Management reinforced the message with commentary about “healthy” U.S. consumers and stable asset quality, arguing that strong card spending and benign credit metrics show the bank is not buying its earnings growth by taking more risk on the loan book.

How Q1 2026 turned out

For the first quarter of 2026, Bank of America $BAC generated approximately $30.3 billion in earnings after interest, versus about $28.2 billion in the same period last year. This equates to seven percent growth. Net interest income was $15.7 billion, up nine percent from a year ago, primarily due to higher interest rates in prior years, growth in loan balances and asset re-pricing. Noninterest income rose to about $14.5 billion from $13.8 billion, reflecting stronger trading, also higher investment banking and asset management fees.

Net income came in at $8.6 billion in Q1, up from $7.3-7.4 billion a year ago, up around 17%. Earnings per share (diluted EPS) was $1.11, up from around $0.89-0.90 last year. Thus, EPS was up about 25% year-over-year, partly due to earnings growth and partly due to fewer shares outstanding after buybacks. Meanwhile, market expectations were around $1.00-1.01 per share, so the bank's EPS and earnings clearly beat.

Costs grew more slowly than revenues. Non-interest expenses increased by about four percent, while revenues grew by seven percent, giving room for an improvement in operating leverage of about 2.9 percentage points. This is exactly what analysts and investors wanted to see after years in which costs often "ate" revenue growth.

Credit quality remained stable. Net charge-offs held at relatively low levels, and the overall picture suggests no dramatic problems for either consumers or corporate clients. Management's comments on the results highlight that consumers are still spending, employed and repaying, while businesses are in good financial health in most cases.

The bank's capitalisation remains robust: the CET1 ratio is around 11.2% and the leverage ratio (SLR) is in a safe band above regulators' requirements. This allows for a combination of dividend and share buybacks without bringing the bank close to regulatory limits, although the exact Q1 capital payout numbers are not dissected in detail in the available reports.

• Full presentation with results.

Segments

• Consumer Banking - generated net income of around $3.1 billion on revenue of $11.0 billion, implying roughly five percent revenue growth. Growth was mainly driven by higher interest income, with average deposits of around $951 billion and average loans of around $322 billion. Card transactions (debit and credit combined) reached about $245 billion, a seven percent growth, and return on equity ratios (ROAAC) in this segment held around 27 percent.

• Global Wealth & Investment Management (GWIM) - delivered about $1.3 billion in net income and $6.7 billion in revenue, or about 12 percent growth. Wealth management fees rose 15% to about $4.2 billion, client assets reached $4.6 trillion (growth of about 10%), and about $20 billion of new capital flowed into managed portfolios. Average loans in the GWIM grew 13% to 262 billion.

• Global Banking - reported net income of around $2.1 billion and revenue of $6.3 billion, about 5% growth. Drivers were higher investment banking fees, leasing income and net interest income; average deposits rose 13% to $648 billion and average loans rose 5% to $397 billion.

• Global Markets - generated approximately $2.0 billion in net income; sales and trading revenue was approximately $6.4 billion, up 13% from last year, including a small positive impact from the revaluation of the proprietary credit position (DVA).

So overall, the result holds together: retail banking, investment banking, trading and wealth management all contributed to growth in revenue, earnings and return on capital.

As management commented on the results

CEO Brian Moynihan reported two main messages in his commentary.

First, that this was strong, across-the-board growth. He highlighted that the bank had achieved a "strong start to the year", with revenue up seven per cent, net profit up 17 per cent and EPS up 25 per cent. He cited growth in net interest income, good trading performance, higher fees from investment banking and asset management as key drivers.

Second, that consumer and credit quality remain healthy. Moynihan says bluntly that customers continue to spend, have stable incomes and the bank sees no widespread problems in the portfolio. This is important in an environment where rates are not as high as they were in 2023-2024, but they are still relatively restrictive and some investors were concerned that this would translate into a significant increase in non-performing loans.

Moynihan and other members of management have reiterated that Bank of America will continue to seek positive operating leverage - i.e., keeping cost growth below revenue growth - and leverage investments in digitization and AI (such as "Erica 2.0" in retail) to increase efficiency without sacrificing the customer experience.

Long-term results

In 2022, Bank of America will generate roughly $115.1 billion in revenue. Revenue moved to $171.9 billion in 2023 (up roughly 49%; part of this is due to the methodology and the high rate environment), to $192.4 billion in 2024 (+11.9%), and fell slightly to $188.8 billion in 2025 (-1.9%). Thus, 2025 was more of a "stabilization" year after very strong growth in previous years.

However, gross profit rose to $104.6 billion in 2025 from $96.1 billion in 2024. Operating expenses rose only slightly to $69.7 billion (from $66.8 billion), so operating profit jumped to $34.9 billion, up 19% from $29.3 billion in 2024. This means that despite slightly lower sales, the bank was able to improve profitability and margins.

Net income for 2025 reached $30.6 billion, up from $27.1 billion in 2024 and $26.5 billion in 2023. Diluted EPS rose from roughly $3.19 in 2022 to $3.08 in 2023 and $3.22 in 2024 to $3.82 in 2025. EPS growth is supported by both higher earnings and a decline in the number of shares, with the average number of diluted shares declining from about 8.17 billion in 2022 to about 7.85 billion in 2024 and about 7.55 billion in 2025.

Shareholders

Insiders (management and board) account for about 7.4% of shares, which is quite a lot for a large US bank. The institution as a whole holds about 71.6% of the shares and about 77% of the free float.

The largest shareholders include:

• Vanguard with a stake of about 9.1% (about 651 million shares)

• BlackRock with about 7.6% (about 542 million shares)

• Berkshire Hathaway with about 7.2% (about 517 million shares)

• State Street with about 4.2% (about 298 million shares)

The presence of Berkshire Hathaway (Warren Buffett) in particular is a signal to many investors that it is a "favored" bank in his portfolio, which may play a role in sentiment and how readily retail investors hold the stock. At the same time, however, the share price is strongly tied to how large fund houses view Bank of America as a sector title - their collective change of heart can move the price significantly.

News and strategic moves

• Normalization after an era of extremely high rates: after three rate cuts in late 2025, the Fed is keeping rates around 3.5%-3.75% for now. Bank of America is no longer just a "pure bet on higher rates" - it needs to show growth in fee and trading businesses as well, as Q1 2026 confirms.

• Emphasis on net interest income and wealth management: management has repeatedly said that NII remains a key driver, but that the main growth legs are Merrill Lynch and Private Bank, where the bank is building new relationships and growing assets under management.

• Digitisation and AI ("Erica 2.0"): The bank is expanding its use of AI in retail banking, particularly through its virtual assistant Erica. The aim is to reduce servicing costs, improve the customer experience and thereby promote positive operating leverage.

• Capital policy: Bank of America is combining dividend and buybacks, and after 2025, with EPS of $3.82 and growing net income, it has room to further increase payouts - always, of course, taking into account capital requirements and stress test results.

• Competitive position: within the large US banks, Bank of America remains the "second pillar" next to JPMorgan - smaller in terms of revenue but with a very strong retail and wealth footprint. Q1 2026 shows that the bank can deliver revenue and earnings growth even in a normalized rate environment, which is a good sign for investors.

Fair Price

There are companies that are good, companies that are great. And then there’s ASML — a company without which modern civilization literally cannot manufacture chips. No other company in the world can do what they do. And the results for 2025 only confirmed that.

What ASML actually does and why it matters

ASML builds lithography machines — enormous devices that use light to "draw" circuits onto silicon wafers from which chips are made. The more precise the machine, the more powerful and energy-efficient the chip.

The key technology is called EUV. One such machine costs over $200 million, weighs 180 tons and consists of more than 100,000 components. ASML is the only company in the world that can build it. TSMC, Samsung, Intel — all without exception have to buy from ASML if they want to produce the most advanced chips.

A monopoly built by decades of research that no one can replicate overnight.

Q1 2026 results confirm a strong start to the year

ASML has just released results for the first quarter of 2026. And they are exactly what you would expect from a monopoly.

Revenue reached €8.8 billion — at the upper end of its own guidance. Net income was €2.8 billion, with earnings per share of €7.15. That’s roughly €0.54 above analyst consensus. Gross margin 53%, again at the upper end of the outlook.

But the most important thing came in the form of an increased outlook. ASML raised its revenue outlook for full-year 2026 to €36–40 billion, from the previous €34–39 billion. And a key detail: this projection already includes potential impacts of export restrictions to China.

Demand exceeds supply

Customers in the memory segment report that capacity for 2026 is largely sold out and supply constraints are expected in the coming years. The main constraint is not demand. It’s ASML’s own production capacity.

The company plans to deliver at least 60 EUV systems in 2026, with potential to scale to 80 systems in 2027. Producing a single machine is so complex that capacity cannot be ramped up overnight. ASML therefore operates in a structural supply shortage, and that’s exactly the kind of situation a long-term investor wants to see.

$TSM is increasing its capital expenditures for 2026 by 33% and is directing 70–80% of its budget to advanced processes. $MU and $HY9H.F are on the same wavelength.

Share buybacks and dividend

In Q1 2026 ASML repurchased its own shares for €1.1 billion. The dividend for 2025 is €7.50 per share, an increase of 17% compared to the previous year.

A company that raises its dividend by 17% and aggressively buys back shares sends one clear signal. Management believes that structural demand for their machines is not going away.

My view

ASML is one of the few companies for which the word "monopoly" doesn't feel like an exaggeration. It’s a monopoly in the truest sense — technologically fortified, protected by decades of research, and practically impossible to replicate.

The Q1 2026 results brought no surprises in the sense of changing the story. On the contrary, they confirmed it. Revenues at the top end of guidance, earnings per share above expectations, an increased outlook for the full year. And what interested me most was that management explicitly said the outlook already accounts for export restrictions. Demand from the U.S., Europe and the rest of Asia is strong enough to make up for China.

The reason I’m interested in this company long-term is that every chip made today for AI infrastructure has passed through an ASML machine. Every data center, every server, every GPU. As long as the world wants more powerful chips, ASML will have work.

Net profit in the first quarter came in at €2.8 billion (about $3.0 billion), and ASML now expects to make €36-40 billion ($39-43 billion) for the full year on a gross margin of 51-53%. Combined with a rising dividend and share buybacks, that says one thing: demand for lithography for AI and advanced chips is so strong that the company can afford to plan for further growth after a record year.

How did Q1 2026 turn out?

In the first quarter, $ASML generated €8.8 billion (roughly $9.6 billion) in total revenue, down from €9.7 billion ($10.6 billion) in Q4 2025, but comfortably within the previously stated outlook. Year-on-year comparisons don't matter so much to management in the materials, as 2025 was already very strong; more important is the trajectory: Q1 is a bit weaker than the extremely strong Q4, but the outlook for the rest of the year is rising.

Installed Base Management - i.e. servicing and upgrades of installed machines - is still a bigger part of the revenue. This item reached €2.5 billion ($2.7 billion) in Q1, versus €2.1 billion ($2.3 billion) in Q4 2025. This is key for the investor as it is recurring, more stable, high-margin revenue that helps smooth out the new machine delivery cycle.

The company delivered 67 new lithography systems, down from 94 in Q4, but also 12 used machines (vs. 8 in Q4). The mix of deliveries and a strong service business meant gross profit reached €4.6 billion (about $5.0 billion) and gross margin jumped to 53% from 52.2% in Q4. This is an extremely high number for a capital intensive business and confirmation that ASML has exceptional pricing in the delivery of the most advanced lithography.

Net profit was €2.76 billion (about $3.0 billion), only slightly below the €2.84 billion ($3.1 billion) in Q4. Earnings per share were 7.15 euros ($7.8) basic EPS versus 7.35 euros ($8.0) a quarter earlier. Given the seasonality of orders and the fact that Q4 2025 was exceptionally strong, this is a very solid start to the year.

On the balance sheet side, there is one notable movement - cash, short-term investments and equivalents fell from roughly €13.3 billion ($14.6 billion) to €8.4 billion ($9.2 billion). This is due to a combination of payments for investments, dividends and, most importantly, the launch of a new share buyback plan: in Q1 alone, the company bought back about €1.1 billion ($1.2 billion) worth of shares.

• Full presentation with results.

What management has to say about the results

New CEO Christophe Fouquet described Q1 as a quarter "within guidance" on revenue, but at the upper end on gross margin. However, his report on demand is key:

• Industry growth continues to be underpinned by investment in AI infrastructure

• chip demand is beginning to consistently outstrip supply

• Customers are accelerating capacity expansion plans for 2026 and beyond

• and ASML has a very strong pipeline of new orders and installed base upgrades as a result

Fouquet says bluntly that all these factors are now behind ASML's expectation of further growth in 2026 in all core businesses - so not just the most advanced EUV systems, but also in DUV and services. He also points out that the company has built in "latitude" in its 2026 estimates for various scenarios around export controls - i.e. that even with unpleasant regulatory developments, it should fit into the €36-40bn revenue band with a gross margin of 51-53%.

For Q2 2026, ASML expects revenues of €8.4-9.0 billion ($9.1-9.8 billion) and a gross margin of 51-52%. R&D costs are expected to be about €1.2 billion ($1.3 billion) and administrative costs €0.3 billion ($0.3 billion). This means that even with aggressive R&D investment, it is still a very profitable business.

Long-term results

Revenues rise from roughly €21.2 billion ($23.3 billion) in 2022 to €27.6 billion ($30.3 billion) in 2023, €28.3 billion ($31.1 billion) in 2024 and €31.4 billion ($34.5 billion) in 2025. That means roughly thirty percent growth in 2023, a slight slowdown in 2024, and again over eleven percent in 2025 - a very strong pace for a company of this size and with such high margins.

Gross profit grew even faster than sales: roughly 10.7 billion euros ($11.8 billion) in 2022, 14.1 billion euros ($15.5 billion) in 2023, 14.5 billion euros ($15.9 billion) in 2024, and 16.6 billion euros ($18.3 billion) in 2025. This corresponds to gross margin growth - ASML is succeeding in selling more and more higher value-added systems, while increasing service and upgrade revenues.

Net profit is around €5.6 billion ($6.2 billion) in 2022, rising to €7.84 billion ($8.6 billion) in 2023, falling slightly to €7.57 billion ($8.3 billion) in 2024 and rising to €9.23 billion ($10.1 billion) in 2025. In addition to the growth in profitability, this is helped by a slight decline in the number of shares due to buybacks (the average number of shares fell from around 398 million in 2022 to 389 million in 2025).

Dividends and buybacks

ASML continues to see a combination of rising dividends and buybacks. It plans to pay a total dividend of €7.50 ($8.2) per share for 2025, up 17% from the previous year. It is proposing a final dividend of 2.70 euros ($3.0) per share after three interim dividends of 1.60 euros ($1.75) already paid.

In addition, it is running a share buyback program for 2026-2028, under which ASML bought back about 1.1 billion euros ($1.2 billion) worth of shares in Q1 alone. Given the high valuation, this is questionable for some investors, but in terms of capital structure the company remains very strong and can afford to do so.

Shareholders

The ownership structure is consistent with a global megacap:

• approximately 43% of the shares are held by funds and ETFs

• about 9-10% by other institutional investors such as Norges Bank, Capital Group, Amundi, Fidelity, etc.

• The rest (less than 48%) is held by public companies and retail investors

The largest shareholders include BlackRock (about 7.1%), Vanguard (about 4.5%), Norges Bank (about 2.3%) and other large asset managers. That said, the sentiment of large global funds on the semiconductor sector - and especially on the "AI capex" story - has had a major impact on ASML's share price.

News

Several things have happened at ASML in recent months that are more important to the story than the Q1 number itself.

• After an exceptionally strong Q4 2025, the company reported record order volume of around €13.2 billion (about $14.5 billion), nearly double market expectations, and followed that up Q1 2026 with another "strong but quieter" quarter.

• In response to the long-term boom in AI infrastructure and datacenters, it significantly raised its 2026 revenue guidance to €36-40 billion ($39-43 billion) at a gross margin of 51-53%, above both the initial range and analyst consensus.

• At the same time, the company announced continued restructuring - including a plan to eliminate some 1,700 jobs to simplify its structure and improve efficiency, while continuing to invest massively in the development of next-generation EUV and High-NA systems.

• ASML confirms that capacity, not demand, is the main limit to growth. In materials and commentary, management talks about the key driver being investment in AI infrastructure and that demand for state-of-the-art EUV systems is higher than the company can physically produce. The plan is to deliver a minimum of around 60 EUV systems in 2026, and to approach the 80-unit mark in 2027, which would represent further significant revenue growth.

• At the same time, changes in the management and governing bodies are underway - ASML has published the agenda for this year's AGM, where the appointments and renaming of the Board and Supervisory Board members are to be confirmed. The aim is to align the governance of the company with the fact that it is becoming a key strategic player not only for the chip industry but also for geopolitics (West vs. China).

Fair Price

A 22% discount to NAV, a 12% dividend and a relatively conservative balance sheet would normally tick a lot of classic value‑investor boxes in a niche that public markets often ignore. But this is still a cyclically exposed business development company, not a bond: future returns will hinge on how aggressively it grows asset‑based lending in the next leg of the cycle, what happens to benchmark rates and, above all, whether management can keep credit standards tight when competition for deals heats up – because in this corner of the market, one or two bad underwriting years can erase several seasons of “safe” double‑digit income.

Top points of analysis

• The stock is trading at roughly $15;, approximately 22% below the NAV of $18.26 per share, which represents a significant discount to NAV.

• The annual dividend of $1.64 ($0.41 quarterly) implies a dividend yield of around 12%.

• The portfolio of over $3.2-3.3 billion is 98.2-98.3% comprised of senior secured loans, of which approximately 96% are first lien positions, and is spread across approximately 900 borrowers.

• Loan quality is exceptional, according to recent numbers, with non-accruals representing approximately 0.3% of the fair value of the portfolio and the vast majority of loans performing, which is above average within the BDC sector.

• The net debt-to-equity ratio is around 1.14-1.17x, available capital (including lines of credit and programs) exceeds $850 million, and a cash position of around $360-410 million provides solid liquidity.

• EPS has risen from around $0.35 (2022) to $1.40 (2023) and $1.76 (2024) in recent years, while the dividend has remained steady at $1.64 per year, suggesting gradually increasing payout coverage.

Company performance

SLR Investment Corp. $SLRC is one of the so-called business development companies - investment companies that channel capital into mid-sized companies in exchange for interest and possibly other revenue components. The business model is based on a simple principle: the firm borrows money cheaply in the capital markets and, through structured loans, passes it on to companies that have a harder time accessing bank financing or want more flexible terms. The difference between the cost rate of debt and the portfolio's return net of costs is then converted into net investment income, which BDCs are obliged to pay out to shareholders for the most part.

The portfolio focuses primarily on senior secured loans, often in the first lien. This means that the financing provided is backed by specific assets of the borrower, such as inventory, accounts receivable, machinery or other tangible assets, and the lender has a priority claim on the proceeds from their realisation in the event of the borrower's distress. This specialization places the firm among the more conservative players in the BDC space, preferring lower credit risk to the potentially higher but less certain returns of unsecured loans.

In terms of geography and sector exposure, the portfolio is spread across a broad spectrum from industrials and services to healthcare and technology to specialized segments such as life-science firms. With roughly 900 issuers in the portfolio, concentration risk is limited, and any potential problem for an individual borrower has a statistically small impact on the universe.

Business and products

The core of the business is asset-based lending, i.e. lending based on collateral in the form of specific borrower assets. The firm assesses the quality of these assets, their liquidity and the likely return on their eventual monetisation, and sets interest rates, loan frame sizes and covenants accordingly. This is fundamentally different from conventional unsecured corporate loans, where the primary source of repayment is only the firm's future cash flow without direct collateral.

In addition to traditional asset-based lending, the portfolio has other lending strategies - for example, equipment financed through leasing, specialized loans for the life-science sector or structured financing for other lenders (lender finance). In each of these segments, it seeks to combine a higher than average market rate with robust collateral to result in an attractive risk-adjusted return. Portfolio-level yields are reported to be in the 9-12% per annum range depending on the specific loan type, which improves return on capital in a higher rate environment.

A particular chapter is the life-science portfolio of about $180 million, spread across seven borrowers, where the weighted average yield on first lien loans is about 12.3%. In this riskier sector, the firm consciously avoids pure development projects with no revenue and favours companies that are already generating revenue - thereby reducing the binary risk associated with regulatory decisions and clinical trials. Pricing power in these segments is based on the fact that conventional bank financing tends to be difficult to obtain for similar firms, so they are more willing to accept higher coupons in exchange for the flexibility and specialization of the lender.

Market and addressable potential

Business development companies operate in an environment where the traditional banking sector has delegated some of the financing of mid-sized companies to the capital markets following the 2008-2009 crisis and tighter regulation. Unusually tight lending rules, capital requirements and a cooling of banks' appetite to fund more complex or less standardised cases have opened up space for specialist lenders. This trend remains relevant today, with banks focusing on large, rated clients, while mid-market firms are making more use of BDCs and private credit.

The addressable asset-based lending market in the US is in the hundreds of billions of dollars and is growing, largely due to a combination of the need for more flexible financing and structural changes in the banking sector. The firm operates in a segment where it meets other specialist players such as other BDCs, private credit funds or specialist finance companies, but the advantage is the ability to structure more complex financing with a higher degree of collateral and long-term work with the borrower.

The realistic growth scenario for this type of company is not to dominate the market, but to gradually expand the portfolio within existing strategies and increase share in specific niche segments.

Competition and market position

Major competitors include other BDCs focused on secured lending to mid-market companies, typically Ares Capital $ARES, Owl Rock Capital or Hercules Capital $HTGC, although each has a slightly different sector focus and risk profile. Alongside these are private credit funds and specialist lending platforms that provide similar products, but often without a public equity listing and with different capital structures.

Compared to BDCs focused on higher-yielding cash-flow loans, SLRC looks more conservative - focusing on asset-based and first lien loans, which reduces risk but limits the maximum coupon. As a result, it can offer investors a lower internal rate of return on equity than the most aggressive competitors, but also a more stable NAV path and a lower likelihood of large write-downs in a recession. In a market environment where the market is concerned about the credit cycle, this approach can be an advantage, even if it looks less attractive in "good times".

Against private credit funds, it has the advantage of transparency - mandatory reporting, public results and daily liquidity through the stock market, which some investors prefer to closed-end structures. On the other hand, it is exposed to the momentary sentiment of the stock market, which can lead to inflated discounts or premiums to NAV that do not always accurately reflect the fundamental value of the portfolio. Today's discount of around 22% suggests that the market views SLRC more on the "skeptical" side of the spectrum, whether due to the BDC sector in general or specific concerns about dividend sustainability.

Management and CEO

• CEO Michael Gross has been CEO and President since 2007, Co-CEO since 2019, and has over 30 years of experience in private equity, distressed debt and lending.

Behind the management team is a team with a background in the lending business and private credit, connected to the broader SLR Capital Partners platform. The firm's management combines experience in traditional banking, structured finance and working at investment companies, which is critical to asset-based lending - it's not just about the ability to lend money, but more importantly about disciplined underwriting, collateral structuring and portfolio management over time.

An important signal is management ownership in excess of 8% of shares and the practice of reinvesting a significant portion of bonuses back into company shares. This creates a fair degree of alignment of interests with minority shareholders, as management participates directly in the development of NAV and dividend payouts. Capital discipline is reflected in maintaining debt levels within a target range of around 1.0-1.25x net debt to equity - the current level of 1.14-1.17x clearly falls within this philosophy.

Management is aware, according to the results commentary, that the key KPI that investors look at is the credit quality of the portfolio - they reiterate that the primary objective is to protect NAV and stable NII, not to maximise nominal returns at the cost of higher risk. This is consistent with the conservative profile of the asset-based strategy, but of course it remains to be seen in a worse credit cycle whether the stated discipline translates into actual lower losses relative to competitors.

Financial performance

Over the past four years, the company has undergone a significant change in terms of profitability. Revenues (total investment income) have risen from roughly $139 million in 2021 to $177 million in 2023 and $232 million in 2024, representing year-over-year growth of 27%, 29% and 1.4%, respectively. Growth has slowed in the last year, but this is partly due to a high comparative base and a stabilizing interest rate environment.

Operating profit net of management costs moved from approximately $90.8 million (2021) to $122.5 million (2022), $164.6 million (2023) and $167.8 million (2024) over the same period, with operating margins well above 65% and reaching approximately 72% in 2024. Net income (net income) shows significant volatility due to investment revaluation and realized gains or losses, but the trend in recent years is upward: about 18 million in 2022, 76 million in 2023 and 95.8 million in 2024, corresponding to a net margin of about 41% in the last year.

EPS has moved from around $0.35 (2022) to $1.40 (2023) and $1.76 (2024) over this period, with the share count rising slightly to around 55 million, but earnings growth has more than offset this. From an investor's perspective, what's important is that EPS growth is being driven by a combination of higher interest income and relatively stable operating expenses, i.e. operating leverage - if the credit quality and profitability of the portfolio can be maintained, the company has room to keep EPS in a range that comfortably covers the dividend this year and beyond.

Cash flow and capital discipline

As a BDC, the company operates a little differently than a traditional operating company: the key is net investment income (NII) generation, not necessarily free cash flow in the traditional sense. Still, it's useful to monitor cash flow to see how liquidity and new loan funding is evolving. In recent years, operating cash flow has been volatile as portfolio size, repayment levels and working capital movements have changed.

