The past year suggests the strategy is working. Revenue expanded sharply, profits grew even faster, and the company kept its financial position strong. That combination matters because it gives management options: invest to grow capacity and distribution without leaning heavily on debt, while keeping the premium positioning that supports margins.

Top points of the analysis

• Revenue 2024: €606.3m USD 662.6m(+28.5%), gross profit USD 229.9m ( +28.5%), gross profit USD 229.9m (+28.5%). USD (+41.6%).

• Margin shift: gross profit grows faster than revenue, EBITDA 81.6mn. USD 81.6 (+99.6%).

• Valuation: P/E 16.75, P/S 1.39.

• Dividend policy: dividend is not paid, priority is growth and investment in capacity.

Company performance

Vital Farms $VITL is a U.S. food company that primarily sells out-of-home-access eggs and is gradually building a broader portfolio of "premium staple foods." The key is that it does not stand out as an anonymous commodity supplier, but as a brand: the product has clear shelf positioning, a consistent visual identity and an origin story. In grocery, this is not a cosmetic detail - it is a tool to differentiate from the private labels of supermarket chains and to maintain price over the long term.

The revenue model is built on the company selling to retail under its own brand and building distribution across the US. In official materials, it says its products are sold in more than 24,000 stores and that eggs are also available at hundreds of foodservice operations. This is an important metric because it shows that this is not a narrow "specialty" segment, but a mass scale that can continue to grow.

What makes the business compelling is the combination of two layers. On the consumer side, it is the confidence that the quality is stable and that the brand has value beyond a single price action. On the chain side, it's the speed of sale and the ability to bring customers into the category who are willing to pay a premium. When a brand raises the value of an entire category, the chain has less incentive to displace it.

Business

The core of the business is eggs and butter, but the key is how the company sells them. In the conventional egg market, producers compete primarily on price and delivery. Vital Farms tries to compete more on trust, traceability and the story of how they are raised. In practice, this means that growth is not just based on "higher prices" but on increasing domestic penetration - that is, how many households buy the brand on a regular basis. This is where the long growth 'runway' comes into play: with premium food, customer switching tends to be slow, but once a habit is formed, it sticks.

In addition to eggs, the company sells butter and eggs in processed forms, such as hard-boiled and liquid whole eggs. These products are important strategically: they move the company from "one item" to a broader shopping basket, while expanding opportunities in retail and foodservice. The company itself has long stressed that its biggest runway is still in eggs, and that it wants to enter other categories cautiously so as not to break focus on its main growth engine.

But the most important part of the product is not just "what it sells", but how it secures the supply. For this type of brand, the supply network is a key asset. The company works with an extensive network of family farms; it is reported to work with nearly 600 family farms. This is critical for an investor because growth for a premium egg is not just about marketing - it's about the ability to add capacity so that the brand doesn't lose quality and the unit economics don't fall apart.

Market and addressable potential

For eggs, at first glance, the market appears saturated. But there is a structural shift under the surface: a growing proportion of eggs are coming from farms that the consumer perceives as a 'better choice' - whether because of the way they are reared, traceability or simply because they are willing to pay extra for quality. An expert source, based on company presentations, reports that the outdoor eggs segment has increased its share of the U.S. market from 5.7% to 13%. This is no small shift - it is a change in category structure.

For Vital Farms, the addressable market is virtually defined by two axes: how many customers it will pull from conventional eggs into the "premium" segment and how much shelf space it will gain. An important detail is that the company itself does not see its main struggle as a direct price war with the industry's largest producers, but rather competition within the premium segment. This is both good and bad at the same time: good because the premium segment can grow over the long term and is not so commoditized; bad because the growth space has to be redeemed by marketing, branding and perfectly managed logistics.

The third layer of the market is capacity. For this company, it's not just about "how many people would want to buy" but how much it can realistically produce and distribute. This is why the expansion of processing capacity enters into the investment thesis: the company is open about the fact that it needs new equipment in order to be able to increase volume in the coming years without losing control over quality. In its latest outlook for 2026, for example, it cites capital expenditure of EUR 140-150 million. The company is planning to spend USD 140 million in the next two years, mainly due to the construction of the Vital Crossroads facility in Indiana to support long-term capacity on the way to its target of USD 2 billion in net sales by 2030.

Competition and market position

Competition in eggs takes two very different forms. The conventional segment is dominated by industrial production, where price, efficiency and the ability to supply in bulk are critical. A typical representative of this world is Cal-Maine $CALM, which describes itself as the largest producer and distributor of fresh shell eggs in the US. This is "volume" competition that can be extremely tough, but at the same time is often not a direct competitor to a premium brand, as long as the brand can maintain a price premium and differentiation.

In the premium segment, branded rivals like Happy Egg or Pete & Gerry's are more relevant. Here it is no longer just about price, but about who can build trust, who can get a better shelf position and who can supply the chains steadily without disruption. It is in this space that Vital Farms benefits from having a widely available brand and from keeping distribution under control. The company also states that it does not consider traditional industrial producers as primary competitors, and that it is focused on competing with other "pasture-raised" brands.

There is a third, silent dimension to the competition: the private labels of the supermarket chains. If the premium category expands, chains eventually want to 'internalise' part of the margin and offer their own alternative. The defence against this is either an extremely strong brand or an on-shelf performance that private label cannot replicate. So for Vital Farms, the key is that growth is not just "demand in a good year" but translates into long-term loyalty and sales velocity.

Management and CEO

The company's CEO is Russell Diez-Canseco. The important thing for an investor with this company is that it is not a management that builds strategy on financial gimmicks. The whole story is based on the "boring" stuff: expanding the farm network, building capacity, maintaining quality, consistent marketing and execution at retail. That's exactly the type of business where bad decisions show up quickly - either in product quality, or ability to deliver, or margins.

At the same time, management shares a clear long-term framework: a target of $2 billion in net sales by 2030 and profitability as measured by adjusted EBITDA margin (earnings before interest, taxes, depreciation and amortization on an adjusted basis) of 15%-17% by 2030, with gross margins of "35% or more" over the 2025-2030 period. These targets are important to investors because they provide measurable milestones - and set the bar for the market to check in the years ahead.

So the key credibility issue is not whether management has a nice story. It's whether it can grow over the long term without the unit's economics falling apart and without the company having to finance expansion with expensive debt or shareholder dilution. Today's balance sheet is strong in this regard - and gives management room to invest in capacity when demand is growing.

Financial performance

The numbers over the past four years show a textbook case of scaling. Revenues have risen from €260.9m to €260.9m. USD (2021) to USD 362.1m (2022), USD 471.9m (2023) and USD 606.3m (2023 ). USD 606.6 MILLION (2024). This is a growth of approximately +133% over three years. More important than the revenue growth itself, however, is that gross profit is growing faster: in 2024, it is 229.9 million. In 2024, sales grew by +28.5%, or +41.6% year-on-year. This is a signal that the company is improving mix and efficiency.

Operating leverage (a situation where profits grow faster than sales as fixed costs are spread out) is already very clearly visible here. Operating profit has jumped from 33.3m to 33.3m. USD 63.6 million (2023) to USD 63.6 million (2023). USD 63 (2024), a +91% increase. And net profit went from 25.6 million (2024) to 25.6 million (2023). USD to USD 53.4 million. USD, up +109%. In other words, the company has moved into a phase where volume growth and brand growth are starting to flow more strongly into profitability.

At the same time, we need to be honest about one thing: the share count is growing. The average number of shares was 42.85 million in 2024 versus 41.19 million in 2023. This is natural for companies that use stock awards, but an investor must want profit and margin growth to trump this effect over the long term. So far, the numbers bear this out - earnings per share have risen to $1.25 in 2024 from $0.62.

Balance sheet and debt

From the metrics, the balance sheet comes out as one of the strongest parts of the story. The debt-to-equity ratio is 0.17, debt-to-assets is 0.12, and enterprise value is even below market value, a typical sign of net cash. Add to that an Altman score of 6.60, and we get a profile that is very comfortable for a fast-growing consumer company.

This is investment relevant for two reasons. First, the firm can weather short-term fluctuations in costs, input prices, or promotional pressure from chains without being forced to take crisis action. Second, when a large investment in capacity comes along, the investor does not have to worry that it will be financed by debt at any cost. Instead, a combination of cash and conservative financing can be expected.

Thus, the balance sheet risk is more indirect: if a firm invests too aggressively in capacity and demand slows for some reason, the return on investment could deteriorate. In other words, the balance sheet is strong today, but capital discipline will be tested in the years ahead.

Valuation and valuation interpretation

At first glance, the valuation looks "sobering" for a company that is growing by tens of percent and improving margins. A P/S of 1.39 means the market is paying roughly 1.4 times annual sales, which is relatively low for a brand with 28-39% growth in recent years. A P/E of 16.75, then, for a company with earnings that have doubled year-over-year doesn't look overdone - even knowing that food can be cyclical in margins due to input and promotional activity.

The second layer of valuation is about what needs to happen to turn "cheap" into expensive. For this company, it's simple: the market needs to believe that growth is not a one-time effect (egg prices, temporary demand), but a long-term shift in the category and the company's ability to grow volume without losing its premium position. Once it is confirmed that investment in capacity leads to growth without weakening margins, multiples tend to rise.

At the same time, it is fair to say that a portion of the market will always have "natural skepticism": eggs are a product where investors instinctively expect commodity behavior. Therefore, the investment thesis must be based on concrete brand evidence - distribution, speed of sale, ability to hold price and volume growth. Here, the fact that the company is already in over 24,000 stores is very important - that's evidence of scaling, not just a story.

Growth catalysts and outlook

The biggest catalyst is capacity. This company has long operated in an environment where demand for premium quality is strong, but growth is limited by how much it can deliver. That's why the plan to build Vital Crossroads in Indiana is key: it's not "just another project," but an infrastructure lever to unlock years of growth and help meet its goal of $2 billion in net sales by 2030. When the company itself says it's investing $140-150 million in capacity, it's both a promise and a commitment: it needs to capitalize on volume, not just cost.

The second catalyst is the structural growth of the premium end of the market. If the outdoor-access egg segment grows from 5.7% to 13% of the market, then even if the economy slows, the long-term trend may continue to work - people won't necessarily always buy premium, but the proportion of those who get used to it may increase. For a company that is one of the most visible brands in this segment, it's a "wind at its back" that reduces the need to push the market through marketing alone.

The third catalyst is distribution expansion and "shelf space" with existing partners. The company openly says in official materials that retail will continue to be the largest source of revenue and that it sees the runway in getting more shelf space, higher sales velocity and greater breadth of products at existing chains. This is important because the cheapest growth tends to be with existing distribution: the logistics are already running and the brand is already known.

Risks

• The biggest operational risk is capacity expansion execution: if a new facility is delayed, becomes more expensive, or does not deliver the expected volume, it can worsen margins and the growth story.

• Input risk: feed, logistics, animal health, and egg price fluctuations can drive margins in the short term, even for a premium brand.

• Competitive pressure in the premium segment: if chains expand private label "premium" eggs, promotional pressure can rise and price premiums can fall.

• Reputational risk: the premium brand is built on trust. Any dispute over the definition of 'pasture-raised' or supplier standards may have a greater impact than for an anonymous commodity.

• Dilution: the number of shares is growing, so the investor must ensure that profit growth outweighs this effect over the long term.

Investment scenarios

Optimistic scenario

The company manages the capacity expansion without major losses and starts to increase sales volume faster without having to discount its premium position. The structural growth of the "better choices" segment continues and the brand gains additional shelf space. In such a scenario, it is realistic that sales will continue to grow in the high teens for several years in a row and that margins will remain healthy as higher volume spreads fixed costs.

Valuations could look "too cheap" in this scenario even in hindsight. If the market starts to believe that the target of 2 billion by 2030 is achievable and that profitability will move towards long-term adjusted EBITDA margin targets of 15-17%, there is usually a growing willingness to pay higher multiples. The key point is that this is not a "eggs will be expensive" story, but a story about the company selling more premium branded units.

A realistic scenario

Growth will remain strong, but will fluctuate based on capacity tilts and how the chains handle promotions. Margins may have weaker quarters as the company will invest in marketing and in developing its farm network. In such a scenario, the story is more likely to "muddle through" and the investor will get a return through a combination of earnings growth and gradual repricing, but without the euphoria.

In this scenario, the most important discipline is to hold on to earnings growth, while keeping an eye on costs and not over-investing to the point where the return on capital falls apart. A strong balance sheet and absence of debt stress plays a big role here, as the company has room to make small-scale mistakes without getting into trouble.

Negative scenario

Demand slows down before new capacity is fully in place, and the firm is forced to compete more on price and promotions. This could worsen gross margins and turn operating leverage in the opposite direction: sales would grow more slowly but costs would remain high. The biggest risk would be if it turned out that some of the growth of recent years was temporary and that customers, under budget pressure, "trade-down" (switch to cheaper alternatives) more than the company expected.

In such a scenario, the market usually pulls back multiples quickly, as the story is rewritten to "normal food company" for consumer brands when growth slows. On the positive side, the balance sheet is strong today, so a negative scenario would more likely mean a loss of momentum and valuation, not existential risk.

What to take away from the article

• Growth has been very consistent so far: 2021-2024 revenues +133%, profitability is accelerating and operating profit has almost doubled in 2024.

• The key driver is not the "more expensive egg" but the combination of brand and volume expansion in the fast-growing premium segment.

• The biggest catalyst is capacity: investment in Vital Crossroads and the ability to "unlock" supply to grow towards the $2 billion target by 2030.

• The balance sheet is very strong and the company is not being squeezed by debt, which increases the chance of getting through the investment phase without unpleasant surprises.

• The dividend is not paying: the return is purely about growth and whether the margin shift can be sustained.

• The biggest risk is the execution of the expansion and the potential erosion of the premium price should chains push for discounts or private labels.

• Investors should mainly monitor: sales, gross margin, capacity investment, distribution growth and stock dilution trends.

But what should we actually be worried about, and how do I think this whole situation will play out?

Shares of companies that manufacture combat drones, such as $ONDS, $AVAV, $UMAC, $RCAT or even $DPRO, are rising by several percent, some even by 10% or more.

It’s important to understand the perception and significance of the Strait of Hormuz. More than 20% of the world’s oil volume flows through this strait, which will push oil prices higher.

Oil is currently trading between $70–75 per barrel. The largest investment banks warned of prices rising to as much as $120 per barrel in the event of a blockade of the Strait of Hormuz. 🚢

Oil prices are rising and stocks are falling. Why? 📉

Oil prices rise in cases of political crisis, especially when the tension occurs where oil production is highly concentrated.

Stocks fall accordingly because the market fears higher diesel and gasoline prices, which would increase costs for all companies, as we saw at the start of the war in Ukraine. 🇺🇦

Which assets are considered so-called safe havens? ⚓️

Money flows into safe havens in moments of uncertainty, when the market is scared.

Long-term, safe-haven assets are those that retain their value, enjoy high investor confidence, and—most importantly—are not directly dependent on economic growth. 🚀

The most typical safe haven is gold. It has served as a store of value for thousands of years. When there is war, inflation, or panic, investors typically buy gold. 🔱

Another category is global currencies like the Swiss franc, the U.S. dollar, or the Japanese yen. The reason is a strong and stable economy combined with investor confidence.

Government bonds of strong countries—most commonly U.S., German, or Swiss government bonds. Investors trust that these countries will not default despite the crisis and will repay their debts.

And how does it work with stocks? 📊

Stocks tend to be quite volatile and often lose value in times of uncertainty. But some sectors are less volatile and more stable. For example, healthcare, since medicines are needed even during war or crises. Companies like $JNJ or $LLY. 💊

The sector that probably benefits most from war is the defense sector. Shares of companies like $LMT, $PLTR or $BA. 🛡️

Then there are other defensive equity sectors—consumer staples or utilities. ⚡️

Financial markets were hit by news in late February that immediately put geopolitics back in the spotlight for investors. On 28 February, US President Donald Trump announced in a video message the launch of large-scale strikes against Iran, citing Iran's nuclear programme, missile capabilities and military infrastructure as the main targets.

The operation, which Washington and Israel are conducting under the name "Operation Epic Fury", is one of the largest coordinated military campaigns in recent years, according to the White House. At the same time, Trump has openly acknowledged that the conflict could bring American casualties and could last several weeks, which immediately put markets into heightened caution mode.

The situation escalated further after the US administration announced the elimination of key Iranian officials, including Supreme Leader Ali Khamenei, in joint US-Israeli strikes. This move significantly increased the risk of a wider regional escalation and prompted an immediate reaction from Tehran, which responded with attacks on US targets in the region.

The first direct repercussions were not long in coming. The U.S. military confirmed the death of three soldiers and the wounding of five others in Iranian retaliation, moving the conflict from the phase of pre-emptive strikes to a more open confrontation. For the financial markets, this means one thing: geopolitical risk is once again a major factor in 2026.

And it is at moments like this that history repeatedly shows that capital is rapidly shifting to a few very specific sectors. In particular, energy, tanker transport and strategic commodities. So the next developments will not only be important for geopolitics, but also for sectoral rotation in global markets.

History shows us a fairly consistent pattern. When conflicts in the Middle East escalate, usually:

• the price of oil rises

• energy companies strengthen

• tanker rates rise

• and often the interest in uranium and energy security

Oil is the first to react

The energy market tends to be the most sensitive to geopolitical shocks, and the current situation is no exception. Investors in particular are watching closely:

• the risk of supply disruptions

• the security of the Strait of Hormuz (up to 20% of the world's oil flows through the Strait; if it is closed for a long time, this is a significant problem and oil prices could continue to rise significantly)

• and the potential OPEC+ response (yesterday oil producing countries agreed to increase production by 200,000 barrels per day)

Even relatively small disruptions to the flow of oil through the Middle East have historically had a significant impact on prices. The reason is simple: the region is a key global supply hub.

But what is even more important for investors is the stock market's reaction. Energy companies tend to react to oil price movements. If oil rises by units of percent, producers' profits often rise many times faster thanks to operating leverage.

This is why capital typically moves to large integrated oil companies in times of stress.

The tanker market is starting to revive

A less watched but historically very sensitive segment is tanker shipping. As geopolitical risk increases in key shipping lanes, it grows:

• the risk premium

• ship insurance

• and often the freight rates themselves

Tanker companies can thus profit even when global oil demand is not growing dramatically. Increased uncertainty in logistics is enough.

This is precisely the mechanism we have seen repeatedly in past conflicts in the region, and the first signs of a similar dynamic are beginning to emerge now.

Uranium and energy security back in play

Alongside oil, another issue is coming back to the fore: energy security. Geopolitical tensions have long fostered states' interest in diversifying their energy sources, which has historically benefited the nuclear sector.

The reason is structural. In an environment of heightened geopolitical risk, governments:

• invest more in domestic energy sources

• increase the emphasis on stable energy supply

• and strengthen strategic fuel supplies

This creates a supportive environment for the entire uranium chain, which was marginalised by investors just a few years ago.

Market reaction

While the market's initial reaction to tensions in the Middle East is often short-lived and emotional, recent developments show something a little different and perhaps surprising. The US indices are trading at a loss today, the first trading day since the conflict was declared, but only around 1%.

• The S&P 500 is writing off 0.78% this morning and the NASDAQ 1.15%. In fact, both indices have been reversing earlier losses in recent hours.

At the same time, implied volatility in commodity futures is rising and market sensitivity to any new geopolitical news from the region is increasing.

It is also important to observe that the current tensions come at a time when the global energy infrastructure is not significantly oversized. After years of relatively restrained investment in upstream and production capacity, supply remains more sensitive to any disruption. This increases the likelihood of sharper price reactions should there be a real supply shortfall or logistical constraint in key routes.

In addition to oil itself, secondary segments are also starting to move. Tanker rates are showing the first signs of strain and investors are once again eyeing companies with exposure to crude oil transportation, which have historically acted as a leveraged bet on geopolitical risk. Similarly, the energy security theme is coming back into play, fueling interest in the nuclear fuel cycle and companies connected to the uranium market.

Which stocks are in investors' sights

In an environment of growing geopolitical uncertainty, there is a relatively narrow set of potential winners that has historically been a recurring theme. Investors typically look for companies that meet at least one of three conditions: direct exposure to the oil price, leverage to tanker rates, or a structural link to energy security. It's in these segments that names like Cameco $CCJ, Exxon Mobil $XOMFrontline $FRO are now most commonly found.

Exxon Mobil $XOM is a classic big oil company with global exposure to both the upstream and downstream segments. It is this integrated model that gives the company high sensitivity to oil price increases, but also some cash flow stability. In periods of geopolitical tension, such giants are often the first destination for institutional capital because they combine liquidity, size and a relatively predictable response to commodity movements.

The price of a barrel of oil is trading 7% higher today than at the end of last week. It should be noted that this is not an extreme change for such an escalated conflict. However, the room for further growth is open and will depend on the escalation of the war's impact.

The $XOM stock itself is directly benefiting from this reaction. Their price is already trading around $160 in the premarket phase. This corresponds to a 4.6% rise and a new absolute peak.

The other frequently mentioned company that does not move in the investment mainstream is tanker operator Frontline $FRO. This segment tends to be extremely cyclical, but that is why it often reacts most strongly to geopolitical shocks. As uncertainty around shipping routes or ship insurance grows, tanker rates can jump very quickly. Yet history shows that tanker stocks tend to react with significant leverage to changes in the shipping market.

And this is borne out today in the pre-trading phase of the market. Shares of $FRO, which have already gained 73% year-to-date last week , are up less than 5% today, pushing them to the $40 per share mark. They are trading at their highest since 2012.

Canada's Cameco $CCJof the largest publicly traded uranium producers and its shares tend to be sensitive to any shift in the energy security narrative. Indeed, in an environment of geopolitical tensions, there is increasing pressure for energy diversification and stable production, which has historically fueled interest in nuclear power. Thus, Cameco is not a direct "war winner" like the oil companies, but rather a secondary beneficiary of energy policy change.

Thus, the current situation has so far had the least impact on the share price $CCJ of the companies mentioned. The price is even 1.4% below Friday's closing price today before the start of trading.

Also worth noting are the defense companies led by $LMT. This firm is up 6.6% today before the market opens, and one share is trading above $700 for the first time ever. Thus, the largest US arms company is up 41% since the beginning of the year in the form of its shares. However, other companies in the same sector are also rising, such as $RTXEuropean $RHM.DE, which has written off much of its gains in the first hours of trading.

Conclusion

The current tensions in the Middle East are once again reminding investors how quickly the priorities of financial markets can change. After a period of technology dominance, macroeconomic and geopolitical factors are coming back to the fore. These are energy security, supply stability and geopolitical risk. It is these variables that have historically been able to redirect capital between sectors in a very short period of time.

Developments to date suggest that the market is gradually starting to incorporate geopolitical risk into asset prices, but not yet to such an extent. Energy companies are showing relative strength, the tanker segment is responding to increased uncertainty in logistics and the nuclear energy theme is regaining relevance in the context of long-term energy security. Should tensions in the region persist or escalate further, this sectoral rotation could intensify.

However, the trajectory of the conflict itself remains a key factor for further developments. Markets typically react most sharply when geopolitical risk turns into a real disruption of physical commodity flows or transport routes. Until then, volatility often manifests itself primarily in sentiment, risk premia and relative sector performance.

For investors, the current environment is thus a reminder that even in the era of artificial intelligence and technological megatrends, geopolitics remains one of the most powerful drivers of markets. Moreover, events change from hour to hour, so it is important to react now and be prepared for high volatility.

The interesting part for investors is what this says about negotiating power. Netflix did not take on integration risk, debt risk, or regulatory fights. It stayed focused on its core business and still got paid for being a credible bidder. Reports also say the fee was covered by Paramount Skydance as part of the improved package, rather than coming out of Netflix’s pocket or requiring Netflix to build anything new.

How it became a "win" for Netflix

The basic mechanics are simple. Netflix $NFLX had a deal with Warner $WBD to buy its studio and streaming assets at a price Warner deemed fair until Paramount came in with a higher offer. Netflix refused to bid up to Paramount's level and walked away from the fight. Warner then, by contract, had to terminate the original deal - triggering the $2.8 billion breakup fee that is key to the whole puzzle.

Paramount took on that fee and paid it directly following the termination of the deal. In other words: Netflix didn't get "damages" because it was wronged, but because the deal was written so that Warner couldn't simply walk away without a price for changing partners. And because Paramount needed to convince Warner to take its offer, it paid that extra bill as well.

For Netflix, this is an extra win in two layers. The first is cash and immediate. The second is strategic: Netflix avoided taking on the integration risk, debt burden, and regulatory wrangling associated with one of the biggest media mergers of the decade - but still benefited from the escalating prices in this auction. Even analysts in the media are framing this as Netflix "jacking up the price" of the Warner war by design, and it is the new Paramount-WBD conglomerate that will have to foot the final bill to defend the financing and synergies.

Why this is an expensive joy for Paramount and Warner in turn

The winner of the acquisition now has a whole different world to deal with. The deal is worth roughly $110 billion (equity value of around $81 billion), according to the companies, and targets a close in the third quarter of 2026. Paramount and Warner are promising more than $6 billion in savings, but those synergies aren't "free" - in practice, they usually mean big changes in organization, technology and costs, which often translate into restructuring costs and political pressures in the early years.

At the same time, financing shows how tough a discipline this will be. According to Reuters, it is a combination of about $47 billion in capital from investors and $54 billion in debt obligations from banks and other partners, plus a planned rights offering. That's exactly the kind of environment where every extra billion - including the breakup fee for Netflix - adds pressure for synergies to really kick in and for the new company to be able to stabilize cash flow quickly.

