revenue, which reflects multi-year commitments from enterprise customers that are integrating cloud and AI workloads into their infrastructure. Some industry analysis points to a backlog figure well north of expectations, indicating a strong pipeline of future revenue. Wall Street models have even suggested OCI could grow into a $144 billion annual revenue business within a few years, dwarfing legacy segments and underscoring Oracle’s strategic pivot toward high-growth areas.

Despite near-term challenges around funding and execution, analysts see potential for multi-year upside driven by Oracle’s expanding cloud footprint, diverse enterprise software base, and incremental AI services adoption.

Funding Initiatives and Strategic Investment

Oracle’s recent announcement of plans to raise capital including up to $50 billion in mixed debt and equity funding for cloud infrastructure expansion has been a focal point for investors evaluating its long-term growth trajectory. While the scale of this financing plan has raised debate about dilution and leverage, the broader market has largely interpreted it as evidence of Oracle’s commitment to meeting surging enterprise demand, with major clients such as Meta, NVIDIA, AMD, and AI firms like OpenAI reliant on high-performance cloud capacity.

Investor sentiment has occasionally been tempered by concerns about debt levels and infrastructure spending, but the recent bond offering success including strong institutional demand for a reported $25 billion in new bonds was seen as a positive sign that markets still support Oracle’s strategic direction.

What Investors Are Watching Next

As Oracle’s stock continues its rebound, several key metrics and catalysts will shape investor expectations and near-term performance:

Cloud Revenue Growth: Continued acceleration in OCI revenue, particularly with AI workloads and enterprise modernization projects, will be critical to validating long-term growth models.

Backlog and Contracted Revenue: RPO figures above $500 billion act as forward guidance on future revenue streams and give visibility into multi-year demand strength.

Capital Deployment and Funding Execution: How Oracle deploys the planned $45–50 billion in funding toward infrastructure, data centers and partnerships will influence both growth and investor confidence.

Earnings and Guidance: Upcoming earnings prints and management commentary on margins, subscription growth, and AI adoption will be key near-term catalysts.

Overall, Oracle’s stock rise today is part of a broader reassessment of its role in the cloud and AI landscape, with investors increasingly willing to look through cyclical volatility to its structural opportunity.

The market is treating 2026 as a transition year. Management talks about tighter discipline and a reset, but guidance suggests that a return to prior profitability levels will take time. UnitedHealth remains a high-quality franchise, but investors are grappling with a risk profile that looks less predictable than it did in recent years.

How was the last quarter?

The fourth quarter of 2025 was the weakest quarter for UnitedHealth Group $UNH in terms of profitability in several years, although revenues remained strong. Revenues in the quarter were approximately $113.2 billion, representing year-over-year growth of approximately 12%, driven primarily by continued growth in the number of insureds in the Medicare and Community & State segments and volume growth in Optum Rx. Thus, at the revenue level, the company is not facing a demand problem, but a cost structure problem.

Operating profit in the fourth quarter, however, fell to just $0.4 billion, down from $4.3 billion in the same period last year. The main reason was a one-time charge of $1.6 billion after tax, which included final costs related to the cyberattack, portfolio restructuring, exits from unprofitable businesses and revisions to loss-making insurance contracts. After including these items, reported earnings per share were only $0.01, an extreme drop from the company's historical norm.

On an adjusted basis, earnings per share came in at $2.11, which better reflects the normal performance of the business, but even that figure fell short of what investors have long been accustomed to at UnitedHealth. The key negative factor remains the medical care ratio, which rose to 88.9% on an adjusted basis, up from 85.5% a year earlier. This 340 basis point increase represents a significant deterioration in profitability leverage - for every dollar of premium, significantly more is now spent on health care itself.

The operating expense ratio was 12.9% on an adjusted basis and remained roughly stable year-over-year, suggesting that the problem lies not in administrative costs but in the cost of care provided. Cash flow from operations in the quarter remained solid, but its structure was impacted by the timing of payments that would normally fall in 2026.

• Full presentation with results.

Outlook for 2026

The outlook for 2026 is solid at first glance, but on closer reading rather defensive. The company expects revenue to exceed $439 billion, which would imply only low single-digit growth over 2025. Operating profit is expected to exceed $24 billion and adjusted earnings per share are expected to be above $17.75, with the low end of reported EPS at $17.10.

The key takeaway is that this outlook already fully reflects higher healthcare costs, the impact of the Inflation Reduction Act, lower Medicare funding from CMS, and continued margin pressure in the UnitedHealthcare segment. In other words, management openly admits that a return to the old 2021-2023 margins is not realistic.