The dividend of $1.64 per year is paid quarterly and has remained stable in recent years, which is consistent with the nature of BDCs, which are required to distribute the majority of earnings to shareholders. Dividend cover from NII is tight but acceptable so far - in recent years it has hovered around 95-100%, with NII slightly underperforming the dividend in some quarters and exceeding it in others. So the "dividend cushion" is not extremely large, but it relies on the portfolio being mostly performing and non-accruals being minimal.

The stress test for the dividend is relatively straightforward: if NII were to fall persistently into the $1.30-$1.40 per share range as a result of falling rates or deteriorating credit quality, and at the same time significant write-downs were added to reduce NAV, management would sooner or later be faced with the decision to cut the dividend or accept higher debt and eroding capital. We don't see this in the numbers today, but it is a key variable that an income-oriented investor should be watching.

The main positives of the dividend

• Stable dividend payout - the company has a long track record of maintaining dividends (15 years of payouts).

• Income relatively covered by earnings - balance sheet shows net investment income, which has typically covered the dividend in recent years (payout ratio around 85-100%).

• Portfolio with lower credit risk - most of the portfolio is in senior secured lans targeting companies in relatively resilient sectors, which reduces the likelihood of significant defaults.

Key dividend risks

• Dependence on loan yields - as a BDC, SLRC lives off the interest earned on loans to mid-sized companies; if the economy worsens (recession, deterioration in borrower solvency), net investment income and therefore the ability to maintain current dividend levels may decline.

• High yield = high risk - a yield of around 12% is an indirect signal that the market views the structure and risk of BDCs as significantly higher than that of traditional dividend stocks in the S&P 500.

• Borrowing cyclical sensitivity - in an economic slowdown, BDCs may face more defaults, deterioration in asset valuation (fair value), and must potentially cut the dividend to protect capital.

• Impact of interest rates - while high rates may increase yields on new loans, they also increase the cost of their own debt and may initially weigh on earnings.

Balance sheet and debt

The balance sheet corresponds to the BDC type: the firm combines equity with debt from credit lines and bonds, which it then leverages in a loan portfolio. As of December 31, 2025, the investment portfolio was about $2.1-2.12 billion (excluding additional structures), with a net asset value (NAV) of $995.9 million and debt at par of about $1.15 billion. Net debt to equity was around 1.14x, within the target range and below the regulatory limit for BDCs.

Liquidity is bolstered by cash of around $360-410 million and available capital of over $850 million, including unused credit lines and programs such as the Senior Secured Loan Program. This gives the company room to continue originations during periods when the capital markets would be less accommodating without being forced to immediately issue new shares or aggressively raise debt. Interest cover is comfortable due to the high margins at the NII level, but could deteriorate in an environment of potentially lower rates and higher losses.

Valuation

At the current price of around $15 and NAV of $18.26, the stock is trading at around 0.8-0.82 times book value. This implies a discount of around 18-22% to NAV, which is rather on the lower end within the BDC sector, especially for companies with such low levels of non-accruals. The P/E based on the last twelve months is around 8-9, which is a conservative multiple given the rising EPS and high dividend.

More meaningful than tracking P/S (roughly 3.7) in this case is a combination of P/B, dividend yield and P/E, as these best capture the relationship between price, NAV and ability to generate NII. Compared to some peers trading in the 0.9-1.1 times NAV range, SLRC looks cheaper, but the market is likely reflecting concerns about the tight dividend cover and the potential impact of the future credit cycle.

For "cheap" to turn into expensive, a couple of things would have to happen: first, the market would have to start pricing the BDC sector more optimistically overall (for example, due to good portfolio quality experience in a recession); second, SLRC would have to demonstrate that it can keep EPS above the dividend in a lower rate environment and potential growth in non-accruals. In that case, the P/B could approach 1.0 and the dividend yield could fall to 8-9% without anything deteriorating on the fundamental side - it would be purely a rerating.

Risks

The first risk is credit - if the economy goes into a recession and non-accruals jump from today's 0.3% to several percent of the portfolio, there would be a need to make provisions, which would push down NII and NAV. A signal to this scenario would be a rapid increase in the number of problem loans, a deterioration in the ratings of internally monitored borrowers, and an increase in restructurings.

The second risk is interest rate - a rapid and significant decline in rates would reduce the yields on SOFR+ spread floating loans, while the cost of debt would adjust more slowly, compressing margins and potentially driving NII below the dividend. The signal would be the confluence of declining NII per share and a stable or rising dividend, which would indicate that the company is paying above its potential.

A third risk relates to the BDC model itself - regulatory changes or changes in the tax treatment of similar structures could make the sector less attractive or increase the cost of capital. Signals should be looked for in upcoming legislative proposals, regulators' attitudes towards leveraged structures, and potential changes to the rules for distributing profits. Another specific risk for SLRCs is that if there is a large widening of the discount and sustained pressure on the price, the issuer would have limited ability to fund growth through equity issuance without significant dilutive penalties.

Investment scenarios

Optimistic scenario

In the optimistic scenario, the combination of an asset-based strategy, an emphasis on first lien, and conservative underwriting results in non-accruals remaining well below 1% of the portfolio and losses being minimal even in a more challenging environment. NII per share is holding or rising slightly due to floating rates and continued originations in ABL, EPS is stabilizing in the $1.7-1.9 range and NAV per share is slowly rising above today's $18.26 level. In such an environment, the market may gradually re-price the title to a P/B of around 1.0 and a P/E in the 10-11 range, which at a NAV of around $19-20 implies a potential share price of $19-22 and a dividend yield falling towards 8-9%.

The investor in this scenario benefits from a combination of high ongoing cash yield and capital appreciation as the discount to NAV narrows. The total annual return could be in the higher double-digit percentage range if the rerating takes place over a few years. The key assumption is that market concerns about the credit cycle and sustainability of the dividend will not be confirmed, but rather that SLRC will be one of the more disciplined players.

A realistic scenario

In the realistic scenario, the company will remain a stable "annuity" title. NII oscillates around $1.6 per share per year, the dividend of $1.64 remains unchanged, although the payout ratio hovers near 100% and occasionally benefits from accumulated gains from previous years. Non-accruals will increase slightly but will not exceed 1-1.5% of the portfolio, so the impact on NAV will be manageable and capital will not need to be raised significantly. Revenues will remain in the range of $220-240 million per year and EPS around $1.5-1.7.

Valuation multiples will not change much in this scenario - P/B will remain around 0.8-0.9, P/E around 8-9 and dividend yield between 10-12%. Thus, the total return to the investor is primarily made up of a high dividend, while capital appreciation will be limited or moderate, depending on whether the discount to NAV narrows slightly. This scenario is attractive from an income investor's perspective: it is a "living on dividends" scenario with a realistic expectation that the share price will stagnate around today's levels over the long term, with possible fluctuations according to sentiment.

Negative scenario

The negative scenario combines a faster decline in rates with a more severe deterioration in the credit environment. Portfolio yields decline, NII falls below $1.4 per share and non-accruals spike above 2-3% of fair value, leading to write-downs and pressure on NAV. While management is trying to restructure distressed positions, the combination of lower interest income and credit losses are pushing EPS down. At some point, the current dividend policy is no longer sustainable and the company either cuts the dividend or holds it at the cost of increased leverage and capital erosion.

In this scenario, the market reacts by widening the discount to NAV - P/B may fall to 0.6-0.7, P/E to 6-7 and share price to the $10-12 range while NAV moves lower due to depreciation. For an investor who got in at today's price, this means a capital loss, partially offset by dividends previously collected. A key signal that this scenario is beginning to play out would be a significant drop in NII per share below $0.40 quarter over quarter and an increase in non-accruals above a few percent of the portfolio.

What to watch next

• The level of net investment income per share, particularly whether it remains at least at $0.40 per quarter over the long term.

• The proportion of non-accruals to the fair value of the portfolio and its evolution over time - ideally below 1%, cautioning above 2-3%.

• The evolution of NAV per share, whether it remains stable or is trending lower.

• Net debt to equity ratio - whether it remains in the target range of around 1.0-1.25x and doesn't shoot higher in a recession.

• Volume and structure of originations vs. repayments, especially in the asset-based segment and life-science portfolio.

• Dividend development - maintaining $0.41 per quarter vs. possible downward adjustment.

• Trends in EPS and ROE, if they stay at least in the $1.5-1.7 range and 8-10%.

What to take away from the article

• This is a more conservative BDC with a portfolio of over $3.2 billion, 98% made up of senior secured and most first lien loans.

• The stock trades at a roughly 20-22% discount to NAV and a dividend yield of around 11-12%, creating an attractive income profile.

• Credit quality is currently exceptional, with non-accruals only around 0.3% of the portfolio, but this may change in a recession.

• The dividend is tightly covered by net investment income, so its sustainability depends on the evolution of rates and loan losses.

• Leverage of around 1.14-1.17x net debt to equity is in the target range, but leverage increases sensitivity to the credit cycle.

• The positive scenario assumes a gradual narrowing of the discount to NAV and a total return combining a high dividend and rerating valuation.

• The negative scenario comes if the NII permanently falls below the dividend and non-accruals rise significantly, which could force a dividend cut as well as further pressure on the price.

Why some stocks look too cheap

There is a group of companies in the stock markets that trade at valuations well below the market average. Their P/E ratios are in the single digits, sometimes even below 2x, which at first glance looks like an extreme opportunity. But the experienced investor knows that a low P/E is not in itself a reason to buy. There is always a specific story behind such a low valuation and a reason why the market is valuing at a significant discount to the broader market.

The reasons can be varied. In some cases, it is one-off accounting gains that artificially inflated EPS and thereby depressed the P/E ratio without any real improvement in operating profitability. Other times, a structural problem in the business model, regulatory risk, extreme debt or declining sales are behind the low valuation. But in many cases, the market simply overlooks a company that is undergoing an operational turnaround, generating stable cash flow and gradually improving its fundamental profile.

It is the distinction between a value trap and a real opportunity that is key. Our analyst team has focused specifically on low P/E stocks, and in this analysis we present seven titles with potential or those best avoided. Let's take a look at what's really behind these numbers.

Regis Corporation $RGS

Regis Corporation operates one of the largest networks of hair salons in North America, primarily under the Supercuts brand. The company has undergone a major restructuring in recent years, transforming from operating its own salons to a franchise model. The current P/E ratio of around 0.5x looks extremely low, but you have to see the context. This figure is largely driven by one-off accounting items, including tax benefits and gains on asset sales, which distort the true picture of operating profitability.

In the first fiscal quarter of 2026, the company reported an operating profit of $5.9 million, an increase of 181% from the prior year. Net income from continuing operations was $1.4 million. The company recorded its fourth consecutive quarter of positive operating cash flow, an important signal of stabilization for investors. However, market capitalization is only around $60 million on annual sales of over $230 million, reflecting the market's continued high uncertainty about the sustainability of the turnaround.

The biggest risk remains whether the franchise model is strong enough to deliver long-term revenue growth. The hairdressing industry faces structural challenges, including changing consumer behaviour and competition from smaller independent salons. While the acquisition of the Alline chain has brought a new source of revenue from operating salons, it has also increased operational complexity. Thus, the low P/E at $RGS is more a reflection of a specific accounting situation than a true undervaluation of the company.

LexinFintech $LX

LexinFintech is a Chinese fintech company focused on consumer lending and digital financial services. The firm operates the Fenqile platform, which offers installment purchases and personal loans, while also providing technology services to financial institutions. The stock trades at a P/E of around 1.8x on a market capitalization of roughly $385 million, an extremely low valuation for a company with annual revenues of over $1.8 billion.

The low valuation is primarily due to regulatory risk associated with the Chinese financial sector. The Chinese government has significantly tightened regulation of online lending and consumer finance in recent years, which has created pressure on margins and growth across the industry. Adding to this is the geopolitical risk associated with investing in Chinese ADRs (American Depository Receipt is an American Depository Receipt that allows investors to easily trade shares of foreign companies) listed on U.S. exchanges (NYSE, Nasdaq). UBS $UBS lowered its recommendation to Neutral in December 2025 while knocking the target price from $13.60 to $3.50. While the company is generating profits, paying a dividend (13.6%) and actively buying back its own shares, the risk profile remains too high for most Western investors.

On the other hand, it cannot be overlooked that the firm is actively improving credit risk management with AI, reducing delinquencies, and the CEO has personally purchased over $10 million of stock. The dividend yield is over 7% and the payout ratio is below 24%. For investors willing to take regulatory and geopolitical risk, this is an interesting situation, but it is clearly a speculative position.

Lyft $LYFT

Lyft is one of the most interesting examples in this analysis. The company, which has been a loss maker for most of its history and traded at a negative or extremely high P/E, has flipped into significant profitability in the last year. The current trailing P/E is around 1.9x, a dramatic turnaround from 2024 when the P/E was above 200x. Over the past 12 months, the company posted net income of $2.84 billion on revenue of $6.32 billion.

The key problem is that much of that profit comes from one-time items and accounting adjustments, not operating performance. Forward P/E is around 8.9x, indicating that analysts expect significantly lower earnings in the coming quarters. The stock has lost about 31% since the beginning of the year and is trading well below analysts' target prices, which average around $20.50. Additionally, the company is facing competitive pressure from Uber $UBER, and the emergence of autonomous vehicles through its partnership with Waymo presents both an opportunity and a threat.

The robo-taxi collaboration with Waymo in Nashville, where Lyft maintains and operates the vehicles through its Flexdrive division, points the way to a future model. If autonomous driving becomes widespread, Lyft could benefit from reduced driver costs. But at the same time, there is a risk that tech giants will operate their own fleets without the need for an intermediary platform. A forward P/E of around 9x is interesting for a ridesharing firm with growing revenues, but investors should distinguish between recurring and non-recurring earnings.

Live Ventures $LIVE

Live Ventures is a diversified holding company with a strategy inspired by Warren Buffett's model of buying, building and holding mid-sized U.S. companies. The portfolio includes steel fabrication, flooring, retro media retail, and other products. The firm trades with a market capitalization of about $41 million, with annual revenues in excess of $440 million and total assets of $389 million.

The seemingly low P/E is a result of fiscal 2025, when the firm posted a net profit of $22.7 million, but the vast majority of that was one-time gains. In the first quarter of fiscal 2026, the firm has already posted a slight net loss of $64,000. However, operating profit improved 353% to $3.5 million and adjusted EBITDA increased 36% to $7.8 million. So the company is going through a real operating turnaround, but net income impacted by one-time items creates a misleading P/E picture.

The flooring segment remains under pressure due to the weak real estate market and sales in this segment declined 20%. In contrast, the retro media retail segment grew 11% and steel products benefited from demand associated with data centre construction. The company is actively reducing debt and buying back its own shares. It is a micro-cap company with a significant discount to book value, but with limited liquidity and a high dependence on the macroeconomic environment.

Vertical Aerospace $EVTL

Vertical Aerospace is a UK company developing electric vertical take-off and landing(eVTOL) aircraft for urban air mobility. The company is developing its flagship model, the Valo, and is still in the pre-commercial phase. A P/E of around 2x is a completely misleading metric in this case, as the company generates virtually no revenue and its earnings over the past 12 months have come from accounting adjustments related to liability restructuring and derivative instruments.

The firm recently announced funding of up to $850 million for its Valo program, with $50 million raised from the issuance of new shares. Orders total about 1,500 units worth about $6 billion, but commercial operation is not expected until 2028 at the earliest. Analysts have an average target price of about $10 versus the current price of about $2.50, but that price reflects a successful certification and production start-up scenario, which is still highly uncertain.

An investment in $EVTL is closer in nature to a bet than a traditional value investment. The company faces a patent dispute with Archer Aviation's competitor $ACHR, has limited cash, and the certification process for eVTOL aircraft is complex and time consuming. P/E is not a relevant metric in this case and investors should evaluate the company based on real cash, certification progress and order book strength.

Nu Skin $NUS

Nu Skin is a global cosmetics and wellness products company that distributes its products through a network of independent retailers in approximately 50 markets worldwide. With a P/E ratio of around 2.3x and a market capitalization of $370 million, the company is trading at historic valuation lows. Over the past 12 months, it has reported revenues of $1.49 billion and net income of over $160 million, a significant portion of which is a one-time tax benefit.

Total sales for 2025 are down 14% year-over-year, reflecting weaker demand in key Asian markets and continued consumer caution toward premium products. On the other hand, the company significantly improved gross margin to nearly 71% and operating margin to 10.79% (for 2025). Management issued guidance for 2026 with revenue between $1.35 billion and $1.50 billion and EPS in the range of $0.80 to $1.20. This puts the forward P/E at around 7.5x, which is significantly higher than the trailing P/E and suggests a normalization of profitability.

The company is betting on two major catalysts.

• The first is the Prysm iO device, an AI skin scanner that measures antioxidant levels, which should boost sales in the nutritional cosmetics segment.

• The second is its entry into the Indian market, planned for the second half of 2026. Latin America is already showing strong growth with more than 100% year-on-year growth in sales and customers.

If the company can replicate this model in India, it could significantly improve the overall revenue mix. Moreover, an ROE of 22% shows that the company can manage capital efficiently even in a period of declining revenues.

Uniti Group $UNIT

Uniti Group is a U.S.-based fiber optic infrastructure provider that merged with its largest customer Windstream in August 2025. The result is a company with 240,000 route miles of fiber optic serving more than a million customers. A trailing P/E of around 2.9x looks extremely cheap, but consider that 2025 net income included a one-time $1.68 billion gain from merger-related settlements. Without that effect, the company would be loss-making.

UNIT

The biggest risk with Uniti Group is its extreme debt. The debt-to-equity ratio is 26.5x and total debt exceeds $10 billion with a market capitalization of about $2.6 billion. The company has issued a 2026 outlook with revenues of $3.6 billion to $3.7 billion and a net loss of $360 million to $410 million. That said, the trailing P/E is completely misleading and the forward valuation points to negative earnings. Analysts expect negative EPS through at least 2028.

On the other hand, Kinetic's retail fiber optics segment is showing strong growth with 24% year-over-year subscriber revenue growth and 20% customer growth. The company is actively building fiber-to-the-home infrastructure with a goal of covering 3.5 million homes by 2029. In an environment of growing demand for data traffic and AI infrastructure, fiber optic infrastructure is a strategically valuable asset. The question remains whether the company can service its massive debt while investing in growth.

Comparisons and common patterns

Looking at all seven companies, several common patterns emerge. Most of them have low trailing P/Es due to one-time accounting items, be it tax benefits (Nu Skin, Regis), restructuring gains (Vertical Aerospace, Uniti Group), or a combination of operating turnover and one-time gains (Live Ventures, Lyft). Only LexinFintech trades at a low valuation primarily due to regulatory and geopolitical risk.

It is crucial to distinguish between trailing and forward P/E. While the trailing P/E is below 2.5x for most of these companies, the forward P/E is significantly different. It is around 9x for Lyft, 7.5x for Nu Skin, while analysts expect negative earnings for Uniti Group and Vertical Aerospace.

Strategic view

From an investment perspective, it is suggested to divide these seven companies into three categories.

• Lyft falls into the potential opportunity category, as its operating model has stabilized and its partnership with Waymo offers an interesting prospect. Nu Skin represents a value play on a direct sales turnaround with catalysts in the form of new products and geographic expansion. LexinFintech then offers an extreme valuation discount, but only for investors with a high tolerance for regulatory risk.

• The category with significant caution includes Regis Corporation and Live Ventures, where low valuations are justified by specific accounting situations and limited liquidity. Both firms are undergoing operational improvement, but are too small and low profile to attract broader capital.

• Then in the speculative bets category are Vertical Aerospace, an unprofitable company where the P/E has no telling value, and Uniti Group, where massive debt outweighs an otherwise interesting fiber story.

What to watch next

• Lyft: Q1 2026 results expected in May to show whether operating profitability is sustainable without one-time items

• Nu Skin: progress of Prysm iO launch and entry into the Indian market in H2 2026

• LexinFintech: the evolving regulatory environment in China and delinquency trends in the loan portfolio

• Uniti Group: ability to reduce debt and growth of Kinetic's retail optics segment

• Regis: sustainability of positive operating cash flow and performance of the Alline acquisition

• Live Ventures: the evolution of the steel products segment in the context of data centre demand

• Vertical Aerospace: progress on Valo certification and drawdown of agreed financing

An extremely low P/E ratio is tempting, but rarely tells the whole story. For most of the companies analysed, the low valuations are the result of one-off accounting effects, not structural undervaluation. Investors who look at these stocks only through the lens of trailing P/E risk creating a distorted picture of the true value of the company.

The real opportunity lies where low valuations coexist with real operational improvement, rising cash flow and clear catalysts for future growth. In this regard, Lyft, with its operating turnaround, and Nu Skin, with its innovative product portfolio, stand out most from the group. Other titles require either a higher tolerance for risk or increased patience.

When the American private equity giant KKR opens its wallet and pulls out over $800 million for a single Asian tech company, it’s worth pausing to see exactly what they’re seeing in the data. Because KKR doesn’t buy blindly.

When did big money enter Asian tech?

Remember the year 2000? Back then capital flowed into anything with “.com” in its name. It ended badly — not because the technologies were bad, but because valuations were detached from reality and flashy names hid companies without a real business.

Today the situation is different. $KKR, a firm with more than $600 billion in assets under management, is not entering Samsung SDS via buying shares on the stock market. It chose a convertible bond structure. That’s an important detail we’ll come back to.

A closer historical parallel is SoftBank’s entry into Alibaba in 2000, when no one really knew how big Chinese e‑commerce would become.

Masayoshi Son bet $20 million and got back a thousandfold. KKR today is not betting on the unknown. It’s betting on a company with 14 trillion won in annual revenue, 26,000 employees and an exclusive partnership with OpenAI.

What exactly does Samsung SDS do and why is it interesting?

Samsung SDS is not the Samsung you know from phones and TVs ($SSNLF). It’s the IT and logistics arm of the Samsung group — practically invisible to the average consumer but absolutely crucial for businesses.

The three pillars of the business:

Cloud and AI services: This is the fastest‑growing area. The cloud segment jumped 15.4% year‑on‑year. The company is launching GPUaaS products built on the latest Nvidia B300 chips — essentially renting out compute power for companies that can’t afford or don’t need their own infrastructure.

Digital transformation: Samsung SDS is the exclusive reseller of ChatGPT Enterprise from OpenAI in Korea. It helps companies adopt generative AI into their everyday processes. This is a business that is only just beginning.

Logistics via the Cello Square platform: The digital logistics platform is growing its client base by 27% annually. By the end of 2025 it was used by over 24,600 companies globally. The logistics segment as a whole is currently being pulled down a bit by falling ocean freight rates, but the platform itself shows healthy growth.

Why convertible bonds and not a direct purchase of shares?

Here we get to why the structure of this deal is so interesting.

Convertible bonds work simply: $KKR lends Samsung SDS money. If the shares don’t rise as expected, they get their money back with interest — a classic bond. But if the shares do rise, the bonds can be converted into equity and they profit from the upside.

For KKR it’s an ideal position: upside like an equity investor, downside protection like a creditor.

For Samsung SDS it’s fresh capital without immediate dilution for existing shareholders and at the same time a strategic partner with a global network of contacts.

The transaction is expected to close in the second quarter of 2026 and will be financed from KKR's Asia Fund IV.

Honestly? This deal makes me think about two things at once, which is painful in itself 🤣, and I’m not sure which one carries more weight.

On one hand I see the classic story of so‑called smart money. $KKR isn’t a fund that throws capital into the air. The convertible bond structure signals one thing: we believe in the AI boom, but we’re not naive enough to bet without a safety brake.

On the other hand the timing surprises me. Samsung SDS shares spiked more than 20% in a single day based only on the announcement. The market is celebrating before the deal clears regulators and before $KKR even acquires a single share. This is exactly the kind of move that tempts retail investors at the wrong moment.

If I had to summarize, the fundamental story makes sense. Exclusive partnership with OpenAI, GPUaaS on Nvidia B300 chips, 27% growth of the logistics platform — these are real numbers, not just hype. But jumping into the stock after a 20% one‑day surge? I’d let that cool down.

And you? Do you hold shares of any Asian company?

What makes the quarter stand out even more is how generous Citi was with its success. The bank returned about 7.4 billion dollars via dividends and buybacks in the period – a payout ratio of 134% of earnings – funded from a still‑comfortable CET1 capital ratio of 12.7% and a tangible book value just over 99 dollars per share. For investors, that combination of double‑digit profit growth, a long‑awaited move of ROE into the low‑teens and capital returns that temporarily exceed what the bank earns is a powerful narrative, but it also underlines that Q1 sits closer to “harvesting the benefits of a clean‑up” than to a sustainable new baseline Citi can repeat quarter after quarter.

How Q1 2026 turned out

For the first quarter, Citi $C made $24.6 billion, versus $21.6 billion in the same period in 2025. That's 14% growth, and it's built on a broad base - all five core businesses and the remaining "legacy" franchises are growing. It's not that the bank has made one big one-off number somewhere in trading, but the opposite: the model is starting to behave as CEO Jane Fraser has been promising for several years, as an interconnected whole.

Net profit climbed to $5.8 billion from $4.1 billion last year. This is a roughly 42% year-over-year increase, driven mainly by three factors: higher sales, a lower effective tax rate (around 21%, down from 25% last year), and the bank having fewer shares due to buybacks. As a result, earnings per share moved from $1.96 to $3.06, with about a third of the improvement coming from lower taxes and fewer shares, and the rest coming from actual improved operating performance.

Costs rose to $14.3 billion, up seven percent from a year ago. They're being pulled up by higher wages, including severance, the impact of foreign exchange rates, as well as higher cost-related expenses (such as commissions, fees and other items tied to revenue growth). On the other hand, we are already seeing savings - productivity, lower legal costs, the gradual unwinding of "stranded" costs following the sale of foreign franchises, and lower transformation expenses at headquarters.