That's where regulation and politics come in. In the US, there is already advance talk of a tough review in California, and there are concerns about further concentration in Hollywood, including criticism from unions. At the same time, there is commentary that Paramount has strong political ties, which may be seen as an advantage - but it also increases the visibility of the deal and the risk of it becoming a symbolic battle for media power.

What this means for investors and what to watch next

For Netflix, the bottom line is straightforward: the company takes home cash from the whole episode while confirming that it can play hardball in M&A chess without having to complete the transaction itself. The key will be how Netflix handles such one-time revenue and how the market "clears" it when looking at long-term margins and cash flow - because one-time fees are not a repeatable business, but they can improve flexibility in content investments or buybacks.

For Paramount-WBD, on the other hand, it's a test of execution. Investors will be looking at three things: how quickly the promised 6+ billion in savings start to materialize, how the regulatory process sets the terms (and potentially how expensive they will be), and how much the company's debt sensitivity to rate and ad market developments will rise post-merger. In that optic, the 2.8 billion almost seems like a detail for Netflix - but for the buyer, it's another reminder that the price of winning the Warner war is not paid in one sum, but in a series of "mandatory surcharges" along the way.

Stronger AI safeguards and accountability are now core to competitive business strategy

These protections include enhanced monitoring of model outputs, stricter access controls for sensitive use cases, periodic safety audits, and improved incident response protocols. As AI models become more powerful and integrated into business workflows, safety and accountability have moved from academic concerns to central pillars of competitive strategy especially for commercial platforms powering productivity, search, and enterprise automation.

Microsoft’s strategic AI investment deepens with broader implications

OpenAI’s safety initiatives arrive in a backdrop of an evolving and deepening partnership with Microsoft. Since Microsoft made a multibillion-dollar investment in OpenAI and integrated AI models into its Azure cloud business, the alliance has helped accelerate both product innovation and enterprise adoption. Microsoft’s Azure OpenAI Service has become a cornerstone of its push to deliver AI-enhanced applications, tools, and services to corporate clients worldwide.

The partnership is synergistic: OpenAI benefits from Microsoft’s infrastructure scale and go-to-market reach, while Microsoft gains exclusive advantages in deploying cutting-edge models across productivity, security, and developer toolchains. The Microsoft-OpenAI relationship has reshaped the competitive landscape, raising the bar on what enterprise AI capabilities look like at scale.

Safety as a competitive differentiator in the AI era

While generative AI remains one of technology’s most powerful growth trajectories, safety concerns have also escalated from misinformation to model abuse and unintended societal impacts. OpenAI’s layered protections signal to enterprise clients, regulators, and the public that responsible AI deployment is not an afterthought. In doing so, OpenAI sets a benchmark for accountability in a space where ethical lapses can trigger regulatory scrutiny and brand risk.

This dynamic also creates competitive differentiation as companies that can demonstrate robust safety frameworks may earn stronger adoption among risk-averse enterprises. Microsoft in particular leverages this by embedding OpenAI’s safeguards into Azure’s enterprise compliance protocols and security posture.

Market reaction: elevated expectations for enterprise readiness

The broader market has reacted to recent developments with increased optimism about the commercial viability of advanced AI solutions. Financial markets are interpreting the heightened focus on safety as a signal that enterprise adoption may accelerate, particularly among Fortune 500 companies that prioritize governance, privacy, and compliance. Microsoft’s stock performance has reflected this narrative, benefiting from both Azure growth and its strategic alignment with the evolution of generative AI offerings.

Investors are also paying attention to how safety protocols can mitigate downside risk for long-term AI deployment, which in turn may bolster confidence in subscription-based revenue models tied to Azure and AI service usage.

Regulatory context adds urgency to safety commitments

Generative AI companies are operating under growing regulatory scrutiny globally, with governments and standards bodies pushing for clearer guardrails around data usage, explainability, and systemic risk. OpenAI’s disclosure of its layered protections may preemptively address some regulatory concerns by demonstrating transparency and proactive governance. As the European Union and U.S. regulators continue to debate AI policy frameworks, companies with robust safety postures may enjoy smoother market access and reduced exposure to punitive enforcement actions.

This regulatory backdrop influences strategic positioning for both OpenAI and Microsoft as they expand into global markets.

Microsoft’s AI service expansion amplifies the ecosystem effect

$MSFT has integrated OpenAI models across a spectrum of products including Office 365 Copilot, Dynamics 365 AI, and GitHub Copilot, driving stickiness among enterprise customers. This broad footprint amplifies the impact of OpenAI’s safety enhancements because the models underpinning these services now benefit from higher levels of oversight and governance. As businesses increasingly look to embed AI into mission-critical workflows, trust and reliability become decisive purchasing criteria.

The scaling of AI services across productivity and business process automation strengthens Microsoft’s recurring revenue base and positions it well against competitors scrambling to build comparable enterprise AI suites.

Investor implications: growth with guardrails

For investors, the twin narratives of innovation and safety governance create an intriguing risk-reward profile. On the one hand, the market opportunity for AI services is monumental, with enterprises budgeting for AI-enabled transformation and cloud providers capturing infrastructure and service revenue. On the other hand, governance failures could trigger backlash, regulatory clampdowns, or client hesitancy.

OpenAI’s layered protections help de-risk portions of this equation, enhancing confidence in the durability of AI deployments a favorable signal for long-term investors and allocators interested in tech disruption tempered by responsibility.

Looking forward: AI strategy, execution, and collaboration

As the AI landscape evolves, OpenAI and Microsoft’s alignment combining world-class model research with enterprise-ready infrastructure and safety protocols positions them at the forefront of commercial AI adoption. Traders and longer-term holders alike will monitor execution on safety commitments, integration depth across Microsoft’s product suite, and emerging policies that could shape competitive dynamics. Together, these developments suggest that the AI era is shifting from proof of concept to governed, scalable deployment and the companies that master both innovation and risk management are poised to lead the next chapter of technology growth.

At the same time, Berkshire enters 2026 with unusual financial strength. Reports pointed to cash near $373 billion at year-end. The company still is not buying back its own shares and remains careful with new investments. For investors, the message is straightforward: results can move up and down, but the balance sheet gives Berkshire the ability to wait and act when better opportunities appear.

How was the last quarter?

Berkshire $BRK-B reported net income of $19.199 billion in Q4 2025, but this number is misleading for Berkshire because it includes a large component of investment gains and losses. The firm says it outright in the press release: investment results in individual quarters "typically say nothing" about the performance of the business and can be confusing to less experienced investors. In Q4 2025, after-tax investment gains were $13.494 billion, but at the same time, write-downs on investments in Kraft Heinz and Occidental ($4.495 billion) squeaked into the results.

Therefore, it makes more sense to stick with operating profit, i.e. the result "excluding the impact of investment revaluation" and selected one-off items. Q4 operating profit fell to $10.200 billion from $14.527 billion a year earlier. The biggest negative contribution came from the insurance industry: insurance underwriting fell to 1.561 billion from 3.409 billion and insurance investment income fell to 3.072 billion from 4.088 billion.

Outside of insurance, the picture was mixed but less dramatic. BNSF railroads lifted operating profit to 1.347 billion (from 1.278 billion), energy (Berkshire Hathaway Energy) was slightly lower at 691 million (from 729 million) and industrials, services and retail rose to 3.370 billion (from 3.262 billion). In other words: "real businesses" held up, but insurance companies didn't generate as strong a surplus this time as last year, and that dragged the entire quarter down.

Top points of the results (quarter + full year)

• Q4 after-tax operating profit: $10.2 billion (up from $14.5 billion).

• Net income attributable to shareholders in Q4: $19.2 billion (virtually unchanged).

• Q4 includes, among other things, a $4.5 billion after-tax write-down of the value of investments in Kraft Heinz and Occidental combined.

• Full-year 2025 operating profit: $44.5 billion (down from 2024).

• Full-year net income 2025: $67.0 billion (down from 2024).

• Insurance "float" at the end of 2025: about $176 billion (+$5 billion year-over-year).

• Full presentation with results.

Management commentary

"The amount of investment gains (losses) in a given quarter is typically meaningless and provides earnings per share data that can be very misleading to investors who have little or no knowledge of accounting rules."

From the letter to shareholders: Management positions Warren Buffett as a key pillar of Berkshire's entire investment identity. It recalls that his "engine" was not just stock selection, but building the insurance business and working with the so-called insurance "float," the capital Berkshire holds through insurance and can invest over the long term. At the same time, the text works with comparisons to baseball legend Ted Williams to emphasize the style of decision-making: patience, picking the right opportunities, and then making a decisive move when the "right pitch" comes along.

Long-term results

At Berkshire, the long-term view is always about what is "corporate performance" and what is "accounting noise" from the stock portfolio. That's why the company itself tries to pitch operating earnings, not net income, to investors. In the 2025 numbers, the difference is starkly visible: full-year net income of $66.968 billion carries investment gains of $30.737 billion, but also write-downs on selected investments of $8.255 billion. The operating profit of 44.486 billion thus comes out as a more "realistic" picture of how the core group fared.

The structure of operating profit for the full year 2025 shows where Berkshire is earning steadily: insurance investment income 12.513 billion, insurance underwriting 7.258 billion, BNSF 5.476 billion, energy 3.979 billion and industrial/services/retail 13.647 billion. If an investor wants to understand Berkshire, this is the "engine map" that is more important than quarterly swings in net income.

The other long-term axis is capital discipline. The public summaries show that Berkshire continues to do no buybacks of its own stock despite its huge cash hoard and remains a net seller of stocks in the portfolio, consistent with a "don't buy at any price" philosophy. This is a factor that may hinder short-term performance against the market, but over the long term it is a mechanism that protects against overshooting in an expensive market.

Shareholding structure

Berkshire is a distinctly institutional title: the institution holds roughly 67% of the stock and the largest holders are Vanguard, BlackRock, State Street and Geode. For the average investor, the conclusion is simple: this is a highly liquid and "fund-owned" stock where sentiment is driven more by the market's view of value, interest rates and investing discipline than by short-term news.

Analysts' expectations

Berkshire's analyst coverage tends to be surprisingly limited and target prices vary across sources. For example, Investing.com lists a consensus "buy" with an average target price of about $526 for the Class B stock, while MarketWatch mentions an average target price of about $533 and an average recommendation of "hold." It's fair to read this to mean that Berkshire's analytical models differ mainly in their work with portfolio value, insurance revenue expectations, and how the market values the giant cash.

Fair Price

According to the latest information, we could actually see another of Musk’s companies go public.

SpaceX plans to file for an IPO in March. The actual listing is therefore estimated for the beginning or during the summer months.

The IPO could raise up to $50 billion for the company. At that size, SpaceX would surpass the current record-holder, Saudi Aramco, which raised $29 billion when it went public in 2019.

That would correspond to the sale of roughly 3% of the company's shares.

At that valuation, SpaceX would also be the sixth-largest company on the exchange. Based on current values, only the companies $AAPL, $NVDA, $MSFT, $AMZN and $GOOG would be larger.

Would you invest in this before the IPO?

Oracle’s cloud evolution and enterprise software dominance

Oracle has transformed dramatically over the past decade, shifting from legacy on-premise database software to a cloud-centric enterprise platform provider. Revenues from $ORCL Cloud Infrastructure (OCI) and SaaS applications have grown sequentially, contributing to stronger recurring revenue streams that appeal to value-oriented investors such as Berkshire Hathaway. Analysts note that Oracle’s multi-cloud strategy with a focus on enterprise applications, autonomous databases, and hybrid cloud deployments has gradually shifted market perception from aging legacy provider to modernized enterprise tech contender.

This evolution aligns with Buffett’s preference for stable earnings, repeat customers, and predictable free cash flow, and suggests that Oracle now fits more comfortably within Berkshire’s traditional investment philosophy despite its tech identity.

Buffett’s tech exposure: from Apple to Oracle

Buffett’s Oracle investment is often discussed in the broader context of his technology holdings. $AAPL remains Berkshire’s largest public equity position by far, and it has been one of the best-performing tech stocks in the S&P 500. The addition of Oracle signals that Buffett sees value in enterprise software and database solutions areas that historically offered recurring revenue and pricing power even in competitive markets.

Some analysts view Oracle’s recurring revenue base and large enterprise footprint as reminiscent of the economic moats that Buffett has historically prized. This perspective coupling hardware-agnostic software dominance with predictable cash flows helps explain why $BRK-B continues to build its stake as markets digest broader tech valuations. For context on Buffett’s Apple position and philosophy, see ongoing analysis.

Market reaction: valuation meets value investing blueprint

The market’s response to Berkshire’s Oracle accumulation has been notable. Oracle’s share price rebounded on the news, reflecting investor confidence that a marquee institutional buyer sees long-term upside. This contrasts with recent sentiment turning cautious around many high-growth software names that lack predictable earnings paths. Oracle’s stable earnings and strategic clarity particularly in cloud migration scenarios have positioned it as a relative safe-harbor among enterprise tech equities.

Analysts emphasize that while Oracle’s growth rate may not rival high-flying SaaS peers, its profitability and cash flow profiles make it attractive in a macro environment where investors are increasingly prioritizing earnings stability and quality over unbridled expansion.

Oracle’s monetary discipline and shareholder returns

Part of Oracle’s appeal to value investors like Buffett is its demonstrated capital allocation discipline. The company has consistently returned cash to shareholders through dividends and share repurchases, supporting total return even when multiples contract in broader markets. In contrast to some software firms that reinvest all free cash flow into aggressive expansion, Oracle’s blend of capex discipline and shareholder returns aligns with traditional value investment doctrines.

Combined with the company’s strategic cloud investments, this financial stewardship gives long-term holders a compelling earnings and income story a blend of growth and return that can underpin durable returns over economic cycles.

Why Berkshire may view Oracle as a “final tech anchor”

One intriguing angle emerging from this week’s reports is how Oracle might serve as a final foundational tech holding for Buffett. After decades of avoiding traditional tech, Berkshire has embraced Apple’s consumer ecosystem prominence and now appears to be anchoring part of its enterprise software exposure with Oracle’s enduring business lines.

This does not necessarily imply Buffett is moving aggressively into broader tech rather that he may be focusing selectively on companies that combine technological relevance with durable earnings power and strong competitive positioning.

Long-term investment themes resonate amid market uncertainty

Oracle’s current narrative captures several long-term investing themes that have resonated with institutional buyers: predictable subscription revenue, deep enterprise adoption, recurring license agreements, and a transition to cloud that enhances customer stickiness. In markets where macro uncertainty and valuation skepticism have dampened enthusiasm for speculative tech bets, Oracle’s profile offers clarity and financial consistency.

While not immune to cyclical pressures, its business model demonstrates resilience even during periods of slowed IT spending, making it a preferred pick for investors seeking exposure to software growth without excessive volatility.

What this means for investors watching the Buffett blueprint

Warren Buffett’s expanded Oracle position underscores a broader investment axiom: durability and clarity of earnings can outweigh headline growth. For patient investors, Oracle represents a compelling intersection of technology adoption and value investment principles. Whether this is truly Buffett’s “final major tech investment” or simply the next chapter in his evolving portfolio, the market’s reaction and broader context highlight why Oracle’s narrative has shifted from legacy software provider to strategic enterprise growth story.

Going forward, investors will be watching not only Oracle’s execution on cloud expansion but also how this stake influences Berkshire’s overall tech allocation strategy particularly as new AI-related capex waves and macro conditions continue to reshape risk and return dynamics across sectors.

The more balanced view is that the company is not falling apart, it is changing shape. Streaming and studios were the stronger parts of 2025, and free cash flow stayed positive at $3.1 billion for the year. Management is also focused on reducing leverage, even though net debt remains high at about $29 billion and leverage is around 3.3x. The investment question is timing: digital growth is real, but it still has to grow enough to offset the decline in traditional TV.

How was the last quarter?

In the fourth quarter, $WBD revenue fell to $9.46 billion (-6% year-over-year), with pressure in virtually every major revenue line outside of streaming. Distribution revenue was down 3%, advertising was down 7% and content sales were down 9%. Executives at advertising openly say that the growth of cheaper ad-supported fare in streaming wasn't enough to offset the decline in viewership on traditional TV, plus the NBA was missing year-over-year, which itself took roughly 4 percentage points off the growth rate.

Adjusted operating profit before depreciation and amortization fell to $2.216 billion (-19% year-over-year), and the main culprit was the TV networks, where adjusted operating profit fell 27% to $1.405 billion. While streaming continues to grow in revenue, profitability deteriorated slightly to $393 million in the quarter as the company increased content and marketing costs due to global expansion.

Net loss attributable to shareholders was $252 million. It's important to add that the income statement was heavily weighed down by accounting and restructuring items: the firm reported roughly $1.3 billion in pre-tax amortization of intangible assets, content revaluation and restructuring costs. That's why WBD's cash is the main thing to watch: operating cash was 1.8 billion and free cash was 1.4 billion, although it was down significantly year-over-year.

From an investment perspective, the clearest signal is in subscriber numbers: streaming ended the quarter at 131.6 million, +3.5 million vs. Q3. At the same time, however, average revenue per user declined as the company grows mainly abroad, while the US was hit by a change in its distribution agreement. Translated: volumes are up, but monetization per user is weaker, which is exactly why the market will continue to want to see margins improve in streaming.

• Full presentation with results.

Top points of the results

• Revenue in the quarter of $9.5 billion, -6% year-over-year.

• Adjusted operating profit before depreciation and amortization of $2.2 billion in the quarter, -19% year-over-year.

• Free cash in the quarter of $1.4 billion, -43% year-over-year (impaired by approximately $0.6 billion of one-time items).

• Streaming: revenue in the quarter of $2.8 billion(+5%), but adjusted operating profit of $393 million (down slightly).

• Studios: sales in the quarter of $3.2 billion(-13%), adjusted operating profit of $728 million(-23%).

• Television Networks: sales in the quarter of $4.2 billion(-12%) and adjusted operating profit of $1.4 billion(-27%).

• Streaming subscribers at quarter-end 131.6 million, +3.5 million quarter-over-quarter.

• Average revenue per user globally declined to $6.80 ( -9% y-o-y), mainly due to the decline in the US and growth in cheaper foreign markets.

• Full year 2025: revenue 37.3 billion(-5%), free cash 3.1 billion(-30%), net debt 29.0 billion.

Management commentary

In the company's materials, the tone is clear: streaming is to be the growth engine, studios are to bring back creative "reach" and TV networks are to be optimized to generate cash for as long as possible. In the 'shareholder letter', management also emphasises the balance sheet work and confirms that it expects strong operating profit to cash conversion in 2026 too, with only the additional transaction and separation costs still running in the first half of the year and the first quarter tending to be seasonally weakest due to the timing of content payments.

Outlook

In 2026, it expects profit-to-cash conversion to remain strong, while acknowledging additional transaction and separation costs mainly in the first half of the year and noting that the first quarter is typically the weakest for free cash. This is important for investors as cash can "look worse" in the short term without impairing the core business.

Long-term results

Warner Bros. Discovery in recent years is a textbook example of a company where accounting earnings must be separated from real cash. In 2022-2024, results were significantly impacted by the accounting effects of the merger and depreciation in value. In 2024, the company reported $39.3 billion in revenue but ended up with a huge accounting loss of $11.3 billion and a negative operating result. At the same time, however, it reported EBITDA of 22.4 billion, showing how different the same year can look by the metrics.

The year 2025 already looks "cleaner" on a current year basis: sales fell to 37.3 billion (-5% year-on-year), adjusted operating profit before depreciation and amortisation fell just 3% to 8.7 billion, but more importantly it reaffirmed where the pressure is coming from. TV Networks (Global Linear Networks) fell year-on-year in both revenue (-12%) and adjusted operating profit (-21%), while streaming and studios grew. Overall, the streaming segment doubled adjusted operating profit to 1.37 billion for 2025, and studios jumped to 2.55 billion. This is the key trend: the "new" digital business is growing stronger, but the "old" TV business still makes up a big chunk of the results and its decline cannot yet be completely overcome.

At the same time, the cash story is tougher than on paper. Free cash is down 30% to $3.1 billion in 2025, with the firm explicitly saying it was negatively impacted by separation and transaction items of roughly $1.35 billion. That's an important distinction for investors to make: part of the decline is "one-off" but part is structural - TV advertising and a decline in cable subscribers.

And then there's the balance sheet, which puts the whole thesis in context. Net debt of 29 billion and debt of 3.3 times mean that WBD is not a "risk-free" story: the company needs to keep a handle on cash because high debt in the media cycle limits room to maneuver. Management is showing that it is paying down debt and wants to maintain strong cash generation in 2026, but the market will be tight: for this title, the pace of debt decline and streaming's ability to grow profits, not just subscriber growth, will be critical.

News

The biggest "operational" news is the continued growth in streaming: +3.5 million subscribers for the quarter and a move to 131.6 million for the year. But at the same time, the company admits pressure on average revenue per user, especially in the US. Alongside this, the company's materials include an emphasis on boosting studio and network efficiency - i.e. a drive to raise the quality of content while extracting maximum cash from linear TV at a time when its audience is declining.

Shareholding structure

WBD is typically an institutional title: the institution holds around 73.8% of the shares and the insider share is around 4.5%. The largest holdings are Vanguard (about 11.4%), BlackRock (7.8%), State Street (5.3%) and Harris Associates (3.2%). This typically means two things: high liquidity and also that sentiment can change quickly as large funds reassess debt risk and the pace of the shift toward streaming.

Fair Price

Enterprise Hardware Powers AI Growth

This bold forecast underscores how hardware vendors with deep enterprise relationships can participate in the broader ai ecosystem, not just through components or chips but through complete server, networking, and support solutions. As organizations of all sizes accelerate ai integration, demand for robust, scalable ai hardware has become a strategic imperative, reshaping how investors view demand cycles for core infrastructure.

Economic drivers fueling ai infrastructure investment

The push for ai-ready servers comes amid a broader explosion in data volumes and computational workloads, where enterprises seek to deploy ai models closer to where data is generated. Analysts note that this trend reflects a broader architectural shift away from monolithic cloud compute toward hybrid models incorporating edge, on-premises, and high performance clusters. With Dell positioned across this full stack, it stands to benefit as spending shifts from capex-constrained it upgrades to targeted ai hardware deployments. Sector coverage supports the notion that ai server demand could rival the historical peaks seen in storage and networking refresh cycles.

In this context, Dell’s projection isn’t just aspirational it aligns with rising corporate it budgets dedicated to ai initiatives, as organizations recognize that general-purpose infrastructure won’t suffice for modern generative models or real-time inferencing workloads. Larger enterprises in finance, healthcare, and manufacturing are increasingly allocating funds to secure performance-optimized platforms, which helps explain why Dell expects such a significant revenue horizon.

Competitive landscape: hardware rivals and ai compute ecosystems

Dell’s forecast comes amid a rapidly evolving competitive landscape where hardware rivals including Hewlett Packard Enterprise, $LNVGY, and Cisco are also positioning their server lines for ai workloads. At the same time, semiconductor powerhouses such as $NVDA and $AMD continue to dominate the processor layer, with their accelerators often at the heart of Dell’s ai server builds. While Dell doesn’t manufacture the chips themselves, its ability to integrate best-in-class accelerators and software ecosystems gives it a strategic edge in the enterprise segment.

Enterprises increasingly prefer turnkey solutions that combine compute, storage, networking, and advanced ai-ready architectures, placing incumbents like Dell in a strong position relative to smaller builders or custom OEMs. This holistic demand explains why Dell’s ai server guidance resonated with investors, as it taps into broad-based budgetary shifts across industries.

Stock reaction and valuation narrative among investors

Following the ai server revenue forecast, Dell’s share price reflected renewed optimism, with strong trading volumes signaling institutional and retail interest. Investors reacted to the magnitude of the $50 billion projection as a validation of Dell’s strategic pivot toward ai infrastructure, incorporating the company’s deep enterprise relationships and operational scale into future growth assumptions. Analysts observed that this narrative shift differentiates Dell from peers whose growth stories are centered more narrowly on software or consumer hardware sales.

Despite the enthusiast reaction, valuation debates persist. Some analysts caution that Dell’s hardware-centric revenue forecasts must ultimately translate into sustained margin expansion and free cash flow growth before multiples can expand meaningfully. Yet the ai server narrative provides a compelling backdrop for reappraisals of Dell’s role in the enterprise growth cycle.

Macroeconomic impacts on demand and enterprise spending

$DELL’s bullish outlook also reflects a nuanced understanding of the broader macroeconomic environment. Many CIOs and CTOs have been cautious with capex allocations in recent years due to inflationary pressures and shifting demand patterns. However, as ai initiatives increasingly become strategic imperatives rather than discretionary projects, enterprise capex on servers and ai infrastructure is showing resilience. Reports from industry analysts indicate that global ai infrastructure spending continues to accelerate despite broader economic headwinds, driven by both private sector competition and public sector modernization efforts.

This dynamic creates a favorable growth runway for Dell’s ai-specialized servers, particularly as companies vie for competitive advantage through internal ai deployment, predictive analytics, and real-time intelligent automation systems.

Integration of software and services complements the hardware story

An important dimension to Dell’s forecast is the integration of software and professional services within ai infrastructure deployments. As hardware becomes more commoditized, value adds such as optimized ai stacks, managed services, and ongoing support contracts create recurring revenue streams that enhance customer stickiness and margin profiles. Dell’s enterprise portfolio has been evolving in this direction for several years, blending software-defined storage, edge solutions, and artificial intelligence management suites that support broader digital transformation agendas.

This trend helps explain why investors may view Dell’s long horizon $50 billion target with increasing credibility it is not based solely on hardware sales volumes but also on value-enhancing service layers that accompany enterprise deployments.