The efforts to price discipline and reprice insurance products are positive signs, but these steps will be delayed. Thus, 2026 will be a year of stabilisation rather than growth acceleration.

Management comment

CEO Stephen Hemsley described 2025 as a watershed year in that the company "faced the challenges head on" and took painful but necessary steps. In particular, he highlighted Optum's reorganisation, management turnover and return to integrated value care. According to management, it is the second half of 2025 that lays the foundation for more sustainable growth in the years ahead.

At the same time, however, management does not appear overly optimistic. The language of communication is cautious, with an emphasis on discipline, transparency and cost management rather than expansion or aggressive growth. This in itself explains why the market reacted restrainedly after the results.

Long-term results

Looking at UnitedHealth Group's long-term development, it is evident that the company has dramatically increased its scale over the past four years, but 2024 marked a turning point in the quality of that growth. Revenues grew from $287.6 billion in 2021 to $324.2 billion in 2022, then to $371.6 billion in 2023, and reached $400.3 billion in 2024, a cumulative growth of more than 39% in three years. This growth has been driven by a combination of acquisitions, demographic trends and the expansion of public health programs.

However, the cost side grew even faster. Cost of revenues increased from $217.9 billion in 2021 to $244.5 billion in 2022, $280.7 billion in 2023, and up to $310.9 billion in 2024. As a result, costs grew nearly 11% year-over-year in 2024, while revenues grew only 7.7%. This led to gross profit falling to US$89.4 billion, a 1.7% year-on-year decline, the first real drop in gross profitability after years of expansion.

Operating profit was flat in 2024 at US$32.3 billion, virtually unchanged from 2023, despite strong revenue growth. This clearly shows a loss of operating leverage. An even more pronounced deterioration can be seen at the level of net profit, which fell to US$14.4 billion in 2024 from US$22.4 billion in 2023, a drop of more than 35%. Earnings per share fell from US$24.12 to US$15.64, a fundamental change in the profitability profile of the entire group.

EBITDA declined to US$28.1 billion in 2024, down nearly 23% year-on-year, while growing at a double-digit rate between 2021 and 2023. This development confirms that UnitedHealth has entered a phase where volume growth no longer automatically means profit growth, and the ability to control healthcare costs and adapt pricing to the regulatory environment is becoming a key issue.

Shareholder structure

UnitedHealth has a stable institutional base. The institution holds roughly 84% of the stock, with the largest shareholders being Vanguard (10.0%), BlackRock (8.2%) and State Street (4.9%). Insider ownership remains low, which is standard for a company this large.

Fair Price

Investors are not buying a pristine income statement, but a transition. Capacity growth is approaching the point where it can translate into mobility revenues, while balance-sheet pressure continues to ease. Management points to positive free cash flow in fiscal 2026 and 2027, a record backlog near $4 billion, and a leverage target below 3×. The investment case has become binary: execution will determine whether the risk premium compresses meaningfully.

Top points of the analysis

• Record backlog of around $4 billion, up roughly $430 million year-over-year

• Strong cash flow: cash flow from operations USD 727 million for the quarter, free cash flow USD 444 million (significantly lower after adjusting for one-off payment, but still improving trend)

• Key milestone: commercial launch of new satellite capacity services expected around May, further capacity expansion by end of summer

• Leverage declining: net debt to adjusted EBITDA at roughly 3.25x and target to get below 3x

• Outlook for fiscal year 2026: revenue slightly up, EBITDA roughly stable, CapEx reduced to USD 1.0-1.1 billion and ambition of positive free cash flow

Introduction of the company and what it sells

Viasat $VSAT is a satellite communications and broadband company that makes its living by delivering connectivity where terrestrial infrastructure doesn't make sense or isn't available. In practice, it's a mix of products and services for aviation, maritime, government and defense customers, and select enterprise and fixed broadband offerings. From an investment perspective, the key is that it is not just "hardware in space" but a combination of capacity, ground infrastructure, terminals and long-term contracts.

The business typically relies on multi-year contracts and high switching costs. For aviation and maritime, terminal installation, integration into operations and certification is a process that in itself creates a barrier to exit. For government SATCOM, on the other hand, security certification, compatibility, relationships and the ability to deliver services in modes where commercial players often face constraints are key.

The biggest investor "aha moment" is that the company is not in "small growth disruptor" mode, but in infrastructure mode with a huge front-loaded CapEx. In good years this looks boring, in tough years it looks dangerous. Only one thing makes the difference between the two worlds: available capacity and the ability to turn it into cash without inflating debt further.