The cost of risk was $2.8 billion. Of this, 2.2 billion is net charge-offs, about the same as last year, and about 0.6 billion is net reserve additions. So the bank is still pricing in a not risk-free environment - factoring in worse macro scenarios and a change in portfolio mix - but at the same time it no longer needs to increase reserves as aggressively as in past years. Net charge-offs are even down 10 percent year-over-year, mainly due to better U.S. credit and markets.

The balance sheet continues to firm up. Loans were around $762 billion at the end of the quarter, averaging $755 billion - up about nine percent from a year ago. Deposits grew to about $1.4 trillion, up about ten to eleven percent year-over-year, primarily due to growth in the corporate and institutional services segment.

For shareholders, this quarter was exceptional. Citi returned approximately $7.4 billion in dividends and share repurchases - roughly $1.1 billion in dividends and $6.3 billion through buybacks. That translates to a payout ratio of 134%, more than the bank earned in the period. It's a clear signal that management is confident in the capital position and wants to lift returns to shareholders quickly, but also something that can't be taken as a new long-term standard.

• Full presentation with results.

What Jane Fraser says and how to think about the results

Citi boss Jane Fraser described the results as "an exceptionally strong start to the year". There are three key messages from her comments.

The first - growth is across the board. Fraser teases out that revenue is up fourteen percent and net profit up 42%, with all major divisions growing: services (Services) +17%, markets (Markets) over seven billion in revenue, banking (Banking) with fee growth of 12% and a record first quarter in M&A, wealth management with eleven percent revenue growth, and US credit cards with four percent growth and returns of around 20%. This is not the Citi of the post-crisis era, which was riding on one strong leg, but a fairly well-balanced model.

Two - the transformation is in its final stages. According to Fraser, Citi is in the "final stages" of divesting foreign retail franchises and 90% of its transformation programmes are said to be "at or close to target". That said, the weight of transformation costs should gradually ease over the next few years and the bank should be more defined by standard operating results. Translated: it should no longer be a perpetually rebuilding bank, but a normally operating profit machine.

Third - capital and returns. Fraser stresses that the target for this year is a return on tangible common equity (RoTCE) in the 10-11% range. In the first quarter, Citi achieved a 13.1% RoTCE and is therefore beating the 2026 target rather than just catching up. This is a marked difference from previous years, when the bank often missed the target. It also implicitly says: the Q1 result is above "normal", other quarters may be weaker, but 2026 should still look better than previous years.

At Investor Day in May, Citi wants to better show investors in detail what this new phase will look like - what exactly they should expect from each business, what the capital policy will look like, and what returns the bank can deliver over the long term. This will be even more important for valuation than the Q1 number itself.

Long-term results

The annual results over the last few years show that Citi is gradually picking itself up from the deep downturn, but still stands somewhere between "done" and "more to do".

Revenues were around $100 billion in 2022, $155 billion a year later, and have already hit $170.7 billion in 2024. 2025 then brought a slight drop to 169.2 billion - a roughly one percent respite after very strong growth in the previous two years. It can be seen that part of the story was driven by the normalisation of rates and interest income after a period of zero rates, and part of it is attributable to the trading and fee business.

Operating profit (EBIT) was around $18.8 billion in 2022, dropping to around $12.9 billion in 2023, rising to $17.0 billion in 2024 and moving to $20.2 billion in 2025. It's a typical "turnaround" picture where costs, restructuring and depreciation come first, then savings and a new business mix take effect.

This makes net income look similarly zigzag. Citi earned roughly $14.8 billion in 2022, dropped to $9.2 billion in 2023, jumped to $12.7 billion in 2024, and moved to roughly $14.1 billion in 2025. Earnings per share (diluted) were about $7 in 2022, then fell to about $4.0 in 2023, rose to $5.95 in 2024 and $6.99 in 2025.

Yet two trends are clear:

• Net income and EPS rise steadily after the 2023 decline.

• at the same time, the number of shares is shrinking due to share buybacks - from around 1.96 billion shares in 2022 to around 1.87 billion in 2025

This means that some of the EPS growth is "financial engineering" via buybacks, but a substantial portion is going after actual profitability growth. Q1 2026 fits into that picture - 42% earnings growth and $3.06 EPS in one quarter give Citi a chance to move up another "step" this year unless the environment deteriorates dramatically.

Shareholders

Citigroup is a pure institutional title. The insider stake (management and board) is roughly a quarter of a percent of the stock, virtually negligible. Over 82% of the shares are held by institutions - large funds, pension and insurance companies.

The largest shareholders are Vanguard and BlackRock, each with a stake of about 9.5 percent, followed by State Street with nearly five percent and Capital World Investors with less than three percent. In other words - Citi's course is in the hands of the big fund houses. As soon as their collective view of Citi shifts, whether through better results or a change in strategy, the stock reacts quickly.

This is important in the context of the current payout ratio of 134%. If the big players believe that Citi can sustain such a generous capital policy for at least a few years with a stable ROE of around 11-12%, they will be willing to rewrite valuations to the upside. If, on the other hand, they see this as a one-time "reward" in a good year, they will remain more cautious and want to see more quarters of similar numbers.

News and strategic moves

The first quarter of 2026 is not just about the numbers, but also about where Citi is moving strategically.

The bank is in the final stages of divesting foreign retail franchises, including Russia, and is moving toward a model that rests on five interconnected pillars - Services, Markets, Banking, Wealth Management and the U.S. consumer. The goal is to have a business that is less complex, more manageable and more capital efficient than the old Citi, spread across 20 retail banking markets.

The transformation costs and risks associated with "legacy" portfolios should gradually decline, leaving room for business as usual - growing loans, fees and services to large corporations and institutions. At the same time, Citi is dramatically paying down capital so that shareholders will finally see the benefit of sitting in a bank that now carries significantly more capital than the regulatory minimum.

From an investor's perspective, the Q1 2026 results look like really good news - Citi is no longer just a "perpetual turnaround" but a bank that, for all the noise around transformation, can deliver double-digit revenue growth, more than 40 percent earnings growth, and a return on capital above its own target. The question for the next few quarters is whether this quarter will become the new normal or just a happy combination of a favorable environment and a restructuring still in progress.

Fair Price

Is anyone invested in it?

At first glance, it may strike you that net accounting profit and GAAP EPS are down more than fifty percent year-over-year. But these are mainly last year's one-time effects (such as the impact of the transactions around Kenvue), so management and the market are looking primarily at the adjusted numbers: adjusted earnings per share of $2.70 are only slightly below last year and above analyst estimates.

How did Q1 2026 turn out?

First-quarter revenues $JNJ rose to roughly $24.1 billion, up nearly 10 percent from roughly $21.9 billion in the same period last year. Adjusted for currency effects, revenue grew around six percent, with an adjusted operating view of just over five percent - solid organic growth for a company of this size. Most of the growth was driven by the pharmaceuticals (innovative medicine) division: this added sales to around $15.4 billion, compared to around $13.9 billion last year. The rest came from the medtech segment, which benefited from higher demand for orthopedics, cardiology and eye products.

At the profit level, the picture is two-layered. GAAP net accounting profit fell to about $5.2 billion from about $11.0 billion last year, and GAAP EPS fell from about $4.54 to $2.14 - more than half. This is primarily due to the fact that the comparative base was heavily impacted by one-time items (asset sales, tax effects, etc.), while this year's number is "cleaner" operationally in terms of structure.

However, if we move to adjusted earnings (excluding these one-off effects), the picture is more stable. Adjusted net income was down only about one to two percent at around $6.6 billion, and adjusted earnings per share were $2.70, versus $2.77-$2.77 last year. Importantly, the $2.70 is above the average analyst estimate, which was expecting something around $2.66-$2.68. In other words, margins are under modest pressure, but operating performance is within or slightly above expectations.

Free cash flow was weaker this quarter - estimates are talking about $1.5 billion, compared to about $3.4 billion last year. This is mainly related to the timing of investments, working capital and some payments; more important to JNJ is its full-year ability to generate stable cash, which has been very strong over the long term. The balance sheet remains robust, with low debt and plenty of room for dividends and acquisitions.

• Full presentation with results.

As commented by management

In the press release and presentation , CEO J. Duato talks about the "strong start to 2026" and that the company is "delivering the year of accelerated growth" that it promised. He singles out in particular:

• Nearly 10 percent revenue growth

• strong momentum in innovative medicine

• Confirmed and newly approved products to support growth through the end of the decade

• and, finally, the lifting of the full-year outlook

J&J now expects 2026 revenues of roughly between $100.3 billion and $101.3 billion, with the midpoint of the $100.8 billion range slightly above market consensus. Adjusted earnings per share should be between $11.45 and $11.65 - the midpoint of $11.55 corresponds to about seven percent growth versus 2025 and roughly in line with what the market was expecting. Overall, then, management is sending the signal, "we're growing faster than before, we're raising guidance, and the plan to achieve double-digit growth by the end of the decade is on track."

The stock reacted with a slight upward move after the results. There are two reasons for this:

• A good outlook for the rest of the year

• Expectations of success for a number of products

JNJ's long-term results

The annual numbers for the past four years confirm that J&J is a typically stable company - sales and profits have been growing over the long term, although acquisitions, divestitures and one-off items occasionally speak between years.

Revenues have moved from roughly $80 billion in 2022 to just over $94 billion in 2025 in four years, growing about six and a half percent to $85 billion in 2023, a little over four percent to $88.8 billion in 2024, and more than six percent to $94.2 billion in 2025. That's a very solid pace for a healthcare giant, especially when you consider the spin-off of the consumer business.

Gross profit grew at an even faster rate - roughly 55.4 billion in 2022, 58.6 billion in 2023, 61.4 billion in 2024 and 68.6 billion in 2025. This suggests that the product mix is improving (more high-margin drugs and better medtech portfolios) and that the company is able to keep the cost of goods sold under control.

Operating expenses (research, sales, administration) grew a bit faster - from about 34.4 billion in 2022 through 35.2 billion in 2023 to 39.2 billion in 2024 and 43.0 billion in 2025. Operating profit still grew - around 21.0 billion in 2022, about 23.4 billion in 2023, dropping slightly to 22.1 billion in 2024 (due to one-time factors) but jumping to $25.6 billion in 2025.

Net income is heavily influenced by one-time items - jumping to over $35 billion in 2023 (double that of 2022), falling to about $14.1 billion in 2024, and rising to $26.8 billion in 2025. Importantly, adjusted (normalized) earnings are growing more steadily, so it makes more sense for an investor to track the trend in adjusted EPS and cash flow. For example, the supplemental materials show that normalized adjusted EPS grew from roughly $10.8 in 2025 toward an estimated $11.5 in 2026.

Share count has been declining slightly in recent years due to share repurchases (from about 2.66 billion shares in 2022 to about 2.43 billion in 2025), so some of the EPS growth is attributable to financial policy, but the main driver is business and margin growth. EBITDA is on an upward trend over that period, with a significant jump in 2025 when EBITDA approaches $32.6 billion.

Shareholders

Insider holdings (management, board) account for only about 0.06% of shares - a negligible amount. Institutional investors hold roughly 75-76% of the stock and free float. The rest is held by a broad base of retail investors and smaller institutions.

The largest shareholders are large fund groups:

• Vanguard holds around 240 million shares (roughly 10%)

• BlackRock about 209 million (about 8.7%)

• State Street about 134 million (about 5.6%)

• JPMorgan and Geode Capital each hold about 2.4% of the shares.

That said, the price performance depends heavily on how the large index and actively managed funds view J&J. If they believe that J&J has a quality drug pipeline, a stable medtech business, and the ability to grow the dividend and earnings over the long term, they are willing to hold the stock despite temporary swings in GAAP numbers. Should sentiment toward healthcare or valuations in general deteriorate, pressure could come despite the fact that the results themselves look good.

News and strategic moves

• New approved drugs and indications - J&J has strengthened its portfolio in areas such as dermatology and oncology. It mentions the approval of ICOTYDE as the first targeted oral peptide for psoriasis, the expansion of indications for the TECVAYLI + DARZALEX FASPRO combination in multiple myeloma, and other moves to ensure that the failure of older blockbusters (e.g., Stelara) won't be fatal for the company.

• Medtech innovations - in medical technology, the company is launching products such as VARIPULSE Pro for faster ablations in cardiology and the TECNIS PureSee intraocular lens for cataract patients in the US. These products expand the addressable market and help lift margins in the medtech segment.

• Increased full-year outlook - J&J raised its full-year revenue and earnings estimates during Q1. It now expects sales of about $100.8 billion and adjusted EPS of about $11.55, which is slightly above the previous forecast and in line or slightly above consensus. This confirms the company has "visibility" for the rest of the year.

• Strategic focus post-Kenvue - after spinning off the consumer business, J&J is purely "healthcare" - innovative pharmaceuticals and medtech. Management reiterates that the goal is to achieve double-digit annual growth by the end of the decade, and Q1 2026 is presented as confirmation that they are on that trajectory.

• Planned Enterprise Business Review - the company has announced a plan for December 2026 to show investors in more detail its medium-term strategy, capital allocation and innovation pipeline. This is a signal that it is preparing for the next "chapter" after Kenvue with an emphasis on transparency to the market.

Fair Price

The turnaround, however, is only half‑built. The foundry unit still runs deep in the red, with annual operating losses measured in multiple billions as Intel ramps EUV nodes like 18A and pours more than 100 billion dollars into fabs in the U.S. and Europe, and management is targeting roughly 40% gross margins and break‑even by around 2027 - a goal that assumes new capacity can be filled quickly enough with meaningful external volume, not just internal chips. For investors, Intel’s foundry story has moved from “pure sunk cost” to a real, if risky, option: if the company can turn today’s pipeline of AI, hyperscaler and government deals into durable, high‑margin wafer and packaging contracts, the division could justify its footprint; if not, the expensive experiment will keep weighing on group returns long after the rest of the business has healed.

Top points of the analysis

• IFS has grown to about $17.8 billion in annual sales and is now about a quarter of Intel's sales, whereas the share was in the single digits of one percent two years ago.

• External foundry sales (outside of Intel's own chips) are still only in the hundreds of millions a year, but are growing at double-digit rates and the order book exceeds $15 billion.

• The foundry segment is still generating billions of dollars of operating losses (on the order of USD 2-3 billion per year), which are pushing down group margins and cash flow.

• EUV wafers have moved from less than 1% in 2023 to over 10% in 2025, showing that Intel is realistically moving to the most advanced manufacturing nodes.

• Overall, Intel earns roughly $73.5 billion in 2025 at a gross margin of 48.5% and roughly $3 billion in free cash flow - so it is no longer a "burning house" but still a capital-intensive transformation.

• The CHIPS Act support brought in about USD 1.5 billion, allowing the state to partially share the risk and unlock financing for new factories without a full onus on the balance sheet.

• The share price has already priced in some of the turnaround - after the massive drop in 2024 came a significant rally, so the room for "easy money" has shrunk, but the re-pricing will stand on how foundry margins evolve.

What's changed: From vision to numbers

The key change is that IFS is no longer a fringe activity, but one of the three main arms of the business alongside client PCs and data chips. In 2025, IFS accounted for more than 25% of Intel's revenue, whereas as recently as 2023 it was a unit of one percent. This mix means that any shift in the foundry segment's margins will translate very quickly into overall results.

At the same time, the revenue mix within foundry is changing. Management reports that EUV wafers - i.e., production on the most advanced nodes - already account for more than 10% of wafers, up from less than 1% in 2023. This is critical because it is the advanced nodes that carry the highest prices per wafer and can pull the foundry business out of the red. As long as most of the volume is running on legacy processes, it is hard to compete with TSMC on price and margin.

There has been an important shift in demand as well. According to the latest data, external foundry sales have climbed to about 307 million. USD 307 million in 2025, with a significant acceleration towards the end of the year. While this is still a small number relative to total sales, the trend shows that more customers outside of Intel's own portfolio are interested in Intel's capabilities. If large contracts in AI chips, automotive or datacenter can be concluded, IFS will have a visible external contribution to cash flow.

At the group level, Intel has moved from a period of deep decline to a phase of stabilisation. In 2025, the company will reach revenues of USD 73.5bn, +10.7% y-o-y, with a gross margin of almost 50% and around USD 3bn of free cash flow, despite heavy investments. This suggests that the core business (PCs, data centers) is no longer in crisis management mode and can act as an "engine" to pull the costly foundry ramp-up in the meantime.

What needs to work for this to work

• Intel needs to maintain the technology roadmap and introduce new nodes into real mass production on time.

• External foundry sales must move from "hundreds of millions" to billions of dollars in a few years.

• Foundry margins must approach at least mid double-digit levels or the segment will remain structurally loss-making.

How to work your way to growth?

https://www.youtube.com/embed/IhbQqEMlUz8?rel=1

The first source of potential growth is long-term contracts to produce advanced chips for large designers - from AI accelerators to automotive. At the moment, Intel has a declared order pipeline of over $15bn, which should materialise over the next few years as new factories are launched in the US and Europe. Each major customer that switches a portion of production to IFS moves the segment closer to the tipping point.

The second driver is product mix. As the share of EUV wafers and advanced nodes grows, the average price per wafer and potential gross margin increases. If Intel can maintain high capacity utilization on these nodes, foundry margins could jump significantly from deep losses towards zero and then into the black within 12-36 months - even at relatively conservative prices.

The third source is cost sharing and support with governments. The CHIPS Act has already provided a direct injection of about $1.5 billion, and additional grants and tax credits reduce the effective CAPEX that Intel must fund from its own balance sheet. In practice, this means that every dollar of free cash flow has a higher leverage effect on return on capital because part of the investment in factories is de facto subsidized.

The numbers that support the growth thesis

• Total sales 2025: USD 73.5 billion, +10.7% year-on-year.

• Gross margin 2025: 48.5%, a significant shift from the "crisis" years.

• IFS sales 2025: ~USD 17.8bn, ~25% share of sales.

• IFS growth: ~3-25% per year depending on metrics (reported vs. adjusted).

• External foundry revenue: $307 million. USD 307mn in 2025, of which USD 222mn in 2025. USD 222 million in 4Q.

• Foundry operating loss: on the order of USD 2.3-3.2bn per year.

• Group free cash flow: around USD 3bn in 2025.

• Cash on balance sheet: USD 20-25bn.

These figures show that turnaround is not just a marketing sticker. The core business is growing again, margins have picked up and the company is generating positive cash flow even though the foundry segment is still massively subsidized. At the same time, it shows that IFS is already big enough to move the overall valuation if successful - but would still be a significant liability if unsuccessful.

Strategic news

Partnerships and investment

• Partnership with Nvidia $NVDA (capital entry and joint chips) - Intel and Nvidia announced a strategic collaboration where Nvidia will invest approx $5bn in Intel and the two companies will jointly develop chips for AI platforms and PC SoCs - Intel will supply x86 cores and manufacturing, Nvidia GPUs (RTX) integrated directly into Intel processors. The goal is to connect the x86 ecosystem with Nvidia's accelerated GPUs, to strengthen Intel Foundry Services and to get RTX graphics into PC segments where Nvidia hasn't been so much.

• Capital support from the U.S. government and SoftBank - Intel's "turnaround narrative" was boosted by news of CHIPS Act subsidies and SoftBank's investment of about $2 billion in Intel to accelerate the foundry business and next-generation chip development.

Manufacturing and factories

• Deferral of Ohio mega-factory project - Intel announced a significant delay in the construction of two large fabs in Ohio (originally targeting a start-up around 2025) - the first fab at a cost of c. USD 28bn is not due to be completed until around 2030, with operations planned between 2030-2031, followed by the second around 2032. The main reason is financial savings at a time when Intel is making a costly transition to a contract manufacturing (foundry) model and needs to better align CAPEX with real demand.

Products and roadmap

• Core Ultra 200 (Arrow Lake and others) at CES 2025 - At CES 2025, Intel unveiled new Core Ultra 200 (Arrow Lake) and next-generation (Bartlett Lake, Raptor Lake Refresh, Twin Lake) processors with a focus on AI, efficiency, security (vPro) and modernizing enterprise IT environments. These chips are headed to both notebooks and desktops and are expected to be the core platform for PCs with local AI acceleration in 2025.

• Panther Lake / Core Ultra 300 and Intel 18A process - Intel finally showed chips made with Intel 18A process at CES 2026 - the next generation Core Ultra 300 "Panther Lake" for PCs with significantly higher CPU and integrated graphics performance. The company promises up to 60% more computing power and 77% more graphics performance over the previous generation, while also marking the first commercial deployment of the 18A process ("designed and manufactured in the USA").

• Arrow Lake Refresh (desktop) - According to leaks indirectly confirmed by Intel's timing, it is also planning an Arrow Lake Refresh for desktop in 2026 - improved Core Ultra models for higher performance, though one of the originally planned top models (Core Ultra 9 290K Plus) has been cancelled.

The new platform

• New hybrid AI platform with SambaNova - Intel and SambaNova have introduced a heterogeneous AI platform that combines GPUs, SambaNova SN50 accelerators (RDUs) for decoding, and Intel Xeon 6 processors for orchestration and operation of tools and agents. The goal is to offer data centers an alternative to pure GPU solutions (mainly Nvidia) and to accelerate inference of agent AI systems at lower power and CAPEX requirements. According to internal data, Xeon 6 has up to 50% faster LLVM compilation compared to ARM servers and up to 70% higher performance on vector databases compared to AMD EPYC, while SambaNova SN50 promises up to 5x higher inference performance and significantly lower TCO(total cost of ownership) than previous generations.

• The entry into the Terafab project also remains a significant new feature.

Valuation: what's included and what's not

Intel's current valuation no longer reflects the crunch years of 2022-2024. After a significant decline in 2024, a strong rally has come, reflecting the belief that the turnaround is "real" - the market is already pricing in a return to revenue growth, margin improvement and support from the CHIPS Act. As a result, revenue and P/E multiples are not explicitly "crisis" and investors are no longer just paying for hardware dinosaurs, but potential foundry players.

The key point is that the current valuation clearly does not fully factor in a scenario in which IFS achieves near TSMC-like margins over the long term. IFS is a large loss-making segment for now, so the market is projecting more of a discount into the price - acknowledging that revenues exist and are growing, but not believing that this will quickly translate into high returns. If Intel shows a combination of double-digit operating margins in foundry and stable FCF within 2-4 years, the repricing could be very significant.

Conversely, if foundry doesn't come out of the red even in a few years, the current valuation is easily defensible as "fully priced" or even overpriced - especially given the capital intensity and risk of technology slippage. In such a scenario, the market could depress the valuation again to reflect a traditional, slow-growth manufacturing company rather than a technology leader.

What the market values

• A return to revenue growth and improved gross margins.

• Government support and de-risking of a portion of CAPEX through the CHIPS Act.

• The real emergence of a foundry segment with a significant share of revenue.

What the market fears

• Long-term loss-making foundry business and weak margins.

• Risks of technology slippage against TSMC and Samsung.

• Dividend and balance sheet pressure with high CAPEX.

Macro and market

The whole foundry story is playing out against the backdrop of growing global demand for chips, mainly due to AI, data centers and automotive. The advanced node(sub-5nm) market is expected to grow at a double-digit rate in the coming years, with current capacity led by TSMC $TSM and Samsung $SSNLF. Intel is attempting to enter exactly this tier of the market - the segment where competition is fiercest but margins are highest.

For Western customers, geopolitics and efforts to diversify production outside of Taiwan also play a role. IFS is thus positioning itself not only as a technological but also as a geopolitical alternative, supported by US and European policies. If tensions around Taiwan increase, this could paradoxically play in Intel's favour, even though it would damage the entire sector in the short term.

Risks

The first major risk is technological slippage. If Intel fails to roll out new nodes on time and maintain yield, customers will be unwilling to pay premium prices and will prefer TSMC. In the numbers, this would translate into weaker IFS revenue growth and persistent loss-making.

The second risk is financial. The Foundry segment already generates billions of dollars in operating losses and requires enormous CAPEX. If the PC or server environment were to deteriorate, cash flow from the core business that subsidizes Foundry today would decline. The result could be increased debt, pressure to cut the dividend or defer some projects.

The third risk is commercial - Intel may have the technology and the capacity, but without large enough external customers the foundry business will never reach effective scale. The pipeline of contracts is promising, but it needs to materialize into long-term contracts with real volumes.

Risk Checklist:

• Delay of new production nodes against schedule.

• Insufficient growth in external foundry sales.

• Persistently high foundry losses with no trend towards improvement.

• Increase in debt and rating downgrade.

• Negative changes in support from CHIPS Act and other programs.

• Weaker demand for PC/data chips that fund transformation.

Investment scenarios

Optimistic scenario

In the optimistic scenario, Intel successfully completes its technology roadmap by 2028-2030, acquires several large foundry customers, and IFS reaches double-digit operating margins. Group revenue could grow at a mid-double-digit rate, FCF would increase significantly and valuation would reflect Intel as a combination of an established chip designer and a major foundry player.

• Revenues: 8-10% annual growth, IFS share over 30%.

• Operating margins: return to higher double-digit levels.

• FCF: strong growth, room for dividend and buyback increases.

• Dividend: stable to rising, cover safely above 1.5x.

• Valuation: revaluation at multiples consistent with a combination of growth foundry and stable chip business.

Realistic scenario

In the realistic scenario, foundry gradually reduces its loss, but only reaches a tipping point in the second half of the decade. IFS becomes a significant but not dominant part of the business and Intel remains more of a "hybrid" between a traditional manufacturer and foundry.

• Revenues: 4-6% growth per year, IFS share around 25-30%.

• Operating margins: mid double-digit, but below best years.