Geopolitical and supply chain considerations in ai hardware delivery

As global supply chain dynamics continue to evolve, particularly under ongoing geopolitical tensions and trade policy shifts, Dell’s ability to secure component inventories, resilient logistics, and diversified assembly has become a differentiator. Trade tensions, such as tariff regimes and export controls, have previously disrupted hardware lifecycles and component pricing, reminding investors that geopolitical risk remains relevant for capital equipment makers.

Dell’s supply chain resilience, developed over decades of managing complex global production networks, positions it to navigate these uncertainties better than smaller competitors. Maintaining this advantage is key to delivering on multi-year forecasts.

The investment case: ai servers as a new growth pillar

In conclusion, Dell’s ambitious forecast of up to $50 billion in ai server revenue encapsulates a broader thematic shift in enterprise technology spending. As ai models grow more sophisticated and computationally demanding, the demand for purpose-built, scalable server solutions is becoming a central growth driver. For investors, Dell’s position illustrates how traditional hardware vendors can still capture outsized opportunity by aligning with secular trends in ai and digital transformation.

Whether long term holders or tactical traders, market participants will be watching closely how Dell translates its strategic aspiration into execution, revenue growth, and sustainable profitability in an era where ai has become the defining frontier of enterprise technology.

The key detail is how management treats cash. The dividend is set so the company can keep about 27% of cash instead of paying out the maximum. That buffer is the reason the yield can be attractive without looking forced.

Top points of analysis

• Dividend yield around 6%, yet the payout is not "on the edge" - cash covers it by a significant margin.

• Dividend cushion is strong: for every $1 of dividend, there is roughly $1.4-1.6 of cash, depending on recent results.

• Operating cash has fallen in 2025, but earnings and EBITDA have remained relatively stable - need to watch whether this was a one-off blip.

• Debt is higher but manageable for now: interest servicing comes out at around 6x, reducing the risk of immediate pressure on the dividend.

• Valuation-wise, it is an income title: the market is now paying for cash flow stability rather than growth, so the main driver is dividend security and funding costs.

Company profile

W. P. Carey $WPC is one of the large real estate firms that builds on long-term leases where the tenant bears most of the operating costs. The effect for the investor is simple: income is more stable because rents are not based on short-term occupancy of a single center, but on whether the tenant fulfills a long-term contract. In addition, the company invests across the US and Europe and focuses mainly on industrial, warehouse and select retail, properties that are an "operational necessity" for the tenant, not just a nice-to-have.

From a dividend perspective, two things are important. The first is the quality and distribution of rents over time. The second is the ability to continually increase rents through contractual indexation. W.P. Carey has a large portion of rents tied to inflation ( rents automatically increase with inflation) and also reports that contractual rent growth on a comparable portfolio was 2.4% in 2025 and expects a similar to slightly higher rate in the "mid-2%" range in 2026. These are numbers that don't look dramatic on their own, but for a dividend title, they are exactly the stable "centimeters" that make up long-term certainty.

Main theme: Great dividend cover

For real estate companies, the purest metric for the dividend is operating cash adjusted for one-time items, often using AFFO per share. W.P. Carey achieved AFFO of $4.97 per share for 2025 while paying a dividend with a payout of 72.8% of AFFO.

That 72.8% is actually the most important number in the entire dividend thesis, because it says that the company doesn't pay out everything to investors from every "dollar" of operating cash.

This is significant for three reasons. First, even if AFFO deteriorates in the short term, the firm has room to maintain the dividend without having to dig into the balance sheet or sell assets quickly. Second, some of the cash can go into acquisitions and renovations, which keeps the growth going for years to come. Third, it increases the likelihood that the dividend increase will not be a one-off "PR move" but will build on cash earnings growth.

And here we come to 2026. The firm gives AFFO guidance of $5.13-$5.23 per share, which at the midpoint of the range implies further growth around the low single-digit percentages. If W.P. Carey keeps the payout in a similar range, it naturally creates room for continued incremental dividend increases. Not fast, not aggressive, but exactly what a long-term dividend investor wants: stable and underpinned cash flow.

Where will the growth come from in 2026 and beyond?

Contractual rental growth as a "silent engine"

In a long-contract environment, the biggest advantage is that growth does not come in leaps and bounds, but continuously. W.P. Carey reports contractual rent growth of 2.4% in 2025 on a comparable portfolio. What is significant for the 2026-2028 story is that this pace can be sustained without the firm having to dramatically increase risk. For "net rents", much of the growth will happen purely by flipping the calendar: indexations are reflected, contracts run, rents rise.

Capital acquisition and recycling as the second leg

The second growth engine is investment activity. In 2025, the firm made $2.1 billion in acquisitions, which it called a record, while selling $1.5 billion in assets. For 2026, it plans acquisitions in the USD 1.25-1.75bn range and sales of USD 250-750mn. USD 250 MILLION.

This is important for an investor in terms of discipline. W.P. Carey is not pushing for growth at any cost while retaining the flexibility to buy where the return makes sense relative to the cost of capital. In an environment where the real estate market is rebounding after two years of uncertainty, this is a pragmatic approach: jump on opportunities but don't overdo it at a time when rates may not yet come back low.

Portfolio clean-up and higher quality mix

W. P. Carey has been adjusting the portfolio in recent years and communicating a strategy of moving away from offices, which has been reflected in the dividend policy. Today, it is important that the firm positions itself as more of an industrial-logistics player, where there should be rental stability and lower occupancy volatility. For example, analysts mention the shift towards industrial and warehousing and cite high occupancy. In practice, this means: less sensitivity to "old office world problems" and more connection to sectors that are critical to the companies' operations.

Market and context: why conditions are improving for net-lease REITs

With net-lease, the macro story is not whether the economy grows by 1% or 2%. What matters is the cost of capital and market liquidity. And this is where the shift is happening: according to CBRE, US net-lease investment volume rose to $51.4bn in 2025, up +16% y/y, and activity picked up significantly in Q4.

CBRE also reports that the average capitalization rate in the net-lease market was relatively stable, while the spread to the 10-year Treasury note widened. For the investor, this means a simple thing: when yield spreads appear more "reasonable" again, capital returns to the segment. This can help with both acquisitions and divestitures, and it improves REIT valuations, as less nervousness around financing typically lowers the required risk premium.

Dividend: level, sustainability, growth rate

The current dividend is $0.92 per share quarterly, or $3.68 annually, and the company has increased it by about 4.5% year-over-year. But more crucially for the dividend investor, the payout ratio for 2025 was 72.8% AFFO. That's a conservative level for the proportions of a stable net-lease business, as it leaves room for investment and normal fluctuations.

At the same time, it makes sense to expect dividend growth to be more "in rhythm" with AFFO growth in the years ahead, rather than the company seeking aggressive payout increases. And that's exactly the kind of dividend that works best for a long-term portfolio: less spectacular, but stable, with a high probability of sustainability.

How safe is the payout really?

A dividend yield of around 6% is attractive on its own, but a simple rule of thumb applies to real estate titles: it determines how much cash the company has left after the payout. Here, the picture comes out pretty solid, especially when you look at it through operating cash flow.

From the 2025 data - the firm generated Operating Cash Flow of $1.282 billion. With an average share count of ~220.5 million shares, that equates to roughly $5.8 operating cash per share. If the dividend "run-rate" in the market is around 6%, we're typically talking about an annual dividend of around $3.6-3.7 per share (the specific amount varies by share price, but the order of magnitude fits). In this case, it works out that the dividend is covered by operating cash with a very decent reserve.

To make it perfectly clear in one sentence: if a company generates about $5.8 cash per share and pays out about $3.7, it still has about $2.1 per share left as a cushion. This cushion is exactly what an income investor wants to see, because it reduces the risk that there will be downward pressure on the dividend in the first bad year.

What the cash flow trend says and where the weak spot is

It's fair to add the other side of the coin: operating cash flow fell by ~30% in 2025 (from US$1.833bn to US$1.282bn). At the same time, net income remained roughly stable(US$466m vs US$461m) and EBITDA even grew slightly(+6%). This suggests that the decline in operating cash flow may have been partly due to changes in working capital or the timing of items, not necessarily a "break-up" of earnings.

Simple dividend stress test

• If operating cash flow had fallen another 10%, it would have been ~$1.15bn → a dividend of around $0.81bn would still have been covered (~1.4x).

• If it fell by 20%, it would be ~$1.03 billion → the dividend would still be covered (~1.3×).

• Only with a decline of roughly 35-40% vs. 2025 would the coverage approach the "on the edge" level (around 1.0×), where the dividend is already sensitive to any further negative variation.

Valuation

At first glance, valuation may look expensive if we look at the company through a "stock" lens via classic multiples. By the metrics, the P/S is 8.1 and the P/B is 1.94. However, for real estate and income titles, it tends to be more accurate to read valuation through cash flow and what yield the market is demanding versus risk-free rates. And this is where the picture looks more balanced.

Let's start with the capital structure. A market capitalization of $16 billion and an Enterprise Value of $25 billion means that net debt (and liabilities factored in EV) comes out to roughly ~$9 billion. This fits with the fact that the company is capital intensive (debt is normal in this type of business) and also has reasonable debt service ratios: interest coverage of 6.2x looks like a relatively comfortable level in a higher rate environment.

The two metrics that make the most sense for valuation

1) EV/EBITDA

From the numbers: EV $25 billion / EBITDA $1.391 billion ≈ 18×. That's not "cheap as a bank", but for a stable cash-flow model with long contracts, it's not even extreme.

2) Price to Cash Flow (P/CF)

P/CF 16.1×. For income titles, this is often a better compass than P/E because the cash flow is closer to the reality of dividend coverage.

How to combine this with a dividend yield of 6%

The 6% dividend yield is also a "valuation anchor" for the market. For these titles, it is often the case that the share price moves to keep the yield within a certain range. If the company convinces the market that the dividend is safe and that cash flow will grow, the yield may gradually fall (as the price rises). Conversely, if uncertainty increases, the yield will rise (because the price is falling).

That's why the relationship is important: 6% yield + solid cash cover + decent debt service. That's a combination that tends to work as an "income value" profile - the investor gets a yield today while having a chance for gradual repricing if sentiment on rates and financing improves.

What could improve valuation (and what will hurt it)

Potential positive revaluation:

• Steady growth in cash per share (not just book)

• Continued debt discipline (Debt/Equity is already 1.10, so the market will be sensitive to further debt)

• lower cost of capital (easier to refinance, better acquisition spreads)

What may hold valuations down:

• Further decline in operating cash flow (if 2025 trend repeats)

• Pressure on interest costs (reduces room for dividend growth)

• Any signal that the dividend cushion is thinning (payout moves higher)

Long-term results

W. P. Carey (WPC) revenues have been visibly "wobbly" in recent years: after strong growth in 2023 to $1.74 billion from $1.47 billion in 2022 came a decline to $1.58 billion in 2024 and a return to growth again in 2025 to $1.72 billion. The top line itself therefore does not feel like a purely linear growth story, but rather a mix of one-off influences, changes in portfolio composition and timing of returns. Importantly, 2025 is close to 2023 in revenue, but still slightly short of catching up.

At the profitability level, the biggest red flag is the sharp increase in "Cost of revenue" in 2025 to 704 million. USD, while it was multiples lower in 2022-2024 (USD 78-140m). This immediately spilled over into gross profit, which fell to US$1.01bn in 2025 from US$1.46bn in 2024, and also into operating profit, which fell to US$870mn in 2025. USD 1.32 billion from USD 1.32 billion. Operating expense, on the other hand, went down to USD 101 million. The pressure came not from "administration" but from direct costs or the accounting classification of items in cost of sales. An interesting detail is that EBIT and EBITDA in 2025, on the other hand, grew year-on-year (EBIT USD 870m vs. USD 797m, EBITDA USD 1.39bn vs. USD 1.31bn), suggesting that different lines may capture different item structures and without knowing the methodology/notes to the statements, this can be confusing "at a glance".

From a shareholder perspective, the key point is that net income and EPS in 2024-2025 remain relatively stable (net income 461 → 466m USD, EPS 2.09 → 2.11) but are significantly lower than in 2023 (708m USD, EPS 3.29). At the same time, the number of shares has increased significantly since 2022 (average 199.6m → 220.5m), which in itself pushes earnings per share down, even if absolute earnings don't "fall" as much.

What an investor should watch for

• AFFO per share and payout ratio: if it stays roughly around 70-75% and doesn't climb into the loss cushion zone.

• Occupancy and length of leases: 98% occupancy and long leases are the main dividend "protection".

• Investment discipline: if acquisitions are kept to a meaningful volume and sales serve to recycle capital, not extinguish problems.

• Net-lease market liquidity: deal volumes and yield spreads to bonds, as this affects valuations and ability to grow without expensive capital.

Risks worth taking seriously

The biggest risk to the net-lease model tends to be a combination of higher rates and deteriorating access to capital. When financing becomes more expensive and the market closes, acquisitions slow down and some growth is postponed. The second risk is tenant credit. Even with "operating" properties, there are times when a tenant loses the ability to pay or has to restructure, and that's when the power of portfolio diversification and contract quality comes into play. The third risk is the execution of capital recycling: selling at a good price and buying at a meaningful return is a discipline that is harder to do in real estate than it looks on paper.

Investment scenarios

Optimistic scenario

AFFO will meet the top end of the outlook and grow at roughly 4-5% per year due to a stable market and good acquisitions. The dividend rises at a similar rate, with the payout remaining around 70-73%. The result is a combination of a solid dividend yield and gradual payout growth, with valuations able to benefit from improved real estate sentiment and more stable financing.

A realistic scenario

AFFO grows near the midpoint of the outlook, roughly 3-4% annually, acquisitions are on track but without euphoria, and the dividend grows more slowly to give the company a cushion. In this world, it is primarily a "boring" income title: high yield, moderate dividend growth, and stability.

The pessimistic scenario

Market stays tight longer, some investment shifts, AFFO grows minimally or stagnates. The company holds the dividend, but the payout growth rate slows to a token level, the payout moves higher towards 75% and the market becomes more cautious in valuation. The dividend will survive, but the investor will not get significant capital growth alongside the yield.

What to take away from the article

• The $3.68 per year dividend is covered relatively conservatively today, as the payout was 72.8% AFFO in 2025.

• The company has a clear framework for 2026: AFFO of $5.13-$5.23 per share and an investment plan that supports continued dividend growth.

• The net-lease market is picking up, with U.S. investment volumes at $51.4 billion (+16%) in 2025, improving conditions for acquisitions and valuations.

• The investment thesis is not based on a miracle, but on a combination of long contracts, stable occupancy and discipline in capital allocation.

Dividend ETFs (and dividend stocks in general) are back in the investor spotlight in 2025 and early 2026. After several years of dominance by growth technology titles, some capital is starting to shift to segments that offer more stable cash flow, lower volatility and regular returns. This shift of capital is well evident in the performance of the major dividend funds, many of which are currently trading near all-time highs.

A combination of several factors is behind the increased interest. Higher interest rates have made cash flows more attractive in recent years, while the increased volatility of the technology sector has led some investors to diversify their portfolios more.

Therefore, large and liquid funds focused on quality dividend companies deserve particular attention. However, the key question remains whether their current valuations still offer room for further growth or whether these funds are at a later stage in the cycle.

Our analyst team has selected the 4 most interesting ETFs, with some of them having dividend yields as high as 5% and earning over 10% appreciation in recent months.

Vanguard High Dividend Yield ETF $VYM

ETF $VYM is one of the largest and most popular dividend-oriented funds in the U.S. market. Managed by Vanguard, the fund tracks the FTSE High Dividend Yield Index, which selects U.S. stocks with above-average dividend yields while excluding real estate investment trusts (REITs). The result is a broadly diversified portfolio of large and mid-cap companies with an emphasis on dividend stability.

In terms of sector allocation, this ETF is heavily exposed to financials, healthcare, industrials and consumer staples. Technology plays a much smaller role here than in the S&P 500, which partly explains the fund's different performance at different market phases. The expense ratio is kept very low at around 0.04%, which is one of the reasons why the fund is popular among long-term investors.

Why has the ETF been rising recently?

The current strength of $VYM is closely related to the rotation of capital from highly valued growth titles into more value-oriented segments of the market. Higher interest rates and increased macroeconomic uncertainty have historically supported dividend and value strategies in particular. The fund also benefits from a heavy weighting in financials and energy companies, which have posted solid profitability and strong cash flow over the past two years.

Another supporting factor is the structure of the FTSE High Dividend Yield Index itself, which favours companies with sustainable dividends and relatively robust balance sheets. This means the fund is less susceptible to speculation and more linked to the fundamental performance of companies.

Performance over different market cycles

Historical data shows that $VYM tends to underperform the broader market during strong technology-driven growth phases, but instead exhibits relative resilience during periods of heightened volatility.

During the 2008-2009 financial crisis, the fund experienced a significant decline similar to the rest of the market, but the subsequent recovery has been supported by a stable dividend component. In the pandemic year of 2020, the ETF briefly underperformed the more technology-oriented S&P 500, but instead outperformed the S&P 500 in 2022, when the market faced rising rates and a sell-off in growth titles.

Source: Vanguard - Fundamental characteristics of the fund

Portfolio Composition

The $VYM portfolio contains hundreds of titles (562 to be exact), with large U.S. blue-chip companies among the largest positions. One of the most interesting stocks in the fund, for example, is $JPM Chase & Co. $JPM represents a strong weighting to the financial sector in the portfolio.

JPMorgan has long benefited from its dominant position in U.S. banking, strong capital base and robust profitability across the cycle. Exposure to similar quality financial institutions is one of the key factors why $VYM has performed relatively steadily in a higher rate environment.

Source: Vanguard - Portfolio sector allocation

Fund Valuation

From a valuation perspective, $VYM typically trades cheaper than technology-oriented indices. The forward P/E is currently at 21 points. It is therefore slightly higher than the long-term average, but given the fund's growth in recent years and the fact that it is currently at absolute peaks, this is not an overblown value.

iShares Core High Dividend ETF $HDV

The $HDV ETF from BlackRock (iShares) is one of the most well-balanced dividend funds on the market. It tracks the Morningstar Dividend Yield Focus Index, which doesn't just select stocks based on dividend size, but places a strong emphasis on companies' financial health, dividend sustainability and economic "moat" (competitive advantage).

The fund is more concentrated than, say, $VYM and typically holds about 70-80 stocks (currently 74). The Expense Ratio is around 0.08%, which is still a very competitive level. The dividend yield over the past 12 months is 2.96%. Historically, however, the yield used to be higher. Indeed, the current decline is a function of the fund price, which has risen 13.7% since the start of 2026.

Why the ETF has been rising recently

The strong recent performance of $HDV is primarily related to its sector structure. The fund is heavily weighted in energy, health care and defensive consumer staples. It is these segments that often exhibit relative stability in earnings and cash flow in an environment of higher rates and a slowing economy.

Morningstar's quality filter, which excludes companies with dividend risk from the portfolio, also plays an important role. This has led to $HDV generally exhibiting lower volatility in recent years than some strategies that focus predominantly on dividend yield per se. Indeed, with a higher dividend for a poor quality firm comes a much greater risk of a subsequent dividend cut. However, such firms are not found in this ETF.

Performance over different market cycles

Historically, $HDV has behaved like a defensive stock. During periods of strong technology rallies (such as 2021 or 2025), the fund typically underperforms the broad S&P 500 index. Conversely, during periods of stress or rotation of capital into the value segment, it tends to outperform the market.

During the pandemic downturn in 2020, the fund suffered in the short term due primarily to its exposure to energy, weakening nearly 40% (more than the S&P 500), but the subsequent recovery in the commodity sector helped stabilize performance. In 2022, as growth stocks faced pressure from rates and inflation, the ETF held up relatively well and even managed a 3.6% gain.

Source: iShares Portfolio Characteristics

Portfolio Composition

The $HDV portfolio is more concentrated in large, highly profitable companies. One of the most prominent positions tends to be Exxon Mobil Corporation $XOM on a regular basis, which illustrates the fund's energy exposure well.

Exxon Mobil benefits from a global position in both the upstream and downstream segments and very strong free cash flow in an environment of higher oil and gas prices. The firm's long history of dividend payments and disciplined capital management make it attractive for dividend strategies.

Source: iShares Key Facts

Fund Valuation

From a valuation perspective, $HDV maintains a typical value profile. The portfolio's forward P/E tends to be in the lower to mid "teens," price-to-book tends to be below the broader market, and the dividend yield is often close to 4%. Thus, compared to the broader S&P 500, the fund offers a higher income component at the cost of lower growth exposure.

SPDR Portfolio S&P 500 High Dividend ETF $SPYD

The $SPYD ETF is one of the highest-yielding dividend funds focused on U.S. large caps (companies with high market valuations). The fund from State Street tracks the S&P 500 High Dividend Index, which simply picks the 80 stocks from the S&P 500 index with the highest dividend yields and weights them equally in the ETF. Unlike $HDV, there is no deep quality filter, giving the fund a significantly different risk-return profile.

The expense ratio is around 0.07%, which is a very good level. The biggest attraction of the fund is the dividend yield, which historically has often been between 4% and 5% depending on the market price and cycle. The high yield is the main reason for the ETF's popularity.

Why ETFs have been growing recently

SPYD's recent growth is closely tied to rotation into the value segment and improved sentiment in high dividend yield sectors. The fund has traditionally had high exposure to real estate, utilities, energy and financials, areas that have been under pressure in recent years and are now partially making up for the loss.

Moreover, the equal weighting means SPYD is not dependent on a few titles, which works to its advantage in a broader market rotation environment. When market performance extends beyond the tech giants, the fund typically benefits.

Performance over different market cycles

Historically, SPYD has been more volatile than, say, previous ETFs.

During the 2020 pandemic shock, SPYD was one of the hardest-hit dividend ETFs, largely due to its heavy weighting in the real estate and energy sectors. The subsequent recovery has been slower than the broader market. In 2022, the fund, despite being dividend-oriented, faced a much larger decline than $HDV.

Portfolio composition

Source.

SPYD's portfolio contains 80 equal-weighted titles, which significantly reduces risk concentration but increases exposure to more cyclical companies. One of the typical strong positions tends to be Realty Income Corporation, which is a good representation of the real estate component of the fund, which is the largest.

Realty Income $O is known as "The Monthly Dividend Company" (because it pays a dividend on a monthly basis) and has long been one of the most stable REITs in the US. The company benefits from a portfolio of commercial properties with long-term leases, but is also more sensitive to interest rate movements. It is titles like these that explain both SPYD's high dividend yield and its higher cyclicality.

Source.

Fund Valuation

SPYD ranks among the cheapest dividend ETFs from a valuation perspective. The forward P/E is currently below 15, the price-to-book tends to be below the broader market (currently 1.83), and the dividend yield is often close to the 5% mark. However, the higher yield is traded off by a higher sensitivity to the economic cycle and interest rates.

Vanguard Value ETF $VTV

The $VTV ETF represents a slightly different approach than previous funds. It is not primarily a top dividend strategy, but a broadly diversified value fund tracking the CRSP US Large Cap Value Index. It selects US companies based on a combination of value metrics (e.g. book-to-price, earnings-to-price) and growth characteristics. Dividend yield is therefore not the main selection criterion here, but a natural side effect.

The fund is one of the largest ETFs in the world and offers a very low expense ratio of around 0.03%, which has long been one of Vanguard's main competitive advantages. Dividend yields typically range between about 2.2% and 2.8%.

Why the ETF has been growing recently

The current strength of $VTV is primarily related to the gradual renaissance of the value segment. After a long period of dominance by growth titles, valuation, cash flow and balance sheet quality, factors to which the CRSP index is sensitive, are beginning to gain more traction.

At the same time, the fund benefits from the high weightings of the financials, healthcare, energy and industrials sectors. If market interest extends beyond a narrow group of technology megacaps, $VTV has historically tended to improve its performance relative to the broader market.

Performance over different market cycles

From a historical perspective, $VTV exhibits classic value investment behavior. In strong growth boom years (e.g., 2017-2021), it has lagged the technology-driven S&P 500 Index. Conversely, in 2022, when rates were rising sharply and technology valuations were declining, the fund rose.

During the pandemic shock of 2020, the fund briefly weakened along with the broader market, but subsequently stabilized due to broad diversification and exposure to financials and industrials. Over the 2023-2024 period, performance varied with the strength of value stocks, with volatility generally lower than the rest of the market.

Portfolio composition

The $VTV portfolio contains hundreds of companies (312 today) and is one of the broadest exposures in the market. One of the most significant and interesting positions has long been Berkshire Hathaway Inc.

As a diversified conglomerate with an emphasis on cash flow, capital discipline and long-term capital allocation, Berkshire $BRK-B captures the values of this ETF. Although it does not pay a dividend, its inclusion in the portfolio illustrates well that $VTV is not a pure dividend fund.

Fund Valuation

From a valuation perspective, $VTV typically trades at a discount to growth indices. The portfolio's forward P/E is slightly above 21 points and the P/B tends to be lower than the S&P 500. It is currently 3. The S&P 500 is above 5.

Conclusion

Dividend ETFs are once again in a more favorable position after years of growth dominance. The combination of still elevated rates, an emphasis on cash flow and broader sector rotation creates an environment in which these strategies can relatively better keep pace with the broader market. At the same time, however, it is evident that individual funds differ significantly in both portfolio structure and sensitivity to the economic cycle.

While the more concentrated highest yield strategies may offer a higher income component, the value approach delivers a more stable profile across market phases. Given that all of these ETFs are currently near all-time highs, future performance will largely depend on the trajectory of interest rates, the strength of the economy and the continuation of sector rotation in the U.S. equity market.