What's changing the investment thesis right now

Not long ago, the dominant concern was simple: the company is investing billions, satellites are delayed, fixed broadband in the U.S. is weakening, and debt leverage combined with higher rates is creating pressure. But in the current set-up, for the first time the focus of the story is visibly shifting towards cash flow and the execution of specific milestones. CEO Mark Dankberg explicitly says that cash generation is better than planned and that targeted transactions and savings in capex and operations go hand in hand with investment in future growth.

The second major change is the timing of ViaSat-3. Flight 2 is "within sight" of reaching operational status, commercial launch services are expected around May, and Flight 3 is to follow up after Flight 2 deployments are completed with a faster "orbit raise". These are not cosmetic details: with this type of company, the difference between "launched on time" and "delayed by a quarter or two" is the difference between de-risking and another wave of skepticism.

The third change is strategic optionality. Management has a strategic review underway, including consideration of separating the government and commercial parts. Management ties this directly to successful deployments, macro trends and achieving deleveraging and FCF targets. This is important because it adds "optionality" to the stock: if the operating story is confirmed, it can open the way for a restructuring, which the market often values at a higher multiple than a conglomerate with a mixed risk profile.

Segments and what the latest numbers say about the quality of growth

At the segment level, aviation is the most obvious positive. Aviation revenue grew 15% and the number of commercial aircraft in service grew 9%. This is the type of growth that has investment weight because it is a mix of higher installed base and monetization, not one-off sales. Moreover, this is an area where new ViaSat-3 capacity can unlock further scaling without the company having to dramatically increase the fixed cost of servicing each unit.

Government SATCOM grew by 4%, which may seem like a "boring number", but in defence and government contracts, the stability and quality of the backlog is often more valuable than the short-term growth rate. A backlog of around $4 billion at record levels is a key anchor in this context. In such a contract-driven business, backlog improves visibility and reduces the likelihood of a company falling into a cash-flow pit at the most sensitive stage of deploying new capacity.

Conversely, fixed broadband and 'fixed services and other' remains a weak spot, with revenues down 20% and a continued decline in US subscribers. This is exactly the kind of segment that can spoil the impression for investors if it continues to deteriorate faster than the mobility use-cases take off. At the same time, this is a segment where management openly reckons that improvement will only come with new services once satellites go live.

Management

Mark Dankberg has been running the company for a long time and is betting on two things at the current stage: de-risking through execution and through improving capital efficiency. The three growth pillars - ViaSat-3, multi-orbit broadband and "new frontier defence technology" - are recurring themes in the communication, but more importantly, how he plans to fund these pillars. The emphasis on cash conversion and on deleveraging is not cosmetic, but a direct response to what the market has been chastising this stock for the past few years.

CFO Garrett Chase frames it as a "mantra": build franchise and earnings power, generate and grow in free cash flow, and set a path to a long-term value-maximizing capital structure. For an investor, this means that the firm is trying to switch from "survive the investment cycle" mode to "reap" mode - and that it has already aligned both its CapEx outlook and its approach to Ligado-type deals with that.

It's also worth noting that management is openly talking about "capital-efficient innovation." An Equatys-type partnership with Space42 is intended to reduce the cost of capital and provide access to capacity at an attractive unit cost. This is exactly the type of design that can improve ROIC in the years ahead without having to repeat extremely capital-intensive phases again.

Long-term results

At the revenue level, we see a shift to higher scale. In the fiscal year ending March 31, 2025, revenues reached approximately $4.52 billion, a 5.5% year-over-year growth after a jump in fiscal 2024 to $4.28 billion. For context, fiscal 2023 was at $2.56 billion and 2022 at $2.42 billion. This shows that the company is in a very different league today in terms of size than it was a few years ago - and that investors need to read trends in the context of integration, acquisitions and portfolio transition.

Gross profit is growing more slowly than the market would like, but the trend is steady: $1.49 billion in fiscal 2025 to $1.38 billion in 2024. Importantly, the cost base is starting to behave in a more disciplined manner. Operating expenses in fiscal 2025 are down about 30% to $1.59 billion after an extreme year in 2024 ($2.27 billion). This is critical for investors, because controlling operating expenses is often the only quicker tool in the satellite business to stabilize the bottom line when you are still waiting for new capacity on the revenue side.