• FCF: gradual growth, with significant volatility based on CAPEX.

• Dividend: stable, no aggressive growth, cover around 1.2-1.4 times.

• Valuation: rather average across large chip companies, no extreme premium or discount.

Pessimistic scenario

In the pessimistic scenario, Foundry never reaches competitive margins, external revenues never rebound from the hundreds of millions, and CAPEX remains high. Intel finds itself trapped, funding an expensive project with uncertain returns while the core business stagnates.

• Revenue: minimal growth or stagnation, IFS revenue share high but not very profitable.

• Operating margins: low, under pressure from foundry losses.

• FCF: weak, at risk of negative values in years with highest CAPEX.

• Dividend: stagnating or declining, covering below 1x in worse years.

• Valuation: pressure on share price, valuation as a "heavyweight producer" with no sustainable competitive advantage.

What to watch next

• External foundry sales growth quarter after quarter.

• Foundry segment operating loss development - trend towards improvement.

• Share of EUV wafers in total production volume.

• Announcement of large foundry contracts (AI, automotive, datacenters).

• CAPEX and its relation to sales and FCF.

• Development of gross and operating margins at group level.

• Cash position and changes in debt.

• Signals from CHIPS Act and other programs (grants, rebates).

• PC and data center demand trends.

• Management comments on break-even IFS timing.

What to take away from the article

• Intel Foundry Services has moved from a marketing vision to a segment with nearly $18 billion in revenue and a key impact on the entire company.

• The core business has stabilized, margins are growing, and the company is once again generating positive cash flow.

• The Foundry segment is still deeply in the red but has growing external revenues and order pipeline.

• Intel's valuation already reflects that the turnaround is real, but the full success of Foundry is not yet fully factored in.

• The dividend is sustainable, but payout growth will be limited until foundry "stops hurting".

• Key metrics are IFS external revenue growth, segment loss development and mix towards EUV wafers.

• Government support reduces CAPEX risk, but also "handcuffs" Intel to a strategic infrastructure role, which brings regulatory risks.

• Investors should view Intel as a long-term bet on the emergence of a third global foundry player, not a quick "AI trade".

What makes the print more than an accounting outlier is the breadth behind it: consumer and commercial banking kept growing, investment banking and markets revenues rebounded, wealth and asset management added fee income, and the balance sheet remains stuffed with capital and liquidity, giving the franchise room to keep taking share while others are still patching holes from the last rate shock.

Q1 2026 results

The bank reported managed revenues of around $50.5 billion for the first quarter, up about 10 percent from the same period last year. Roughly half came from interest income - net interest income was around $25.5 billion, up nine per cent on last year - and the other half from fees and trading, where non-interest income was up eleven per cent. This shows that JPMorgan $JPM is able to benefit from both the higher rate environment and the markets and fee business.

Net income came in at $16.5 billion, up from about $14.6 billion in the same period last year. Earnings per share were $5.94, well above last year's $5.07 and also above what the market was expecting. Return on equity comes out to nineteen percent and return on tangible equity to twenty-three percent, which is elite levels in the banking world. Even net of the cyclical favorable environment, that's just a very high profitability.

On the expense side, the bank spent about $26.9 billion, up about fourteen percent from a year ago. So it's true that costs are growing fast, but revenues are growing even faster, so profitability has improved despite higher payroll, marketing and other items. Loan loss provisions were $2.5 billion, with net charge-offs of $2.3 billion - almost the same as last year - and the net addition to reserves was only slightly positive, indicating that the bank sees no deterioration in credit quality.

The balance sheet and capital position show why Dimon keeps talking about a "fortress balance sheet." CET1's core capital is about $291 billion, CET1's capital ratio is about 14.3 percent (standardized methodology), total loss absorbing capacity (TLAC) is about $572 billion, and cash with liquid securities is about $1.5 trillion. Average loans are up eleven percent year-over-year to about 1.5 trillion and average deposits are up seven percent. So the bank is both growing and sitting on a very strong capital cushion.

Shareholders have not been left out - in this quarter alone they received roughly $4.1 billion in dividends ($1.50 per share) and have received another $8.1 billion back through buybacks. So over the past twelve months, the total "payout" - the combination of dividends and buybacks - is about 82% of earnings.

• Full presentation with results.

Retail & Consumer (Consumer & Community Banking)

The Consumer & Community segment delivered a net profit of around five billion dollars, up around twelve percent from a year ago. Revenues were approximately $19.6 billion, up seven percent year-over-year.

Retail Banking & Wealth Management grew primarily due to higher fees and investment management revenues. The mortgage business benefited from higher production, although net interest income in this segment declined slightly. Cards and auto financing were clearly a strong driver, with higher revolving credit card balances and higher auto leasing revenues pulling this subsegment's revenues up more than ten percent.

Retail costs grew rapidly, up about eleven percent. They were pulled up by investments in marketing, higher depreciation in leasing, and higher fees for bankers and consultants. Provisions remain within reasonable limits - net charge-offs rose slightly, but some provisions are dissolving thanks to better real estate prices. The segment's overall return on capital of around thirty-two percent shows that JPM's consumer business is very profitable, albeit cyclical.

Commercial and Investment Bank (CIB)

The Commercial and Investment Bank is the main "driver" of results. Net income was about nine billion dollars, up thirty percent from a year ago, and revenues rose to about 23.4 billion dollars, up nineteen percent.

In investment banking, revenues were up nearly forty percent, and advisory and equity fees were up about 28 percent. This meant that M&A and equity issuance picked up again after a weaker period, and JPM was able to carve out the biggest slice of that - over nine per cent of the global IB fee market in the first quarter. Payments added double-digit growth thanks to higher deposits and fees, while the credit side benefited from higher balances and gains from portfolio hedging.

Trading and securities services were also very strong. Trading revenues were around $11.6 billion, up twenty percent from a year ago, with fixed income trading growing by more than twenty percent and equity trading by around seventeen percent. Securities services benefited from higher market valuations and greater client activity. Costs in CIB rose by around thirteen per cent - mainly due to higher fees and commissions - but the segment's profitability still improved, with return on capital around twenty-one per cent.

Asset & Wealth Management

The wealth management segment generated a net profit of around $1.8 billion, about twelve percent higher than last year. Revenues moved to $6.4 billion, representing about eleven percent growth. The main drivers are higher management fees due to rising market valuations and net capital inflows, as well as higher client trading activity.

Assets under management climbed to about $4.8 trillion, client assets to $7.1 trillion, and long-term net inflows into funds and other products were about $54 billion in the quarter alone. This is important for stability - the larger this cushion, the less reliance on one-off transactions in investment banking.

What Dimon had to say about this and how to think about it

Jamie Dimon's commentary on the results is that performance is strong across the business - retail, investment bank and wealth management are all growing at the same time, in an environment that is supportive but also fraught with risk. He notes that the bank has "plenty of capital and liquidity" and that while changes to the proposed capital rules have removed the biggest extremes, there is still room for improvement.

On the macro front, he says the US economy has been resilient so far: people have jobs, people are spending, companies are in good shape, plus fiscal policy, some deregulation, investment in AI and previous Fed actions are helping. But on the other hand, he warns of a mix of geopolitical risks, tensions in energy markets, trade disputes, high deficits and inflated asset prices. In other words - the numbers look great, but there's no reason to think the risks have gone away.

Long-term results: strong trend, but 2025 was not a new record

JPMorgan had about $153.8 billion in revenue in 2022, about $236.3 billion in 2023 and about $270.8 billion in 2024 - very strong growth, driven mainly by higher rates and activity in the markets. 2025 brought in around 256.5 billion in revenues, a slight decline from 2024 but still well above 2022-2023 levels.

Gross profit rose to about $168.2 billion in 2025, up from $158.8 billion in 2024 and $145.7 billion in 2023. Operating expenses rose to about $95.6 billion, up slightly from $83.7 billion in 2024, so operating profit fell slightly from $75.1 billion to $72.6 billion. Still, that's significantly higher than 2022, when operating profit was around 46 billion.

Net income reached about $57.0 billion in 2025, just a bit less than the $58.5 billion in 2024 but noticeably more than the $49.6 billion in 2023 and $37.7 billion in 2022. Meanwhile, earnings per share moved from about $12.1 in 2022 to $16.3 in 2023, $19.8 in 2024 and $20.1 in 2025, thanks to buybacks and profitability growth.

This implies several things:

• 2024 was the "peak" of the cycle so far in terms of revenue and profit, and 2025 was slightly behind, but it was still a very strong year.

• The trend over the last four years is clearly up - higher earnings, higher EPS, higher gross profit.

• Q1 2026 builds on this trend and shows that the bank has not fallen off the top of the cycle yet, rather it is near the top.

Shareholders

JPMorgan is a classic institutional large bank. Insider holdings are small, around half a percent of the stock, with the majority in the hands of funds.

According to the latest data, they are holding:

• Vanguard roughly 265.8 million shares (about 9.9%)

• BlackRock about 211.6 million (about 7.9%)

• State Street about 125.3 million (about 4.7%)

• Morgan Stanley about 66.4 million (about 2.5%)

The institutions as a whole control over three-quarters of the free float. That said, the evolution of the share price is very much about how the consensus of the big funds evolves. If they recalculate the models and conclude that a 19% ROE and sixteen and a half billion in quarterly earnings is sustainable, they can send the stock significantly higher. If, on the other hand, they see this as the top of the cycle and start counting on a normalization of profitability, they can put the brakes on the upside even after a great quarter.

News and strategic moves over the past period

• The bank continues to clean up and fine-tune retail - building credit cards and consumer finance, but keeping discipline on risk, as seen in stable charge-offs and only modest reserve changes.

• In investment banking, it confirms its number one position globally - a nearly 10 percent share of fees in the first quarter and double-digit fee growth show JPM is taking full advantage of the resurgent M&A and capital markets.

• Wealth management is building on massive growth in assets under management and net inflows, which is key to a stable fee business over the long term.

• The firm communicated a 2026 net interest income outlook of around $103 billion, although it expects rates to fall further - relying on loan growth, particularly in cards and other credit segments, and a better deposit mix.

• At the regulatory level, JPMorgan is actively involved in the debate over the final form of Basel III rules in the US - the aim is that capital rules should not restrict banks' ability to fund the economy while leaving room for a reasonable payout of capital to shareholders.

Fair Price

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I try to sell as little as possible and hold stocks for several years, but I remember, for example, $CVS or $MMM, which I sold because of various problems and lawsuits. A few months later they rose by several tens of percent. Timing isn't always right, but that's just part of investing.

In addition to dividends, there is another important channel in the stock market through which companies return capital to their shareholders. Share buybacks, or share buybacks in English, have become increasingly important in recent years and in many cases exceed dividend payouts in volume. Yet many retail investors pay considerably less attention to them than to traditional dividends. And this is where the investment opportunity may lie.

Buyback yield is an indicator that measures what proportion of a company's market capitalisation has been spent on buying back its own shares over a given period. It works similarly to dividend yield, but instead of paying cash to shareholders, the company reduces the number of shares outstanding. This has a direct impact on earnings per share (EPS), return on equity(ROE) and valuation multiples. When a firm buys back shares below their intrinsic value, this is one of the most efficient forms of shareholder value creation. If, on the other hand, it buys back overpriced shares, value is destroyed.

In the US market today, we find three companies from completely different sectors that have extremely high buyback yields. Dropbox in the cloud software segment, Ready Capital in commercial real estate finance, and Wendy's in fast food. Each has a different reason for aggressive buybacks and each faces different challenges. Our team has thoroughly analyzed these companies and compiled the most important things to know about them.

Dropbox $DBX

Dropbox is one of the most aggressive companies when it comes to share buybacks in the entire U.S. market. The company, which made a name for itself as a cloud storage pioneer, is now generating steady revenue from its subscription model, but its revenue is virtually flat. It is the combination of a stagnant top line and strong free cash flow that has created room for a massive buyback program.

Over the course of 2024 and 2025, the company repurchased approximately $1.46 billion of its own shares, reducing the number of shares outstanding by roughly 19%. The company's three-year average buyback yield is 7.6%, which puts it among the absolute top of the US market. In addition, in September 2025, management approved a new buyback authorization of an additional $1.5 billion, funded through, among other things, a credit facility from Blackstone Credit & Insurance.

Fundamental picture and risks

For the full year 2025, the company reported revenue of $2.52 billion on net income of $508 million. Gross margins have been steady around 80% and free cash flow exceeds $800 million annually. The stock is currently trading around $23 on a market capitalization of approximately $5.4 billion with a P/E ratio of around 12.

The key risk remains whether aggressive buybacks are merely masking the absence of organic growth. The company's revenues are down slightly and the competitive environment in cloud services is getting tougher. Dominant players such as Microsoft $MSFT with OneDrive or Google $GOOG with Google Drive have distribution advantages that Dropbox $DBX is unlikely to overcome. While the company is developing a new AI product , Dash, that enables intelligent search across unstructured data, its monetization is still at an early stage.

For investors, Dropbox is a prime case of a company using buybacks as a tool to boost earnings per share in a declining top-line environment. When management buys back shares below their intrinsic value, it is an efficient allocation of capital. Morningstar, for example, estimates the fair value of the stock at $81, which would suggest a significant undervaluation. Wall Street analysts, however, are more cautious, and the consensus target price is around $28.

Ready Capital $RC

Ready Capital presents a very different case than Dropbox. It is a commercial real estate finance company(mortgage REIT) that focuses on lending for smaller and mid-sized commercial properties and loans guaranteed by the U.S. Small Business Administration (SBA). The firm operates in a highly leveraged model typical of real estate investment trusts.

In January 2025, the company authorized a new share repurchase program of up to $150 million. Given the then market capitalization of under $300 million, this is an extremely aggressive authorization. The company's total shareholder yield is 44%, which includes a combination of the dividend yield, and just the buyback yield. Meanwhile, the company is buying back shares at prices well below book value, which was $8.79 per share at the end of 2025, while the stock was trading around $1.60.

Why is the discount so extreme

The reason for the extreme discount to book value is clear. Ready Capital is going through a period of severe credit problems. In the fourth quarter of 2025, the company reported a loss of $1.46 per share and book value per share fell 14%. The company has significantly increased its loan portfolio allowance and is facing rising delinquencies in the commercial real estate segment. The dividend was drastically reduced to just 1 cent per share for the quarter. At December 2024, the dividend was still $0.25.

Management is trying to restructure the portfolio through loan sales and liquidity releases. For 2025, the company generated approximately $380 million from portfolio sales and loan repayments. However, analysts remain skeptical. Some have lowered the target price to $1.85, while the average analyst target price is $2.81.

Ready Capital is thus an example of a situation where a high buyback yield may not make for an attractive investment. While the company is buying back shares at a fraction of book value, the book value itself is under pressure and may decline further. It is thus a highly speculative bet that management can stabilize the loan portfolio and stop the erosion of value before further asset depreciation occurs.

Wendy's $WEN

Wendy's, the third-largest burger chain in the U.S., represents a third different approach to buybacks. The company deliberately cut its quarterly dividend from $0.25 to $0.14 per share in 2025 and redirected the freed-up capital into an aggressive buyback program. For the full year 2025, it returned a total of $330 million to shareholders through dividends and buybacks, buying back 14.4 million of its own shares. The company's buyback yield is approximately 8.8%.

In the first quarter of 2025, the company launched an accelerated share repurchase (ASR) program of up to $300 million and spent $124 million on buybacks in the first three months alone. Free cash flow for 2025 was $205 million, showing that the buybacks are largely funded by operations, not debt.

The company is under pressure from declining revenues

The context for this aggressive program, however, is a problematic operating reality. Wendy's faces declining U.S. sales, and the stock has lost about half its value since the beginning of 2025. The company unveiled its Project Fresh strategic plan in February 2026, which includes closing 240 to 360 underperforming U.S. restaurants in the first half of 2026, representing 5% to 6% of the entire U.S. network. The stock is currently trading around $7 with a market capitalization of approximately $1.3 billion.

Trian Fund Management (whose founder is Nelson Peltz, who is also a former Wendy's board member) is in discussions with potential partners about strategic transactions, including a possible acquisition, according to a February document. This adds another layer of uncertainty and potential to the situation. Bank JPMorgan $JPM cut its target price to $7 in response to the results, while Citigroup $C maintained its target at $18.50, illustrating the extreme dispersion of opinion on Wall Street.

Thus, Wendy's is an example of a firm that actively shifts capital policy away from dividends and toward buybacks during periods of operational difficulty. The market will be watching closely to see whether Project Fresh actually leads to improved margins and earnings, or whether buybacks merely slow the decline in earnings per share without addressing the fundamental problems of the business.

Comparison and investment context

All three companies have buyback yields well above the market average, but the motivation and quality of these programs differ fundamentally. Dropbox is buying back shares from a position of strength, from a stable and highly profitable software model with minimal capital requirements. Ready Capital is buying back at an extreme discount to book value, but in an environment of rapidly deteriorating asset quality. Wendy's is consciously shifting the capital policy mix from dividends to buybacks to offset pressure on operating performance.

A key differentiator is the source of funding for buybacks. Buybacks funded by strong free cash flow, as in the case of Dropbox, are the most valuable. Buybacks funded by debt or asset sales, as in part with Ready Capital, carry significantly more risk. Investors should also pay attention to the net buyback yield, which takes into account new share issuance, such as for employee compensation plans. A firm that buys back large volumes of shares but also issues new shares through stock-based compensation may have a real impact on the number of shares outstanding that is significantly lower than the gross buyback yield suggests.

A strategic view

Share buybacks are a legitimate and, in many cases, effective capital allocation tool. Research shows that firms with high net buyback yields that repurchase shares at attractive valuations and from sustainable cash flow have historically outperformed the broader market. But as Warren Buffett has pointed out, buybacks only create value if they are done at prices below the intrinsic value of the firm. Otherwise, they harm shareholders.

In the current environment of higher interest rates and a shift in investor sentiment towards earnings quality, buyback yields are becoming more important as part of the overall shareholder yield. Investors who focus solely on dividend yield are missing out on a significant part of the picture. The combination of dividend yield, buyback yield, and possibly deleveraging provides a more comprehensive view of how much capital the firm is actually returning to its shareholders.

What to watch next

• Dropbox: results for Q1 2026 (expected April 30), the evolution of paying users and the first signs of monetization of the Dash product

• Ready Capital: pace of distressed loan sales, delinquency and book value per share trends over the next few quarters, potential action from Trian Fund Management

• Wendy's: the progress of Project Fresh and the impact of restaurant closures on sales, free cash flow trends and a potential strategic transaction initiated by Trian Fund Management

• General: monitor net buyback yield (net of new issues) rather than gross buyback yield and always evaluate buybacks in the context of the company's valuation, cash flow and debt burden

Share buybacks are a tool that can create or destroy value, depending on the terms and sources of the firm's execution. Dropbox, Ready Capital and Wendy's offer three distinct case studies of this mechanism. Dropbox shows how a mature software firm can effectively use stable cash flow to reduce the number of shares outstanding and increase earnings per share. Ready Capital illustrates the risks of aggressive buybacks in an environment of deteriorating asset quality. And Wendy's demonstrates a strategic shift from dividends to buybacks in response to operational pressures.

The key for investors is not to view high buyback yields in isolation, but always in the context of the fundamental quality of the business, the source of funding for buybacks, and the valuations at which buybacks are executed. It is this combination that determines whether buybacks actually increase value per share or merely create the illusion of capital discipline.

What makes the difference is the pace of growth. While Google is set to hold steady this year with digital ad revenue growth of around 11.9%, Meta is set to accelerate from 22.1% in 2025 to 24.1% in 2026, according to Emarketer. In absolute terms, that means Meta is adding tens of billions of dollars more each year, allowing it to outspend even a strong player like Google in global advertising.

How Meta is outgrowing Google in advertising

Emarketer explains the change primarily by the difference in growth dynamics. Meta $META 's ad revenue is projected to accelerate from 22.1% this year to 24.1% in 2025, while Google is projected to hold "only" a steady pace of around 11.9%. In absolute terms, Meta is thus adding tens of billions of extra dollars each year, which will allow it to catch up to and even overtake Google $GOOG in net digital ad revenue in 2026, according to projections.

Driven primarily by ad products across Facebook, Instagram, WhatsApp and, more recently, Threads. Meta has launched ads on WhatsApp and Threads, putting it in direct competition with X (formerly Twitter) and other messaging and social platforms, while Reels on Instagram continues to rival TikTok and YouTube Shorts in short video. It is short video and automated campaigns that are one of the fastest growing segments of digital advertising today.

Advantage+ and the concentration of budgets on big players

Playinga significant role in Meta's growth is the Advantage+ suite of tools, which uses machine learning to automate campaigns - from targeting to budget allocation to creative. Emarketer and other analysts point out that it's the ability to deliver higher return on marketing spend (ROAS) with less "manual" work that makes Meta an attractive option for advertisers, especially for midsize and smaller companies without large in-house teams.

At the same time, in an environment of geopolitical uncertainty and budget cuts, ad spend is concentrated towards the largest platforms. Analysts cited by Reuters say smaller players such as Snap $SNAP or Pinterest $PINS are more vulnerable when budgets are cut, while Meta and Google will capture a larger slice of the "shrinking pie" thanks to the scale and power of their ad systems. Emarketer estimates that by 2026, Google, Meta and Amazon combined will already account for roughly 62% of global digital ad spend.

What Google has in addition and why it may still be falling behind

Alphabet has a more diversified business compared to the Met - in addition to search and YouTube advertising, cloud, hardware, YouTube Premium subscriptions and other segments are still growing rapidly. But it's the broader mix that analysts say may be holding back pure ad growth: Google has more "legs", but not all of them are growing as fast as Meta's ad business, which is still essentially primarily an advertising company.

Analyst Max Willens comments that Google's outperformance in ad revenue is a symbolic endorsement for Meta of its strategy - a focus on performance marketing, massive use of AI in targeting and aggressive monetisation of new spaces like Reels, WhatsApp and Threads. Google still has plenty of growth avenues, according to him, but in the pure advertising line, Meta's higher growth rate may put it behind for some time.

What this means for the digital advertising ecosystem

If Emarketer's forecast comes true, it will end an era when it was taken for granted that Google was the "ad leader" of the internet. For the first time in history, the combination of social, short-form video and messaging would generate more ad revenue than search and YouTube combined.

From the advertisers' perspective, this marks another shift to a few dominant platforms that hold most of the reach, data and optimization tools. For medium and smaller networks, this further increases the pressure - in an era where budgets are shifting rather than growing massively, it will be increasingly difficult to carve out a significant share alongside Meta, Google and Amazon's $AMZN.

Why Meta is accelerating: AI, WhatsApp, Threads

Emarketer attributes Meta's accelerating growth to several factors:

• Advantage+ and AI automation: automated campaigns boost performance and lower the barrier to entry for advertisers who don't have to deal with complex setups.

• WhatsApp and Threads: ads on these apps are estimated to add up to an extra $25 billion a year over the next few years.

• Reels and short video: Meta has been able to monetize Reels in a way that no longer dilutes overall margins - tmp has expanded inventory while maintaining strong ROAS.

Google, by contrast, is growing more steadily but more slowly. YouTube is still going strong, but some of the growth is shifting to subscriptions (YouTube Premium) which are not net ad revenue, and experiments with AI answers in search are not yet multiplying ad revenue at the same rate Meta is growing on social.

In my portfolio I currently hold only one Dutch stock – $ADYEN.AS . I have two positions in it with a combined weight of about 3% of the portfolio. Both are currently at a loss, but I stay calm and hold them with a medium-term horizon and a target price around 1530 USD.

Why I like $ADYEN and why I hold it:

One of the global leaders in payment platforms with a scalable and high-margin model

Strong long-term trends thanks to the shift to digital and cashless payments

High customer “stickiness” – switching to a competitor is costly and complex

Expansion into new regions and segments (especially the US and enterprise clients)

Stable balance sheet and consistent cash flow generation even in a weaker macro environment

I believe the current price does not fully reflect the long-term growth potential, so I’m prepared to be patient and let the position “work” over the coming quarters.

On my Dutch watchlist I also have $ASML . I consider the company to be exceptionally high quality from a long-term perspective, but at current prices I view it as overvalued and I’m not buying yet. My planned entry zone is around 980 USD.

Why $ASML is attractive, but I’m waiting:

Global leader in EUV lithography – practically a monopolistic position in the most advanced chip manufacturing

Key supplier for the largest players like TSMC, Intel, and Samsung

Strong structural demand driven by AI, HPC, and the ongoing need for more powerful chips

Significant technological lead that is extremely difficult to catch up with

On the other hand, the current valuation in my view already largely prices in an optimistic growth scenario and leaves minimal “margin of safety” in case of a slowdown in the semiconductor cycle or order delays. Therefore I prefer to wait for a better entry price.

Discipline on entry prices remains one of my key rules. I’d rather miss part of the upside than enter at an unattractive risk-reward ratio.

How about you? Do you hold Dutch stocks like $ADYEN or $ASML in your portfolio? Are you also waiting for better prices on some names?

The English version of this post is available on my profile on eToro. If you’d like to follow me there or possibly copy my USD portfolio, I’d be happy!

What matters is how the bank got there. The quarter reads less like a one‑off windfall and more like the payoff from a multi‑year course correction: shrinking or exiting low‑return retail experiments, re‑weighting toward advisory franchises, financing and wealth management, and pushing harder on capital discipline and buybacks. With the stock already up sharply over the past year and the share of earnings coming from fee‑rich, balance‑sheet‑light activities rising, Q1 2026 works as a proof‑of‑concept that the “back to our knitting” strategy can support a near‑20% return on equity even in a world of higher capital requirements – a bar most universal banks still only talk about in slide decks.