After the Q4 FY2026 results were released, I, like most investors, expected consolidation around $200 or a move toward $210–$215. Instead, there was a sharp decline and the stock closed the day at approximately $184.89 (-5%).

(The lower chart also shows after-hours and pre-market trading (24/5).)

What actually happened? Nvidia once again reported an exceptionally strong quarter:

Revenue $68.1B (+73% YoY), above market expectations (~$65.9B)

Adjusted EPS $1.62 (vs. $1.53 expected)

Data Center segment at a record $62.3B

BUT — the stock still fell. Main reasons in my view (trying to find causes looking in the rearview mirror):

Extremely high expectations: Nvidia is priced almost to perfection. “Great” isn’t enough—the market wants “exceptional.”

Concerns about future AI capex: Hyperscale companies are investing enormous sums in AI infrastructure, and investors are starting to question whether this pace is sustainable long-term.

The outlook didn’t provide a fresh catalyst: Guidance was solid but didn’t offer anything that would significantly raise already high expectations.

Profit-taking: The stock had run up into the results, so some investors simply took profits.

Possible scenarios for the coming weeks:

1) Optimistic scenario Holding above $180 and a return above $195–$200 could open the way back to $210–$220, especially if strong demand for Blackwell chips is confirmed.

2) Base case (most likely) Consolidation in the $175–$195 range over the next few weeks until a new catalyst arrives (e.g., the GTC conference or another outlook).

3) Negative scenario If concerns about AI investment intensify, the stock could test $160–$170. A break below $170 would indicate a deeper correction.

My approach: I remain growth-oriented for the long term—Nvidia still holds a dominant position in AI infrastructure. Short-term, however, I expect higher volatility and I would personally consider buying on a drop below $170.

What do you think? Are you adding on this dip, or waiting for even lower prices?

An English version of this post is available on my profile at www.etoro.com. If you want to follow me there or copy my USD portfolio, I’d be very happy.

What changes the tone is the capital return plan. Salesforce generated very large operating cash flow and free cash flow over the year, and management is using that capacity to raise shareholder payouts. The company announced a new $50 billion share repurchase authorization and increased the dividend to $0.44 per share. For investors, the message is simple: growth continues, but the company is now also behaving like a mature cash generator that returns more capital.

How was the last quarter?

Salesforce $CRM showed in the fourth quarter that it can grow without "buying" revenue at the expense of profitability. Revenue rose to $11.2 billion and the core foundation of the business - subscriptions and support - added 13% to $10.7 billion. This is important because this is the part that is most predictable and forms the core of the company's long-term value.

But the report's strongest metric is the pipeline of contracts going forward. Total contracted future revenue of $72.4 billion (+14%) shows that despite the large comparative base, demand for the platform is still very much alive. Short-term contracted revenues of 35.1 billion (+16%) then suggest that it is not just a case of "sometime in the future" but that the contract pipeline is spilling over into revenues in the foreseeable future.

And the third layer is cash. For the full year, the company generated $15.0 billion of operating cash flow and $14.4 billion of free cash flow. To an investor, this means that Salesforce is not just a "growth story" but a very strong cash machine that can afford massive buyouts while investing in products and acquisitions.

Highlights of the results and outlook

• Q4 revenue: $11.2 billion, up +12% year-over-year.

• Subscription and support revenue: $10.7 billion, +13% YoY.

• Total contracted future revenue (RPO): $72.4 billion, +14% year-over-year.

• "Short-term contracted" revenue (cRPO): $35.1 billion, +16% y/y.

• Operating margin for 2026: 20.1% on an accounting basis and 34.1% after adjustments.

• Operating cash flow: $15.0 billion(+15%) and free cash flow : $14.4 billion(+16%).

• Return of capital to shareholders: $14.3 billion (buybacks 12.7 + dividends 1.6).

• New buyback program: $50 billion (replaces unused previous programs).

• Dividend raised to $0.44 per share(+5.8%).

• Q1 outlook: revenue of $11.03-11.08 billion, "short-term contracted" revenue growth of around 14%.

• Outlook for sales (full year): $45.8-46.2 billion and operating cash flow is expected to grow about 9-10%.

• Full presentation with results.

CEO commentary

Marc Benioff builds communications on the fact that Salesforce wants to be the "operating system" for businesses where work is combined between humans and automated helpers in software. From an investor's perspective, it's important to filter the marketing and take the hard numbers that management attaches to it: annual recurring revenue from the suite around Agentforce and Data 360 exceeded $2.9 billion (more than tripling year-over-year), and Agentforce alone reached $800 million, growing 169% year-over-year. In addition, CFO Robin Washington mentions that the acceleration of "new contracts and expansion with existing customers" in the second half of the year reinforces confidence that organic growth can accelerate again in the second half of fiscal 2027.

Outlook

The outlook for 2027 is built on two pillars: steady double-digit revenue growth and maintaining strong profitability after adjustments. Salesforce expects revenue of $45.8 billion to $46.2 billion, or 10-11% growth, and an operating margin of 20.9% on an accounting basis and 34.3% after adjustments. That's a clear signal that the company doesn't want to "chase" growth at the cost of broken margins - and that the discipline the market has appreciated in Salesforce in recent years is set to continue.

For the first quarter, the company expects revenue of $11.03 billion to $11.08 billion and earnings per share after adjustments of $3.11 to $3.13. At the same time, it expects near-term contracted sales to grow around 14%, which is important because that metric often outpaces the future pace of reported sales. At the same time, management is explicit that organic growth should accelerate again in the second half of the year - a promise the market will want to see confirmed in the next two to three quarters.

Long-term results

Salesforce has undergone a four-year transformation from a "fast-growing company" to a "large, steadily growing, high-margin company with huge cash." Revenues have grown from $31.4 billion in 2023 to $34.9 billion in 2024, $37.9 billion in 2025 and $41.5 billion in (FY) 2026. The growth rate has gradually stabilized around 9-11% per year, which is typical for a company of this size - which is why the question of whether new products can "kick-start" growth again without having to discount margins comes to the fore.

Profitability is seeing a return of operating leverage. Operating profit has risen from $1.0 billion in 2023 to $5.0 billion in 2024, $7.2 billion in 2025 and $8.3 billion in 2026. That's a massive shift that didn't happen by accident: costs have grown slower than gross profit and the company has systematically pushed for efficiency. Net profit rose from 0.2 billion in 2023 to 4.1 billion in 2024, 6.2 billion in 2025 and 7.5 billion in 2026.

The key detail for shareholders is "earnings per share" and working with the number of shares. Earnings per share rose from $0.21 in 2023 to $4.25 in 2024, $6.44 in 2025 and $7.85 in 2026. At the same time, the average number of shares declined (from roughly 992 million to 950 million), so the company is not only increasing earnings, but also translating some of the value into "per share" metrics via buybacks. Combined with the fact that it returned $14.3 billion to shareholders for 2026 and launched a new $50 billion buyback, it is clear that return on equity will be one of the main drivers of earnings in the years ahead.

And here's an important interpretation: Salesforce is no longer a "grow 20% a year" story. It's a story about being able to grow steadily, hold high margins, and return capital aggressively from cash. Moreover, if it can really accelerate organic growth in the second half of the year, it may change what "growth premium" the market is willing to pay. If it doesn't, there is still a very solid foundation of contract pipeline and cash strength.

News

The biggest news is that the company has started to publicly measure "how much work automated helpers can do in the system" and adds scale of use numbers (billions of units of work, trillions of tokens processed). For the investor, the only thing that matters is that Salesforce is trying to prove that AI is not just an extra feature, but a new revenue source that is already of measurable size (recurring annual revenue in the billions of dollars) and accelerating business activity (tens of thousands of contracts). The second innovation is purely capital-intensive: the new $50 billion buyout is a huge commitment that also suggests the company expects high cash generation over the long term.

The shareholder structure

Salesforce is a distinctly institutional title: the institution holds roughly 84% of the shares, and the insider stake is around 3%. The largest shareholders are Vanguard (roughly 9.6%) and BlackRock (roughly 8.6%), followed by State Street and Capital International. This typically means high liquidity, and also means that share price movement is sensitive to how large funds evaluate contract pipeline growth, margin stability, and rate of return on capital.

Analyst expectations

According to MarketBeat's summaries, the consensus is around a "slightly positive" recommendation and the average target price is roughly $300, with a wide range of estimates.

The practical interpretation: the market will continue to want proof that "AI in action" actually accelerates organic growth, not just marketing. In this report, Salesforce showed excellent cash and a record backlog of contracted sales. Now it will decide whether that translates into visibly faster growth in the coming quarters without the need to rely on acquisitions.

Fair Price

Strong subscriber and engagement metrics underpin strategic narrative

Recent company disclosures reveal that Spotify is delivering robust growth across core user engagement metrics. In the fourth quarter of 2025, the firm reported double-digit increases in both monthly active users and premium subscribers while expanding revenue and improving margins. These results reflect an expanding user base nearing three-quarters of a billion monthly listeners and a continued climb in paid subscriptions key dynamics that support long-term growth narratives and help justify higher valuation targets.

AI features and product innovation gain traction amid competitive pressures

$SPOT's product roadmap has evolved beyond traditional music streaming. The company recently launched AI-powered prompted playlists in beta, enabling users to create personalized listening experiences from natural language prompts — a signal of how deeply AI is being integrated into engagement tools. This type of feature may help increase time spent on the platform and differentiate Spotify in a crowded field that includes tech giants with extensive audio offerings.

Price targets and analyst views paint a mixed but constructive picture

While the recent upgrade has perked up sentiment, analyst price targets for Spotify remain wide-ranging, reflecting differing views on how subscriber growth, advertising recovery, and monetization initiatives will translate to earnings over the next few quarters. The consensus leans moderately bullish, with a significant number of analysts rating the stock as a Buy and an average projected upside of nearly 45 % from current levels. Such divergence underscores how investor positioning is balancing growth optimism with near-term execution risks.

Revenue composition and monetization remain key investor focus areas

Behind the scenes, Spotify’s revenue mix continues to evolve. Premium subscription fees remain a cornerstone, but advertising and emerging revenue streams such as podcasting, audiobooks, and live experiences are increasingly central to management’s monetization strategy. Price adjustments in select markets and explorations of new paid services suggest that Spotify is addressing margin expansion while continuing to invest in content and technology The interplay of pricing power and engagement growth will likely influence long-term profitability profiles.

Institutional interest signals conviction but risks remain

Institutional flows into Spotify stock highlighted by recent notable portfolio additions from respected investment managers indicate that some major investors see current valuations as attractive entry points. This level of capital commitment often accompanies confidence in sustainable earnings drivers. Yet, at the same time, the stock has traded below some earlier high targets and experienced volatility as markets digest mixed signals around ad revenue recovery and new product monetization.

Technical and sentiment dynamics shape near-term price action

Technically, Spotify’s share price has been under pressure relative to its multi-year highs despite earnings beats and growth surprises, suggesting profit-taking, rotation out of deeply valued tech stocks, or risk aversion among certain investor cohort. Short-term trading sentiment may swing with macro developments, streaming sector rotation, or upcoming quarterly earnings previews all of which will be closely watched by traders and longer-term holders alike.

Long-term thesis: scale, engagement, and diversification drive structural growth

Looking forward, Spotify’s strategic positioning reflects a broader shift in how audio platforms monetize and engage users worldwide. With an expanding base approaching 1 billion users and a clear push into integrated content categories and AI-driven discovery, the company is framing its transformation as a platform for all forms of audio and creator-driven content. If execution toward broader monetization and margin expansion complements subscriber growth, Spotify could justify higher valuation multiples as it transitions from pure streaming to a diversified audio ecosystem.

The market is punishing perfect results that beat analysts' expectations today. Can someone please explain why?

TTD: -17%, CRM: -4%

Investors also liked the “quality” side of the results. Snowflake generated strong free cash flow and showed a very high cash margin, which supports the idea that growth is becoming more efficient. On top of that, management’s outlook for the full year came in above what analysts expected, which is usually the detail that decides whether a good quarter turns into a positive re-rating.

How was the last quarter?

In the fourth quarter, Snowflake $SNOW delivered two numbers that can be read as direct evidence that the company is stabilizing after a turbulent year: 30% growth in core services revenue and, at the same time, 42% growth in contracted future revenue. The $1.28 billion in revenue isn't just a "nice round" number - it's mainly that the growth isn't built on one big customer, but on a broad base. The company added 740 net new customers, up 40% year-over-year, while continuing to grow its depth of relationships: 733 customers are already spending over $1 million a year, and the number of large customers over $10 million a year has reached record levels.

The second layer is the quality of the revenue. Revenue retention of 125% means that the average customer already using the platform continues to expand usage - and that's the healthiest type of growth in practice because it's cheaper than hunting for new names. This is backed up by the fact that contracted future revenues have jumped to $9.77 billion. For an investor, this is like a "future bill stock": contracted future consumption that will only gradually translate into reported sales.

The third layer is profitability and cash. After adjustments, Snowflake reported $139 million in operating profit and an 11% operating margin in the quarter, with core services gross margin of 75% after adjustments. At the same time, it's worth a fair explanation of the difference between profit and loss and cash: under standard accounting, the company reports an operating loss (-318 million in the quarter), but cash flow is very strong - operating cash of 781 million and free cash of 765 million. This is important, because with Snowflake, the market has long wondered whether it can grow while not "burning through" costs. Q4 shows that the cash engine is already significantly more robust than a year ago.

Top points of the results

• Revenue in the quarter of $1.28 billion, +30% year-over-year.

• Core services revenue of $1.23 billion, +30% YoY.

• Revenue retention of 125%.

• 740 net new customers in the quarter, +40% year-over-year.

• 733 customers with annual core service revenues of over $1 million, +27% year-over-year.

• Contracted future revenue of $9.77 billion, +42% year-over-year.

• Core services gross margin after adjustments of 75% in the quarter.

• Free cash of $765 million ( $782 million after adjustments), roughly 60% cash margin.

• Full fiscal year 2027 outlook: core services revenue $5.66 billion(+27%).

• Full presentation with results.

CEO commentary

CEO Sridhar Ramaswamy builds the story on the fact that Snowflake is the infrastructure on which companies are building the use of AI safely and at scale. Crucially, it doesn't just rely on marketing: the leadership team backs its argument with numbers - rapid growth in contracted future revenue, steady retention of 125% and accelerating new customer inflows. CFO Brian Robins then puts the emphasis on two things the market wants to hear: the ability to bring in new customers in bulk while deepening relationships with existing ones, as seen in the growth of customers over a million dollars a year as well as the record number exceeding ten million.

Outlook

The outlook is really the "material" part of the report this time. For the first quarter of fiscal year 2027, Snowflake expects core services revenue of $1.262 billion to $1.267 billion, which equates to roughly 27% growth. For the full fiscal year, the company is targeting $5.66 billion in core services revenue, again roughly 27% growth, and that was above the market consensus cited by Reuters.

What's important about the outlook "between the lines": Snowflake is no longer just talking about revenue growth, but giving a framework for profitability and cash. The company is targeting a 75% core services gross margin after adjustments, as well as a 12.5% operating margin after adjustments for the full year (it expects 9% in Q1). In addition, it gives a target for free cash after adjustments of 23% for the full year. Translated into investor-speak: the growth rate is holding high, but the company wants more of it to gradually translate into "cleaner" operating discipline.

Long-term results

Snowflake has been growing rapidly and relatively regularly for the last four years, which is still exceptional in the enterprise data market. Revenues have risen from $2.07 billion (year ending January 31, 2023) to $2.81 billion (2024), $3.63 billion (2025) and now $4.68 billion (FY 2026). The growth rate may be gradually slowing from the upper thirties towards less than thirty percent, but it is still growth that most large software companies would take with all ten hands. At the same time, gross profit is also growing, showing that the underlying "machine" is working: gross profit has moved from $1.35 billion to $3.15 billion over the same period.

But the long-term picture is more complex at the operational level, and here it's important to be specific. The operating result according to standard accounting is negative over the long term, and even growing in absolute terms: roughly -0.84 billion (2023), -1.09 billion (2024), -1.46 billion (2025) and -1.44 billion (2026). The main reason is simple: operating costs are growing rapidly (around $4.58 billion in 2026) as the company invests in development, sales and support at scale. That's also why it's so crucial for investors to track "after adjustments" metrics and, most importantly, cash at Snowflake. And this is where we see improvement: in fiscal 2026, free cash reached $1.12 billion and $1.19 billion after adjustments, meaning that even with a book loss, the company can generate very decent cash.

The big change of the last year is the "shape of growth": the company is no longer relying only on expansion with existing customers and is accelerating the acquisition of new ones. That's important because 125% retention is great, but that alone won't explain long-term sustainable growth if the inflow of new business slows. Q4 brought 740 net new customers while growing the number of those spending over $1 million per year. That's a combination that usually increases the likelihood that growth will not be a "temporary blip" but rather a more stable trend.

A final important point for the long-term outlook is contracted future consumption. Contracted future sales grew 42% to $9.77 billion, significantly faster than current sales growth. This often means that the company has a very strong business pipeline and that some of the growth has yet to "spill over" into reported numbers in future quarters. If this ratio holds, Snowflake can continue to grow at a high rate in 2027 without having to aggressively worsen pricing.

News

Three areas stand out from the report: rapid expansion of AI capabilities (the company lists over 9,100 accounts using these features), accelerating product development (over 430 new capabilities per year), and strengthening partnerships with major model vendors to give customers choice. It is also adding acquisitions in operational monitoring and systems reliability to expand the use of the platform beyond pure data analytics towards operations and application management.

Shareholding structure

Snowflake is a distinctly "institutional" title. The institution holds roughly 78% of the shares (and over 80% of the free float), with insiders holding around 3.4%. The largest holders are Vanguard and BlackRock (both around 8-9%), followed by Fidelity (FMR) and Jennison.

Analysts' expectations

Reuters mentions that the core services revenue outlook for the year ($5.66 billion) was above the average market expectation and that the outlook for the first quarter was also above consensus. This is usually the main trigger for a positive reaction at a company where investors are most worried about a slowdown in consumption. At the same time, however, the market will continue to keep an eye on two things: whether the 125% retention will hold, and whether operating discipline will continue to improve as indicated by the margin and cash outlook.

Fair Price

Based on my experience over the past two years, trading shares of Lenovo Group Limited $0992.HK and NIO Inc. $NIO has proven relatively straightforward for me. For Lenovo, I’ve found it effective to buy below $9 and sell above $10, while for NIO I buy below $4.60 and sell above $5.60.

I have successfully executed each of these strategies twice already. I currently hold Lenovo purchased at $8.92 (January 2026) and NIO at $4.62 (January 2026). If the price exceeds the target level by roughly 10%, I set a trailing stop-loss based on the original target price to protect gains while allowing for further upside. This approach has worked very well so far. The main risk would be a prolonged downtrend, where an investor repeatedly buys a falling asset (“catching a falling knife”).

Why this strategy works for Lenovo:

Strong technical support around $9: The stock repeatedly bounces from this level, supported by a relatively low valuation and cyclical demand for PC and server infrastructure refreshes.

Quick upward moves above $10: Demand for AI servers and a broader tech-sector recovery often produce short-term gains of 10–15%.

Why this strategy works for NIO:

Support around $4.60: The high volatility in the electric vehicle sector creates repeated buying opportunities, with technological innovations and rising deliveries acting as catalysts.

Moves toward $5.60 and above: Positive news from the Chinese economy, stimulus measures, or better-than-expected results can lead to relatively rapid gains of tens of percent.

This approach fits my conservative strategy — disciplined entries and exits even with more volatile stocks can deliver steady returns if the investor follows clearly defined risk-management rules.

What do you think of this strategy? Does it make sense to use recurring price bands, or do you think it’s too risky? Do you have similar positions in other stocks?

An English version of this post is available on my profile at www.etoro.com. If you’d like to follow me there or possibly copy my USD portfolio, I’d really appreciate it.

The more important part is capital return. The company is generating large free cash flow and is actively sending it back to shareholders through buybacks and a higher quarterly dividend. That is why the valuation debate exists: the market focuses on the fear of “cooling,” while the business is behaving like a strong cash generator.

Top points of analysis

• 2025 revenue: $26.9 billion, +13% y/y; bookings $186.1 billion, +12%.

• Operating profit 2025: US$8.83bn(+17%); net profit US$5.40bn.

• Free cash flow 2025: USD 9.09bn(+15%), operating cash 9.41bn.

• Net margin 20.1%, adjusted EBITDA margin (earnings before interest, taxes, depreciation and amortisation) 36.9%.

• 2026 outlook: Q1 revenue growth of 14-16%.

• Valuation: P/E 26, P/S 5, EV/EBITDA 14; this is a "quality premium" title, not a cheap bet.

Company introduction

Booking Holdings $BKNG is a global travel platform that primarily earns money from arranging accommodation and other travel services. At its core is Booking.com, complemented by brands such as Priceline, Agoda, KAYAK and OpenTable. Simply put, it connects the supply of accommodation and travel services with traveler demand and takes a commission or brokerage fee, or earns a commission on payments and advertising.

The business is "fixed" from both sides. What works on the traveller side is breadth of supply, brand trust, reviews, ease of change and customer support. On the partner side, access to demand and the ability to fill capacity is key. The bigger the network, the more self-reinforcing it is because the customer goes where the choice is greatest and the hotelier goes where the demand is greatest.

From an investment perspective, one more thing is important: even though it is travel, it is not a "fragile" model built on revenue growth alone. The company is already in a high profitability and high cash generation mode, which gives it a lot of flexibility in how it survives weaker periods and how it continues to buy back stock.

Core business in numbers

The best shortcut to understanding Booking Holdings' performance is to look at three operating metrics: the number of nights sold at various properties, booking volume and revenue. In 2025, the company sold 1.235 billion nights in suites and rooms ( +8% year-over-year), with bookings volume reaching $186.1 billion(+12%) and sales of $26.9 billion(+13%). In the fourth quarter alone, there were 285 million nights, $43.0 billion in bookings and $6.3 billion in sales.

These are the numbers that tell you directly if the platform is growing "for real" or just due to pricing. For Booking Holdings, the bottom line is that growth is not just through price, but through volume: room nights are up, and total bookings are up at the same time. In addition, the company reports that nights in alternative accommodation on Booking.com grew by around 9% in the fourth quarter, which is important because expanding beyond traditional hotels increases choice and strengthens the platform's network effect.

The third key level is efficiency. In Q4, operating expenses grew 15%, slower than revenue (+16%), and for the full year, adjusted EBITDA margin increased to 36.9%. In other words, the company can grow while continuing to maintain discipline, which is exactly what feeds earnings per share over the long term on a large platform.

Market and addressable potential

Online travel is no longer a young market that will grow just by people "going online". It's growing mainly by moving more categories to digital channels, improving payments, mobile shopping, personalising offers and simplifying the whole booking process. According to one widely cited projection, the online travel agency market is set to grow from roughly US$613 billion in 2024 to US$1,003 trillion by 2024. USD 1. 3bn by 2030, equivalent to a rate of around 8.6% per annum.

For Booking, the bottom line is that in such an environment it is not just about "how many people travel", but who can get a bigger share of each transaction. This is where monetisation comes into play: a higher proportion of direct bookings (fewer expensive intermediaries), more effective marketing, expanding the range of accommodation on offer and adding services that increase the value per booking. If the market is growing in single digits, the leader can grow similarly - but can still lift earnings per share faster through redemptions and better margins.

And then there's the second dimension: technology. In travel, there is a growing concern about future bookings being "via smart assistants" that bypass traditional platforms. That's a real risk, but it also forces platforms to invest in their own tools, data and direct relationship with the customer, because that's their biggest defence.

Competition and market position

Booking Holdings competes primarily with three types of competition. The first is Expedia Group $EXPE, which has a broad portfolio of brands and a strong position in packages and the US market. The second is Airbnb $ABNB, which is extremely strong in alternative accommodation and in direct host-guest relationships. The third is Trip.com $TCOM, which has a dominant position in Asia and an advantage in local ecosystems.

Booking has several long-term advantages against it: the size of the offering, a strong position in Europe and a global scale that improves marketing effectiveness. Where it may lose out, on the other hand, is where the way search and booking is changing - if some of the demand shifts outside of traditional search (to in-app 'agents', for example), there is increasing pressure for the brand and direct channel to be strong enough.

Importantly, this is not a 'winner takes all' market. Rather, it's about who can have the best mix: more direct bookings, the best conversion from visit to purchase, and the lowest cost of customer acquisition. This is where the details in marketing, product, and technology will make the difference, not one big breakout moment.

Management and CEO

The CEO of the company is Glenn D. Fogel.

The company says: Glenn D. Fogel is the CEO and President of Booking Holdings, a position he has held since January 2017. He previously served as the company's global head of strategy and planning, a position he held from November 2010 to December 2016. He was also Executive Vice President of Corporate Development, a position he held from March 2009 to December 2016, and was responsible for global mergers, acquisitions and strategic alliances. Mr. Fogel joined Booking Holdings in February 2000. Prior to that, he was a trader at a global asset management firm and before that an investment banker specializing in the airline industry.

From an investor's point of view, the most important thing about his style is that the management combines growth with a very tough discipline in capital allocation: much of the free cash goes into long-term share buybacks and, more recently, the dividend. In its latest report, the company emphasized that returning capital to shareholders remains a key priority alongside product and technology investments - Q4 buybacks of $2.1 billion and a concurrent dividend increase.

Management's credibility is assessed here simply: whether it can sustain growth in operating metrics (nights, booking volume) while not letting marketing and fixed costs "run away". So far, the numbers bear this out, as the company has increased revenue by 13% and free cash flow by 15% for the year while continuing to reduce share count.