Accounting profitability remains weak, operating income is still negative (around -$97 million in fiscal 2025, with a much deeper decline in fiscal 2024). Yet EBITDA in fiscal 2025 jumped to about $1.24 billion from about $364 million in 2024. This discrepancy is typical for an investor: satellite infrastructure carries high depreciation, amortization, and often non-recurring accounting items. Therefore, it is more important to monitor EBITDA trends, cash conversion and whether the relationship between CapEx and cash generated is actually changing.

Cash flow and why it's the most important metric right now

In the last reported quarter, the company showed strong cash flow momentum: cash flow from operations of $727 million and free cash flow of $444 million on CapEx of $283 million. On first reading, this looks like a clear turnaround, only part of it is impacted by a one-time payment (Ligado). Adjusted for this component, cash flow from operations was $307 million and free cash flow was $24 million. That's a much more sobering picture, but still important: the company still came close to zero FCF in the quarter even after adjusting, which is exactly what the market wants to see as evidence of a turnaround.

Even more important than the number itself is the mechanism by which the company gets there. Management is talking about more efficient cash conversion, targeted transactions, cost savings, and also investing for the future. In practice, this means trying to reduce the "penalty" for capital intensity: less overinvestment, more partnerships, and tighter discipline on working capital.

Forward-looking, the firm confirms expectations of positive free cash flow in fiscal 2026, 2027 and beyond, reducing CapEx for fiscal 2026 by $100-200 million to $1.0-1.1 billion. Of this, roughly USD 350 million is attributable to the "Inmarsat silo" and just over USD 200 million to the completion of ViaSat-3. If these frameworks hold, the investor finally gets a modellable bridge between the "satellite build-out" and "cash-flow harvest" phases.

Balance sheet, debt and the path to leverage under 3x

The stock's biggest sensitivities are leverage and interest coverage. Metrically, this can be seen in net debt to EBITDA (around 4.7× in some reports) and weak interest coverage. But management also reports net debt to trailing 12-month adjusted EBITDA at 3.25×, a significant improvement from around 3.7× a year ago, while explicitly targeting below 3×. The difference between the "adjusted" and "non-adjusted" view is exactly what an investor needs to watch, as the market may prefer a more conservative interpretation in risk-on mode.

On the positive side, the company has a reasonable liquidity position in working capital and short-term ratios. A quick ratio of around 1.48 and a current ratio of around 2.08 reduce the risk of a short-term liquidity crunch. However, this does not address the long-term capital structure issue, as the key is how fast net debt declines relative to EBITDA, how the interest bill evolves, and whether CapEx stays within.

From a shareholder perspective, the most important thing is that deleveraging is no longer just a slogan. The company is tying it to specific sources: positive cash from operations, proceeds from Ligado-type transactions and smaller divestitures. If this mix holds up without the one-off components, the risk premium will gradually start to decrease.

Valuation and why the market is still holding the brake

Market valuations today don't look like typical tech euphoria. Market cap is around USD 5.1 billion and enterprise value around USD 11 billion. A P/S of around 1.11 is low on the face of it for a company operating in a critical connectivity infrastructure, but it also reflects a lack of confidence in accounting profitability and how stable FCF will be once one-off effects have worn off and the most expensive phases of the investment cycle are complete.

A P/CF of around 34.7 looks high, but this is precisely the result of the market not yet believing that cash flow will be sustainably high over the long term. Once FCF is proven to be structurally positive while leverage declines, the valuation framework may change from "will it survive?" to "how much of it will compound?". This is the point at which not only the multiples often change for similar companies, but also the type of investors holding the stock.

The optionality of the strategic review is also interesting. If a company were to decide to separate the government and commercial businesses, the market may price that at a higher sum of the parts than today's conglomerate discount. But this is only true if the satellite deployments turn out well and the cash-flow profile is stable. Otherwise, "optionality" becomes just another source of uncertainty.

Where can a company grow and what needs to sit for growth to materialize

The primary growth driver is mobility: aviation and maritime. There is already solid momentum in aviation and with new capacity a combination of higher quality service, higher airline penetration and better monetization per aircraft can be unlocked. If the new capacity performs as planned, the main question will not be "whether it grows" but "how quickly does growth translate into margins" as mobility products tend to have higher operating leverage.

The second driver is multi-orbit broadband, combining GEO capacity with LEO partnerships to give customers better latency, coverage and flexibility. Partnerships like Telesat Lightspeed for the aero segment point the direction: one antenna, multiple orbits, more competitive with pure LEO solutions. If this model catches on, the company can avoid having to capitalize LEO capacity with its own investments and instead monetize "system integration" and distribution power.