How Q1 2026 turned out

Revenue and profit

• Net revenues:

  • Approximately USD 17.2 billion

  • Approximately USD 15.1 billion in Q1 a year ago

  • year-on-year growth of around 14%

For a bank that is already very large, double-digit revenue growth in one quarter is clearly a positive signal. At the same time, it is well above the market consensus, which means that Goldman $GS was able to take advantage of the current market situation better than the market expected.

• Net Earnings:

  • Q1 2026 approximately USD 5.6 billion

  • Q1 2025 approximately USD 4.6 billion

Year-on-year, net income will thus increase by around USD 1 billion, or around 20-25%. This is the main number that "pulls" the story of the quarter - the bank was able to translate much of the revenue growth into profit growth, not just "burn" it in costs.

• Earnings per share (EPS):

  • Q1 2026: $17.55

  • Q1 2025: approximately USD 14.1

EPS growth of about $3.4 per share corresponds to a year-over-year increase of about 25%. That's a very solid pace for a bank of this size and confirmation that this is not just a cosmetic improvement.

Return on equity

• Return on Equity (ROE):

  • Q1 2026 around 19.8%

  • a year ago more in the region of 14-15%

A jump close to 20% is crucial - most large US banks typically hover somewhere between 10% and 15%. Nearly 20% means Goldman can earn significantly more per unit of capital than the sector average.

• Return on tangible equity (ROTE):

  • Q1 2026 around 21%. This number strips capital of goodwill and other intangible assets, so it is closer to how efficiently the bank works with "real" capital. Over 20% is a very high level in the banking world, which usually justifies an above-average valuation if it is sustainable.

• Full presentation with results.

How management commented on the results

"The geopolitical environment remains very complex - so disciplined risk management must remain at the core of our operations," Goldman Sachs CEO David Solomon said in a statement.

Management built on two main theses in its commentary.

First, that this is an "earned" number, not just a fluke. Management notes that the bank has been making tough moves in recent years - exiting retail banking, cutting back on loss-making projects, realigning its capital allocation. Q1 2026 shows that the puzzle is coming together nicely: capital is concentrated where Goldman has traditionally had a strong brand, people and processes.

Second, that they recognize the cyclicality of the business despite a strong quarter. Market activity, M&A volumes or new issue creation are sensitive to the macro economy and investor sentiment. Management is therefore stressing that it wants to continue to strengthen the more stable pillars of returns - mainly wealth management, investment products and long-term mandates from large clients.

At the core, then, is the message:

• The numbers are excellent.

• They are not just a fluke, but a result of the changes we have made.

• Still, we're not going to pretend it's going to be like this every quarter, and we're going to continue to build a more stable mix of returns.

The long-term picture

When we step back from one quarter and look at the last few years, a clear turnaround is emerging. After the weaker years of 2022-2023, when results were pressured by weaker market activity and retail losses, both annual revenue and net income have gradually started to pick up.

Revenues have been roughly in the range of USD 46-50bn per annum in recent years, with 2025 bringing further improvement thanks to a recovery in investment banking and trading. Net profit in 2025 was somewhere between USD 15-16 billion, a marked improvement on the weaker years before.

Return on equity has gradually moved from levels around 10-12% closer to the bank's previously communicated target of somewhere in the 15-17% range. Q1 2026 builds on this and adds another step: ROE of nearly 20% and EPS of $17.55 are above the average of recent years.

Investors need to ask themselves two questions:

1. How much of this performance is due to "good markets"? If activity in MA, issues or trading weakens next year, the numbers will go down.

2. What is the structural change? If a lower cost base, a better mix of business and a greater emphasis on asset management is a permanent change, the average year in the future should look better than the average year in the past even after the current boom is subtracted.

Q1 2026 alone doesn't address this issue, but it makes a good case for saying that Goldman has the potential to steadily hold near the top end of the sector as long as regulation and the environment don't throw it a big pitchfork.

Shareholders

Goldman Sachs is a typical "institutional" title.

• Most of its shares are held by large funds - index funds, actively managed funds, pension and insurance portfolios.

• The largest holdings include fund groups such as Vanguard, BlackRock and State Street, which together own a significant portion of the free float.

Insider holdings (the share of management and directors), on the other hand, are relatively small, which is common among similar firms.

Practical implications for the share price:

• the move after earnings is not about "someone big" selling or buying

• but how dozens and hundreds of funds adjust their models

  • increase their estimates of long-term EPS and ROE → more willing to pay more for the stock

  • will see Q1 as just the top of the cycle → will be more likely to hedge profits and put the brakes on further price appreciation

Therefore, even after a very good quarter, the market reaction may be muted if investors start to fear that it won't get better in the short term.

News and strategic moves

Q1 2026 not only gives good numbers, but also fits in with a couple of important moves the bank has been making recently:

• Completing the retreat from retail and consumer lending - Retail banking projects that have historically generated losses and complicated the balance sheet have either been sold or muted. This has freed up capital and management for key areas.

• Focus on core investment banking and trading - Goldman is returning to what it has been doing for decades - advisory, issuance business, equity, bond and derivatives trading. In an environment where capital markets are waking up, it is taking full advantage of this.

• Building a more stable pillar in wealth management - Wealth management and investment products (funds, alternatives) are a priority. The Bank wants a greater proportion of future revenues to come from regular fees, not just "hit and run" income from large transactions.

• Capital policy - Goldman combines dividend with share buybacks. In a high profitability environment, this helps earnings per share growth, but at the same time the bank needs to hold enough capital for regulatory testing and stress scenarios.

• Strengthening its position in the mergers and acquisitions market - Goldman is one of the main advisors in a period when larger deals are starting up again after a hiatus. This is important not only for short-term fees, but also for reputation and future assignments - those who service large deals now are more likely to be called upon next time.

Fair Price

Sitting in that unglamorous layer is a manufacturer that began life as an IBM spin‑off and has since reinvented itself as a specialist contractor for AI data centers, assembling custom systems for cloud giants, chip makers and government programs instead of pushing a consumer brand. Over the last four years, its revenue has climbed from roughly 5.6 billion to more than 12 billion dollars, net income has compounded by several dozen percent a year and returns on invested capital have moved into territory investors usually associate with software, not with factories and contract manufacturing.

Top points of analysis

• The company has shifted from a traditional EMS assembly plant over the past decade to an engineering partner for AI datacenters - designing and integrating 400/800G and emerging 1.6T switches, AI servers, and entire rack-scale systems for hyperscalers and chipmakers.

• Revenues grow from roughly $5.6 billion in 2021 to $9.6 billion in 2024 and around $12.4 billion in 2025, with the CCS datacenter segment being the main driver - growing 64% YoY in Q4 2025 alone and accounting for about 78% of revenues.

• Profitability is growing even faster: net profit increased from $104m to $428m between 2021 and 2024. USD428 (+75% between 2023 and 2024 alone), EPS roughly tripled to USD3.62 and reached USD6.05 in 2025 according to the results, and return on equity (ROIC) is around 21%.

• The balance sheet is strong and relatively conservative: total assets less than USD 6bn, equity around USD 1.9bn, net debt around USD 0.5bn.

• Management, led by Rob Mionis (CEO since 2015), has been open about the fact that AI is not a short-term fad but a structural change, and is investing accordingly - for 2026 it plans CapEx of US$1bn in new capacity in Texas, Thailand, Mexico and Japan, funded primarily by operating cash, and has raised revenue guidance to US$17bn and adjusted EPS to 8.75.

• Key strength is in AI infrastructure: the company is a major supplier of datacenter Ethernet switch platforms (alongside Nvidia/Accton, Cisco, Arista) and builds custom systems for Alphabet's TPU infrastructure, for example, giving it confidence and predictability into orders through 2027.

How an assembly plant became an AI hyperscaler partner

The Celestica $CLS story begins in the late 1990s, when $IBM spun off part of its manufacturing capabilities in Canada into a separate entity. It gradually expanded, came under the ownership of investment group Onex, and became a major player in EMS (Electronic Manufacturing Services) - a company that assembles servers, telecommunications equipment and industrial electronics for other brands. The business was then high volume but not very attractive: price pressure, low margins, minimal bargaining power.

The turning point came when Rob Mionis took the helm in 2015. He brought industry and private equity experience and a relatively cool-headed view of what such a firm needed to do to avoid being doomed to a slow erosion of margins. He started with a challenging period for the portfolio: he had to exit contracts where the firm is just an anonymous assembly line, invest in in-house design teams and move higher up the value chain to design, integration and lifecycle services. Gradually, the Hardware Platform Solutions division was created, no longer waiting for a detailed drawing to be commissioned, but designing entire systems - from mechanics, to power, cooling and cabling, to testing. It was this layer that later proved crucial when the world started building AI datacentres.

What the company does and what it does for a living

Today's business stands on two main legs that differ in dynamics and nature.

The first and most fundamental is the Connectivity & Cloud Solutions (CCS) segment. This is where the AI story unfolds. The company designs and manufactures for large customers:

• Datacenter switches and routers with 400G, 800G throughput and 1.6T Ethernet platforms in development

• AI servers, training and inference nodes, often in the form of custom solutions for specific chip platforms

• entire rack-scale systems, including liquid cooling, power supplies and cabling

These customers include hyperscalers (global cloud companies), chip manufacturers (including players developing their own AI accelerators), and large enterprise customers building their own AI capabilities. In 2024, CCS accounted for roughly $6.5 billion of the $9.65 billion in total revenue, according to available data, and grew roughly 40% year-over-year. In 2025, CCS continued to accelerate, growing 64% year-over-year to $2.86 billion in Q4, accounting for nearly 80% of revenue. This is where the company has the largest margins and the role of "picks and shovels" in the AI boom.

The other leg is Advanced Technology Solutions (ATS). This includes aerospace & defense, industrial electronics, healthcare and capital equipment (machinery for the semiconductor and imaging industries). This portfolio is growing more slowly, sometimes stagnating - in the last quarter of 2025, ATS earned about $0.8 billion in revenue, down 1% year-over-year. But from an investor's perspective, ATS is important because it delivers more stable cash flow and increases diversification. Aerospace & defense is benefiting from the global increase in military budgets, industrial applications from the automation trend, and healthcare from demographics.

The numbers: revenue, margin and capital growth

The company's transformation in recent years is clearly reflected in the numbers. In 2021, the company earned about $5.63 billion, in 2022 already $7.25 billion (+28.7%), a year later $7.96 billion (+9.8%) and in 2024 $9.65 billion (+21.2%). For 2025, according to the company's results, revenues continued to grow and approached $12.4 billion, driven mainly by the CCS segment.

Profitability growth is even stronger. Net income grew from $104 million in 2021 to $180 million in 2022, $244 million in 2023 and $428 million in 2024, rising to above $650 million in 2025, which corresponds to a growing EPS of about $6.05. EPS has thus more than tripled in four years. Much of this is due to a combination:

• CCS revenue growth.

• margin expansion due to higher value added and operating leverage

• a slight decline in the number of shares outstanding due to share buybacks

At first glance, margins don't look huge - gross margins of around 11.6%, operating margins of 7.2%, and net margins of 6.2% in 2024. But in the context of the manufacturing hardware business, the dynamics are significant: gross profit more than doubled between 2021 and 2024, from $487 million in 2021 to $487 million in 2024. Operating profit rose from $487 million to $1.034 billion, operating profit rose from $168 million to $599 million (+77% between 2023 and 2024 alone), and EBITDA moved from $294 million to $736 million. In Q4 2025, the company reported an adjusted operating margin of 7.7%, its all-time high, and CCS segment margin of 8.4% shows that the mix shift towards AI infrastructure is gradually lifting profitability.

The balance sheet adds an important detail: the company is growing without becoming dangerously leveraged. Total assets at the end of 2024 were just under $6 billion, liabilities $4.1 billion and equity $1.9 billion. Net debt was around $0.5 billion, Debt/Assets was 0.14, Debt/Equity was 0.45, and Altman Z-score was 7, corresponding to a low risk of financial distress. Return on capital is high for a manufacturing company: return on assets around 10.5%, return on equity 38.5% and return on invested capital approaching 21%. Simply put: every dollar invested in the business returns a double-digit percentage appreciation.

CEOs, management and their view of the AI boom

Rob Mionis is the quintessential "operator" - a CEO who grew up in the industry and private equity and has a keen eye for operational efficiency. His career prior to joining the firm included various executive roles at industrial companies and a role as an operating partner at Pamplona Capital, where he focused on manufacturing, aerospace and healthcare businesses. When he assumed leadership in 2015, the firm was marginally profitable and heavily dependent on certain EMS contracts.

Mionis isn't just selling AI as a buzzword - in an interview with CNBC, he described the firm's role with the metaphor that if AI is a runaway freight train, they're laying down the tracks in front of it. This captures two aspects of his strategy well: first, the move from "wiring" to designing entire systems, and second, the realization that AI is not just a fad, but a structural change in how datacenters look and what infrastructure they need. Hence the investment in design centers in Austin and Taiwan, hence the emphasis on rack-scale systems and liquid-cooled solutions, hence the partnering with big players like Alphabet in TPU systems.

The CEO openly says 2026 will be an investment year - CapEx around $1bn, FCF margins lower due to ramp-up of new plants - but also stresses that most of the investment will be covered by operating cash and the goal is to keep net debt in a reasonable range. The entire executive team thus comes across as a combination of "operators" rather than visionaries - which can be seen as a plus in a capital-intensive business.

Market share and competitive position

In AI infrastructure, this company is a typical "hidden champion". It doesn't show up on the box, but it's inside it. On the datacenter networking side, it is one of the major manufacturers of Ethernet switch platforms for datacenters alongside names like Nvidia/Accton, Cisco and Arista. In AI switches and routers for 400G/800G networks, it has a substantial market share according to analysis, especially if you focus on OEM and white-box solutions that are subsequently rebranded.

On the AI compute side, it works with big players on custom platforms. One of the most notable examples is its partnership with Alphabet, where it helps design and manufacture systems using TPU chips for Google Cloud's internal AI needs. The combination of these two competencies - networking and rack-scale compute - is key in AI datacenters, as the bottleneck is often the throughput and efficiency of cluster interconnects, not the GPU performance itself.

The competitive landscape consists of:

• Large networking vendors (Cisco, Arista)

• EMS giants (Foxconn, Jabil)

• and specialized players in datacenters

The move this company has made is to focus on design-rich contracts and build long-term partnerships where it is not easily replaced purely on price. The more a customer's AI stack relies on a particular rack, switch and cooling design, the higher the switching costs.

Where the company can grow in the coming years

The near-term horizon is pretty much a given. Management itself says it has "unprecedented visibility" into AI infrastructure orders through 2027 thanks to multi-year programs with hyperscalers and large cloud customers. The outlook for 2026 - revenue of $17 billion and adjusted EPS of 8.75 - stands primarily on continued robust growth in CCS, particularly AI networking and compute.

In addition, it has several structural drivers:

• Moving datacenters to 800G and 1.6T Ethernet and wider deployment of liquid-cooled racks

• continued growth of AI training and inference clusters, including on-premise solutions for large enterprises

• Increasing military budgets, supporting aerospace & defense projects in ATS

• Long-term trend towards automation and robotics in industry, which requires next generation industrial electronics

When we envision the company in five years, the growth scenario will include:

• Have a significant presence in AI networking and rack-scale systems in multiple generations of datacenters

• an important partner for two or three major hyperscalers and one or two major AI chipmakers

• still have a solid aerospace and industrial business as a stabilizing component

• and to operate with margins that are superior to the hardware business

Valuation: what's worth today

Based on a combination of data and current market indicators, the stock is trading today at roughly:

• P/E 53.3

• P/S 3.36

• EV/EBITDA 37.3

• P/B 18.6

• P/CF around 115

These are values that we would consider extremely inflated for a classic EMS player. But the market views this company as a high-growth AI infrastructure company, not an electronics manufacturer. Fair value models that combine EPS growth, ROIC, discounted cash flow, and a risk premium for cyclicality often end up somewhere around $200 per share, and valuation scores of 19/100 suggest that from a purely numerical perspective, the title is more on the expensive side.

An investor buying today is therefore implicitly saying:

• I believe the company will deliver $17 billion in revenue in 2026 and EPS of 8.75

• I believe the AI CapEx hyperscalers won't have an early end

• I believe the mix towards higher value-add and design-rich contracts will sustain margins

• and I'm resigned to the fact that even with good numbers, the market may at some stage reduce multiples

Risks not to be forgotten

The first is the cyclicality of AI investments. While AI looks like a structural trend, the budgets of hyperscalers and chip companies work in cycles. After two or three years of aggressive building, there may come a phase where projects shift into optimization and maintenance rather than expansion. In an environment where the core segment is now growing at tens of percent per year, even "just" a flat year could mean a significant disappointment.

The second risk is the concentration of large customers. In recent results, the company itself admits that its three largest customers collectively generate more than half of its revenues. Any shift in their strategy - a decision to integrate more production in-house, give a larger share to another integrator, or simply temporarily reduce CapEx - would have an immediate impact on the revenue line.

Investment scenarios

Base case scenario - growth with gradual compression of multiples

In the base scenario, the AI wave in datacenters does not subside, but logically slows down after the extremely strong years 2024-2025. The company delivers a raised outlook for 2026 - revenue of around $17 billion and adjusted EPS of 8.75 - and in the following years, revenue growth stabilizes somewhere in the high single-digit to low double-digit percentage range annually. The CCS segment will continue to grow faster than ATS, but no longer at a 60+% pace; margins will hold near today's levels thanks to a mix of design-rich contracts and operating leverage, and CapEx will normalize downward after an investment-heavy 2026, so free cash flow will start to more closely match accounting earnings.

The market will gradually stop accepting P/Es over 50 and EV/EBITDA around 37, and multiples will compress somewhere in the P/E range of 30-35, EV/EBITDA 18-22 - still a premium to conventional EMS players, but lower than today. Thus, the combination of EPS growth (about 15-20% annualized from today's levels) and multiple compression can still deliver a decent total return: roughly a doubling of earnings per share vs. a one-third to one-half reduction in valuation multiple. The investor in this scenario is not betting on further rerating, but on growth in fundamentals to "tighten" today's premium.

Growth scenario - longer AI supercycle

In the growth scenario, the AI datacenter boom turns out to be not just a 2 to 3 year wave, but a longer supercycle. Hyperscalers will ramp up CapEx beyond 2026 to build next-generation training and inference clusters, transitions to 800G and 1.6T Ethernet will happen faster than expected, and large enterprise firms will join in full force alongside cloud giants to build their own AI capacity. Enterprise in this environment:

• Will gain additional "design wins" at two to three major hyperscalers and chipmakers

• expand collaboration on TPU and other custom AI platforms

• and be able to fill new capacity in Texas, Thailand and Mexico without significant margin fluctuations

In such a scenario, revenues could still grow at double-digit rates after 2026, margins could still improve slightly due to a larger share of rack-scale systems, and FCF would start to catch up more sharply to book profits after the 2026-2027 investment wave. The market would then have reason to hold the title at a P/E of 35-40 and EV/EBITDA of around 25, possibly higher if the company profiles itself as an "indispensable" part of the AI infrastructure. An investor coming in today would see a combination of double-digit EPS growth and only modest pressure on multiples in this scenario - a potentially very attractive yield.

Cautious scenario - AI wave breaks, multiples normalise

In the more cautious scenario, the cyclical nature of AI investing becomes fully apparent. After two to three years of aggressive CapEx, hyperscalers will shift from "build" mode to "optimize" mode - focusing on better utilization of existing clusters, software-hardware stack efficiency, and only later on the next wave of large investments. CCS revenues continue to grow, but at a much slower pace, or even stagnate some years; ATS, while holding steady in revenue, cannot fully compensate for weaker momentum in datacenters.

In this mix, the company remains fundamentally sound - it has solid margins, positive cash flow, acceptable debt - but the market no longer wants to pay a growth premium. The P/E may retreat to 20-25, EV/EBITDA to 12-15, closer to better industrial companies than pure growth companies. Meanwhile, EPS may still grow (e.g., due to slight margin expansion, stock buybacks, gradual revenue growth), but compression of multiples will "eat" some of that growth. The result is a more moderate total return, or a period where the fundamentals grow but the price tends to go sideways or undergo volatility for a few years.

What to take away from the story

This is not a story about a cheap stock that the market is overlooking, but about a company that has managed to be in the right place at the right time - in AI datacenter infrastructure - and the market is willingly paying a premium price for it. The assembly plant has become an engineering platform that today designs and assembles the hardware that runs the AI clusters of the world's biggest players. Revenues and profits are growing fast, returns on capital are high and balance sheets are strong. But at the same time, the stock carries multiples that reckon the AI train will run at full speed for years to come, and that this company will remain the one laying its tracks.

If we want physical AI exposure in a portfolio and are willing to accept higher volatility and valuation risk in exchange for exposure to the datacenter boom, it makes sense to think of this stock as a growth stock, not a stable core. If, on the other hand, we are looking for more of a valuation margin of safety and less reliance on the investment cycles of a few hyperscalers, it may be prudent to watch this story from afar for now and wait for either better input or a clearer signal that AI investing is indeed transforming into a long-term sustainable, not just cyclical, business.

The logic is clear: the AI boom means demand for compute power, electricity and physical server halls. More and more companies don’t want to build their own data centers and prefer to “rent” them from specialized players, so having a large pool of capital solely for consolidating and building these assets makes sense from Blackstone’s perspective. For investors, though, it will come down largely to price: if this vehicle hits the market already carrying an “AI premium” in its valuation and with pressure to spend capital quickly, returns could be worse than picking specific, already established REITs/data-center companies. An interesting story, but the question is how much AI hype will already be priced in on IPO day.

Why follow analysts' sell signals

Sell or strong sell analyst recommendations are not as common in the stock market as one might think. Most analysts naturally gravitate toward positive ratings (reviews) because maintaining good relations with corporate management is part of how Wall Street works. Thus, when an analyst issues a sell recommendation, it is usually due to specific and well-founded concerns about fundamental problems that cannot be easily overlooked.

In the current market environment, where investors increasingly value earnings quality, margin stability, and realistic returns on capital, firms with uncertain prospects come under particularly strong pressure. Our team has selected five companies where analysts are sending a clear warning signal. Each faces different challenges, but the common features are a loss of confidence among professional investors and a declining willingness of the market to tolerate poor performance.

Beyond Meat $BYND

Beyond Meat is now a shadow of its former glory. The company, which went public in 2019 as a symbol of the food industry revolution with a share price as high as $240, is now trading below the one-dollar mark. The consensus analyst rating is sell, with an average price target of around $0.66 to $0.73 per share. None of the original enthusiastic buy recommendations remain.

Structural problems with no clear solution

The source of the problem is not just a cyclical downturn, but a structural failure of the business model. Demand for plant-based meat alternatives turned out to be much less than the market had originally expected.

Revenues for the fourth quarter of 2025 were just $61.6 million, gross margins fell to about 10%, and the company continues to generate deep losses. Negative equity of minus $784 million and total debt of more than double the company's market capitalization paint a picture of a company on the brink of insolvency.

The situation is further complicated by a warning notice from the Nasdaq stock exchange of a possible delisting, which the company received in March 2026 after its stock traded below the one dollar mark for 30 consecutive trading days.

The company'sAltman Z-score is deep in the financial distress zone, suggesting a probability of bankruptcy in excess of 65% in the short term, according to independent models.

Cricut $CRCT

Unlike Beyond Meat, this is a company that is profitable, showing an ROE of around 20% and generating a net margin of over 10%. Yet it has a consensus rating of strong sell, with analysts at Goldman Sachs $GS, Barclays $BRC and Citi $C rating it negatively. The average analyst price target is around $3.45 to $3.67, implying a decline of around 15% from the current price.

Stagnation as the main threat

Cricut' s main problem is not the loss, but the lack of growth. Revenues for the full year 2025 remained virtually flat with the previous year and product revenues are declining. While the company is increasing the number of paying subscribers and improving profitability through cost savings, it lacks any organic growth engine. The market for creative cutting machines is inherently limited and market saturation is reflected in declining interest from new users.

Insider behaviour is also a worrying sign. CEO Ashish Arora sold thousands of shares in March 2026, not a signal that inspires confidence in future developments. Institutional holders own less than 20% of the shares, which is an unusually low proportion and reflects the limited willingness of professional investors to engage with the title.

Alexander's $ALX

Alexander's is a real estate investment trust focused on just five properties in the New York metropolitan area. The firm is managed by Vornado Realty Trust and its revenue is heavily dependent on one key tenant, Bloomberg, which accounts for approximately 60% of total revenue. This extreme concentration creates a vulnerability that the market is increasingly taking into account.

Declining FFO (net cash flow from operating activities) and a threatened dividend

The 2025 financial results confirm the negative trend. Net profit fell 35% to US$28.2 million and FFO fell from US$78 million to US$63 million. For the fourth quarter, the decline was even more dramatic, with FFO falling to $12.5 million compared to $20.8 million in the prior year. Dividend coverage declined to approximately 90%, suggesting that the current payout of $4.50 per share per quarter may not be sustainable in the long term.

This is compounded by high debt levels, with a debt-to-equity ratio of 7.6, and analysts' forecasts expecting a further decline in earnings of 9% per annum on average over the next three years. Revenues for 2025 have fallen by almost 6% and profit margins have declined from 19% to 13%. Moreover, short selling (shorts) of the stock rose 21% in March 2026, signaling growing negative bets for further downside. In addition, the company announced the sale of Rego Park I for net proceeds of $202 million in March 2026, which, while improving the balance sheet, will reduce future earnings.