Financial performance

Over the past four years Booking has shown a combination of growth and profit scaling. Revenue has risen from US$17.1bn (2022) to US$21.4bn (2023), US$23.7bn (2024) and US$26.9bn (2025). Operating profit has risen sequentially from US$5.1bn to US$5.8bn, US$7.6bn and US$8.83bn in 2025. This is exactly the picture of a company that is no longer in a "post-pandemic comeback" mode, but is in a stable operating performance mode.

Earnings per share are affected by two things: actual profitability and share count. Profitability was still very strong in 2025, but net income fell year-over-year to $5.40 billion from $5.88 billion in 2024, which translated into a slight decline in earnings per share. At the same time, however, the company has been reducing its share count over the long term: the average number of shares has fallen from around 39.9 million (2022) to 32.5 million (2025). This is crucial for investors because even with more "normal" revenue growth, earnings per share can grow faster by being split between fewer shares.

The net margin for 2025 was 20.1%, while the adjusted EBITDA margin was 36.9%. In practice, this means that while travel can be cyclical, this company has high enough margins today to weather weaker periods without having to break even on investment or stop returning capital.

Cash flow and capital discipline

At Booking, cash is the main argument why the "narrative" sometimes misses the reality. In 2025, the company generated $9.41 billion of cash from operations and $9.09 billion of free cash flow. The free cash flow margin was 33.8% of revenue, an extraordinarily high number for a company in the service sector.

This cash then goes in two directions. The first is returning to shareholders: $2.1bn of buybacks in Q4, with $21.8bn of authorisations still to come, plus a growing dividend of $10.50 per share (payable 31 March 2026). The second direction is investment in product and technology, where the company is openly talking about its transformation programme and targeting around $550m in cash. USD 550 million in annual savings by the end of 2026.

For an investor, this is important because even if revenue growth slows in any year, the combination of high cash and buybacks can "hold" earnings per share growth - and thus long-term returns.

Valuation

Booking trades today as a quality, highly profitable leader. Metrics show a P/E of 26, P/S of 4.96, EV/EBITDA of 14.23 and P/CF of 15.54. In practice, this means two things: (1) the market expects continued growth and stable margins, and (2) the upside room for the stock price is highly sensitive to whether the company delivers on guidance and maintains the pace of bookings.

With such a valuation, it is key to understand what can improve it. It's not just about higher revenues. Valuations are often shifted by a combination of higher direct bookings, better marketing effectiveness and continued buybacks. Should demand worsen or customer acquisition costs rise sharply, multiples can quickly retreat even if a company remains profitable.

Growth catalysts and outlook

In the near term, the catalysts are relatively "boring" but all the more reliable: continued growth in bookings, growth in nights and stable margins. The firm expects revenue growth of 14-16% and bookings growth of 14-16% for Q1 2026, also at constant currency, with 7-9%. This is important because it says that even with a reasonable currency slowdown, the organic pace remains decent.

The second catalyst is efficiency. The transformation programme, with a target of around EUR 550 million, is a very good one . USD 550 million in annual savings by the end of 2026 can act as a silent profit engine. If the savings actually materialize and the company can largely translate them into higher earnings per share (rather than "eating it all up" through marketing), that's exactly the type of improvement the market values at a higher multiple.

The third catalyst is return on capital. In an environment where the market is unsure how fast demand will grow, investors often gravitate toward companies that can continuously repurchase shares and hold a disciplined dividend. Here's a concrete number to see: $21.8 billion in remaining repurchase authorization. That's "fuel" that can smooth out volatility and increase each shareholder's share of earnings over the long term.

Risks

• Weaker demand in the U.S. or Europe, which would slow growth in nights and bookings.

• Deterioration in marketing efficiency: higher customer acquisition costs can squeeze margins.

• Risk of technological change: bookings via 'smart assistants' may weaken traditional platforms over time if they lose the direct relationship with the customer.

• Higher interest rates for longer: with interest cover around 4.5, care needs to be taken to ensure profit and cash remain robust in a worse cycle.

• Competitive pressure: more aggressive subsidies and discounts from competitors can temporarily drive out marketing costs.

Investment scenarios

Optimistic scenario

Travel demand remains strong, the company maintains bookings growth in the upper bands while managing to translate savings from the transformation program into higher margins. In this case, earnings per share in 2026 may grow by around "mid-teens percent" through a combination of business growth and redemptions, and the market may be willing to hold the multiple around current levels or even higher.

Put another way: if earnings per share grow by around 15% and the market holds a multiple of around 26-30, this gives a price range of around 4,950 to 5,700 (using the same valuation logic). This option rests on the "slowdown narrative" not being borne out and cash continuing to flow steadily.

Realistic scenario

Growth normalises. Bookings and sales grow in the single digits to low teens on constant currency, margins remain roughly stable, and the company continues to make buybacks and pay a dividend. Earnings per share may grow mainly due to buybacks and efficiency, not dramatic market growth.

In such a scenario, it is crucial that valuations do not "fall apart". If the market values the company more conservatively (e.g., P/E of 22-26) and earnings per share grow modestly, a range of approximately 4,200 to 4,700 is logical. This is a "quality compounded appreciation" scenario, not a quick speculation.

Negative scenario

Demand slows perceptibly, marketing becomes more expensive, and some savings are lost in the battle for market share. Revenues may continue to grow, but at a slower rate, and earnings per share will improve little or not at all. At such a point, the market will usually pull the multiple down as the certainty of growth is reduced.

If earnings per share stagnate and the multiple falls towards 20-22, this gives a range of roughly 3,600 to 4,200. Ironically, for an investor, this could be the point at which an "expensive quality title" becomes a quality title at a more affordable price - but only if it turns out to be a cycle, not a structural problem.

What to take away from the article

• Booking Holdings is growing "in volume and in money": 2025 revenue +13%, bookings +12%, nights +8%.

• The company is generating extraordinary cash: free cash flow of $9.1 billion and free cash flow margin of 33.8%.

• Return of capital is strong: Q4 redemptions of USD 2.1bn, remaining authorisations of USD 21.8bn, dividend of USD 10.50.

• The "slowdown narrative" needs to be backed up by numbers; so far the outlook for Q1 2026 still shows a decent pace.

• The main investor defense is to watch operating metrics, margins, cash and marketing effectiveness.

• If the company maintains discipline and keeps buying back shares, the long-term story is based on stacking earnings per share, not one big trick.

Global financial markets entered the last few weeks expecting a gradual calming of trade relations. After the legal disputes over the tariffs introduced last year, it seemed that the biggest source of political volatility might temporarily subside. Thus, the Supreme Court decision, which challenged part of Trump's tariff policy, was initially interpreted by markets as the potential start of de-escalation.

However, these expectations proved premature. Donald Trump signalled almost immediately that he intended to continue the trade pressure and very quickly proposed new measures. At the same time, his rhetoric at the last press conference indicated that trade policy will remain a key instrument of his administration's economic strategy in the months ahead.

For investors, this marks the return of a factor that was one of the main sources of market volatility in 2018-2019. Back then, when Trump was in the White House for the first time, all it took was a single announcement on tariffs or countermeasures and indices such as the S&P 500 or Nasdaqr echoed with sharp movements. Indeed, investors could see the same behaviour in April last year. The current situation bears similar features. It is no longer just about the tariffs themselves, but above all about the increased level of uncertainty about the future direction of US trade policy.

Moreover, from a macroeconomic perspective, today's environment is more sensitive than in the last cycle. Global supply chains are increasingly fragile after the pandemic and geopolitical upheavals, inflation may have fallen from its highs but remains above central bank targets, and US equity valuations are above long-term averages. The combination of these factors increases the likelihood that even relatively small political shocks of this nature can have a significant and immediate impact on markets.

The initial market reaction was consistent with this. Following Trump's comments on the court decision, there was an increase in implied volatility, a weakening of cyclical sectors sensitive to global trade, and a relative resilience of defensive segments. As a result, investors are once again starting to factor the risk premium associated with trade policy into asset prices.

How tariffs are actually impacting equity markets

In order for investors to properly assess the current situation, it is crucial to understand the mechanism by which tariff policy translates into equity prices. This is because the market is not only reacting to the introduction of tariffs itself, but more importantly to the expected impact on margins, global demand, supply chains and currency flows.Let's break this down into four main channels:

The first and most direct channel is the pressure on the cost structure of firms. Tariffs effectively act as an additional tax on imports, which immediately raises input costs for companies dependent on foreign components or finished goods. Companies are thus faced with a choice: either absorb the costs into margins or pass them on to the customer. However, in an environment of cooling demand, cost pass-through to end customers is often limited, leading to a decline in profit margins. This is what stock markets are particularly sensitive to.

The second key channel is uncertainty in supply chains. Already during the 2018-2019 trade war, it was evident that companies started to postpone investments and shift production. This process is capital intensive and negative for cash flow in the short term. If trade tensions escalate again now, the market may begin to discount a repeat of a similar scenario, particularly for industrial, technology and consumer companies with global exposure. Indeed, they tend to be the most sensitive to this.

A third, often underestimated effect is the impact on global demand. Tariff escalation tends to slow down world trade volumes. The weaker trade dynamics then translate into lower GDP growth expectations, which has a direct impact on cyclical sectors. This is why segments such as industry, semiconductors, transport or SMEs with high economic sensitivity have typically lagged behind in past tariff wars.

Value of duties and fees collected from 2026 in billions of USD

Fourth channel impact on investor sentiment. Markets today are largely driven by expectations. Once unpredictable policy variables come back into play, volatility rises, credit spreads widen and capital tends to rotate into safer assets. This process can push down valuations in the short term even without an immediate impact on fundamentals. We can see it live in the markets now. Riskier assets are falling and dividend stocks like $MCD, $PEP and others are rising. The investor community at Bulios has dissected the capital shift in this post.

What makes the current situation extra specific is that it comes at a time of relatively tight valuations for US equities. The S&P 500 index is still above its long-term forward P/E average, which means the market has less benevolence to absorb negative surprises. Thus, political risk may have a more rapid transmission to prices in this cycle than in periods when valuations were significantly lower.

In the short term, therefore, it is not just the level of the new tariffs themselves that is critical, but whether the likelihood of a broader trade escalation begins to increase. It is the change in investor expectations that has historically been behind the largest market movements.

Sector map: which sectors are at risk and which can benefit

History shows that the impact of trade barriers is concentrated in a few specific segments, while other parts of the market may remain relatively resilient or even benefit indirectly from geopolitical frictions.

Cyclical industrial companies with high exposure to global trade remain the most vulnerable group. This includes manufacturers of machinery, industrial components, transport logistics or capital goods. These firms typically operate with complex international supply chains and are also strongly linked to global trade volumes. As the likelihood of tariff barriers increases, the market for them quickly discounts the combination of higher costs and potentially weaker demand. In past years of trade tensions, it was the industrial sector that was among the first to start underperforming the broader index.

The semiconductor segment also remains very vulnerable, albeit for different reasons. For chip companies, it is not just about tariffs alone, but about the broader geopolitical fragmentation of technology supply chains. Export restrictions, regulatory barriers and pressure to localise production may gradually increase the capital intensity of the entire industry. In an environment where valuations of parts of the AI and chip ecosystem are still elevated, even a slight deterioration in the outlook can trigger a disproportionately strong market reaction. The biggest players such as $NVDA or $MU have not yet been directly impacted and the stock has even appreciated.

Another vulnerable area is the import-dependent consumer sector, especially the consumer segment. Retailers and consumer goods manufacturers often operate with low margins and high price sensitivity of customers. If tariffs increase import prices, there is limited scope for passing them on to the final consumer, again increasing the risk of falling margins.

At the other end of the spectrum are the defensive sectors. Utilities, parts of the healthcare sector or basic consumption typically have lower direct exposure to global trade and more stable demand profiles. Historically, in periods of heightened macro uncertainty, capital seeking cash flow stability has been directed to them. This does not mean that they are immune to trade wars, but performance against cyclical segments tends to be more favourable in such phases. This is, in recent days and weeks, a much talked about capital shift.

It is also important to monitor the financial sector. Although banks are not the direct target of tariffs, they are sensitive to secondary effects, such as the economic slowdown in particular. If trade tensions start to dampen growth significantly, this could gradually feed through to profitability expectations for financial institutions.

What the market will watch next

Following the strong rise in US equities in previous quarters, and with valuations still relatively elevated, especially those of the largest companies, the likelihood that policy shocks such as the introduction of tariffs will have a more rapid and visible impact on asset prices than previously.

The key now will be whether Trump's rhetoric and the newly announced tariffs translate into a broader escalation of trade disputes. Historically, markets have been able to absorb individual tariff moves relatively quickly as long as they remain isolated. However, a significantly more negative reaction came when investors began to react to a chain reaction of retaliation from trading partners and real disruption to global trade.

Moreover, the macroeconomic environment does not provide the market with as much room for benevolence as in previous years. Global growth is gradually slowing, industrial indicators in several key economies remain mixed, and central banks may be moving towards easing policy, but the pace remains slow. Should trade tensions escalate further, this could complicate the expected improvement in sentiment in the second half of the year.

Thus, from a stock market perspective, several specific signals will be crucial to watch.

• The first is the evolution of implied volatility, which often acts as an early indicator of a change in risk aversion.

• The second is the performance of cyclical versus defensive sectors. A sustained decline in industrials or semiconductors would suggest that the market is beginning to take the trade slowdown scenario more seriously.

• A third factor would be the reaction of corporate managements during earnings season, particularly comments on costs, pricing and investment plans.

The Fed also remains an important variable. Trade policy is once again becoming an instrument of broader economic strategy and its future evolution may be significantly influenced by domestic political dynamics in the US. In addition, a new chairman of the US Federal Reserve will be elected in May, which may also have some impact on markets, although it is expected to be rather mild for the time being. What will really make the difference will be the rate cut actions in the second half of the year.

Conclusion

US trade policy is once again becoming one of the key factors that may shape the mood of equity markets in the coming months. While the level of the new tariffs alone does not yet represent a systemic shock, the combination of political uncertainty, elevated valuations and a fragile global environment creates the conditions for a more sensitive market reaction than in previous years. As a result, investors are again starting to reflect the risk premium associated with trade policy unpredictability in asset prices.

A key theme for the period ahead will be the evolution of expectations, not just the implementation of tariffs per se, but whether the likelihood of broader trade escalation and spillovers to the global economy will increase. The current situation thus reaffirms that geopolitics and trade policy remain a full part of market sentiment, not just short-term noise.

What investors will focus on next is guidance. Nvidia expects about $78.0 billion in revenue next quarter, with a small range around that figure. The company also said this outlook assumes no data-center revenue from China. That supports the idea that demand elsewhere is very strong, but it also highlights how export rules can still affect where growth comes from.

How was the last quarter?

In the fourth quarter of fiscal year 2026, Nvidia $NVDA posted revenue of $68.127 billion, up +20% versus Q3 and +73% year-over-year. Gross margin on a standard accounting basis was 75.0% (75.2% adjusted), up 1.6 percentage points from the prior quarter. Operating expenses rose to $6.794 billion (+16% vs. Q3), but operating profit and net income rose to $44.299 billion (+23% vs. Q3) and $42.960 billion (+35% vs. Q3), respectively, thanks to faster sales and margin growth. Earnings per share were $1.76 ($1.62 after adjusting for the impact of the same).

The key is where the growth is coming from. Data center segment revenue was $62.3 billion, and itself grew faster than the company as a whole: +22% vs. Q3 and +75% year-over-year. For the full fiscal year 2026, the data center segment generated $193.7 billion (+68%). This means that today it is no longer "one strong product" but an industry-wide range of computing infrastructure delivery, where networking, systems and entire turnkey platforms for running AI are sold alongside the chips themselves.

At a company-wide level, the picture is similarly extreme for the full year. Fiscal year 2026 brought revenues of $215.938 billion (+65%), operating profit of $130.387 billion (+60%), and net income of $120.067 billion (+65%). Earnings per share rose to $4.90 ($4.77 on an adjusted basis). At the same time, we can see that the company is investing in growth and people: annual operating expenses increased by 41% (on standard accounting), a logical accompaniment to a situation where NVIDIA is running at the edge of capacity while preparing the next product generation.

A very important part of the report is the return on capital. NVIDIA returned $41.1 billion to shareholders during fiscal year 2026 (a combination of buybacks and dividends) and still had $58.5 billion of authorized buyback capacity available at the end of Q4. The dividend remains nominal ($0.01 per share), so the main tool for shareholders continues to be buybacks.

Highlights of the results

• Revenues of $68.1 billion, +20% versus last quarter, +73% year-over-year.

• Data center revenue $62.3 billion, +22% vs. last quarter, +75% YoY.

• Gross margin of 75.0% (75.2% adjusted), an improvement from last quarter.

• Operating profit $44.3 billion, +23% vs. last quarter, +84% YoY.

• Net income $43.0 billion, +35% versus last quarter, +94% year-over-year.

• Earnings per share $1.76 (adjusted $1.62), nearly double year-over-year.

• For the full fiscal year 2026, sales of $215.9 billion (+65%) and net income of $120.1 billion (+65%).

• The company returned $41.1 billion to shareholders in 2026 (buybacks and dividends) and still has $58.5 billion in authorized buybacks.

• Q1 outlook: revenue of $78.0 billion plus or minus 2% and excluding data center contribution from China.

• Important accounting change: starting in Q1, the company will now include stock compensation expense in "adjusted" metrics.

• Full presentation with results.

CEO's comments

Jensen Huang builds the communication on the fact that companies are moving from experimentation to mass adoption of "autonomous helpers" in software and processes, which is lifting demand for computing power and shifting the focus from learning models towards their daily use in companies. In practice, this means a push for the lowest cost per compute and the highest efficiency, where NVIDIA is betting on next-generation systems and fast inter-chip interconnects. The tone is both confident and investment-savvy: the company wants to convince the market that the biggest wave of demand isn't over, it's just changing shape.

Outlook

The outlook for the first quarter of the fiscal year is exceptionally strong: revenue of $78.0 billion plus or minus 2%. Gross margin is expected to remain around 75% (74.9% on a standard accounting basis and 75.0% on an adjusted basis, with a plus or minus 0.5 percentage point tolerance). Operating expenses are expected to rise to about $7.7 billion ($7.5 billion on an adjusted basis), with about $1.9 billion of stock compensation expense already included.

The sentence about China deserves the most attention: NVIDIA does not include any data center revenue from China in the outlook. If the situation doesn't improve, it's a drag. If, on the other hand, there is a possibility of at least partial shipments, this is an asymmetric positive factor that is not in the current outlook.

Long-term results

Nvidia today is an extreme example of what the combination of a superior product, strong demand and operating leverage will do. Yet fiscal 2022 was a "normal" tech business: sales of around $26.9 billion and profits of $9.8 billion. Fiscal year 2023 was virtually stagnant sales, but also a push for profitability - operating profit fell to around 4.2 billion and net profit to 4.4 billion. Then the story broke: fiscal year 2024 brought sales of 60.9 billion and net profit of 29.8 billion. Fiscal year 2025 had already jumped to 130.5 billion in sales and 72.9 billion in net profit. And now fiscal year 2026 has delivered sales of 215.9 billion and net profit of 120.1 billion. That's not "rapid growth," that's a scaling of the entire business in just a few years.

But the bottom line is that it's not just about sales, it's about how profitability behaves. Gross margin in the quarter [Q4 2026] was around 75%, very high even by the standards of the top semiconductor companies. For the full fiscal year 2026, gross margin is lower than the previous year (the data shows a drop of about four percentage points), a signal that the company is also rapidly expanding capacity, changing product generations, and some of the "cost of production" may be temporarily pushing margins. Even with that, however, operating profit for 2026 was $130.4 billion, up 60% from a year ago. In other words, even if margins fluctuate slightly, volume and operating leverage are so great that overall profits continue to grow at a tremendous rate.

When we look at costs, there is an important nuance: operating costs are growing fast (over 40% annually), but in absolute terms they are still "small" compared to the growth in sales and profits. That's the very definition of operating leverage - the company adds people, development and operations, but every additional dollar of sales carries a high contribution to profits.

Another long term important factor is "earnings per share" and working with share count. Nvidia has a slightly declining average share count, so earnings growth translates well into growth per share. Earnings per share for fiscal year 2026 rose to $4.90 ($4.77 after adjusting). And because the company is returning huge cash through buybacks, this effect may continue to strengthen. In fiscal 2026 alone, it returned $41.1 billion to shareholders through buybacks and dividends, and at the end of the quarter it still had $58.5 billion in authorized buybacks. The dividend is rather symbolic; the main "driver for shareholders" is share buybacks.

News

The report shows that NVIDIA doesn't want to stand on just one product generation. The company has unveiled the next platform for the next period, while expanding partnerships with key players that operate large data centers. At the same time, it is strengthening the ecosystem around networking, storage and software so that customers buy the whole solution, not just the chip. Significantly, the company is also openly communicating the push for AI operational efficiency, i.e., reducing the cost of running models in the field, a topic that will directly impact customer investments in 2026 and beyond.

Shareholder structure

Nvidia is a distinctly institutional title: institutions hold roughly 69.6% of the stock (and roughly 72.8% of the free float), while insiders hold around 4.35%. The largest holders are Vanguard, BlackRock, State Street, Fidelity and Geode. This typically means high liquidity, stable "index" capital, and also sensitivity to how large funds change exposure to AI and the technology sector as a whole.

Fair Price

Nvidia released results for fiscal Q4 2026 and the numbers again confirm that demand for AI infrastructure remains extremely strong.

📊 Key results:

• Revenue: $68.1B (+73% YoY)

• Net income: $43B

• EPS: $1.76

• Gross margin: 75%

🧠 Data Center remains the main growth driver

The Data Center segment achieved revenue of $62.3B (+75% YoY) and confirms that Nvidia is no longer just a GPU company, but a key infrastructure provider for the entire AI economy.

⸻

📊 Estimates vs. reality:

• Expected revenue: ~$66.2B → actual $68.1B ✅

• Expected EPS: $1.53 → actual $1.62 ✅

• Expected outlook for next quarter: ~$72B → Nvidia guides $78B ✅

The biggest surprise came from the outlook!!!

⸻

💰 The company returned $41.1B to shareholders over the year through buybacks and dividends.

👉 Key trend: AI is shifting from model training to real-world deployment (inference), which keeps demand for compute power very high. ✅✅✅

Their main point is that the market often assumes established firms are the ones that will be harmed by AI. Morgan Stanley takes the opposite view. In the next few years, the bigger effect should be practical adoption of AI inside real businesses. That can lift productivity, expand markets, and support pricing power for companies that already have customers, data, and strong sales channels.

"The 'AI panic' as a misplaced market bet

Morgan Stanley $MS describes the current jitters as typical of the course of a great investment cycle: alternating between phases of enthusiasm and phases where the market begins to question whether the giant capital outlay will pay off and who will be "rolled over." During such periods, price volatility widens and pockets of selling emerge where the sell-off becomes detached from the reality of corporate performance.

This is why the bank recommends looking for three types of titles: established "core" players in the AI ecosystem, strong growth companies, and quality companies with a high ability to translate value into prices. In their vocabulary, this means companies that can deploy AI quickly into products while having the customer impact to maintain margins even in times of pricing pressure.

Why Morgan Stanley is returning to software even though it has been under pressure

Software is one of the segments that has been hit hardest by AI fears, with some investors interpreting the new tools as having the potential to "cheapen" development, thereby destroying the pricing power of traditional vendors. But Morgan Stanley says the market overly assumes the inability of established firms to use AI innovation to their advantage. Rather, their thesis is that AI will expand what can be automated in enterprise systems, thereby increasing the scope for further growth.

The argument from the second Morgan Stanley note taken up by financial sites fits in with this: after sell-offs, multiples in software are significantly lower than at times of peak uncertainty, creating "attractive entries" in big names. Specifically, the average firm value-to-revenue multiple has fallen by about a third since October 2025, returning to levels familiar from the earlier wave of uncertainty around firms moving to the cloud.

That's why Morgan Stanley names the likes of Microsoft $MSFT, Intuit $INTU and Atlassian $TEAM as interesting entry points - firms that have a strong position with enterprises, a broad ecosystem and the ability to "build AI" into products in a way that customers will actually pay for. In that logic, AI is a new feature that adds value to products and extends contracts, rather than a "killer" of existing players.

Banks as the net beneficiary of AI profits

Interestingly, Morgan Stanley counts banks among the net winners. The reason is pragmatic: the banking business is full of repetitive processes (client servicing, risk control, document processing, compliance) where AI can incrementally increase productivity and reduce costs. This translates into profitability over time, even if it is not "seen overnight".

At the same time, the bank names specific "most resilient" choices: Citigroup $C, Bank of America $BAC, State Street $STT and Truist $TFC. The common denominator is supposed to be a combination of size, a stable business and the fact that it is difficult for them to be quickly displaced by pure technology change. In other words: AI in banks is likely to first lift the efficiency of those already sitting on the infrastructure and customer base.

Payments, consumer finance and insurance: less revolution, more efficiency

For payments and fintech, Morgan Stanley mentions Mastercard $MA and Visa $V as beneficiaries. The basic reasoning is simple: AI increases automation, speeds up decision-making, improves fraud detection and can support new ways of shopping where software does some of the decision-making for the user. Thus, short-term concerns about "disruption" can become a long-term story of efficiency and higher transaction volume over time.

Consumer finance is viewed similarly: the market fears that AI will bring new competitors, but Morgan Stanley argues that the benefits in terms of productivity and better processes will outweigh this. For insurance, they see a gradual improvement in the way intermediaries work, while contract complexity, regulation and mandatory processes reduce the risk of AI "overhauling" the entire industry anytime soon.