The third driver is defence and "new frontier defence technology". There, growth is often less linear, but rewards winners with long contracts, high switching costs, and a greater willingness to pay for security and availability. Record backlog is important in this segment not just for volume, but to signal that customers are planning capacity ahead. In addition, if the macro for defence budgets improves and delays caused by administrative factors subside, this may improve short-term order backlog.

Risks that can destroy the investment thesis

The biggest risk is execution and timing. The satellite business is ruthless: delays to Flight 2 and Flight 3 are immediately reflected in the revenue side while holding the cost base highly fixed. Should technical complications recur or service launches be delayed, the market may quickly reassess the likelihood of a scenario in which FCF improves more slowly and leverage remains higher than is comfortable.

The second major risk is competitive pressure, particularly in mobility. LEO players have set new standards in latency and capacity expectations, and customers will be comparing not only price, but also quality, coverage and ease of installation. Viasat may succeed with just a multi-orbit strategy and contract depth with customers, but if competitors offer better parameters at an aggressive price, it may push margins and slow the monetization of new capacity.

The third risk is financial. Negative interest coverage and relatively high net debt mean sensitivity to rates, refinancing and cash flow volatility. While short-term liquidity looks better, the long-term story is that positive FCF will not be a quarterly episode impacted by a one-off item. Once it becomes apparent that, absent extraordinary influences, the company is generating only weak FCF, the pressure on valuation and on strategic options will rise sharply.

Investment scenarios

Optimistic scenario

The optimistic scenario is based on Flight 2 entering service around May, Flight 3 by the end of summer, and that capacity will indeed unlock growth in the mobility segments without the need to dramatically increase opex. In that case, the company can move from "low single digit revenue growth" to a visibly better mix in 12-24 months, where aviation and government pull and fixed broadband ceases to be a drag. With continued deleveraging towards below 3x, the equity story would change to "deleveraging + growth", which historically raises the market's willingness to pay a higher EV/EBITDA multiple. The fair price in this scenario could lie significantly higher than today, as the combination of lower debt risk and higher cash flow visibility often adds tens of percent of value to a stock even without "miraculous" earnings growth.

A realistic scenario

The realistic scenario assumes that fiscal 2026 will indeed deliver only a low single-digit sales growth rate and roughly flat Adjusted EBITDA, but that a key point will hold true: FCF will be positive not just "on paper" but on a recurring basis. CapEx in the $1.0-1.1bn range will remain under control, backlog will hold visibility and leverage will continue to slowly decline. In this world, the stock may move more gradually - revaluation will be more about reducing the risk premium than the growth premium. For the investor, this is a "reward for patience" scenario where the main gain comes from the market stopping waiting for trouble.

The negative scenario

The negative scenario starts with capacity deployment milestones being pushed back again, fixed broadband continuing to fall faster than mobility takes off, and one-off cash injections not being enough to make a compelling deleveraging case. In this case, leverage may be held higher, the interest bill will remain painful and strategic review will be delayed. The market then typically addresses the worst question: whether further asset sales will be necessary, a significant reduction in investment, or whether the firm will enter a long "value trap" waiting mode. Fair valuations in the negative scenario tend to be significantly lower because equity is last in line in such a structure and most sensitive to changes in expectations.

What to watch next

Three timing milestones are most important: the actual launch of Flight 2 and Flight 3 services and how quickly aviation and maritime capacity utilization begins to pick up post-launch. Investors should want to see not only "it's up and running" but also the first signs of monetization: revenue growth in aviation, growth in the installed base, and steady churn with commercial customers.

The second set of metrics is purely financial: recurring free cash flow without one-off payments, CapEx trend vs guidance and net debt/adjusted EBITDA trend towards sub-3x target. If the company is able to keep FCF positive while leverage continues to decline, the probability of a valuation revaluation increases regardless of whether revenue grows 3% or 7%.

The third thing is segment quality: the fixed broadband subscriber base and rate of decline, the evolution of the government SATCOM backlog, and any news from the strategic review. Once the more concrete contours of a separation of a part of the business or a larger transaction emerge, the market would read this as a signal that the company is "post de-risking" and can maximize the value of the structure.

What to take away from the article

• The stock is a bet on the execution of satellite milestones and the transition to steadily positive free cash flow

• Record backlog and improved leverage move the story from "survival" to "de-risking"

• Greatest immediate strength is in the aviation segment, fixed broadband remains the biggest drag

• Valuations today contain a high risk premium that can change quickly based on FCF and leverage trajectory

• Key is to monitor FCF repeatability without one-off effects and the speed of monetization of new ViaSat-3 capacity