SandRidge Energy $SD

SandRidge Energy is an independent oil and gas production company focused on the Mid-Continent region of Oklahoma and Kansas. The company is significantly smaller than most competitors in the sector with a market capitalization of around $600 million and limited analyst coverage. This limited size and liquidity is one of the factors contributing to the negative rating.

Volatile results and dependence on commodity prices

The fourth quarter of 2025 highlighted key weaknesses. Revenue was $39.4 million, slightly below analysts' expectations. Earnings per share of $0.34 fell short of the consensus of $0.37. The realised oil price fell to $57.56 per barrel compared to $65.23 in the previous quarter and $71.44 at the end of 2024, illustrating the company's extreme dependence on commodity prices. This trend is very likely to change in future results due to the rapid rise in oil prices as a result of the conflict in the Middle East.

Freedom Capital dramatically downgraded the rating from a strong buy to a strong sell in March 2026, an unusually sharp reversal. Oil and gas producers of this size are inherently risky investments because they lack the diversification of large integrated companies and their operating costs per barrel are relatively higher. In an environment of falling oil prices, this disadvantage is particularly pronounced. Although Carl Icahn, one of the best-known investors, holds a stake in the company, even his presence in the shareholder structure has not prevented a decline in analyst confidence.

Hovnanian Enterprises $HOV

Hovnanian Enterprises is an American residential real estate builder that focuses on the entry, mid-rise and luxury home segments. The company has come under significant pressure in recent months due to a combination of high mortgage rates, rising incentives and weaker sales momentum. Analysts at Citizens initiated coverage in April 2026 with an underperform rating and a price target of $74, down approximately 35% from the current price.

Margins in a downward spiral

Financial results for the first quarter of fiscal 2026 revealed the extent of the problems. Gross margin in the homebuilding segment fell to 10.1% from 15.2% in the prior year, a decline of nearly 500 basis points. Adjusted gross margin declined to 13.4% from 18.3%. The biggest problem, however, is the net margin, which fell to just 2.08% in 2025. The company was thus only able to earn less than $69 million on nearly $3 billion in revenue.

The main reason for this is rising incentives for buyers, which mainly include rising mortgage rates. Incentives as a percentage of average sales price reached 12.6%, up from 9.7% in the previous year, and this trend has continued for seven consecutive quarters.

Sales (for the most recent quarter) decreased 6% to $632 million on a 12% decline in home deliveries. Net income decreased from $28.2 million to $20.9 million. While Hovnanian has successfully refinanced its debt and all major obligations are now unsecured for the first time since 2008, operational performance is deteriorating.

Common features and differences

All five companies are facing different challenges, but several commonalities unite them. First and foremost, they are companies where the negative trend is reflected in fundamentals, not just sentiment. Beyond Meat is struggling to survive, Cricut is stagnant in a tight market, Alexander's is losing revenue from a concentrated portfolio, SandRidge is exposed to commodity risk and Hovnanian is facing structural margin pressure from high interest rates.

Meanwhile, there is no obvious catalyst for any of these companies that could reverse the negative trend in the short term. This is a significant difference from firms that are temporarily undervalued due to cyclical factors. Here, in most cases, the problems are structural and require either a fundamental change in the business model or a significant change in the macroeconomic environment.

Strategic view

From the perspective of potential investors, the key is to distinguish between a stock that is cheap and a stock that is cheap legitimately. For Beyond Meat, bankruptcy risk is a real scenario, not a marginal possibility. Cricut can be an interesting value trap for investors who only focus on a P/E ratio of around 11, but ignore the absence of a growth engine. Alexander's offers a high dividend yield of nearly 8%, but dividend coverage below 100% of FFO is a warning sign.

SandRidge Energy and Hovnanian are then examples of companies whose performance is heavily tied to macroeconomic factors outside of their control. In SandRidge's case, it is oil and gas prices, and in Hovnanian's case it is mortgage rates. If these factors develop favorably, both firms could surprise positively. Otherwise, however, there is room for further downside.

What to watch next

• Beyond Meat's stock price performance relative to the Nasdaq compliance deadline (August 2026) and a potential reverse stock split

• Cricut's quarterly results, highlighting trends in active users and product sales

• Alexander's decision regarding a potential dividend cut and the impact of the sale of Rego Park I on future FFO

• Development of WTI crude oil prices and realized prices at SandRidge Energy in future quarters

• Incentive trends at Hovnanian, in particular whether the company will be able to stabilize gross margin at 13% to 14% based on guidance

• The evolution of mortgage rates in the US and their impact on housing affordability for the entry-level buyer segment

Sell recommendations from analysts are not common in the stock market, and when they do occur, they are usually backed by well-founded concerns. For all five companies analyzed, there is a specific fundamental issue that cannot be easily resolved in the short term.

This does not mean that all these stocks must necessarily continue to weaken. The market sometimes punishes troubled companies too much, creating opportunities for contrarian investors. But the key is to distinguish between temporary cyclical pressure and permanent structural damage to a business model.

Tesla has finally received FSD approval in the Netherlands, and this is the first such authorization in the EU. In my view this is very bullish news and it’s only a matter of time before other countries allow the system as well. Tesla hasn’t been doing great lately, so this could help. I’m not buying more shares right now, but I definitely plan to hold them long-term.

The package on the block includes the century‑old Boron mine in the Mojave Desert town that literally bears the element’s name, still the world’s largest borax operation, along with processing plants, a refinery and export terminal at the Port of Los Angeles, and the Owens Lake mining operation near the Sierra Nevada. Geology is part of the appeal: estimates suggest reserves that can sustain output into the early 2040s, giving chemical producers and private‑equity buyers not just scale but a long‑duration position in a mineral that the U.S. has reclassified as “critical” for everything from fertilizers and heat‑resistant glass to renewable‑energy hardware and even nuclear applications.

What exactly is Rio Tinto $RIO selling

According to reports from Bloomberg, Mining.com and other sources, Rio Tinto is looking to sell the entire package of its pine operations in California. This includes:

• An open pit mine and processing facility in the Mojave Desert town of Boron, the world's largest borax mine

• a refinery and shipping terminal at the Port of Los Angeles

• mining at Owens Lake near Sierra Nevada

These operations, according to company and analyst data, account for approximately 30-33% of global demand for refined boron and borates, making them literally the backbone of the global market for this critical mineral. Sources cited by Bloomberg say Rio has already instructed UBS and JPMorgan to structure the deal, and the official "auction process" is expected to be underway in the first half of the year.

Serious bidders include WE Soda, Magris Resources and U.S. Silica Holdings, according to Bloomberg and Reuters, and binding bids are expected to be submitted by June. Given the deposit's long life (reserves into the early 40s) and strategic position in global supply, it is estimated that the package could reach a valuation of up to $2 billion.

Why boron is strategic and who needs it

Boron is one of the lesser known but increasingly important "critical" minerals. It is used in a wide range of industries:

• Specialty glasses and ceramics (e.g. heat resistant glass, displays)

• Renewable energy - components for wind turbines, solar technology

• nuclear energy, insulation and high-resistance materials

• fertilisers and agrochemicals

• chemical industry, detergents and as an additive for drilling in the oil and gas sector

In 2023/2024, the U.S. Geological Survey and the U.S. Department of the Interior listed boron as a critical mineral due to supply risks, limited substitutes, and high concentration of production outside the U.S. This is what makes Rio Tinto's California project a strategic asset: a large 'domestic' deposit in a country that wants to reduce its reliance on imports for key materials for the energy and high-tech industries.

What the sale could bring to Rio Tinto

For Rio Tinto, the divestment of the pine assets is part of a broader strategy to 'narrow' its portfolio. Last year, CEO Simon Trott unveiled a plan to generate $5-10 billion through a combination of "non-core" asset sales and productivity improvements to allow the company to channel more capital into its core pillars (iron ore, copper, aluminium and new battery metals).

An expected price of up to $2 billion would enable Rio:

• strengthen its balance sheet and possibly reduce net debt

• free up capital for large growth projects in copper, lithium or iron ore

• Simplify the operational structure and management, as the boron operations have a different logic than the company's core mining segments

The market has so far viewed the news positively. Following news of interest from more than a dozen bidders and valuation estimates, Rio Tinto $RIO shares briefly added roughly 1-1.5% in New York, reflecting expectations that the firm can sell the asset at an attractive price in a competitive process.

Impact on the boronmarket and possible scenarios

As Rio Tinto's California complex covers approximately one-third of the world's demand for refined boron, owning these assets will change the market balance. If the assets are taken over by a specialty chemical company or an industrial player such as WE Soda or U.S. Silica, the following may occur:

• better vertical integration: linking boron mining with the production of final products (glass, chemicals, fertilisers)

• changes in pricing policy and long-term offtake contracts

• greater investment in capacity expansion or modernisation of processing if the new owner sees room for margin expansion

Conversely, the entry of a strong private-equity fund could mean a more financially oriented approach - cost optimization, perhaps restructuring of contracts and subsequent sale after a few years with appreciation. But in both cases, the asset is long-lived (reserves into the 40s) and the industry benefits from the long-term trend of electrification, renewables and demand for specialty materials.

For Rio Tinto, it is thus more a question of capital allocation than of exiting a promising segment - the company is betting that it will make $2 billion better in other projects than by continuing to operate a "chemical-oriented" US pine portfolio on its own.

This morning U.S. Vice President JD Vance returned from Islamabad (where peace talks were held) without an agreement and with a statement the markets did not want to hear.

Twenty-one hours of talks with Iranian negotiators ended, well… with nothing.

The U.S. presented its final offer; Iran rejected it. Tehran reportedly does not currently plan another round of talks.

Iran’s negotiating position is stronger than it appears

Iran currently holds better cards than the U.S.

Iran controls the strait and continues to limit the number of ships that can pass through it. Former U.S. negotiator Aaron David Miller said that clearly. Iran possesses highly enriched uranium, controls a key maritime route, and the regime has survived. That gives it time. The U.S., on the other hand, is pushing for a quick resolution.

Vance himself admitted that Iran has not yet committed to refraining from developing a nuclear weapon even in the long term. And without that, no agreement is acceptable to Washington.

Markets are closed today, so we can’t observe a direct reaction. However, Bitcoin trades over the weekend and it weakened by more than 2%. We can therefore expect markets to open lower tomorrow than they closed on Friday after a record week.

Whether that visibility translates into a real turnaround is another question. Nike is entering this deal while it wrestles with slowing sales growth, bloated inventories and a perception that product innovation has lagged, especially as faster, more focused challengers like On and Hoka eat into the running category and Chinese competitors press harder in Asia. Analysts point out that even wall‑to‑wall exposure on Champions League nights cannot by itself fix weak sell‑through in key markets such as China, where Nike has been losing momentum and shelf space, so the new UEFA contract looks less like a silver bullet and more like an expensive stage on which the company will still need fresh designs and sharper execution if it wants to turn marketing dominance back into performance on the income statement.

Nike takes the ball from Adidas and heads to the Champions League

According to UC3, Nike and UEFA are in exclusive contract negotiations for official balls for men's club competitions from the 2027/28 season to 2030/31. If the deal is concluded, it will be the first time that balls for the Champions League and other competitions will not be supplied by Adidas $ADS.DE, which has held the rights continuously since 2001.

Nike $NKE has previously shown a willingness to significantly overpay competitors to win key football contracts. In 2023, it also overbid Adidas for a contract with the German Football Association (DFB), offering double the roughly €50 million a year Adidas was paying at the time, according to Handelsblatt. The upcoming FIFA World Cup in 2026 thus represents another major marketing platform for Nike, to which the new ball for European competitions logically connects.

According to the FT and other sources, the total value of the contract with UEFA could exceed €40 million a year, roughly twice as much as the current contract. In addition, the Guardian points out that the upcoming change of supplier also marks the end of the iconic "star" design of the Champions League ball that Adidas has used since 2001, and opens up space for a completely new visual language associated with the Nike logo. This may trigger a new wave of fan interest in replicas and collector's editions, but the impact on the main sales segment - footwear and apparel -will be rather indirect.

Visibility yes, problem solving no

Analysts agree that this is a marketing-attractive win for Nike, but not a solution to the company's major pain points. Morningstar analyst David Swartz called the negotiations with UEFA a "nicely won deal," but added that he personally never saw the logo on the ball and didn't say: "I need to buy new shoes." Similarly, David Bartosiak of Zacks pointed out that "a highly visible corporate partnership is not a silver bullet" unless the brand brings genuinely new and functional products to market.

This is precisely Nike's biggest problem. In recent years, the company has been losing shelf space to brands like On Holding and Hoka, which bring fresh designs and technically distinctive running models. YipitData data cited by Reuters showed that Nike's share of footwear at major U.S. retail partners has fallen, while On and Hoka have increased their share several-fold in a single year. That has forced Nike to launch a three-year, $2 billion cost-cutting program that includes, among other things, cutting some iconic but lower-growth lines like the Air Force 1.

At the same time, Nike has struggled with excess inventory and repeated disappointing quarterly results. In late March, the company warned that sales would fall in the fiscal fourth quarter, with a key drag coming from China, where sales have fallen by double-digit percentages for several quarters in a row. New CEO Elliott Hill, who takes over in 2024, may have declared a return to "core sports" like running and football, but specific product innovations that would generate mass enthusiasm like Air Jordans once did are so far absent.

Champions League as a showcase of credibility

From a marketing perspective, however, this is still a very valuable victory. The Champions League has a global audience of around 1.2 billion viewers per season, according to UEFA's annual reports, which is a showcase of the highest order for any sports brand. M Science analyst Drake MacFarlane said the deal could help Nike in the medium term, particularly in Europe, and "support the regaining of athletic credibility" with fans and players, but added that the effect would only be felt over time.

Brands like Nike and Adidas have traditionally used official balls and jerseys primarily to build image, associate with big moments and to boost replica sales. The real boost to footwear and textile sales comes when these symbols are backed by strong product innovations - iconic cleats, running models or lifestyle silhouettes that fans want to wear off the field.

It's the latter part of the equation that Nike is missing so far: the ball will draw eyeballs, but the shoes and apparel have to convince on their own. Without genuinely new, functional and well-communicated products, the exclusive UEFA ball will remain more of a luxury billboard than a real sales engine.

Yet the stock trades at only about 15 times net income and about eight to nine times free cash flow, multiples that are more typical of the average communications services title than a global industry leader with such profitability. The market discounts stagnant revenues, declining payer numbers and increasing competition in the price, but it also overlooks how rapidly monetization per user is growing, how much room AI features have, and how aggressively the company is returning cash through buybacks and the dividend.

Top points of analysis

• Revenues of around $3.5 billion have been essentially flat for the past two years, but profitability is improving - net margins have risen to around 18% and adjusted EBITDA margins are around 35-38% after adjusting for one-time items.

• Free cash flow in 2024 is about $882 million, in 2025 it has already exceeded $1 billion, and the 2026 outlook calls for $1.085-1.135 billion, or about 8% growth.

• Valuations: a P/E of about 14-15, P/S of about 2.1 and P/FCF of about 7-9 are well below historical averages and valuations of many other profitable internet companies.

• Dominant position: an estimated 60-65% of all dating app downloads, with Tinder as the global leader, Hinge as a fast-growing "relationship" app, and the rest of the portfolio covering older, price-sensitive and specific segments.

• User base: payers are fewer but pay more - payer numbers are declining at around 5% per year, but average revenue per payer (RPP) is growing at 7-8%, reaching roughly $20.7 per user in Q4 2025, which is holding sales.

• Return of capital: over 100% of free cash flow in 2025 was returned to shareholders through aggressive buybacks and a growing dividend, which increased 5% to $0.20 per share in 2026.

• Outlook: management expects 2026 revenue of roughly $3.41-3.535 billion, or zero growth, but an adjusted EBITDA margin of 37.5% and free cash flow of over $1.1 billion; growth to be driven by Hinge, Tinder to undergo a "revitalization."

Company performance

Match Group $MTCH is essentially a "love tax in the digital world". It gathers a number of brands under one roof: Tinder for the young and quick to meet, Hinge for those looking for a relationship, Match.com and Meetic for an older and more conservative audience, OkCupid for those who want a detailed compatibility analysis, and Plenty of Fish for more price-sensitive users. Together, this covers most of the major demographics and motivations in online dating.

The basis of monetization is a freemium model. All apps have free entry, which creates a large base of active users and a "live" ecosystem, but key features are paid for. These include:

• Increased profile visibility in the list

• the ability to see who has "liked" you

• advanced filters and preferential search

• "boosts" for short-term attention boosts

• more daily swipes or interactions

Revenue comes mainly from subscriptions (monthly, quarterly, annual plans) and in-app purchases. The marginal cost of each additional paying user is minimal - it's about server bandwidth, customer support, security and continuous development, but not about materials or logistics. This explains why the company can afford such high margins.

Origin, development and where the company operates

The roots of today's online dating leader go back to the 1990s, when Match.com was founded as one of the first major online dating services. Gradually, other brands such as OkCupid and Meetic were added, and the company became part of billionaire Barry Diller's IAC conglomerate, which made online dating a pillar of the business in its own right.

The turning point came with the advent of mobile apps. In 2012, Tinder was born in the Hatch Labs incubator - an app that took the simple principle of "swipe right - like, swipe left - dislike" and brought it to mobile. Thanks to gamification and rapid expansion on college campuses, Tinder exploded in popularity, became a mobile dating icon, and gradually grew into a major growth engine for the entire group. Today, the company's Apps operate in more than 190 countries, in dozens of languages, and collectively serve an estimated hundred million active users.

Match Group now operates globally: it is strong in North America and Europe, where it has developed monetization, and is growing in Latin America and Asia, where it is gaining users, although average per capita revenues are still lower. Within the online dating market, it is estimated that around 60-65% of all app downloads are attributable to brands in this group, mainly due to the combination of Tinder, Hinge and Match.com.

Market share and competitive position

The company that owns Tinder has the widest reach in online dating today. According to available statistics:

• Tinder alone holds over 30% of the global dating app revenue market and generates sales of around $1.9 billion annually.

• The entire group, including Hinge, Match.com, OkCupid, Plenty of Fish and others, has an estimated 60-65% of all dating app downloads in major markets.

• Competitors such as Bumble, Badoo or regional players have significantly smaller revenues and operate without such a broad portfolio of brands.

The advantage of this company is that it covers the whole spectrum of needs - from "casual" swiping to serious relationships and different age and social groups. Another strength of the ecosystem is that the technology infrastructure, security systems and some of the data is shared across applications. Data from Tinder helps tune algorithms in Hinge and vice versa, creating network effects and a barrier for new players who would have yet to build a similar data base.

Management and who runs the company today

The firm behind Tinder has been led since February 2025 by Spencer Rascoff, co-founder and former longtime CEO of Zillow Group. He succeeds Bernard Kim as CEO, and the board views his appointment as the start of a new phase - Rascoff has more than a decade of experience leading a public technology firm and a track record of turning a relatively narrow segment (real estate) into a dominant platform.

Spencer Rascoff isn't a new face to the firm - he's sat on the board since March 2024, so he's had time to get to know the portfolio of brands (Tinder, Hinge, OkCupid and others) and their challenges before assuming the executive role. As CEO, he publicly emphasizes three priorities: to operate more like a smaller, product-obsessed startup, to aggressively continue to build AI capabilities around Tinder and Hinge, while maintaining a high bar for every AI "dollar" spent so that investments have a clear impact on growth and profitability.

At the board level, Rascoff has the backing of independent chairman Thomas McInerney and other experienced board members who come from media, technology and finance. The operations team is rounded out by newly promoted COO Hesam Hosseini, who previously led some of the brands in the portfolio and is in charge of the day-to-day execution of strategy, while outgoing president Gary Swidler has retreated to an advisory role. That lineup - a tech CEO with a history of "scaling" platforms, a COO with detailed knowledge of individual applications, and a board that pushes for efficient capital allocation - forms the framework within which decisions are made about Tinder's transformation, Hinge's growth, AI functions and returning cash to shareholders.

Financial performance

Revenues and segments

Based on 2025 results, total revenue is around $3.5 billion, virtually flat with the prior year. Here we can see how the online dating market has moved from a phase of rapid expansion to a period of more "mature" growth:

• In 2024, sales grew by about 3.4%.

• in 2025 they were at a similar level

• the outlook for 2026 foresees revenues of 3.41-3.535 billion, i.e. growth in the range of stagnation to low unit percentages

In terms of users, the situation is mixed. The number of payers in Q4 2025 fell by about 5% year-on-year to 13.8 million, while average revenue per paying user (RPP) rose by 7% to $20.72. So, on average, fewer people are paying, but those who are paying are willing to pay more for premium features - especially in North America and Europe, where there is a growing willingness to spend on digital services.

From a brand-by-brand perspective:

• Tinder still accounts for the largest portion of revenue, but its growth rate has slowed and some periods have seen a slight decline in direct sales.

• Hinge, on the other hand, is the star of the portfolio - management is targeting $1 billion in annual revenue by 2027, which would be a significant jump from today.

• Other brands are stable, but no longer the main driver of growth, rather holding specific segments and contributing to overall stability.

Margins and profits

A gross profit of around $2.49 billion in 2024 implies a gross margin of 72.26%, which has been above 70% for a long time. Operating profit of $823 million corresponds to an operating margin of 23.38%, while net profit of $551 million represents a net margin of around 16.2%.

For 2025, management reports:

• Net income of $613 million, implying a net margin of approximately 18% and year-over-year earnings growth of 11%.

• Adjusted EBITDA of $1.2 billion, which on revenue of $3.5 billion implies an adjusted EBITDA margin of around 35%, adjusted for one-time legal and restructuring costs, the margin would be around 38%, better than the original target of 36.5%

Thus: sales are flat, but profitability is rising. The company has managed to cut costs on some fronts while improving payer monetisation.

Cash flow

Free cash flow is the biggest plus of the whole story. It was roughly $882 million in 2024 and exceeded $1 billion in 2025. For 2026, management expects free cash flow in the range of 1.085-1.135 billion, or roughly 8% year-over-year growth.

The conversion from operating cash flow to free cash flow is very high - capital expenditures are relatively low and much of the investment in the product is charged directly to operating expenses. For the investor, this means that accounting profits are not "paper" and that the company has real scope to generate cash for buyouts or dividends.

News, strategy and where the company can grow

1) The transformation of Tinder and Hinge

Management openly admits that Tinder's growth has slowed and that the brand needs to undergo a "revitalisation". The goal is to shift the experience towards a "low-pressure, spontaneous" dating experience that better matches the expectations of Generation Z. The company is testing changes to the user interface, new AI features to help with photo selection and creating authentic profiles, and working on new pricing and product adjustments, some of which will negatively impact revenue in the short term but are meant to strengthen long-term loyalty.

Hinge has the opposite problem - he is a "victim of his own success". Management expects it can reach $1 billion in revenue around 2027, a big jump for a "relationship" app. Growth is expected to come from:

• International expansion (Europe, Asia)

• Use of AI for better matching and "coaching" during dating

• better monetization of engaged users

2) AI as a growth engine

Match has been positioning itself in the last two years as the "AI network" for the entire dating process. According to shareholder letters and presentations, it wants to use AI in three phases:

• Before making contact - AI helps with selecting photos, writing a bio and answering questions in a way that feels authentic and increases the chance of a match

• during the actual matching process - deeper analysis of behavioural and preference data should lead to more relevant partner suggestions

• post-match - AI can suggest first messages, date tips or alerts when the conversation stagnates

In doing so, the company is trying to address two things: increasing the success rate of real introductions (which increases the value of the service) and keeping users active, which encourages subscriptions and in-app purchases.

3) Alternative payments and margins

Another significant source of profitability growth comes from "alternative payments". The company is trying to reduce its reliance on app store fees (Google Play, App Store) by driving users to direct payments outside of these platforms. Management expects these initiatives to deliver approximately $110 million of adjusted EBITDA savings in 2026, reflected in a projected margin of 37.5%.

4) Outlook and Targets

For 2026, the Company expects to:

• Revenues of $3.41-3.535 billion, implying approximately flat growth at the midpoint

• Adjusted EBITDA of $1.28-1.325 billion and a margin of 37.5%

• Free cash flow of $1.085-1.135 billion, growth of approximately 8%

Longer term, we can expect:

• Hinge will be the main growth driver

• Tinder will undergo a transformation to reduce the risk of younger generations leaving for alternatives

• AI features will improve engagement and monetization across the portfolio

• alternative payments and cost optimization will lift margins

Valuation: what's worth it today

In terms of fundamentals, the company looks like this today: market capitalization of about $7.4 billion, enterprise value of about $10 billion, P/E of about 14.7, P/S of 2.14, P/CF of less than 8. For context:

• Historical P/E used to be much higher, the 10-year average is over 80 by some statistics, the 5-year average is closer to 60, but is skewed by extreme periods of growth and optimism

• the average P/E in the peer internet services sector is often around 20-25

• firms with similar margins and free cash flow typically trade on P/FCF between 10 and 15

Fair-price models estimate a base share value somewhere between $33 and $39, with conservative approaches that account for stagnant revenues and risk ending up at the lower end, and more optimistic scenarios with moderate growth and higher P/Es around 18-19 aiming for the upper end. For today's buyer, this means:

• Roughly 10% upside in a conservative view

• roughly 25-30% upside in a base case scenario

• Potentially higher if Hinge turns out to deliver faster growth and the market is willing to pay a multiple closer to 20

Investment scenarios

Base case scenario

Revenues remain in a range of flat to modest growth of around 3-4% per year, Hinge gradually adds a new contribution, but Tinder grows more slowly or just around zero. Margins will improve through alternative payments and better cost management, so adjusted EBITDA margin will hold at 37-38% and free cash flow will grow at around 8-10% per annum. In such a scenario, the market could value the company with a P/E approaching 18-19 and P/FCF around 10-11, which moves the stock price towards $35-39 over a few years.