What to take away from this as an investor

Morgan Stanley's entire thesis can be summed up as follows: the market today is "selling some sectors" as if AI is a purely disruptive force. In contrast, the bank says the next few years will be dominated by a wave of AI adoption - and this will favour firms that already have customers, distribution and the ability to translate new value into pricing.

To this they add a longer-term framework: generative AI is set to expand the addressable market for enterprise software solutions into the hundreds of billions of dollars by 2028. This is important because if the 'pie' gets bigger, established firms may not just struggle for share - they may grow in absolute numbers too.

Technical rebound driven by oversold conditions and relief buying

Crypto analytics show that Bitcoin had entered deeply oversold territory prior to the rebound, fueling a classic relief rally as derivative liquidations eased and traders began covering short positions. Technical momentum indicators such as the Relative Strength Index (RSI) were historically low, suggesting that prior selling pressure had stretched sentiment beyond sustainable levels. When such conditions appear, technical traders often step in, creating short-term strength that can quickly reverse intraday price swings.

Political events and statements adding volatile sentiment swings

Political developments, particularly the State of the Union address, contributed to the backdrop for this week’s crypto moves. Reports indicate that $BTCUSD initially surged to around $66,000 as markets digested economic commentary from political leadership and broader signals about economic health and policy direction. Although the subsequent speech did not directly touch on cryptocurrencies, the optimism around economic data and risk-on positioning helped lift risk assets, including digital currencies. Bitcoin briefly pared some gains during the address but maintained elevated levels compared to earlier weakness.

Short-term volatility amid mixed macro and risk appetite

Despite this rebound, Bitcoin’s price has been sensitive to broader risk sentiment. Recent declines in February put BTC on track for its worst monthly performance in years as wider market risk aversion and profit-taking led traders to reduce exposure to high-beta assets. At the same time, episodes of rising risk appetite often tied to easing macro indicators or relief rallies in equity markets have helped stabilize prices and attract bargain hunters back into the digital asset space.

ETF flows and institutional participation shaping demand dynamics

Underneath these price swings, institutional flows through regulated Bitcoin vehicles continue to be a significant underlying driver. Data from crypto markets suggests that spot Bitcoin ETFs have attracted considerable capital, with steady inflows tightening available supply on exchanges and supporting upward price pressure over time. Institutional participation via ETFs and regulated products also bolsters market confidence, as traditional asset allocators gain exposure with greater compliance and custody safeguards.

Broader crypto market and altcoin correlations confirm risk-on moves

Bitcoin’s rebound has not occurred in isolation. Other major cryptocurrencies such as Ethereum and XRP have also posted gains, reflecting a broader relief rally in digital assets when systemic risk aversion temporarily recedes. These moves often signal broader risk appetite returning to crypto after extended periods of selling pressure, particularly when correlated with positive moves in traditional equities and macro markets.

Psychological and technical milestones influencing trader behavior

Key price levels play a psychological role in the market as well. Levels such as $65,000 and $66,000 have emerged as important short-term resistance or support points, shaping trading decisions amid heightened volatility. If Bitcoin can sustain a hold above these technical thresholds, it could encourage further dip buying and position adjustments among swing traders. Conversely, failure to maintain these levels could lead to renewed selling pressure as market participants reset risk expectations.

Looking ahead: catalysts and risk factors for Bitcoin’s trajectory

Looking forward, Bitcoin’s near-term path will be shaped by a combination of macroeconomic developments, political messaging, institutional flow dynamics, and technical market structure. Upcoming economic data releases, central bank guidance on interest rates and inflation, and continued adoption of regulated crypto products are all potential catalysts that could influence sentiment and price direction. For long-term investors and speculative traders alike, monitoring these elements alongside key technical levels will be crucial to parsing whether this rebound represents a fleeting bounce or a broader shift in market momentum.

If you were a WBD shareholder, would you take $31 and the $7 billion “insurance” as sufficient reason to side with Paramount, or would you bet that Netflix will come up with an even higher bid — even at the cost of prolonging the whole process and risking the market punishing the uncertainty?

This company is an example. Over the last year it produced about $538 million of free cash flow and paid $0.74 per share in dividends, so the common dividend looks well supported. The attention, however, is moving to the preferred shares, because they trade at a low price and show a yield above 7%. The key point is that the yield is high for a reason: the market is charging a premium for credit risk.

Top points of analysis

• Dividend per common share: $0.74 per year, yielding roughly 2%.

• Preferred stock: Dividend e.g. 4.45% (Series O = $1.1125 per year), 5.25% (Series M/N = $1.3125 per year); at a price below $25, the current yield comes out over 7%.

• Debt to assets 0.50, interest coverage 4.82, Altman score 0.50.

• Cash is the main argument: free cash flow over the past year of $538 million. USD 538 million vs. the annual cash estimate for the common dividend of around USD 141 million. USD 141, a gross cover of about 3.8 times.

• Meanwhile, portfolio operations are holding up: revenues are around USD 1.8bn over the long term (2024: USD 1.788bn), 2024 EBITDA of c. USD 881mn. USD 881 million - no collapse, rather a "stable engine in a heavy segment".

Company introduction

Vornado Realty Trust $VNO is a real estate trust that owns and operates primarily office properties in New York City, supplemented by select other assets. It's the type of company where the investment thesis revolves not around "revenue growth like a tech company" but around how tenancy, occupancy, debt refinancing and the ability to maintain portfolio quality in an environment where the office market is not uniform. In other words, it's not about whether offices exist, but which offices tenants choose when they have the opportunity to save, move or change work arrangements.

For a real estate fund, it's good to have a simple income model in mind. Most of the money is from rent that comes from contracts for years in advance. In the short term, therefore, it is usually not "how many people are sitting at the table today" that determines the rent, but rather how many contracts are renewed over time and on what terms. In the long term, it is then the quality and investment in the buildings that is decisive, as the office market has split in recent years: prime addresses and modern buildings hold demand significantly better than the average rest.

The third level is the capital structure. What is important for an investor in Vornado is that there is not only a common stock with a relatively low dividend yield, but also several issues of preferred stock. These have a priority dividend payout and their current yields are now coming out high mainly because they are trading below par at $25. That's why some of the market is looking at Vornado through the lens of a "credit" approach rather than purely through the common share price.

Business

Vornado's office business can be simplified to three questions: how good are the buildings, how strong are the locations, and what are the financing costs. After all, office space today is not just about price. More often than not, tenants are choosing to give employees a reason to come to the office: better accessibility, building services, modern technology, energy efficiency, quality common areas and the ability to flexibly address company needs. This is practically the "product" of the office stock.

This is where the difference between winners and losers arises. The winners are those who own the assets where companies move from inferior offices. The losers are those who own older buildings that would require expensive retrofits to be competitive, but the market often doesn't give them the room to easily pay for those investments with higher rents. From an investment perspective, this means that "office" as a sector can look weak even as the top end of the market improves.

When we look at the numbers, we can see this indirectly: Vornado has had relatively stable revenues in recent years (about $1.8 billion a year), but investors remain cautious anyway because the key uncertainty isn't about today's revenues - it's about how expensive it will be to keep the portfolio top-end over the next five years and what interest costs will look like when refinancing.

The market and addressable potential

For the office market, it makes sense to look less at "global market size estimates" and more at local realities. Vornado is essentially betting that Manhattan will behave like a market where the supply of quality space is limited in the next phase of the cycle, and therefore even with structural changes work will remain a struggle for the best buildings. This is the concept of "flight to quality": firms won't disappear, but they will move to smaller, better space.

The addressable potential here therefore does not look like linear growth, but a combination of normalising occupancy, stabilising effective rents and gradually narrowing the gap between the rest of the market. For the investor, the key point is that once market expectations change from "it's going to get worse" to "the worst is over", there is often a rapid revaluation - even if the change is delayed in the accounting numbers.

At the same time, it's fair to say that offices are now more than ever a funding market. Even when demand improves at the best of times, high rates and cautious banks can keep valuations down. That's why there's an attitude emerging in the current Vornado debate: instead of a pure bet on common share price growth, some investors are looking at preferred stock returns, which are more "about the collection" than when sentiment on offices will turn.

Management and CEO

The CEO is Steven Roth, and at this type of company, management is evaluated less on "big vision" and more on three disciplines: portfolio work, debt work, and dividend work. In the office sector, a bad decision in timing sales, refinancing or building investments can hurt for years. Conversely, a good decision will often take a long time to come to fruition because leases and renovations have a long cycle.

Therefore, management's credibility can be read from whether the company will maintain liquidity, not take forced steps, and maintain stable operating cash even in a higher rate environment. The firm's credit profile can be considered stable, based on the fact that ratings remain unchanged and that market-adjusted metrics support a rating of roughly Ba1.

And for the dividend investor, this has another corollary: if management is conservative and protecting capital, it makes more sense to look at how the company treats the preferred stock (because that's a commitment it doesn't want to damage) than to expect aggressive growth in the common dividend. That's not a downside - it's just a different type of return.

The company's website says: Steven Roth is chairman and CEO of Vornado Realty Trust. Mr. Roth has been Chairman of the Board since May 1989 and Chairman of the Executive Committee of the Board since April 1980. He served as Chief Executive Officer from May 1989 to May 2009 and was reappointed on April 15, 2013.

Financial Performance

The last four years have seen a more stable "top line" and volatility in earnings. Revenues have increased from $1.589 billion (2021) to $1.800 billion (2022), then $1.811 billion (2023), before declining slightly to $1.788 billion in 2024. This is important because it suggests that the business has not collapsed in revenue, but at the same time it does not show significant growth that would attract the market on its own. This is because in office, growth often comes only when effective rents and occupancy start to increase steadily.

Operating profit is positive, but fluctuates: in 2024 it was 264 million. USD 301 million in 2023 and USD 301 million in 2023 . USD 288 million in 2022, USD 288 million in 2020 and USD 288 million in 2022. USD 245 million in 2021 and USD 245 million in 2021 . Net profit was USD 70 million in 2024 and USD 70 million in 2024. The net profit was USD 70 million in 2014, USD 105 million in 2023 and USD 105 million in 2023 . The net loss was USD -346 million in 2022 and USD -346 million in 2022 . In 2021 and 2021 the profit was USD 176 million. USD. This is a typical picture of a real estate company: accounting profit can jump due to one-off items and revaluations, so investors have to lean more on cash.

For this reason, looking at operating profitability and cash generation is more important to the dividend debate than EPS (earnings per share). EBITDA (earnings before interest, taxes, depreciation and amortization) in 2024 is reported to be $881 million. USD 881 million and grew slightly year-on-year. This signals that the portfolio "engine" is still running, but the real question is how much of that will be swallowed up by financing and sustaining investments. And that's exactly the bridge to the dividend.

Cash flow and capital discipline

This is where Vornado is most interesting, because cash is what determines the sustainability of the dividend. Operating cash in 2024 was $538 million. USD 648 million in 2023 and USD 648 million in 2023 . USD 799 million in 2022. USD 762 million and USD 762 million in 2021 . USD. We're seeing a downward trajectory from the peak, but it's still a level that allows the company to operate without panicking. According to the report, free cash flow in 2024 also comes out to 538 million. This suggests that capital expenditure has been low or otherwise included - but with real estate you always need to keep an eye out for "maintenance" being deferred.

And now the dividend: the common dividend is $0.74 per share. Roughly converting it to cash, with an average of ~190.5 million shares, that works out to about $141 million. That's about $141 million per year. Versus free cash flow of $538 million. That's a cover of about 3.8 times. That's very strong on paper, and it says one thing: the common dividend is not a "we can't afford it" problem today, it's a "how much room will we have left after debt and investments when the cycle gets worse" problem. For offices, dividend sustainability is always more about financing than the rents themselves.

Vornado's preferred issues are roughly yielding 7.34-7.47% and the argument here is that this is a yield premium to a portion of the sector at "medium" credit risk, with ratings unchanged (Moody's Ba1, Fitch BB+, S&P BBB-). This is important because a preferred stock investor is not buying "growth", but regular income, while betting that the company can manage this payout in a bad period.

Balance sheet and debt

According to the metrics, the firm has debt to assets of 0.50 and debt to equity of 1.30, with interest coverage coming out at 4.82. That's a combination that doesn't look like an acute problem, but it requires discipline. After all, in office real estate, the fundamental enemy is "wasted time". If the market is slow to stabilize and the debt has to be refinanced on worse terms, it gradually eats away at cash that might otherwise go to dividend or quality investments.

At the same time, the warning light is on: an Altman score of 0.50. It's fair to say that some universal models behave worse for real estate funds than for conventional firms, but even that low number signals that the market is seeing increased balance sheet stress. Translated: investors are unsure what the office funding cycle will look like, and therefore want either a valuation discount or a higher yield.

On the other hand, total assets are around USD 15.5 billion and debt around USD 7.94 billion. This view is important because it's a "bottom-up" argument: we're not just looking at the share price, but the value of the assets and the financing structure. If an investor is scared at the brokerage, the balance sheet is where the fear is either confirmed or dissolved.

In terms of dividend sustainability, the balance sheet conclusion is clear: a dividend is sustainable when a company can get through debt maturities without forcing the issue and without interest becoming the dominant item. And that's why it makes sense to monitor interest coverage and liquidity as closely as rents at this stage of the cycle.

Growth catalysts and outlook

The biggest catalyst for office REITs is not a single product, but a change in expectations. The first catalyst is improving leasing at the highest quality end of the market. Once the market believes that the best buildings have stable demand and that tenants are actually signing new leases without extreme concessions, the valuation discount will begin to close. For Vornado, this is critical because the company is perceived as "quality exposure" to Manhattan - and when something breaks in Manhattan, it often changes the mood for the entire sector.

The second catalyst is purely financial: refinancing and interest costs. If a company can manage maturities without making financing dramatically more expensive, investors' biggest fear begins to diminish. This is the point at which the perception of the dividend may also change: the common dividend is now well covered in cash, but sentimentally it is still "tied" to debt. Once debt becomes a "manageable problem", the dividend ceases to be contentious and starts to act as a stabilising element.

Risks

• Refinancing debt on worse terms can raise interest costs and gradually steal the cash that now covers the dividend.

• The office market may remain polarized: the top end will hold, but the weaker end of the market may continue to push sentiment and valuations for the entire segment.

• Higher spending on tenant improvements and upgrades may reduce free cash in the short term, even as they improve the competitiveness of buildings in the long term.

• The low Altman score (0.50) suggests a higher stress profile should the funding cycle worsen.

• For preferred stocks: the yield is high because the price is low. Should the credit profile deteriorate, the price may fall even with continued dividend payments.

• For common stock, the biggest risk is "time": even if the company is stable, the repricing may take a long time.

Investment scenarios

Optimistic scenario

Manhattan begins to show consistent improvement in high-end leasing and the market stops punishing offices across the board. Refinancing will occur without shock and interest coverage will remain comfortable. In such a situation, the valuation discount begins to close and the common stock may react more strongly than the fundamentals themselves as expectations change.

Dividend-wise, this would mean that the common dividend of $0.74 will remain stable and the company will not be forced to cut it. For the preferred shares, an optimistic scenario would mean a double return: an ongoing yield of around 7% plus a potential price rise towards the $25 par value if the required yield falls.

The realistic scenario

The market will improve slowly and with fluctuations. Revenues will remain around current levels, cash will fluctuate but remain sufficient for common dividend. Common stock valuations will close only slowly as investors will want more evidence over time, not one better quarter.

In this scenario, a "combination" approach often works best: the common stock is a bet on revaluation, but the preferred stock makes sense as a patient collection tool because the yield is already high and the company continues to announce regular quarterly payouts on the preferred series. The investor is then not just relying on when sentiment turns, but is getting an ongoing return.

Negative scenario

The office market weakens again and financing becomes more expensive. Interest costs will start to eat up more of the cash and the company will have to choose between maintaining the dividend, investing in buildings and protecting the balance sheet. In such a situation, the common dividend is the first thing the market will start to question, even if it hasn't been cut in real terms yet - because investors will overestimate the risk ahead.

For preferred stocks, a negative scenario would mean higher price volatility. Payouts may continue, but the price may fall if the market starts demanding even higher yields to compensate for credit risk. This is exactly why it makes sense to monitor ratings, interest coverage and liquidity, not just percentage yield alone.

What to take away from the article

• A common dividend of $0.74 is a $538 million dividend on free cash . At USD 538 million, the gross covered is roughly 3.8 times, so the main risk is the funding, not the payout itself.

• At Vornado, the thesis is mainly that the top offices in Manhattan can improve operations faster than the "average office" in the US.

• The balance sheet is not without risk: debt to assets 0.50, interest coverage 4.82, Altman 0.50 - refinancing is a key variable.

• Preferred stocks today carry roughly 7.34-7.47% as they trade below par.

• The company continues to announce regular quarterly payouts on the preferred series, a practical signal of continuity.

• The common stock is more of a sentiment repricing bet, the preferred stock more of an ongoing income bet.

• An investor's best defense is to watch cash, interest, refinancing, and continued preferred dividend payments.

The financial sector is once again taking centre stage for investors in 2026 and is beginning to show relative strength to the broader market after several years of dominance by technology titles. While the S&P 500 Index has been in a very narrow range this year, select banks, insurance companies and other capital institutions have been able to generate above-average performance for shareholders since the beginning of the year. The growth is based on a combination of macroeconomic factors, sector capital rotation and still solid fundamentals.

Interest rates remain a key supportive element. Although the market has been discussing possible monetary easing over the past few quarters, according to Federal Reserve analysis, net interest margins in the banking sector remain above pre-pandemic averages. Indeed, higher rates have supported loan yields faster than deposit costs have risen through most of 2025 and early 2026. It is this effect that has been one of the main drivers of profitability for large US banks, according to S&P Global reports.

Another important factor is the quality of balance sheets. Following regulatory changes and tighter capital requirements after 2008, the major banks are now entering the current cycle with significantly stronger capital positions than in previous decades. Our team's analysis confirms that the capital ratios of large US banks remain above the regulatory minimums, giving investors a higher degree of confidence in the sector's resilience even in the event of an economic slowdown. This type of protection was put in place precisely to prevent a repeat of the scandal of the financial crisis years.

The change in sentiment also plays an important role. Some capital from technology is starting to move towards sectors that can now generate real cash flow and have more stable returns on capital. It is financial institutions, especially traditional banks, that have benefited from this change in recent quarters.

However, this does not mean that the financial sector is completely risk-free. Investors continue to closely monitor the quality of loan portfolios, sensitivity to any faster rate cuts and potential regulatory pressure. Moreover, performance within the sector remains highly selective. While some companies have grown strongly this year, others have lagged the broader market.

So which stocks in this segment have risen the most out of the entire S&P 500 index so far this year?

Equinix $EQIX

Among the best-performing financials in the S&P 500 since the start of 2026 is Equinix, which is benefiting from structural demand for data connectivity, cloud and AI infrastructure. Although the firm formally falls into the REIT segment of digital infrastructure, investors often view it as a hybrid between technology and financial infrastructure in the current cycle. It is this unique position that helps the stock hold its relative strength even in an environment of heightened volatility in the technology sector.

Fundamentally, Equinix continues to grow consistently. According to the company's latest results, revenue is growing at a steady pace, with the interconnection services and hyperscale customer segments remaining key drivers. Margins have remained at high levels over the long term (rising well above 14% in 2025), and the firm is generating robust operating cash flow to support further data center expansion. Moreover, management has repeatedly emphasized that demand for AI infrastructure remains very strong and the firm can effectively capitalize on it.

A big theme of recent quarters has been capital discipline. Equinix has historically invested aggressively in capacity expansion, but in the current environment of higher rates, the market is much more focused on the return on those investments. However, according to Bloomberg Intelligence analysis, returns on new projects are holding above the cost of capital, which is a key reason why the company has maintained investor confidence despite the general pressure on capital-intensive segments. As a result, the stock has been rising despite the strong sell-off in IT companies. This year, the price is already up 24.4% and approaching the $1000 per share mark.

It is important to note that Equinix is not a pure interest rate sensitive REIT. Unlike retail real estate funds (like $O), the firm's business is much more tied to the digital economy. This has been on full display in recent months, with some capital rotating out of overheated software titles and into players with visible cash flow. According to our analyst team's data, it is this shift that has helped $EQIX stock outperform the broader market.

Risks remain, however. The biggest near-term factor is the trajectory of U.S. interest rates. If long-term bond yields remain elevated for longer, valuations of all REIT structures could face pressure. The second risk is the capital intensity of AI infrastructure. The sector is entering a very challenging phase where differentiating between high and low return on giant investments will be key.

Overall, however, Equinix has so far confirmed its status as a quality business that can grow even in an environment where the largest companies in the market are selling out.

Franklin Resources $BEN

Franklin Resources has been one of the surprise winners in the financial sector, thanks to a combination of stabilizing capital outflows, disciplined expense management, and gradually improving sentiment toward actively managed funds. The firm, known as Franklin Templeton, was entering 2026 after several weaker years when the entire asset management segment faced heavy pressure from passive ETFs and asset outflows. However, it was the low initial valuations that created room for growth.

From a fundamental perspective, it is key that the company's assets under management (AUM) is starting to stabilize. According to recent quarterly reports, the pace of net capital outflows has slowed and the firm has even seen capital raises in some segments. At the same time, management continues to integrate earlier acquisitions, particularly Legg Mason, which is gradually improving operating efficiencies and margins. While operating margins are still below historical highs, the trend has been slightly upward in recent quarters.

The macroeconomic environment has also played a large role in the stock's performance this year. Paradoxically, higher interest rates and increased volatility in the markets are increasing the attractiveness of active management as investors become more concerned with picking and choosing between titles and managing risk. It is this environment that has historically helped traditional asset managers overcome the period of dominance of passive strategies. Franklin Resources has benefited from this shift so far.

From a valuation perspective, $BEN remains one of the more cheaply valued players among large asset managers. Forward P/E is below the long-term sector average. The market still does not fully trust the firm to return to sustainable growth. But the stock can grow even with relatively modest improvement in fundamentals. According to the Fair Price Index on Bulios, $BEN stock is currently nearly 18% below its fair value, despite the fact that it has already managed to grow 14% this year. This puts it at the top of the segment in the S&P 500.

But sentiment remains fragile. The biggest structural risk is the continued pressure of passive ETFs on industry-wide margins. McKinsey's asset management studies warn that active money managers need to add significant value to justify their fees. The second risk is sensitivity to capital market developments. If equities fall significantly, growth could come under pressure again.

Iron Mountain $IRM

Iron Mountain has been one of the largest price appreciating stocks in the financial segment of the S&P 500 this year. The company, historically known primarily as a provider of physical document management, has been undergoing a major transformation toward digital infrastructure and data centers in recent years. This strategic change is one of the main reasons why the stock has been rising strongly since the beginning of the year (adding 36%) and attracting increased investor attention.

Iron Mountain is showing very stable and predictable cash flow from its traditional document management business. This segment, while growing slowly, is generating high margins and strong conversion to cash. According to company reports, recurring revenue has long been a dominant part of sales, giving the company a solid base from which to fund expansion into data centers. This is key for investors today.

But the biggest growth driver is now the data center segment. Here, Iron Mountain has been significantly increasing CapEx and expanding capacity in recent years to capture structural demand for cloud and AI infrastructure. According to management reports and Wall Street estimates, this segment is growing at double-digit rates and gradually increasing its share of total revenue. The market appreciates this shift as data centers are seen as strategic infrastructure with long-term growth potential in the current AI cycle.

In a higher interest rate environment, investors are more likely to value companies with stable free cash flow and visible monetization. With its hybrid model, Iron Mountain offers a combination of defensive business and structural growth. In addition, the dividend yield of 3.05% offers solid income for dividend investors.

On the other hand, however, risks must also be mentioned. The biggest short-term pressure remains the capital intensity of the expansion into data centres. Higher CapEx means temporary pressure on free cash flow and increases the company's sensitivity to financing costs. The second risk is the competitive environment. The data center segment is increasingly populated by hyperscalers, who are spending higher investments to develop it.

From a valuation perspective, however, Iron Mountain is still in an interesting position. Although the stock has appreciated significantly this year, some investors still view the company through the prism of its "old" business. If the transformation towards digital infrastructure continues at the current pace, valuations could increase. However, according to the Fair Price Index, it is already high enough.

Interactive Brokers $IBKR

Interactive Brokers is one of the best performing financials in the S&P 500 this year, reflecting a combination of strong client base growth, high interest rate sensitivity and a disciplined cost model. The firm has long benefited from the trend of a shift in trading toward low-cost online brokers and growing retail and institutional investor activity.

Interactive Brokers is a global broker focused on active traders, hedge funds and professional investors. The company's platform offers access to dozens of exchanges around the world, giving the firm a distinct competitive advantage in the active trading segment. According to the latest results, the company continues to see double-digit growth in the number of accounts and client assets, confirming the long-term structural trend of digital investing.

However, the key driver of this year's growth is interest income. Interactive Brokers holds significant client balances from which it generates net interest income. In a higher rate environment, this segment is significantly boosting the firm's profitability. According to company reports, net interest income has made up an increasingly large portion of total revenue in recent quarters, which investors appreciate, especially when compared to traditional brokers that have a higher cost structure.

In terms of profitability, Interactive Brokers has long been one of the most efficient players in the industry. Operating margins have remained at very high levels, according to recent results, and the firm maintains strong profit-to-cash conversion.

Investor sentiment this year has been boosted by the continued rise in market volatility. Historically, higher volatility increases trading volumes and therefore broker revenues (through fees). Data from recent quarters shows steady growth in daily average trades (DARTs), confirming a healthy client base.

However, risks remain here as well. The biggest structural factor is interest rate sensitivity. Should the Fed or other central banks begin a more aggressive rate-cutting cycle, net interest income could begin to gradually decline. Another factor is the cyclicality of trading activity. During periods of low volatility, fee income can fall. In addition, competition remains intense, particularly from low-cost retail platforms. However, Interactive Brokers has long profiled itself as a professional platform even for the big players.

So how are the shares performing? Since 2024, their price has increased by nearly 250%. Since the beginning of this year, they have reached new all-time highs several times. Yet according to the Fair Price Index, which is based on DFC and relative valuations, they are trading well below their intrinsic value.

Interactive Brokers has been a winner in recent years due to higher rates and active trading. If market volatility remains elevated and rates don't fall too quickly, the firm can maintain its relative strength in the quarters ahead.

CME Group $CME

This firm has long benefited from operating some of the most important derivatives exchanges in the world, where futures and options on interest rates, commodities, indices and currencies are traded.

From a business model perspective, CME Group is a high-quality business with significant network effects. Once the market uses a particular exchange for hedging and pricing, competitors find it difficult to displace it. It is this structural advantage that becomes fully apparent in periods of macroeconomic uncertainty. According to the firm's latest results, average daily trading volumes (ADV) remain elevated across key segments, particularly in interest rate futures where investors are actively reacting to monetary policy developments.

Increased activity in interest rate derivatives is a key driver of this year's growth. In an environment where markets are constantly reassessing the rate trajectory of the Fed and other central banks, demand for interest rate risk management tools is growing. CME data shows that the interest rate products segment is one of the fastest growing parts of the portfolio, which translates directly into revenue and operating profit.

From a financial perspective, CME Group maintains an exceptionally strong profile. Operating margins have long been maintained at very high levels (up to above 50%) typical of the stock exchange infrastructure and the firm generates robust free cash flow. As a result, CME is one of the most profitable companies in the financial infrastructure, allowing it to return capital to shareholders steadily through dividends (currently 1.58% per annum).

Investors also appreciate the defensive nature of the business this year. Unlike banks, CME is not directly exposed to credit risk, and its returns are tied more to market activity than to the quality of its loan portfolio. It thus acts as a relatively resilient financial title in an environment of heightened uncertainty.

However, there are risks here too. The biggest short-term factor is a possible decline in volatility. Should monetary policy stabilise and markets move into a calmer phase, trading volumes could normalise. Another risk is the cyclicality of some commodity segments and the potential regulatory pressure on derivatives markets that has occasionally emerged in the past.

With the share price already up 18% in 2026, the company is currently trading very close to its fair value. According to the Fair Price Index on Bulios, its shares are overvalued by just 3%.

Quick note: today the stock is weakening by 3.4% before the opening bell erasing all of yesterday's gains. However, this should bring the price close to its fair value.

The question for the next few quarters is whether the current level of market activity will last long enough to fully justify the current premium.

Conclusion

The financial sector in 2026 reaffirms that its performance is strongly tied to the macroeconomic environment, particularly the trajectory of interest rates, the level of volatility and the overall condition of the capital markets. After a period of dominance by technology titles, some capital is returning to financial infrastructure and selected financial models that benefit from more stable cash flows that investors are now not finding in technology.

Going forward, the pace of monetary easing and the evolution of market activity will be key for the sector as a whole. As long as rates remain relatively high for an extended period of time and market volatility does not fall too quickly, the financial sector can maintain strength against the broader index. In the opposite scenario, some of the current growth could gradually fade.

NVIDIA Corporation $NVDA will release its Q4 fiscal 2026 results today after the market close. This is one of the most important events of this earnings season and could affect not only the technology sector but the entire market for several weeks to months.

The analysts' consensus expects revenue around $65 billion (compared with $39.3 billion a year ago) and earnings per share (EPS) of $1.53 (vs. $0.89 YoY). The key segment again will be Data Center, where roughly $60 billion is expected due to continued demand for AI infrastructure and Blackwell chips. Equally important will be the outlook for fiscal 2027, which currently projects revenue around $311 billion.

Below I outline three possible scenarios depending on how the results compare to expectations:

1. Optimistic scenario – a significant beat

If NVIDIA significantly beats estimates, for example with revenue above $70 billion and EPS above $1.60, the market could react very positively. Such a result would confirm extremely strong demand for AI infrastructure, driven by the rapid ramp of the Blackwell platform and partnerships with hyperscalers.

In that case, the shares could rise 10–15% and lift the entire tech sector. This scenario would likely lead analysts to raise price targets and further strengthen the long-term AI investment narrative. On the other hand, it could also raise concerns about high valuation.

2. Neutral scenario – results roughly in line with expectations

If results match the consensus (around $65 billion in revenue and EPS of $1.53), the market might react with a modest decline of 2–5%, since expectations are already very high. Even with strong growth in the Data Center segment, a lack of a clear surprise could trigger profit-taking. This scenario could also occur as a combination of outcomes—some metrics well above estimates, others in line or slightly below.

The market would likely remain in a sideways trend in that case, and investors would wait for further catalysts, such as new products or announcements at the GTC conference.

3. Pessimistic scenario – disappointment versus expectations

If revenue falls below roughly $63 billion and EPS drops under $1.45, the reaction could be sharply negative. Shares could lose 15–20% in the short term and pull down the broader tech sector and major indices.

Such an outcome could indicate a slowdown in AI infrastructure spending, margin pressure, or supply-chain problems. That could trigger a wider correction and call into question the pace of further growth in the AI sector.

My view:

I'm cautiously optimistic but prepared for increased volatility. NVIDIA's results could either reignite the rally in tech stocks or confirm the need for a short-term correction. The key will be commentary on AI demand and the outlook for the coming year.

What’s your estimate— a significant beat, or more likely a disappointment?

An English version of this post is available on my profile on www.etoro.com. If you want to follow me there or copy my USD portfolio, I’d be glad.

The bigger message is how the company is setting up 2026. Management is preparing to invest more and to bring in capital from more sources. Besides regular share issuance, Realty Income points to a new open-end fund and a partnership with a large long-term investor. The company’s 2026 outlook calls for AFFO of $4.38 to $4.42 per share, and it suggests that investment volume could be meaningfully higher than in 2025.

How was the last quarter?

In the fourth quarter, Realty Income $O increased total revenue to $1.4879 billion from $1.3403 billion a year earlier. Net income available to shareholders was $296.1 million, or $0.32 per share, compared with $199.6 million and $0.23 per share in the same period a year ago. However, from a "cash performance" perspective, AFFO's headline result was $1.08 per share, a level that is directly linked to the sustainability of the dividend.

The operating quality of the portfolio is demonstrated by occupancy and the ability to renew contracts without losing rent. Portfolio occupancy reached 98.9%, and in reoccupying units, the company achieved that new annual rents were higher than the original ones: in the quarter, the "return on rent" came out to 104.9% (new rents of $88.30 million versus the previous $84.21 million on the same units). This is significant for an investor because it suggests that even in an environment of higher interest rates and more cautious tenants, the portfolio still has bargaining power.

On the investment side, the firm invested $2.4 billion in Q4 ($2.3 billion for its share) with an initial cash yield of 7.1%. At the same time, it continued to work with capital through its continuous share sale program: in the quarter, it settled 14 million shares from previously negotiated sales, raising gross proceeds of $817.8 million. The net debt to adjusted annual operating earnings before interest, taxes, depreciation and amortization (EBITDAre) ratio was 5.4 times, still a "mid" level for a REIT of this type, and combined with access to the capital markets, gives the company room to grow in 2026.

• Full presentation with results.

CEO commentary

Sumit Roy frames 2025 as "consistent returns and targeted actions" to amplify the firm's competitive advantages. Between the lines, the key takeaway is that management is consciously shifting the narrative from mere stability towards growth: it highlights the acceleration of investment in the fourth quarter and argues that the active pipeline for 2026 is strong enough for the company to talk about an initial investment volume of around $8 billion. At the same time, it backs the outlook with two "new sources of capital" - an open-ended fund in the US and a partnership with a major investor - which is expected to reduce reliance on a single source of funding and improve its ability to close deals at scale.

Outlook

Realty Income gives AFFO expectations of $4.38 to $4.42 per share for 2026. Management adds an interpretation that this is roughly 2.8% mid-range growth and approximately 9% total operating income (a combination of cash per share growth and dividend). That's a relatively conservative style of communication: the company isn't promising leapfrog improvement, but it's giving investors a clear framework for what a "normal" year should look like if tenants remain stable and the investment plan can be executed.

The second part of the outlook is the volume of investment. Management talks about the initial investment expectation for 2026 being approximately $8 billion, well above 2025 when the company invested $6.3 billion (for its share of $6.2 billion) at an initial cash yield of 7.3%. For investors, this means a simple thing: AFFO per share growth will largely depend on how effectively the firm combines new sources of capital with the quality of acquisitions, and how much the cost of financing is reflected in the results.

Long-term results

Over the long term, Realty Income is the type of firm where it's important to track two parallel lines: the growth in portfolio scale and whether that growth actually translates into more sustainable cash per share. Revenues have grown strongly in recent years: from $2.08 billion in 2021 to $3.34 billion in 2022, $4.08 billion in 2023 and $5.27 billion in 2024. In 2025, revenues have moved further to $5.75 billion, confirming that the firm is still in an expansion phase and can pick up new properties in volume.

Profitability is specific to REITs, however, as net income often "fizzes" due to revaluations, asset sales and one-time items. That's why Realty Income mainly tracks FFO and AFFO. For 2025, the firm reported FFO of $4.25 per share and AFFO of $4.28 per share, with AFFO itself down only slightly year-over-year from $4.19 to $4.28, which is consistent with the year being very much about funding growth and ensuring that portfolio growth doesn't dilute cash per share. From an investor's perspective, the important thing is that management still maintains a moderate growth outlook for 2026 and backs it up with an investment pipeline.

An important detail that is often missed is the handling of the share count. The data shows that the average number of shares has grown significantly in recent years as the company has financed expansion through issuance, among other things. That's why it's critical for investors to monitor whether acquisitions and hiring revenue can "beat" dilution and sustain AFFO per share growth. Q4 2025 has been steady in this regard: the company has been able to increase net income per share as well as maintain AFFO of $1.08 per share, while holding very high occupancy.

News / Strategic shift

The most obvious strategic shift is the expansion of capital sources and geographic reach. The firm launched its first open-end fund focused on stable commercial real estate in the U.S. in 2025 and had raised $1.5 billion in investor commitments by the end of the year. It then announced a strategic partnership with GIC after year-end and a joint framework for "bespoke" projects with combined commitments of over $1.5 billion. These are steps that may increase the ability to do larger deals without the company having to "push" equity issuance to the same degree in every cycle.

In practical transactional news, the expansion into Mexico is also noteworthy: the commitment to buy out an industrial portfolio for $200 million in dollar-denominated long-term leases is Realty Income's first larger-scale entry into the country. And from a financing perspective, it is key that in January 2026 the company issued $862.5 million in convertible notes due in 2029, creating additional financial flexibility for refinancing and investment.

Shareholder structure

Realty Income is a distinctly institutional title: the institution holds roughly 80.9% of the stock and nearly 81.9% of the free float, while management's stake is approximately 1.24%. This typically means two things: first, high liquidity and a stable shareholder base, and second, sensitivity to interest rate movements, as large money managers often rebalance weightings in the real estate sector as bond yields change.

The largest holdings are dominated by the largest passive and broadly diversified fund managers: Vanguard holds roughly 16.35%, BlackRock 11.50%, State Street 6.91% and Geode 3.17%. For the firm, this typically reinforces the pressure for long-term dividend predictability and disciplined growth funding.

Analyst expectations

For Realty Income, analysts have often agreed in recent months that it is a stable "dividend" title, but there is limited room for significant repricing unless the interest rate environment changes or the company surprises with the pace of AFFO per share growth.

Fair Price

The unusual part is how the deal is designed. AMD is offering Meta an equity-based incentive tied to performance, up to 160 million shares, released in steps as AMD meets delivery milestones. The first portion is linked to delivering the first 1 gigawatt of capacity. For investors, this cuts both ways: it pushes AMD to deliver on time, but it also introduces possible dilution and shows how intense the competition is when hyperscalers negotiate for AI supply.

What does "6 gigawatts" mean and why it's big news

A gigawatt is a unit of power. In this debate, what it means in practice is that $META is not buying "a few thousand units" but planning a giant scaling of computing capacity across data centers. By comparison, even a shift of units of hundreds of megawatts in AI clusters is already considered a significant step. Six gigawatts is therefore a signal to the market that Meta $META is building infrastructure in "industrial production" mode while diversifying suppliers alongside Nvidia $NVDA.

Moreover, both AMD and Meta are talking about multiple generations of chips. The first wave is to consist of MI450 series accelerators to be deployed in the second half of the year in so-called "rack" systems (simplified whole computing enclosures assembled as a single unit). This is important because AI is no longer just about the chip itself, but about how well the cooling, interconnects and software - the whole "package" - are handled.

Why Meta is also paying with AMD stock

The stock instrument (warrant) is set up so that Meta only gets shares if AMD actually delivers what it promises. In practice, this is a "pay for performance": AMD gets a huge subscription and Meta insures that deliveries will be top priority. At the same time, this puts a financial "tether" on Meta to make AMD succeed - if AMD meets the milestones and the stock goes up, Meta can profit.

But for AMD shareholders, there's also the issue of risk. If the entire facility is released, it could mean dilution (more shares outstanding). And it also shows how extremely valuable certainty of supply is today: when companies are building tens of billions of dollars worth of data centers, "not having the chips on time" is more expensive for them than paying substandard terms.

AMD gains validation, Meta breaks down dependence on Nvidia

Just a week ago, Meta announced a multi-year deal with Nvidia to supply millions of Blackwell and Ruby generation GPUs, as well as a large deployment of servers with Grace processors. In sum, this says one thing: Meta doesn't want to stand on one card. Nvidia remains key, but AMD is opening the door to a segment that has long been seen as "Nvidia territory".

In addition to GPUs, processors are also mentioned in the text. Meta mentions CPU purchases from AMD (including new generations) because AI is no longer just about training models, but increasingly about running them on a day-to-day basis. That's the part where CPUs and the whole infrastructure around them are rising in importance alongside accelerators - and AMD has traditionally been strong in CPUs.

Context: Meta raises AI investment to extreme levels

The whole thing makes sense the moment one puts Meta's budget next to it. The company said in earnings that it expects capital expenditures of roughly $115 billion to $135 billion for 2026, primarily due to AI infrastructure. That's a pace that shifts the entire sector - because when one of the biggest players starts spending like that, it forces others to keep up or risk losing ground.

And here's why some investors have become nervous: spending is growing faster than the certainty of return. Meta has held sentiment the best of the big "AI spenders" so far, but the question remains the same for everyone: when will this translate into higher profits, not just bigger data centers.

What to watch next

There are three things that will be crucial with this deal. First, how quickly AMD can realistically deliver the first "1 gigawatt" and unlock the first part of the reward. Second, if the MI450 proves itself in practice to keep the Meta picking up power draws towards 6 gigawatts. And third, how the supplier mix at Meta will evolve alongside Nvidia and its own chips - because diversification is a deal breaker for Meta, but for suppliers it's a competitive pressure on price and performance.

Industrial scale compute reshapes the ai power balance

Six gigawatts of GPU capacity is not incremental expansion. It represents industrial scale AI training capability capable of powering frontier language models, recommendation engines, generative AI tools, and immersive digital environments. As AI workloads expand exponentially, compute capacity is emerging as the defining constraint in innovation cycles.

Why the scale of compute suddenly matters more than ever

Artificial intelligence models are growing larger, more complex, and significantly more energy intensive. Training and deploying advanced generative AI systems requires enormous parallel processing capability, and hyperscalers are racing to secure reliable supply. Meta’s infrastructure expansion reflects this competitive urgency. Companies that control compute capacity control innovation velocity. The broader AI chip demand cycle has already fueled extraordinary growth across semiconductor leaders, with hyperscalers competing for allocation and long term supply agreements. This latest commitment reinforces the thesis that AI infrastructure spending is not slowing but entering a deeper capital investment phase.

AMD strengthens its datacenter credibility

For $AMD, the deal represents a defining strategic milestone. The company has steadily gained traction in high performance computing and datacenter markets, challenging entrenched competitors and expanding its AI accelerator portfolio. Securing a hyperscale partner of Meta’s magnitude validates AMD’s roadmap and strengthens revenue visibility across future quarters. The competitive AI chip landscape remains intense, with multiple players vying for dominance in training and inference workloads. However, long term supply commitments of this size suggest that hyperscalers are increasingly diversifying vendor relationships rather than relying on a single dominant supplier.

Meta’s ai ambitions extend beyond social media

$META's AI strategy has evolved far beyond social platform optimization. The company is embedding generative AI into content creation tools, recommendation systems, advertising optimization, and immersive experiences within its broader ecosystem. Expanding GPU infrastructure supports not only model training but also real time inference at global scale. Heavy capital expenditure into AI signals that Meta sees artificial intelligence as foundational to future revenue streams rather than experimental. The integration of AI across consumer and enterprise layers positions the company to compete aggressively in the next generation of digital services.

Capex expansion fuels investor debate

Large scale infrastructure investment always raises questions about returns. While investors have largely rewarded companies accelerating AI capex, concerns persist around efficiency, power consumption, and monetization timelines. Building gigawatt level GPU clusters requires massive energy coordination, datacenter expansion, and cooling solutions, introducing execution complexity. At the same time, sustained hyperscale demand has reinforced bullish sentiment across semiconductor equities and AI exposed technology stocks. Markets are effectively pricing in a prolonged AI infrastructure cycle, where capital intensity today translates into durable competitive advantage tomorrow.

The broader ai compute arms race intensifies

Meta’s move fits into a broader competitive escalation among global technology giants. Cloud providers, enterprise platforms, and consumer tech leaders are all increasing AI related capital expenditures. The race is no longer limited to model quality alone. It now includes compute ownership, vertical integration, and supply chain resilience. As hyperscalers diversify hardware sourcing strategies, the AI silicon ecosystem becomes more complex and strategically interlinked. Vendor concentration risk, geopolitical considerations, and power grid limitations are now central investment variables.

Execution risks remain under the surface

Scaling GPU infrastructure at this magnitude is not without operational challenges. Deployment timelines, fabrication constraints, component logistics, and grid capacity all influence how quickly theoretical compute translates into deployed AI systems. Any bottlenecks in production or integration could impact rollout speed. Investors will closely monitor quarterly disclosures for signals on deployment cadence, utilization rates, and AI driven revenue contribution. Sustained capital discipline alongside innovation velocity will be critical in maintaining market confidence.

A defining moment in the ai investment cycle

The Meta AMD 6 gigawatt GPU alliance underscores a defining shift in the technology sector. AI infrastructure is becoming the new oil field of the digital economy, with compute capacity functioning as the essential energy source powering innovation. For equity investors, this development reinforces several themes: hyperscale AI spending remains robust, semiconductor competition is intensifying, and capital allocation toward compute dominance will shape market leadership for years. As the AI buildout accelerates, the companies that secure capacity early may determine the pace and direction of the next decade of technological transformation.

A major 2026 step is strategic, not overnight growth. Nu has announced conditional approval to form a US national bank. This does not mean a full US launch tomorrow, but it is an important signal. A national bank path can lead to cheaper funding, a broader product set, and a stronger reputation as a full-service bank. If Nu executes, it also increases competitive pressure on US banks, especially where pricing and user experience matter.

Top points of analysis

• The nearest catalyst is earnings day on February 25, 2026 and market expectations around earnings per share of approximately $0.18.

• In the last reported quarter, the company delivered record net income of $783 million. USD, revenue of USD 4.2 billion and ROE of 31%, which raises the bar for Q4 as well.

• Growth is no longer just about adding users: Nu has 127 million customers and is increasingly pushing for "relationship deepening" (more products and higher revenue per client).

• Mexico and Colombia are increasingly important: they are boosting growth but also raising the demands on risk management and credit quality.

• Conditional approval for US bank charters is a long-term story for 2026-2027: capital, regulatory process, and only then opening a bank.

What the market expects from Q4 and why it matters

Q4 results will be all about whether the "rapid growth + high profitability" combination holds up for investors. Indeed, in Q3 Nu has already shown that it can grow big while maintaining a superior return on capital: an ROE of 31% and record profits create pressure for Q4 not just to be seasonally "decent" but to confirm the trend.

For a preview like "Nu is going after US clients", it is key to understand that the market is not just concerned with the pace of growth itself, but also the quality of it. Nu may add millions more customers, but the critical question is whether revenue per client is growing at the same time, whether good client acquisition costs are being maintained, and whether credit quality is deteriorating as the firm extends credit to a broader population.

Why it is going after US clients

In the U.S. banking world, it's hard to maintain both high growth and high profitability without a massive branch network. $NU shows that the digital model, given enough scale, can work as an operating leverage machine: costs don't grow as fast as revenues, and ROE can be high over the long term. Q3 is a good benchmark in this: record profitability and client base expansion at the same time.

The second thing is financing. In Q3, the firm had deposits of $38.8 billion and a loan portfolio of $30.4 billion. This suggests that loan growth is not just built on expensive external funding and that the deposit engine is real. In practice, this is important because it is the cost of funding that determines whether fintech can compete with banks even when the cycle turns bad.

US: what bank conditional approval means in real terms

News that investors shouldn't pass off as PR: Nu has announced conditional approval from the OCC to establish a US national bank. The firm itself describes the next steps: entering the so-called "bank organization phase", meeting regulatory conditions while still needing approvals (typically FDIC and Fed). Also included is a timeframe - capitalizing the institution within 12 months and opening the bank within 18 months if regulatory conditions are met.

This is important because of what it can change in the economics of the business:

• Cheaper and more stable funding: the bank structure usually expands the options for deposit handling and liquidity management.

• Broader product offerings: a path to full-fledged banking products in a market where ARPU (Average Revenue Per User) is significantly higher than in LatAm.

• Reputation and partnerships: bank charters often increase the trust of large partners and corporate clients.

At the same time, it is fair to say that it is not a catalyst for the next quarter. It's a 2026-2027 project, which can be akin to an "option" from an investor's perspective: more about cost and process in the short term, and opening up a whole new addressable opportunity in the long term.

First step into the US: why it's not PR, but a game changer in the economics of business

The fact that Nu has received conditional approval to set up a US national bank is qualitatively in a different league to "we've launched an app in the US". It is a ticket into a system where the most expensive and important things in banking are decided: the cost of funding, the breadth of products and the trust of the regulator. Nu self-describes that it is now entering the organizational phase and needs additional steps/approvals in parallel; at the same time, the regulatory framework typically requires full capitalization within 12 months and opening of the bank within 18 months if conditions are met.

For the investor, the bottom line is that the US banking license is not "one more country". It is a market where high margins, huge volumes of deposits and loans are at stake, as well as fee income that is often comfortable and stable for traditional banks. Nu enters this with a digital model that has already proven it can scale: the firm has 127 million clients in Brazil, Mexico and Colombia and has shown record profitability in 2025 (e.g. ROE of 31% in Q3). That's no guarantee of success in the U.S., but it's proof that Nu is not a "small fintech" that's just finding product-market fit.

How exactly it is putting pressure on US banks: five places where margins are breaking

The pressure that Nu can create is not about taking JPMorgan's $JPM million clients tomorrow. It's about forcing banks to react in segments where the economics are sensitive to price, fees and simplicity.

1) Fees and "silent" sources of profit (overdraft and co.)

U.S. banks have long collected significant sums from various fees. But regulation and public pressure are escalating: for example, the CFPB has worked with a framework of savings of up to ~$5 billion per year for consumers in capping overdrafts. The digital challenger has one advantage: it can position the offering as "transparent and cheaper" and thus force banks to discount or change fee structures. Even if Nu doesn't get a giant share, it just needs to impair banks' ability to monetize marginal fees - that goes directly to margins.

2) Deposit: the cheapest fuel for banks

The moment a digital player gets a banking license, it can theoretically enhance its ability to collect deposits and fund loan growth more cheaply (and thus compete on price). Well it can already do this at LatAm: in Q3 2025 it reported deposits of ~$38.8bn with a loan book of ~$30.4bn. In the US, the battle for deposits is tougher, but the principle is the same: whoever can attract stable deposits cheaply has a better economy.

3) Credit cards and consumer credit: the market is huge and expensive

US credit card interest rates are high - for example, the FRED shows around 20.97% (November 2025) for commercial bank credit cards. This creates space for a player that can offer a "fairer" alternative, or at least a better user experience, through data, scoring and product design. Either doesn't have to be the cheapest to take share. It just needs to be faster, friendlier and less fee-based - and banks need to respond with promotions, benefits and margin discounts.

4) Cost structure: digital model = different acquisition economics

Much of the traditional banking economy relies on branches, legacy IT and complex processes. Nu has a chance to push banks by offering a "mobile bank" with lower customer service costs and faster product iteration. This is exactly the type of pressure that will manifest itself in the US not as "Nu wins" but as "banks need to invest more in digital", which will push their efficiency in the short term.

5) Simple product bundle: attacking segments where banks live off complexity

In practice, share is best taken where the customer is frustrated: complex fee schedules, fees, slow processes, uncertainty. Nu can start in segments that don't need heavy infrastructure and where onboarding (adoption) and trust make the difference: account, card, simple credit, personal finance management. Banks are then faced with an unpleasant choice: either they discount and simplify (lower yield per customer) or they cede part of the market to challengers.

Where Nu can realistically take a share in the U.S.