Growth scenario

Hinge reaches its 1 billion revenue target faster than expected, AI features significantly lift engagement and monetization at Tinder and other apps, and revenue as a whole returns to 6-8% annual growth. Margins will remain at least at the level projected for 2026, free cash flow will grow at a double-digit rate and debt will slowly decline. In this scenario, the stock is approaching the profile of a "quality growth stock" and a P/E of around 20-22 no longer looks outsized. Combined with buybacks and a dividend, the total return could be well above 30% over a few years.

A cautious scenario

The number of payers declines faster than per capita revenue grows, new AI applications take a bite out of more younger users, and regulations or security incidents force the company to significantly increase costs. Revenue will stagnate, margins will narrow by a few percentage points, and free cash flow will grow only slowly. In such a situation, the market sees no reason to rerate and the stock will remain in the P/E range of 13-15, P/FCF around 8. The return to the investor is then mainly about the dividend and a slight increase in earnings per share due to buybacks, the price itself will not move fundamentally.

Risks

The main weakness is the nature of the business. Online dating sites are vulnerable to security - fraud, fake profiles and abuse are a systematic problem. Each major case attracts media and regulatory attention, which can mean higher compliance and technology costs. The company has already faced criticism for inadequate protections and must invest in authentication and moderation to maintain trust.

The second risk is competition. In addition to established players like Bumble, new apps built around AI are emerging that promise "smarter" matching and a better user experience. If the Tinder generation loses trust, some of it may leave for startups, and while this won't threaten the business overnight, it may make growth more difficult.

The third factor is macro and currency. Because a portion of revenue comes from non-US markets, a strong dollar reduces the dollar value of results when converted. In addition, an economic recession could limit the willingness to spend on premium features, although historically dating sites have proven relatively resilient.

What to take away from the article

This stock is basically a textbook example of a "boring money machine" in a not-so-boring industry. Sales may not be growing at double-digit rates, but the business is generating gross margins of over 70%, adjusted EBITDA margins of over 35%, and free cash flow that is heading toward $1.1 billion per year. Management is actively returning this cash to shareholders through buybacks and a growing dividend, while the current valuation of around 15 times earnings and around 8 times free cash flow looks conservative both against history and against other digital platforms.

When you say thematic ETFs, most investors think of technology funds focused on artificial intelligence, the cloud or semiconductors. However, there are sectors that, while they have not been in the spotlight in recent years, have strong structural trends behind them that could significantly change the balance of entire industries within a few years. Water, nuclear power and rare earths are among such areas.

The common denominator among these four ETFs is that none of them is a typical "fad" that attracts a crowd of investors for a few months and then exposes holders to high volatility. Instead, these funds are based on fundamental changes in the global economy that are unlikely to change in a quarter or two. Clean water shortages, the return of nuclear power as a key source of clean energy, and the geopolitical battle over strategic metals are trends that will shape the investment opportunities of the next decade.

For each of these funds, we looked at the megatrend behind it, how the portfolio is structured, how it has performed to date, and what factors may determine its future.

Invesco Water Resources ETF $PHO

This January, the United Nations officially declared that the world has entered an era of global water bankruptcy. This is not a temporary crisis, but a permanent change in conditions where humanity is consuming more water than it is naturally replenishing. According to the World Bank, approximately $6.7 trillion will need to be invested in water infrastructure by 2030, and this could rise to $22.6 trillion by 2050. The World Economic Forum estimates that the investment gap in water infrastructure today is €6.5 trillion and that every euro invested can generate €1.30 of added value for the global economy.

It is in this context that the $PHO ETF, which invests in companies focused on water purification, treatment and conservation, gains importance. The fund tracks the NASDAQ OMX US Water index and holds 37 positions in its portfolio. It focuses primarily on U.S. companies involved in the entire water value chain, from water utilities to water treatment equipment manufacturers to analytical instruments for quality control.

Portfolio structure and key positions

The fund's largest positions include Roper Technologies $ROPwith a weight of 8.54%, Waters $WAT with 8.35%, Ferguson Enterprises $FERG8.03%, American Water Works $AWK with 7.31% and Ecolab $ECL with 7.45%. The top 10 positions account for approximately 59.5% of the portfolio. The fund's expense ratio is 0.59% annually and total assets under management exceed $2 billion.

As of the beginning of 2026, the fund is losing approximately 1%. The P/E ratio (TTM) is around 25.7 and the dividend yield is 0.54%. The beta over the past five years is 1.12, meaning the fund is only slightly more volatile than the broader market.

The advantage of $PHO is that the water sector is defensive in nature while benefiting from structural trends such as the construction of over $8 billion in U.S. infrastructure renewal funded by federal programs. At the same time, there is a growing demand for water solutions from data centers, which consume huge amounts of water for cooling. For example, Microsoft's $MSFT water consumption has increased by 34% in recent years just to train AI models.

Global X Uranium ETF $URA

Nuclear energy is experiencing arguably the strongest wave of support since its inception. According to BloombergNEF, approximately 15 new reactors are expected to come online in 2026, adding roughly 12 gigawatts of new capacity. US executive orders target an increase in nuclear capacity from 100 GW to 400 GW by 2050. In the US, the first small modular reactor (SMR) from Kairos Power is currently under construction, and plans are underway to restart the Palisades plant in Michigan, which would be the first-ever reactivation of a US nuclear power plant after shutdown.

At the same time, the geopolitical context is changing. The closure of the Strait of Hormuz and instability in energy markets increase the strategic importance of nuclear power as a stable, fossil fuel independent resource. The World Nuclear Association has increased its estimate of uranium demand growth to 5.3% per annum (CAGR) until 2040. Demand for uranium is expected to more than double over the next 15 years from around 69,000 metric tonnes today to more than 150,000 metric tonnes per year.

Fund structure and performance

Global X's $URA ETF invests in companies involved in uranium mining and nuclear component manufacturing. The fund holds 52 positions with total assets under management in excess of $6.95 billion. Canadian company Cameco $CCO is the largest position with a weight of 23.88%, followed by NexGen Energy $NXE with 6.31% and innovative firm Oklo $OKLO with 5.28%. Other notable positions include Uranium Energy $UEC with 5.85% and Kazakhstan's state-owned producer Kazatomprom with 4.84%.

The fund is up approximately 20.3% year-to-date. The Expense ratio is 0.69%, the P/E ratio (TTM) is 39.6 and the dividend yield is 4.4%. The beta of 1.47 indicates significantly higher volatility compared to the broader market, which is consistent with the nature of the commodities sector.

The uranium price trend remains a key driver of future performance. Spot prices have returned above the $100/lb mark in recent months and forward curves suggest further strength. Meanwhile, global uranium production only covers around 90% of current reactor demand, and this deficit will widen as the number of reactors grows.

VanEck Rare Earth and Strategic Metals ETF $REMX

China now controls approximately 70% of global rare earth mining and up to 94% of the production of permanent magnets, which are essential for electric vehicles, wind turbines, defense systems and data centers. In 2025 and 2026, China significantly tightened export controls on these materials in response to US tariffs. While it has temporarily suspended the second wave of restrictions until November 2026, licensing requirements for heavy rare earths such as dysprosium, terbium or yttrium remain in place without exception.

This situation puts unprecedented pressure on Western economies to diversify their supply chains. The US has announced the creation of a $12 billion strategic stockpile of critical minerals. The European Central Bank has found that over 80% of large European companies are no more than three supply links from a Chinese rare earths producer. The International Energy Agency has warned that rare earth prices in Europe have risen up to sixfold following Chinese restrictions.

Fund structure and performance

VanEck's $REMX ETF invests in global companies involved in the mining, refining and recycling of rare earths and strategic metals. The portfolio contains 34 equity positions with significant exposure to titanium, molybdenum, cerium, manganese and tungsten producers. The fund has a strong representation of foreign companies including Chinese, Australian and Canadian miners.

The fund's price has risen approximately 26.5% since the beginning of 2026 and has appreciated 175% over the past 12 months. The expense ratio is 0.58%, assets under management exceed $2.5 billion and the P/E ratio (TTM) is 39.18. The dividend yield is 1.48%.

However, investors should expect high risk. The rare earths sector has historically been extremely volatile and heavily dependent on geopolitical decisions. Any calming of US-China relations may reduce the pressure to diversify in the short term and thus reduce interest in Western producers. Moreover, production development projects outside China typically have a lead time of around eight years, meaning that short-term fundamental improvements in supply are limited.

Sprott Junior Uranium Miners ETF $URNJ

While $URA covers the entire spectrum of the uranium industry, including large producers like Cameco $CCO, the $URNJ ETF specifically targets small and medium-sized uranium miners, which offer higher growth potential but also significantly higher risk. The fund from Sprott tracks the Nasdaq Sprott Junior Uranium Miners Index and typically holds 30 to 40 positions (currently 33) in exploration and development uranium companies.

If global uranium demand significantly exceeds current production, as projections suggest, it will be the smaller miners that will have to step in to make up the shortfall. But new mines require years of preparation and mean that companies developing new projects today could see significant value growth in the coming years if the demand scenario comes to fruition.

Performance and risk profile

The fund has appreciated by over 20% since the start of 2026 and has returned over 150% over the past 12 months. The Expense Ratio is 0.80%, which is higher than $URA but reflects a more specialized focus. Assets under management exceed $420 million, significantly less than $URA. This may lead to lower liquidity.

The main risk of $URNJ is that smaller mining companies are heavily dependent on the uranium price and do not have as strong balance sheets as the large producers. If the uranium price were to drop significantly in the short term, the fund could see a deeper decline than $URA. Therefore, the fund is better suited for investors with a higher risk tolerance who want more exposure to a potential uranium supercycle.

Fund Comparison

Strategic view

Each of these four ETFs represents a different part of the risk/reward spectrum. $PHO offers a more defensive profile with lower volatility, stable positions in U.S. utilities and a direct link to federal infrastructure spending. For investors seeking exposure to a structural megatrend with a relatively conservative risk profile, it is an interesting choice.

$URA and $REMX stand in the middle. Both funds benefit from geopolitical changes and structural shifts in global energy and industry. However, their performance will depend on commodity price movements and policy decisions, which brings higher volatility. $URA has the advantage of greater liquidity and broader diversification, while $REMX offers unique exposure to a segment that has no equivalent in the market.

$URNJ is clearly the most aggressive choice. The fund offers leverage to the uranium cycle through small miners, and its performance in recent months shows how significant this effect can be in a rising uranium price environment. At the same time, however, in the event of a uranium market correction, this fund would face the deepest drawdown of the four.

What to watch next

• Spot uranium price movements and the volume of new utility contracts with miners

• Progress on Palisades restart and SMR reactor construction in the US

• Developments in US-China trade relations and the future of suspended export controls on rare earths (deadline: November 2026)

• The planned UN water conference in December 2026 in the UAE and its impact on global investment commitments

• Commodity price developments in the context of the ongoing conflict in the Middle East and its impact on energy security

These four ETFs demonstrate that there are investment opportunities outside of mainstream technology and AI funds that are underpinned by fundamental structural changes in the global economy. Water scarcity, the return of nuclear power, and the struggle for control of strategic commodities are trends that transcend one market cycle and may shape the investment landscape for the next decade or more.

At the same time, it is important to remember that thematic ETFs carry specific risks. Narrow sector concentrations, dependence on commodity cycles and geopolitical events, and greater volatility compared to broad indices are factors that investors must consider along with often lower liquidity. This is why it is key to view these funds as complementary positions within a broader diversified portfolio, not as the core of it.

As an investor, I can interpret this figure simply: SpaceX today is not a “finished money-making machine,” but a company in a massive expansion phase where profits are sacrificed for growth and new projects — and an IPO valuing it at Tesla’s level is a bet that this model will eventually deliver the corresponding cash flow.

At the same time, Amazon is finally putting hard numbers on AI revenue inside AWS itself. Jassy disclosed that AI services in the cloud unit crossed a 15 billion dollar annual run‑rate in the first quarter of 2026, while overall AWS revenue is tracking at roughly 142 billion dollars a year after reaccelerating in late 2025. To feed that demand, Amazon plans record capital expenditures of about 200 billion dollars in 2026, largely on AI infrastructure, but argues this is not a blind bet: management points to a swelling AWS backlog and long‑term customer commitments that already cover a substantial share of that budget, including what market reports describe as more than 100 billion dollars of contracted capacity tied to OpenAI and other frontier‑model customers.

Amazon's chip division: 20 billion today, 50 billion in potential

According to Jassy's letter, Amazon's chip business is running $AMZN on annualized revenue of over $20 billion, double the roughly $10 billion the company reported as recently as the fourth quarter results of the previous year. The division includes three key products: the Graviton CPU for general computing tasks, Trainium AI accelerators for training and model inference, and Nitro network cards that improve the efficiency and security of AWS servers.

Jassy describes that demand for these chips is so high that it's quite possible that they will sell entire racks of chips to third parties in the future. In the letter, he adds that if the chip division were to operate as a standalone company selling semiconductors to both AWS customers and external clients, its annual revenue run rate would be around $50 billion. That implicitly puts the chip unit in the league of the semiconductor market's big players - and also suggests that Amazon has a "hidden" business inside the company with the parameters of another megacap title.

Today, this division exists exclusively inside AWS: customers access both Traini and Graviton through EC2 instances, not by buying chips directly. Opening up direct sales would make Amazon a hybrid between a cloud provider and an AI hardware vendor, similar to what Google is doing with TPU via Google Cloud, but with a potentially broader reach towards on-premise installations by large customers.

Trainium3 sold out, Trainium4 reserved. AWS AI at 15 billion a year

A key driver of growth in the chip division is the Trainium generation. In December 2025, AWS announced the availability of Trainium3 UltraServers, which deliver up to 4.4x higher compute performance, four times the energy efficiency, and nearly four times the memory bandwidth versus Trainium2-based configurations. Trainium3 can scale up to 144 chips in a single system, with up to 362 FP8 PFLOPs of performance, allowing larger models to be trained faster and cheaper.

According to Jassy, Trainium3 is almost completely sold out, with customers that have moved their AI jobs to it including Uber $UBER. A significant portion of the next-generation Trainium4, which is roughly 18 months away from wide availability, is already booked by key AWS customers. This pre-sale demonstrates both the oversupply of high-end AI accelerators globally and the confidence of large clients in Amazon's roadmap.

At the same time, Amazon for the first time released a direct number for AWS' AI business: AI services reached an annual revenue run rate of over $15 billion in Q1 2026 and are "growing rapidly." By comparison, AWS's total revenue was around $128.7 billion in 2025, and the cloud division is expected to head to around $142 billion this year. Jassy notes that AWS' growth would be even more aggressive if the entire industry didn't run into infrastructure capacity constraints.

Two large customers, he says, have even asked for the option to buy all available Graviton chip capacity for 2026, which Amazon has declined in order to preserve CPU capacity for other users. This again confirms that demand for Amazon's own silicon exceeds current production capacity - and increases the attractiveness of a potential direct sale of the chips.

Duel with Nvidia in the $200 billion AI chip market

Amazon is entering the next phase of the conflict over AI hardware at a time when Nvidia $NVDA dominates the market with around 85% share in AI accelerators and 60-75% in inference thanks to a combination of GPUs and the CUDA software ecosystem. The AI chip market is estimated to exceed $200 billion by 2026, although Nvidia's share could gradually decline to around 75% due to the emergence of its own hyperscaler chips and competition from AMD.

AMD holds about 7% share of the fast-growing AI market, with the rest coming from the proprietary chips of big cloud players such as Google TPU, Microsoft's "Maia/Mauri" project and Amazon's Trainium. In his letter, Jassy openly says that Amazon will continue to use Nvidia's chips, but customers "want better price/performance ratio", which is exactly the area where Trainium is expected to deliver an advantage.

By considering selling racks directly with its own chips, Amazon is entering - at least in part - Nvidia and AMD territory. The difference is that Amazon can sell its own hardware "backed" by the AWS cloud and software, so customers get both on-premise performance and the ability to easily integrate with cloud services. If this model takes hold, it could erode some of the traditional GPU manufacturers' business while reinforcing the dependence of large clients directly on hyperscalers.

USD 200 billion capex: "We don't invest on a hunch"

The big question for investors is how Amazon is funding such an expansive AI strategy. In the letter, Jassy reminds us that the company is planning around $200 billion in capital expenditures in 2026, the vast majority of which is going into AI infrastructure - data centers, chip manufacturing, and networking capabilities. Some in the market have been spooked by these sums, but Jassy assures that Amazon is "not investing on a hunch" and that much of this capex is covered by long-term customer commitments.

According to information leaked to the media, those commitments include, among other things, a more than $100 billion contract with OpenAI to use AWS to train and run its models. At the same time, Jassy has previously hinted that AI should help AWS reach up to $600 billion in annual revenue in the longer term, roughly double its previously communicated goal.

These numbers show that Amazon sees AI infrastructure as the next "backbone layer" of its business after e-commerce, logistics and traditional cloud. Combined with the chip division's potential to become a standalone business with $50 billion in annual sales, this is one of the most ambitious investment theses within the big five tech companies.

How the market is responding to Jassy's AI vision

Following the release of the letter to shareholders and a new set of numbers for the AI and chip division, Amazon shares rose roughly 1.5-3.5%, according to various sources and measurement times. Investors particularly appreciated the transparency around the $20 billion number for the chip division and $15 billion for AI services, which gives a more concrete outline of the "hidden" components of Amazon's valuation.

It's a signal to the market that Amazon doesn't just want to play the role of "infra add-on" for OpenAI and others in AI, but that it potentially has another big semiconductor company and a standalone AI cloud giant in it at the same time. How quickly this story translates into actual profits and margins will depend on Amazon's ability to continue to increase its use of Trainium and Graviton chips, open up direct sales to third parties, while managing its giant capex plan in a disciplined manner.

Last week something happened that I had been waiting for a long time. Andy Jassy, Amazon’s CEO, for the first time in history released concrete figures about how much money the company makes from artificial intelligence. And that number honestly surprised me.

But first a bit of context, because that’s key to understanding why this is important news.

Why this is a historic moment

Amazon Web Services, Amazon’s cloud division, has existed since 2006. For two decades AWS has been something of the company’s “quiet engine,” less sexy than Prime Video or Alexa, but generating the vast majority of operating profit that funded everything else. Investors knew it, analysts knew it, but Amazon never broke down the numbers so precisely to make clear exactly where the future lies.

Now Jassy did it for the first time. And the message is clear: Amazon is not a retail company. Amazon is increasingly an infrastructure company for the digital era, and AI is the new chapter of that story.

15 billion from AI, 20 billion from chips

Let’s start with a factual overview of what Jassy actually disclosed.

AWS currently generates annual revenues exceeding $142 billion. Of that, roughly $15 billion comes directly from AI services — that is, from companies and developers using AWS to train models, run inference workloads, and build AI applications. That represents about 10% of the overall AWS “pie.” And this number is growing quickly. Jassy himself admitted that the cloud business would grow even faster if not for capacity constraints that trouble the entire tech industry today.

But even more interesting than AI revenues is the second number Jassy revealed.

Amazon’s own chip business doubled last quarter from $10 to more than $20 billion in annualized revenue. It is growing at a triple‑digit year‑over‑year rate. For comparison: Nvidia, whose GPUs are now the symbol of the whole AI revolution, reported chip revenues of roughly $115 billion per year. Amazon is therefore still a fraction of that, but the dynamics are dizzying.

Then came a sentence that immediately caught my attention.

A strategic move that changes the game

In his letter to shareholders Jassy hinted at something Amazon has never done before: the possibility of directly selling its own chips to external companies. “Demand for our chips is so high that it is very possible we will sell entire racks to third parties in the future,” said the Amazon chief.

To be clear what this means for investors: Amazon has so far used its chips exclusively internally, either in AWS for its own needs or as an option for AWS customers. Opening sales to external players would mean entering a market segment today dominated by Nvidia and partly by AMD.

The strategy outside AWS is also being tested by $GOOGL. Last October it struck a deal with Anthropic to supply millions of its own AI chips. For Amazon this would be an analogous step, only on an even larger scale.

Jassy illustrated it with a thought experiment: if the chip business were a standalone company and sold chips like other leading chipmakers, annual revenues would be roughly $50 billion. That’s a number that demands attention from anyone who holds or is considering Amazon in their portfolio.

Trainium vs. $NVDA: A price war that’s just heating up

To understand why Amazon’s chip division is strategically important, you need to grasp the core problem of the entire industry.

Nvidia’s GPUs are expensive. Training large language models costs hundreds of thousands to millions of dollars, with a large portion of those costs going to hardware. Anyone who can offer an alternative with a better price‑to‑performance ratio enters the game with enormous leverage.

Amazon claims its Trainium chips have a 30–40% better price‑to‑performance ratio compared to competitive hardware available on AWS. Trainium 2 costs approximately 40% less than comparable GPUs from Nvidia. These figures are not just a marketing slogan — they are confirmed by firms like Anthropic, Databricks, and Deutsche Telekom, which are among the chip testers.

Jassy himself stated in the shareholder letter that at full deployment Trainium could save Amazon tens of billions of dollars in capital expenditures annually and add several percentage points of operating margin compared to dependence on external chip suppliers. That is a concrete, measurable number.

$200 billion into capex: Fear, or opportunity?

When Amazon announced earlier this year that it plans to invest roughly $200 billion this year into capital expenditures focused primarily on AI infrastructure, the market reaction was mixed. Some investors were horrified — that’s a brutal number even by the standards of the world’s largest tech company.

Jassy counters this skepticism with concrete arguments. From the planned AWS expenditures meant to be “monetized” in 2027 and 2028, Amazon already holds customer commitments for a substantial portion. Among them is a deal with OpenAI exceeding $100 billion. In other words: Amazon is not building capacity based on forecasts, but on real contracts with clients.

The market logic is simple: demand for compute capacity for AI exceeds supply, and by a lot. Two large AWS customers reportedly asked to buy all available Graviton processor capacity for the entire year 2026. Amazon had to refuse because other customers would have been left without service.

That is a problem solved in one way: build more.

Vojta’s thoughts

Amazon is one of my largest positions, and this disclosure only confirmed why I added it to my portfolio.

There is no “if” here — the numbers are real, the customer commitments are real, and the dynamics of the chip business honestly surprised me more than the AI revenues themselves. Doubling from $10 to $20 billion in a single quarter and triple‑digit year‑over‑year growth — that doesn’t happen every day for a $20 billion business.

What interested me most, however, is the strategic move to sell chips to external companies. Amazon has so far presented itself as a cloud platform. If it truly opens chip sales outside AWS, it will enter direct competition with Nvidia and do so with a 40% price advantage. This is not a small step.

Of course there are risks. $200 billion in capex is a huge bet that demand for AI infrastructure will continue. If the AI bubble bursts or it turns out AI revenues are insufficient to cover the costs of building infrastructure, Amazon will feel it. But with the customer commitments Jassy describes, I believe the risk is well calibrated.

I am bullish on $AMZN, and these numbers strengthen that conviction.

Amazon is transforming from an e‑commerce and cloud company into an AI infrastructure powerhouse. The combination of proprietary chips, a gigantic cloud platform, and customer commitments worth hundreds of billions of dollars creates a moat that will be hard for competitors to overcome over the next several years.

Do you believe Amazon can realistically threaten Nvidia’s dominance in the AI chip market, or will it remain exclusively an internal AWS tool? Where do you see the biggest risk in this $200 billion bet?

Do you trust $AMZN and hold their shares in your portfolio?

The find comes at a time when OXY has a much cleaner "oil & gas" producer profile following the sale of its chemical division to OxyChem and aggressive debt reduction. The combination of new potential in offshore projects and strong cash flow from Permian puts the title back on the radar of investors looking for leverage in oil but not wanting an extremely leveraged name.

What we know about the new discovery in the Gulf of America

Occidental $OXY has been ramping up activity in the Gulf of Mexico in recent years, using the term "Gulf of America" as part of a broader package of offshore projects. It's an area where the company is betting on deepwater projects in paleogenic formations that may hide significant volumes of oil, in addition to established fields.

According to company commentary and sector analysis, OXY plans to increase capital expenditures in the "Gulf of America" by about $250 million, precisely because of new opportunities in the deeper horizons of the Gulf of Mexico and parallel projects in Oman. Already in 2025, the company launched the ultra-deep "Bandit" well targeting paleogene structures, a clear signal that it wanted to resume an aggressive exploration role in the region.

The new find builds on that story: it confirms that the Gulf of Mexico - or "Gulf of America" as some US companies are using it after President Donald Trump's policy advice - still offers attractive growth opportunities, even though the region has been mined for decades. Exact figures on the size of the deposit and expected costs are not yet publicly available, but the mere fact of a commercially interesting discovery boosts market confidence in OXY's long-term reserves.

A clean balance sheet: OxyChem gone, debt below target

In parallel with exploration and new projects, Occidental is undergoing a significant financial transformation. The company closed the sale of its chemical division OxyChem to Berkshire Hathaway for $9.7 billion, of which roughly $6.5 billion was used to reduce debt. This brought net debt below the long-term target of about $15 billion and significantly reduced the leverage that the market had blamed the firm for after the Anadarko acquisition.

In terms of the structure of the business, this means that OXY is now a much "cleaner" energy company whose results are mainly driven by oil and gas in the Permian, Rockies and Gulf of Mexico. It's a clearer story for investors: less of a conglomerate mix of chemicals and upstream, more direct exposure to oil, but with a balance sheet that can afford higher buybacks and a more stable dividend.