The most likely places where Nu can "take a bite" in the US are not the wealthiest segments from day one. They are segments where there is high volume, high frustration and relatively low barriers to entry:

• Mobile mainstream banking for mass retail (emphasis on simplicity, transparency, fast onboarding).

• Cards and short-term credit for fee and UX sensitive clients (especially when interest rates on cards are high).

• LatAm diaspora and cross-border needs (if Nu builds on what it can do in LatAm - there is a logical synergy here, though market impact will depend on the product).

• Gradual upsell into a broader product set as the bank gains trust and data (this is the model Nu has demonstrated in LatAm by scaling to tens of millions of clients).

LatAm wind in the sails: the infrastructure for digital finance is growing fast

Nu is benefiting from the fact that Latin America is still in a phase of rapid digitization of financial services. In Brazil, this is helped by the Pix instant payments system, which is estimated to process up to half of e-commerce transactions by 2028 and may already be heading for a ~45% share by the end of 2026. This is pushing the market towards digital behaviour and lowering the barriers for Nu-type players.

At the same time, the "infrastructure" layer around banks and fintechs is also growing: for example, open banking in LatAm is estimated to grow at a high rate (a CAGR of ~28.8% for 2025-2030 is cited). For Nu, this means better opportunities for client acquisition, data-driven scoring and product expansion.

And competition is sharpening: global fintechs are going to Mexico and the region is becoming increasingly attractive. For Nu, this is both an acknowledgement of the opportunity and a reminder that staying ahead will be about execution, not story.

What to watch in Q4?

To ensure that the preview doesn't just become a "customer count" debate, it's useful to have a simple dashboard:

• Net customer additions and growth rates outside Brazil (Mexico, Colombia).

• Net interest income (NII) and NIM: in Q3 NIM was 17.3%, but more important is risk-adjusted NIM ( 9.9% in Q3) as it filters out credit risk.

• Credit quality: short delinquencies (15-90 days) and 90+; in Brazil in Q3 15-90 NPLs 4.2% and 90+ 6.8% (seasonality).

• Deposits vs. loans (funding stability): in Q3, deposits USD 38.8 billion, credit portfolio USD 30.4 billion.

• ROE and efficiency: in Q3 ROE 31%; question is whether Q4 will confirm that scale still adds profit.

Risks that can spoil the "coming for US" story

• The biggest risk is the credit cycle. The more the firm moves from "prime" clientele to the broader masses, the more the market will question whether credit growth will bring a worsening of delinquencies.

• The second risk is regulation: a U.S. bank charter is potentially a big plus, but regulatory processes are slow and costly, and may bring capital requirements that reduce flexibility in the short term.

• The third risk is competition in Mexico and the broader LatAm. The region is attractive and more players are coming. This can increase client acquisition costs and reduce margins over time if the market gets into a promotional war.

Investment scenarios 2026-2028

Optimistic scenario: scale + expansion + stable credit

Nu maintains high ROE near 2025 levels, Mexico and Colombia grow without significant credit deterioration, and the US bank project progresses as planned. In this scenario, the market may gradually shift valuations towards a "quality digital bank" rather than a pure fintech. Consensus earnings per share expectations for the next few years (e.g. Zacks) suggest continued growth, which could be significantly outperformed in the optimistic scenario.

Realistic scenario: solid growth but with margin pressure and more regulation

Customer growth will slow as the business is already huge, but there will be revenue per client growth. NIM will remain volatile but risk-adjusted NIM will hold quality. US bank charters will progress but costs and regulatory requirements will temporarily reduce momentum. The stock rises in this scenario mainly as the firm "works off" results and the market gradually trusts it more.

Pessimistic scenario: credit deterioration + competitive pressure

Credit quality will deteriorate faster than expected, especially with credit expansion outside Brazil. Competition in Mexico will increase acquisition costs and margins will tighten. US bank project will be slower and more expensive. In this scenario, the market will knock down the growth premium and start looking more at the risk of losses than the potential for expansion.

What to take away from the article

• Q4 (Feb 25, 2026) is a short-term catalyst: the market will be watching to see if high profitability and credit quality are maintained; EPS expectations are around $0.18.

• Nu already has the parameters of a "big player": 127m customers, Q3 profit of 783m. USD 787 and ROE of 31% set a high bar.

• The biggest long-term shift is the US bank charter - not as an immediate revenue growth, but as an opportunity to change the economics of financing and open up a new market.

• LatAm digitization and Pix are shifting market behavior toward digital payments and banking, which supports the long-term environment for growth.

Recent years have brought significant performance divergence to global markets. While the US S&P 500 index continued to be heavily driven by a narrow group of technology giants, previously less-tracked markets in Europe have surprisingly begun to dominate due to their specific sector composition and macroeconomic environment. One of the most notable examples is Poland's WIG20 index, which has managed to outperform its US counterpart in the form of the S&P 500 several times since the beginning of 2025.

This development is not due to chance or short-term speculation. According to data from the Warsaw Stock Exchange and our team's analyses, growth was driven by a combination of several structural factors:

• the strong performance of the banking sector,

• the recovery of the energy sector,

• the inflow of foreign capital into the CEE region

• and the relatively low starting valuations at which Polish equities were positioned after the weaker 2021-2023 period.

Meanwhile, the WIG20 index, which brings together the largest and most liquid companies traded on the Warsaw Stock Exchange, is sectorally distinct from the US S&P 500. While the US index is heavily concentrated in technology and communication services, the Polish index is dominated by banks, energy, mining companies and traditional industries. It is this different structure that has proved to be a key advantage in the environment of higher interest rates and capital rotation, which has become increasingly evident in the markets this year.

As a result, the WIG20 has significantly outperformed the S&P 500 by several times since the beginning of 2025. Over this time, the Polish index has risen by 55.2%, while the S&P 500 has gained "only" 13.3%.

Investors, who have been used to following mainly the US megacaps, especially this year, are once again turning their attention to regions that have long remained outside the mainstream of capital.

It is important to add, however, that the strong performance of the index is not due to an across-the-board rise in all its components. On the contrary, as with most markets, the scissors between winners and losers are beginning to open up significantly. Some WIG20 titles have risen sharply this year, dragging the index higher, while others remain under pressure from weaker demand, regulatory risks or structural problems in their sectors.

Index analysis

The strong growth of Poland's WIG20 index since the start of 2025 is consistent with a textbook example of regional capital rotation in an environment of higher interest rates and slowing US technology sector growth. While the US market remains heavily concentrated in tech megacaps with high CapEx investments and sensitivity to discount rates, the WIG20 is structured very differently. The index has a significantly higher weighting to banks, energy and the traditional economy, segments that have historically outperformed technology at the very stage that global markets are now in.

From a macroeconomic perspective, Poland is helped by a combination of several factors. The domestic economy remains relatively resilient within Central Europe, inflation is gradually declining from the extremes of previous years and interest rates are still at levels that support bank profitability. According to data from Narodowy Bank Polski, the banking sector's net interest margins remain above the long-term average, which translates directly into profits and dividend potential. At the same time, the financial sector has a much higher weight in the WIG20 than in the S&P 500.

The European context also plays an important role. After several years in which global capital flowed almost exclusively to the US, some investors are beginning to reassess valuations between regions. European stocks, including Polish ones, were entering 2025 at significantly lower multiples than US technology titles. As the market's sensitivity to free cash flow and return on capital increased, cheaper value segments naturally began to gain a relative advantage. The WIG20 is structurally much better prepared for this type of rotation than the tech-heavy US index.

The biggest winners in the WIG20 (as of early 2025)

Index growth has been driven by a relatively narrow group of titles, primarily in the banking and energy segments. The three strongest stocks were:

• PKO Bank Polski $PKO.WA (+55%)

• Bank Pekao $PEO.WA (+70%)

• Orlen $PKN.WA (+129%)

These companies are united by high profitability, robust cash flow and relatively low initial valuations. Thus, exactly what the market is rewarding at the current stage of the cycle.

Biggest declines in the index (over the past 12 months)

At the other end of the spectrum are titles more sensitive to consumer demand and the industrial cycle. Equities have seen the largest declines:

• Allegro $ALE.WA (-5.18%)

• Dino Poland $DNP.WA (-14.7%)

• Zabka Group (-3.3%)

It is this dispersion in performance that confirms that the current WIG20 rally is not across the board, but selective and strongly tied to the macro environment.

Stock Heatmap - WIG20 (1Y)

Although the performance of the WIG20 looks very compelling at first glance, it is no guarantee of future returns. In fact, the history of regional rallies has repeatedly shown that this is how indexes can be highly sensitive to changes in the macroeconomic environment. Current growth is largely based on high bank profitability, strong energy sector cash flow and relatively low initial valuations. Should any of these pillars begin to erode, index dynamics could change quickly.

Risks

The first key risk is the trajectory of interest rates in Poland and the euro area. The banking sector, which forms the backbone of the WIG20, is currently benefiting from above-average net interest margins. However, should central banks move towards more aggressive monetary easing (which is gradually but so far slowly happening), there may be gradual pressure on bank profitability. In the past, it has just been shown that falling rates are reflected in bank titles with some delay, but all the more pronounced.

The second factor is the cyclicality of the energy segment. Oil and traditional energy-linked companies have significantly improved their capital discipline and free cash flow profile in recent years, which has helped them to reprice their valuations. However, the sector remains sensitive to commodity price movements and global demand. A potential slowdown in the European economy or a decline in oil prices would impact the performance of the WIG20 more quickly than more diversified indices.

The nature of the Polish market itself is an equally important risk. The WIG20 is a highly concentrated index with a relatively small number of dominant titles. This means that performance is more dependent on a few key players than, for example, the broad S&P 500. While higher concentration helps to drive significant growth in periods like this year, it also increases volatility when sentiment changes.

Other developments

From an investment perspective, the key question now is whether we are seeing the beginning of a longer-term structural repricing of the region, or rather a classic intermediate phase of capital rotation. The data so far tends to suggest the latter. While the fundamentals of Polish banks and the energy sector are currently strong, much of the positive surprise has already been reflected in share prices. The valuation discount to the US, while still not completely closed, has narrowed significantly relative to 2023.

Thus, the current environment resembles a phase where the market is transitioning from a rotation between sectors to a much more selective approach. As long as the global situation remains stable and rates fall only gradually, the WIG20's relative strength can be maintained for some time to come. However, should strong momentum return to technology stocks in the US or rates fall more rapidly in Europe, historical data suggest that some of the current growth could be gradually lost.

EU interest rates from 2026 (%)

Conclusion

The further development of the Polish index in the coming quarters will depend mainly on several variables that have a direct impact on its sectoral composition. The first and quite crucial one is the development of interest rates in Poland and the euro area. If the monetary easing process is gradual, the banking sector may maintain above-average profitability for longer, which would provide further support to the index. Conversely, a more rapid decline in rates would start to gradually squeeze net interest margins and thus one of the main drivers of current growth. Investors should therefore monitor central bank comments, inflation developments in Central Europe and the first signs of a change in credit dynamics very closely.

The second key area is energy and the evolution of the commodity cycle. The WIG20 is more sensitive to this factor than most Western European indices. If oil prices and mining company margins remain relatively stable and global demand does not weaken, the energy segment may continue to support the index's gains. Otherwise, weakness would manifest itself relatively quickly. The third factor is the flow of global capital itself. In recent quarters, the WIG20 has been helped in part by the fact that some investors have started to look for cheaper stocks outside the mainstream again after years of US dominance. However, if the US tech euphoria were to kick back into full swing, or if US bond yields were to fall significantly, some capital may return.

The current phase is very unlikely to represent the classic start of a long structural bull market. This does not mean that the rally must end immediately, but it does increase the sensitivity of the index to changes in surrounding conditions. History shows that similar phases can continue for some time if bank profits remain high, energy remains stable and global liquidity remains relatively benign. At the same time, however, the longer intense growth lasts, the more the bar for further positive surprises is raised.

It thus becomes crucial for investors to monitor not only the absolute growth of the index, but more importantly the quality of its drivers and the environment that supports them.

On Monday IBM experienced its worst session in more than 25 years, with the stock falling about 13% — the market apparently reacted to reports that Anthropic, with its tool Claude Code, can significantly accelerate COBOL modernization. And COBOL is precisely one of the reasons why a large number of banks, insurers, and government bodies still rely on IBM mainframes. Investors read it simply: if the “rewriting” of old systems becomes cheaper and faster, it could, over time, weaken one of IBM’s traditional pillars.

What I find important about this is the broader context. This isn’t just a single headline about COBOL. By February IBM was already down roughly 27%, and the entire “legacy” technology spectrum takes a hit whenever someone shows a new AI tool that makes cheaper the work that historically supported consulting budgets, licenses, or long projects. The counterargument is also strong: customers have had various ways to migrate off mainframes for years, and just as often they stay, because reliability, security, and the risk of change are more costly to them than the hardware or licenses themselves.

The bigger issue is the story Novo has been selling. Wegovy made the company a leader, but investors were looking for proof that the next wave would keep Novo ahead as Lilly gains momentum. CagriSema was supposed to be one of the clearest pieces of evidence. When the competitor looks better in a key study, the market treats it as a signal about the future line-up, not just one disappointing data point.

What the study showed and why the difference is painful even without the "catastrophic" numbers

$NVO described in its official announcement that when evaluated "under ideal conditions" (when all patients adhere to treatment), CagriSema achieved a 23.0% weight loss after 84 weeks, while tirzepatide achieved a 25.5% weight loss. In the second evaluation, which takes more account of reality (including the fact that some people do not complete the treatment or do not follow it exactly), CagriSema came out at 20.2% and tirzepatide at 23.6%.

On paper, this may not look like a gap. It's just that in practice, it's a difference that can make the difference in what doctors will prefer and what care payers will be willing to reimburse without undue restrictions. Moreover, the market for obesity drugs is rapidly professionalizing: gradually, there is less forgiveness for "second-best" products unless they have a clear advantage elsewhere - perhaps in tolerance, dosing, availability, or price. And a number of analysts are now saying that as it stands, it's hard to find a reason why a patient would get CagriSem instead of tirzepathide if both are on the market.

Another important detail that has investors worried is the reputational moment: some analysts mention that it's unusual to hear management essentially admit that a competitor came out better in a study Novo sponsored and designed. To the market, it's a signal that while the company may push CagriSema to approval, the commercial story will be tougher - and that will be recalculated in the valuation faster than the regulatory decision itself.

Why the stock's reaction is so extreme: it's a valuation built on an "obesity option"

This slump isn't just about one study, it's about how Novo has been priced in recent years. Reuters describes how, after Monday's sell-off, the stock erased the gains of the era when Wegovy made Novo an investment star, and the title has fallen to levels where it last was before the "Wegovy era." From the market's perspective, this means one thing: investors have taken a haircut because they're not sure Novo can maintain the same momentum in the next product cycle.

When a company is priced as a clear market winner, "just" slightly worse data is enough and valuations can collapse quickly. That's because the market isn't just deciding whether CagriSema will pass approval, but whether it will be able to take share from competitors - and whether Novo can once again dictate terms in a segment where huge money is rolling in and where volumes, production capacity, reimbursement and marketing pressure will decide the next few years.

That's why the question of strategy comes to the fore: if Novo doesn't have the most effective next-generation product, it will have to fight harder with other tools - price, availability, combinations, form of delivery - while trying to piece together further growth outside of a direct battle with Lilly "on strength".

What this means for the $LLYfight and why the acquisition plan is starting to be addressed

After this data, analysts are much more confident in saying that Zepbound is now the clear leader and Lilly has room to continue to gain share in the coming years. J.P. Morgan, for example, expects a longer "runway" for Zepbound's share growth beyond 2026, and several banking houses agree that it will be hard for Novo to erode Lilly's market position unless it has a clearer advantage.

The second part of the story is psychological: investors will start putting more pressure on management to show it has a Plan B. And here comes the topic of acquisitions. Jefferies mentions that investor attention may shift to how Novo will handle its financial strength, with estimates suggesting the potential to spend as much as $35 billion this year. An important detail is that some investors would prefer to buy beyond obesity and diabetes to "buy time" for the company and reduce dependence on one battleground.

This is not an academic debate. If the market for obesity drugs were to gradually move towards maximum efficacy (and for that matter availability and reimbursement) being the primary deciding factor, the second strongest player may be pushed into price concessions in the long run. And in such a scenario, even a very good product may become "commercially weaker" because it will be harder to sell or sell at a smaller margin.

Risks and what to watch next

The biggest risk is that CagriSema, while approvable, will enter the market with a "weaker than leader" label. This is exactly the situation where commercial success breaks down to whether the product either has a clear advantage in tolerance or can make a case for itself on price and availability. Barclays, for example, admits that CagriSema may be approved, but warns that winning users will be difficult against a more efficient established competitor, and Novo is then left with few arguments other than price.

At the same time, it remains to be seen how Novo communicates the next steps in its clinical programme: the firm is already hinting that it wants to keep looking at the "full potential" of CagriSema and explore higher doses. The market will want to see whether the gap to tirzepatide can realistically be made up - and more importantly, whether it can be done without compromising tolerability.

One last thing: whether an acquisition strategy will really take off and how quickly. If investors believe Novo can find other growth pillars, some of the damage to confidence may be healed. But if weeks go by with no clear moves, while Lilly continues to push the lead, the stock may remain vulnerable to every other clinical number.

Earnings expectations and valuation pressures weigh heavily

Part of the pressure on CRWD and PANW stems from the interplay between lofty market expectations and tightening financial conditions. Both companies have enjoyed premium valuations in recent years, driven by strong subscription revenue growth and the secular tailwinds of rising digital threats. However, as interest rates remain elevated compared to earlier years and tech multiples contract, investors are demanding greater near-term certainty in revenue and margin execution. When forecasts or guidance wobble even slightly valuation multiples can compress quickly, which is precisely what we saw today in the pullbacks.

CrowdStrike’s growth story collides with execution scrutiny

CrowdStrike’s reputation as a market leader in cloud-native endpoint security has been a cornerstone of its premium stock valuation. The company has consistently delivered strong growth in subscription services, and its platform has expanded into identity protection, workload security, and extended detection and response (XDR). Yet, today’s price action reflects a broader risk environment where weak macro signals or even modest deceleration in billings can trigger disproportionate reactions. Investors are increasingly differentiating between companies that can sustain expansion through economic cycles and those whose growth could slow if corporate IT budgets tighten.

Palo Alto Networks battles cloud transition costs and competition

Palo Alto Networks has been navigating its own transition from traditional firewall hardware toward software-defined security and cloud-centric solutions. This shift is critical for long-term competitiveness but also introduces near-term cost pressures as the company invests heavily in R&D, sales capacity, and integration of recent acquisitions. The market reaction today suggests that investors are scrutinizing the pace at which these strategic shifts convert into free cash flow and long-term margin expansion. With crowded competition from both pure-play cloud security startups and established enterprise vendors, any softness in financial outlook can amplify downside risk in the stock.

Macro headwinds amplify sector-wide vulnerability

The cybersecurity sector does not exist in a vacuum. Broader market conditions including rising yields, inflation data, and global economic uncertainty have made growth stocks more sensitive to shifts in sentiment. When economic indicators signal slowing growth or tighter financial conditions, sectors with the highest expected growth rates often register the largest drawdowns. Today’s traders appear to be rebalancing portfolios toward low-beta and defensive assets, reducing exposure to stocks like $CRWD and $PANW that have historically outperformed in risk-on environments.

Investor psychology: from fear of missing out to fear of loss

Investor psychology plays a significant role in episodes like today’s sell-off. During periods of strong momentum, buyers can develop a fear of missing out (FOMO), bidding stocks up on a nearly unquestioned belief in future growth. Conversely, when cracks appear in earnings forecasts or macro signals sour, the market can swing to a fear-of-loss mindset, where selling accelerates as traders seek to lock in gains or cut exposure. This behavioral flip-flop is especially acute in sectors like cybersecurity where valuations reflect long-term growth assumptions.

Technical patterns signal caution and possible support levels

From a technical perspective, both CrowdStrike and Palo Alto Networks stocks were trading at historically stretched valuation multiples relative to moving averages, and today’s break below key support levels may have triggered additional selling from systematic strategies and trend-following algorithms. While such technical breakdowns don’t determine fundamental value, they can exacerbate intraday moves as stop orders and automated trading amplify selling pressure. Traders watching these patterns closely will be looking for potential support near prior consolidation zones as possible entry points.

Looking ahead: differentiation and execution will matter most

Despite today’s volatility, the long-term secular demand for cybersecurity solutions remains intact as digital transformation and cyber threat activity continue to accelerate across sectors. For investors evaluating $CRWD, $PANW , and peers, the key focus will be on quarterly execution, customer retention metrics, progress in cloud migration, and margin discipline. Stocks in this sector are likely to remain sensitive to macro shifts and relative valuation trends, but companies that continue to demonstrate resilient growth and effective capital allocation should attract renewed interest once sentiment stabilizes. In the interim, tracking earnings calls, guidance revisions, and competitive product adoption will be crucial for assessing risk/reward dynamics in cybersecurity equities.

- Bollinger Bands are a technical indicator that measures volatility and the relative “expensiveness” of a price compared to its average. They’re mainly used to estimate whether the market is short-term overbought, oversold, or preparing for a larger move.

They also mention that in the short term large growth names – mega-caps and growth ETFs – can make sense: they’ve pulled back to the rising 200-day moving average and are holding support there for now, which some view as a “decent entry.” On the other hand, they warn about one weakness: software – if this part of the market doesn’t convincingly recover from the recent wobble, it could drag the entire index down.

Are you currently in “buy-the-dip” mode (mega-cap/growth), or do you prefer to wait for confirmation of a breakout above 7,000 – or perhaps for a fake-out and a better price?

For investors, the key point is that ASML is not describing a lab demo. The company says the system can deliver 1,000 watts of EUV light power under conditions that match real customer use. If that holds in the field, it can lower the cost per chip at the most advanced nodes. It also helps ASML defend its lead at a moment when new competitors in the US are trying to catch up and China is pushing hard to build its own capabilities.

What ASML actually announced: 1,000 W instead of 500-600 W

The crux of the news is simple and hard to measure: ASML researchers have raised the EUV power of the light source to 1,000 watts from roughly 600 watts today. In lithography, this is not a detail - higher power means shorter "illumination" time on the wafer, i.e. faster production rates with the same quality requirements.

Meanwhile, ASML is still the only company in the world that supplies commercial extreme ultraviolet lithography (EUV) machines - a technology that the most advanced computing chips from companies like TSMC $TSM or Intel $INTC cannot do without.

Why source performance matters: speed, cost and factory capacity

In practice, the economics of all semiconductor manufacturing are at stake. When one key step (illumination) is made faster, the number of wafers a machine can handle per hour goes up. ASML directly mentions the target that customers should get to about 330 wafers per hour by the end of the decade, compared to about 220 wafers per hour today.

This then translates into the price of each chip: the same factory can produce more, and with no need to add as many expensive machines, the unit cost goes down. For advanced processes, where the investment in equipment is extreme, such a change is one of the few levers that can move costs down visibly.

How it technically works: tin, laser and "plasma"

ASML $ASML produces EUV light in a way that is itself technologically frontier. Tiny droplets of molten tin are fired in a chamber, which are then hit by a powerful laser, turning the tin into an extremely hot state (plasma) and emitting EUV light with a wavelength of 13.5 nanometers in the process. This is then collected through high-tech optics and fed into a machine where it "draws" structures onto the wafer.

The specific shift to 1,000 watts is to be based on two changes: ASML has increased the number of tin droplets to about 100,000 per second, and instead of one "shaping" laser pulse, it uses two smaller pulses to better prepare the material for the main hit. The result is higher stable power and a path to further scaling.

Why it's news for the competition, too: The US and China are pushing for the emergence of alternatives

EUV machines are so strategic that there has been a geopolitical battle around them for years. The U.S. has long pressured the Netherlands not to ship the most advanced systems to China - and China has simultaneously invested massively in domestic attempts to build an alternative.

What's new is that alongside Chinese ambitions, a US effort to create competition directly at a critical part of the system - the EUV light source - is beginning to take shape. Reuters mentions at least two startups working on this that have raised hundreds of millions of dollars. At the same time, direct government support is also visible: xLight, for example, has announced a "letter of intent" type agreement with the US Department of Commerce for up to $150 million in support to develop an alternative approach to the EUV source.

ASML's message with this shift is simple: even if someone once builds a competitive "foundation", ASML wants to be several iterations ahead. And the company itself says it already sees a realistic path to 1 ,500 watts and beyond in principle, in addition to 1,000 watts.

What this may mean for ASML's results: demand, pricing and the investment cycle

In the short term, there is no immediate jump in sales from this. Rather, it is a strengthening of the "product roadmap" and an argument for customers to plan EUV capacity going forward. In the ASML business, several effects play a role at once: when throughput (wafers per hour) goes up, customers can get some of the capacity "cheaper" on the same basis, but it also makes EUV even more attractive for a wider range of production - and that can support long-term demand for additional systems and upgrades.

Context is also important: China has in recent months been trying to increase performance even on older machines, as EUV technology is virtually unavailable to it due to constraints. This shows two things - how huge the motivation to catch up with the top is, and also how strong ASML's position is at the most advanced nodes.

What to watch next: 3 specific signals

• First, when and in what form ASML will start to take the 1,000-watt resource from internal demonstration to real installations, and how it will talk about stability and availability of power "at the customer".

• Second, whether expectations around EUV system throughput (target of 330 wafers per hour) will start to change in the specific production plans of the big foundry players.

• Third, how quickly the US pursuit of alternatives (xLight and others) will move and whether additional public funding or partnerships with large players will be added.