Production, capex and reserves: where OXY stands

For 2026, Occidental projects capex in the $5.5-5.9 billion range and average production of 1.42-1.48 million barrels of oil equivalent per day. The main driver of growth remains the Permian, where the company has acquired additional prime assets in the high-return Midland Basin following its acquisition of CrownRock.

Analysts point out that cost optimization and infrastructure sharing at Permian have resulted in OXY's "all-in" cost per barrel hovering somewhere around $30-35, allowing the company to generate solid free cash flow even at relatively conservative oil prices. Reserves at the end of 2025 were in the single billion boe range, and the high recovery rate shows that the company can replenish reserves both in the Permian and in offshore projects.

New discoveries in the Gulf of America should further strengthen these long-term reserves. Combined with the production growth in the Permian and the potential to increase profitability through Stratos-type projects (CCUS, CO₂ recovery in EOR), this gives OXY a relatively comprehensive portfolio - from conventional production to low-carbon projects that may be worthwhile in the future thanks to tax incentives.

How OXY shares are reacting

The market is reacting positively to the combination of the new find, improved balance sheet and higher oil prices. In recent weeks, Occidental shares have hit new 52-week highs in the $56-$66 range, driven by the oil price, but also by improved results and the outlook for steady or slightly rising production.

The rise in oil prices following heightened geopolitical tensions and signals of renewed interest in offshore exploration (including in the Gulf of Mexico) by major energy companies are creating an environment in which investors are reassessing the valuations of producers like OXY. The company itself has repeatedly beaten earnings expectations over the past year, thanks to a combination of higher-than-planned volumes and a more efficient midstream environment, helping it to mitigate the impact of oil price volatility.

Importantly for the valuation, OXY is no longer in 'survival mode', but in managed growth and return on capital mode. Lower debt, stable capex and new discoveries in the Gulf of America give management room to continue its mix of dividends, buybacks and selective investments without having to reach for extensive new debt.

What this means for investors

For investors who believe in continued structurally higher oil prices and a shift in production from some from shale back to offshore projects as well, Occidental is one of the visible beneficiaries. The company has quality assets in the Permian, is growing in the Gulf of Mexico ("Gulf of America") and at the same time has a significantly improved balance sheet following the sale to OxyChem.

On the other hand, the classic risks of the energy sector have to be taken into account: the oil price, the regulatory environment and the technical risks of deepwater projects. If the combination of lower oil prices and weaker demand is prolonged, it could knock both profits and the market's willingness to pay current multiples for Oxy.

Do you think Meta’s AI model can outperform ChatGPT? Do you own shares of $META?

$TSLA once again raises a topic the company has promised and postponed for years – a truly affordable electric car. According to current reports, the firm is working on a smaller, more accessible model, likely a compact SUV, which should cost less than the current Model 3.

This move comes at a time when demand for electric cars is weakening and competition, especially from China, is pushing prices down. At first glance it looks like a return to Elon Musk’s original vision – making electric cars accessible to the masses.

A turnaround strategy, or a sign of trouble

Optimists see the cheap model as a chance to reignite growth and appeal to a broader market. Tesla is facing slowing sales and growing inventories of unsold cars, which points to softened demand. Skeptics, however, note that the company has changed or canceled similar plans several times before — for example the “Model 2” project. Moreover, in recent years Tesla has focused more on robotaxis, AI and robotics than on traditional cars. The budget model could therefore be more of a reaction to pressure than a well-considered strategy.

Tesla’s future: cars or technology

The key question is where Tesla is actually heading. The company still earns most of its money from car sales, but its leadership increasingly speaks about autonomy and artificial intelligence as the crucial future. An affordable electric car could be a bridge between the present and that vision — or conversely proof that Tesla still can’t do without conventional cars for now. Investors are watching to see whether this is a new beginning or just a step backwards.

Is a cheap Tesla a real game-changer, or just a necessity?

On March 17-18, 2026, the Federal Open Market Committee (FOMC) agreed to keep interest rates in the 3.50%-3.75% range. The decision was made by a vote of 11 to 1, with the only dissenting vote coming from Stephen Mirano, who favored a 25 basis point cut. While the rate decision itself surprised no one, the content of the minutes reveals deeper tensions within the committee than the brief press release suggests.

The March meeting took place in an environment of greatly heightened uncertainty. The conflict in the Middle East, which led to the closure of the Strait of Hormuz, shot up oil prices by around 50%. At the same time, concerns remain about the impact of artificial intelligence on certain sectors of the economy, particularly the software industry. Inflation as measured by the PCE index remains at 2.8%, still well above the Fed's 2% target. It was this combination of factors that made the March meeting minutes some of the most important in years.

US interest rate developments in 2018-2026

What the Fed said: key points from the minutes

The FOMC minutes reveal several key insights that go beyond the brief press statement.

• First, most participants noted that upside risks to inflation and downside risks to employment have increased. This is a very important signal because it suggests that the Fed is facing a so-called stagflation dilemma, a situation where the economy is slowing while inflation remains elevated. In such an environment, the central bank cannot simply cut rates without the risk of further price increases, nor can it raise them without the risk of deepening the economic downturn.

• Second, some Committee members openly discussed the possibility of raising rates. The minutes indicate that some participants saw a strong case for a possible increase in future interest rates. This is a significant shift in rhetoric from previous meetings, where the debate focused primarily on the pace and timing of rate cuts.

• Third, futures markets were already signaling at the time of the meeting that the probability of a rate hike by early next year had risen to around 30%. At the same time, options markets pushed back the expected timing of the first rate cut to December 2026. This is a fundamentally different situation from expectations at the start of the year, when markets were still pricing in two cuts during 2026.

Inflation: oil shock complicates disinflationary trajectory

One of the most discussed topics at the March meeting was inflation and its outlook in the context of the surge in energy prices. Headline PCE inflation was 2.8% in January and core inflation (excluding food and energy) was 3.1%. Both readings were about a quarter percentage point higher than a year ago.

Fed projections from above: GDP, unemployment, inflation, core inflation

Source: Federal Reserve

Causes of elevated inflation

Two factors are primarily behind the rise in core inflation.

• The first is the continued impact of tariffs, which raise the prices of core goods.

• The second factor is still elevated non-residential services inflation, which remains above pre-pandemic levels.

On the positive side, inflation in the housing sector has slowed considerably and is approaching pre-pandemic levels.

However, the oil shock brings a whole new dynamic to the situation. Oil futures rose by around 50% during March, which is already feeding through to consumer energy prices. Oil companies, however, have benefited from this trend. Shares in companies such as $XOM, $CVX and $COP have strengthened significantly during this period. Meanwhile, the equity markets as represented by the $^GSPC index weakened.

The annual inflation swap rose by almost 50 basis points. Interestingly, however, forward inflation compensation rates at horizons beyond one year remained virtually unchanged. This suggests that markets believe that the current oil shock will be relatively short-lived.

In its updated projections, the Fed raised its estimate of headline and core PCE inflation for 2026 to 2.7% (up from December's estimate of 2.4% for headline and 2.5% for core inflation). The estimate remains at 2.2% for 2027 and the target 2.0% for 2028. However, a major concern of Committee members relates to the possibility that longer-term inflation expectations could become more sensitive to energy prices after several years of above-target inflation. If this were to happen, a temporary oil shock could turn into a more permanent inflation problem.

Updated FOMC Economic Projections (March 2026)

Labour market: stability on the surface, vulnerability under the surface

The unemployment rate remained at 4.4% in February, the same level as in September 2025. However, average monthly employment gains remained low and February's data were further affected by the health sector strike and unusually harsh winter weather. Most meeting participants assessed the labor market as broadly balanced, but some pointed to worrying signs.

Hidden risks in the labour market

Several factors are worth noting and are explicitly mentioned in the minutes.

The concentration of job creation in health care and a few other sectors suggests that the broad base of the economy is not strong enough to generate new jobs. Several meeting participants also warned that firms are beginning to delay or reduce hiring in anticipation of adopting AI and other technologies, which could lead to a more significant increase in unemployment if another negative shock comes.

The vast majority of participants assessed the risks to employment as tilted to the downside. Many pointed out that in an environment of low job creation, the labour market was particularly vulnerable to adverse shocks. Most Committee members also mentioned the risk that conflict in the Middle East could weaken business confidence and further reduce hiring. The Fed's projections for unemployment remained relatively stable: 4.4% for 2026, 4.3% for 2027 and 4.2% for 2028.

Economic growth and financial markets

Despite all risks, participants noted that economic activity continued to expand at a solid pace. Consumer spending remained resilient, supported by growth in household wealth. Corporate investment remained robust, mainly driven by the technology sector and AI-related investments. The Fed raised its GDP growth estimate for 2026 to 2.4% (from 2.3% in December) and for 2027 to 2.3% (from 2.0%).

There have been several notable trends in financial markets over the recent period. Equity indices weakened by around 5%, with the software sector again lagging due to concerns about artificial intelligence. The dollar held steady thanks to its safe-haven status and the US position as a net energy exporter.

International developments are also worth noting. Several central banks, including the European Central Bank, the Bank of Canada and the Swiss National Bank, have started to expect a modest rate hike later this year, although initially they were expected to stay put or ease further. Increased energy prices are thus creating global inflationary pressures that are affecting monetary policy around the world.

Projections for real GDP in 2026-2028 and beyond

Source: Federal Reserve

Dot plot and rate projections: one cut, but with an asterisk

The updated dot plot from the March meeting shows that the median of the FOMC members' projections assumes one rate cut during 2026 (median year-end rate of 3.4%) and another cut in 2027 (median 3.1%). What is important, however, is what lies below this median.

Seven out of 19 participants expect rates to remain unchanged this year, one more than in the December projections. The spread of projections for 2027 is considerably wider than before, with a range from 2.4% to nearly 4.0%. The long-term neutral rate moved higher to 3.1%, signaling a collective belief that the neutral rate level is higher than previously thought.

It is key for investors to understand the difference between the dot plot and market expectations. While the dot plot still points to one cut this year, the CME FedWatch at the time of the meeting assigned approximately a 75% probability that rates would remain unchanged through the end of the year. So the markets don't have much faith in the Fed to actually get to a cut.

This chart shows the Fed's assumptions about the future path of interest rates.

Source: Federal Reserve

Change of Chairman

The March meeting also has a political dimension. Jerome Powell is likely to chair the Fed for the last time. President Trump has named Kevin Warsh, a former member of the Board of Governors who is widely perceived to be more supportive of lower rates, as his successor, although he has not publicly commented on current monetary policy.

At the same time, the legal dispute surrounding Powell is ongoing. U.S. Attorney Jeanine Pirro issued a subpoena in Washington in connection with the renovation of the Fed's headquarters, which Powell has described as a pretext to push for rate cuts. The court sided with Powell and dismissed the subpoena, but the appeal process continues.

What this means for investors

The minutes from the March FOMC meeting offer several important takeaways for investors.

The first key takeaway is that the Fed is in wait-and-see mode. All participants agreed that monetary policy is not on a predetermined path and will be determined based on incoming data. That said, any other major economic report, from inflation data to labor market numbers to oil price developments, could move market expectations significantly.

The second key point is that the rate hike scenario is no longer purely academic. The fact that some FOMC members have openly talked about the possibility of a rate hike if inflation remains elevated is an important signal. For growth stocks and highly leveraged companies, such a development would present significant hurdles.

A third key theme is the growing importance of geopolitics for monetary policy. The conflict in the Middle East and its impact on energy prices has become a central factor in Fed decision-making. Despite the current two-week truce, oil prices are still high and will feed through to the economy in future data releases.

What to watch next

• The evolution of the Middle East conflict and oil prices: if oil prices remain at current levels or rise further, inflationary pressure will increase and the likelihood of a rate cut will drop significantly.

• Inflation data for March and April: Any further number exceeding expectations will strengthen the case for higher rates for a longer period of time.

• Next FOMC meeting April 28-29: No update on the dot plot, but with minutes that may show whether the rate hike debate has widened.

• Transition in Fed leadership: The end of Powell's term in May and the arrival of Kevin Warsh may bring a change in communication strategy and monetary policy priorities.

• Impact of AI on the labor market: the Fed explicitly mentions that firms are delaying hiring due to expectations of AI adoption. This trend may slow job creation even without a recession.

The March FOMC meeting minutes confirm that the Fed is in one of its most complicated periods in years. The combination of still elevated inflation, the Middle East oil shock, a slowing labor market, and structural changes associated with artificial intelligence are creating an environment in which the central bank has no easy path forward.

For investors in particular, this means increased volatility, uncertainty about the direction of rates and the need to closely monitor every other economic report. There is a path to further rate cuts, but it is narrower than at the start of the year and depends on developments that the Fed has only partial control over.

What complicates the decision today is not the quality of the company, but the price you are being asked to pay for that quality. With the share price up about 37% over the last five years, the key question is whether it can keep compounding revenue and margins fast enough for current valuation multiples to make sense, or whether too many good years are already priced in and future returns will be constrained even if the business continues to execute well.

Top points of the analysis

• Baidu made CNY129.1bn (about USD18.5bn) in 2025, down 3% from a year earlier; but in Q4 2025, revenue grew sequentially by 5% to CNY32.7bn (USD4.68bn).

• New AI business already accounts for 43% of core segment revenue and generated over CNY40bn (roughly USD5.6bn) for the full year with 48% growth; AI infrastructure (cloud for AI) alone brought in about CNY19.8bn (USD2.8bn) and grew 34%.

• Net profit in 2025 was about CNY14.1 billion (about USD2.0 billion) and earnings per share was CNY6.99, up about 11-17% year-on-year by metrics; in Q4, profit was CNY1.8 billion (USD255 million) and earnings per share was CNY3.71.

• Apollo Go's robotaxi has completed more than 17 million rides, has been driven in more than 20 cities in China, is being tested in Europe and Dubai, and works with platforms like Uber and Lyft; it travels hundreds of millions of kilometers annually in autonomous mode.

• The company is sitting on cash and short-term investments of over CNY294-296 billion (about USD42 billion), has launched a USD5 billion share buyback and announced a plan to pay its first dividend, an exceptional signal for a Chinese tech firm of this type.

What has changed

Until a few years ago, Baidu $BIDU was all about search, advertising and a few ancillary digital services. Today, the revenue structure is different: the "new" business related to artificial intelligence - i.e. AI infrastructure, services on top of the ERNIE model and automation - makes up almost half of the core, while traditional advertising is stagnant or slightly declining. In the 2025 numbers, it's easy to see: while overall revenue is down 3%, revenue from the new AI business is up nearly 50%, so it's starting to take over as the main driver.

At the same time, profitability has changed. Instead of higher investment in AI leading to a deep loss, Baidu has managed to maintain solid margins: net profit of CNY14.1 billion (USD2.0 billion), earnings per share of CNY6.99 and total operating profit of CNY20.2 billion mean that the AI transition is proceeding on a relatively sound financial footing. In the fourth quarter of 2025 alone, AI activities already accounted for CNY11.3bn (USD1.6bn) in revenue, or 43% of the underlying business, and their growth momentum is much higher than the rest of the company.

There has also been a big shift in robotaxi. Apollo Go is no longer just a trial program in two cities, but a service with millions of actual rides, driverless operations in multiple locations, and plans to expand outside of China. It has reportedly completed more than 17 million rides and is operating in more than 20 Chinese cities, with tests and pilots also underway in Europe and the Middle East. Baidu is thus collecting valuable real-world traffic data that is critical to the quality of autonomous driving.

How it becomes money

From an investor's perspective, the most important thing is that Baidu is starting to have three distinct sources of future value.

The first is the AI infrastructure itself. Baidu is not just selling a "cloud" but a specific AI building block: data centers, computing power, its own ERNIE model, and ready-made enterprise services. AI infrastructure revenues of around CNY19.8 billion (about USD2.8 billion) a year and 34% growth show that there is interest in this offering. This is a business that is high-margin when scaled - once built, the facilities can serve many clients.

The second source is Apollo Go robotaxis. In the short term, it's a project that costs more than it makes, but as mileage and cities grow, it starts to approach economics where the cost of operation spreads out significantly. Additionally, Baidu doesn't need to build its own app for end customers everywhere - it integrates its system into existing platforms like Uber and Lyft to focus on technology and fleet management, while leaving marketing and user interface to partners. If autonomous transportation takes off, this puts Baidu in a good position to earn a commission or royalties from it.

The third source is working with capital. The company has over CNY 294 billion (roughly USD 42 billion) in cash and liquid investments, which is almost comparable to its entire market capitalization. This cash is funding both its large-scale AI investments and its US$5bn share buyback and, more recently, its dividend. If profitability and growth can be sustained, the combination of buybacks and dividends can significantly increase earnings per share and gradually create a "floor" under the stock price.

The numbers that support this thesis

Several key numbers emerge from the 2025 results. Total annual turnover of CNY129.1bn (USD18.5bn) was down 3%, but of this, new AI business was around CNY40bn (USD5.6bn), growing 48% year-on-year. AI infrastructure turnover of around CNY19.8bn (USD2.8bn) grew 34%, with AI activities accounting for CNY11.3bn (around USD1.6bn) in Q4, or 43% of the underlying business.

Net profit of CNY14.1bn (USD2.0bn) and earnings per share of CNY6.99 imply year-on-year growth of around 11-18%, confirming that Baidu is managing to increase profitability even without strong growth in overall revenue. In Q4, net profit was CNY1.8bn (USD255m) and earnings per share CNY3.71, with a margin of around 5%; at the operating level, the firm is seeing margins of around 5-10% depending on whether we look at accounting or adjusted results.

The balance sheet remains very strong: total cash and investments at the end of the year exceed CNY294bn (over USD42bn), with a debt-equity mix more consistent with a conservative profile than an overbought growth title. This is an important difference from many other AI companies - Baidu can invest for the future from a strong balance sheet, not from debt risk.

Comparison with competitors

Compared to other large Chinese tech firms (Alibaba $BABA, Tencent $TCEHY), Baidu looks like the purest AI bet, but also the most "punished" title in terms of return on capital. While Alibaba and Tencent have significantly higher ROEs and stronger, more mature businesses in e-commerce and gaming, Baidu has ROEs of only around 3-4% and again, much of its profits are being tipped into AI projects that are just getting off the ground in terms of numbers. On the other hand, Baidu is trading just below book value (P/B ~0.98) and at less than double sales, while both Alibaba and Tencent are trading higher - so the investor is paying relatively less for each yuan of sales and equity.

Even more interesting is the comparison with US AI-related companies. Large providers of cloud services and computing power for AI, such as Microsoft, Alphabet or Amazon, have significantly higher revenue multiples (often 4-8 times) and profit margins, but also much greater exposure to Western regulation and an oversaturated market. Baidu trades at around 2 times revenue against them, with similar gross margins but significantly lower return on capital - so the market is clearly discounting it for the Chinese environment and the fact that some AI projects are still in the build phase.

In the autonomous transport segment, Apollo Go is a direct competitor to projects like Waymo (Google), Cruise or robotaxis from Tesla and other manufacturers. In terms of cities, mileage and fully driverless driving, Baidu is among the world leaders, but unlike Waymo or Tesla, it does not receive as much attention in the Western press. From an investment perspective, this means that much of Robotaxi's value is probably priced more conservatively in the share price than its US competitors - while investors there often "overpay" for a story, with Baidu we get that story more as a lesser paid bonus.

Valuation

According to current indicators, Baidu is trading at about 36 times earnings, less than twice sales and just below book value - the price to equity ratio is 0.98. That's a combination that we hardly see in a classic "AI growth" title: they typically have significantly higher price-to-earnings and book value ratios, but at the same time often have weaker or negative profitability.

A gross margin of around 45% shows that Baidu still has a very decent margin between revenues and direct costs, but the operating margin is still slightly negative (-2.6%), reflecting the high investment in AI, robotaxis and robotics. The resulting net margin of around 6.9% means that the company can remain profitable on an overall operating level, but the return on capital is still low - a return on assets of just over 2% and a return on equity of around 3.4%. This is significantly lower than what, for example, large US technology firms are achieving today.

From a balance sheet perspective, Baidu looks relatively conservative: debt to assets is 22%, debt to equity is 37% and an interest coverage ratio of 8.5 shows that the company has no problem paying interest on its debt. Liquidity is solid (current ratio 1.91, quick ratio 1.65) and working capital of about CNY 75 billion provides comfort for current operations. Altman's Z-score of 1.60 does suggest that the company is not in a "worry-free" zone, but in light of the high cash and stable earnings, this is not an immediate warning sign, but rather a reflection of the capital-intensive industry.

Investment scenarios

In a favorable scenario, Baidu manages to sustain high AI revenue growth, Apollo Go's robotaxi gets into profit mode in at least some cities, and the licensing model expands with partners in Europe and the Middle East. Overall sales will return to growth, margins will remain in double digits, and the combination of earnings, buybacks and dividends will lead to a gradual revaluation of the stock towards the levels we see today in Western AI titles with similar momentum.

In a realistic scenario, the AI business will gradually fully replace the decline of the legacy segments, total revenues will grow at a mid-single digit rate, robotaxis will act as a long-term option, and capital will be returned mainly through earnings, a modest dividend and buybacks. In that case, it makes sense to expect the current "discount" to historical valuations and to Western competitors to close at least partially.

In a pessimistic scenario, politics come into play - tighter AI regulation in China, conflicted relations with the United States, or reduced cooperation with foreign partners. Combined with a possible slowdown in the Chinese economy, this could limit the growth of AI services, slow the adoption of robotaxis, and prompt investors to demand an even higher risk premium. In such a world, Baidu will remain profitable and liquid, but a valuation discount may become the "new normal."

Risks

Geopolitics and regulation are key risks. Baidu operates in an environment where the state imposes strict requirements on content, data and technology development, and the company is also exposed to tensions between China and the West - be it sanctions, restrictions on technology exports or possible restrictions on Chinese apps and services abroad. The second big risk is technological: autonomous driving and robotics are long-term plays dependent on security, public trust and support from authorities. All it takes is a few serious incidents or a change in rules to slow deployment for years.

Similarly, the competitive pressure cannot be overlooked - in both AI and autonomous mobility, Baidu is competing not only with other Chinese companies, but also with global giants that have a strong position in cloud and model development. Although Baidu has a head start in some areas (for example, in the scale of robotaxi traffic), this head start is not guaranteed. Last but not least, there is the risk that investments in AI and robotaxi will drag on, remain low-margin for a long time, and investors will become impatient.

What to take away

Baidu today is more of a Chinese "AI infrastructure and autonomous" player than a traditional internet company. It brings a combination of a growing AI business, a big bet on robotaxis, a very strong balance sheet and, more recently, a return of capital in the form of dividends and share buybacks - all at a valuation that is strikingly lower than comparable Western titles. For the investor who is not afraid of Chinese risk and wants exposure to AI and autonomous mobility at some "discount", Baidu could be an interesting medium to long-term opportunity.

Underneath that product roadmap lies one of the most aggressive AI capex plans in the market. Meta has guided for 2026 capital expenditure in a range of roughly 115–135 billion dollars tied largely to AI infrastructure, yet still generates tens of billions in annual free cash flow from its core advertising machine, leaving room for buybacks and dividends even after the AI build‑out. For investors, the message is that Mango and Avocado are not being financed with leverage or financial engineering, but with the cash gushing out of Facebook, Instagram and WhatsApp – a bet that today’s ad profits can underwrite tomorrow’s push toward superintelligence.

Mango and Avocado: the first wave after the Llama era

$META has officially unveiled Mango, aimed at generating images and videos, and Avocado, for text-based tasks, logic and programming. These are the first major products from Meta's new Superintelligence Labs division, which builds on the Llama family of models but aims higher in both multimodality and programming capabilities.

The company openly admits that Mango and Avocado may not be instantly the best in all areas compared to OpenAI, Anthropic or Google's $GOOG models. The goal is to have several strong domains that will be attractive to end users - especially in visual content generation and hands-on programming. It is these areas that are intended to help Meta strengthen its core products, from social networking to tools for creators.

Meta initially focused on a flagship model, codenamed "Behemoth," which was intended to be an answer to the most powerful models of the competition. However, its release has been repeatedly delayed due to concerns over performance and its ability to keep up with the top. Llama 4, launched in April, has not received the reception from developers that management expected, deepening Mark Zuckerberg's frustration with the pace of progress. Mango and Avocado thus come as a more pragmatic first step - preferring well-performing models in clearly chosen segments rather than a belated "perfect" jack of all trades.

135 billion dollars: Meta buys the future, but with its own money

Meta is planning capital investments in the range of $115 billion to $135 billion in 2026, nearly double the roughly $72 billion in 2025. The bulk of this is going into AI infrastructure: data centers, compute clusters, and specialized chips for training and deploying models.

The financial results for the fourth quarter of 2025 confirm the quality picture. Revenues were approximately $59.9 billion, up about 24% year-over-year, while net income increased to about $22.8 billion, up 9%. Earnings per share were around $8.9. Thus, Meta is showing that it is able to dramatically increase investment in AI without sacrificing margins and profitability.

This essentially raises the bar for the entire sector: it shows that if the underlying advertising business is strong enough, a tech firm can afford AI investments in the hundreds of billions of dollars without losing Wall Street's confidence. The planned $135 billion in capital spending thus doesn't feel like a gamble, but rather a statement of ambition - Meta wants to be one of the players that define the next generation of AI, not just one of many users of someone else's model.

Alexander Wang and Meta Superintelligence Labs

A key figure in Meta's new AI chapter is Alexander Wang. The 28-year-old entrepreneur, who became a self-made billionaire at the age of 24 thanks to Scale AI, now heads Meta's Superintelligence Labs division while remaining a member of Scale AI's board of directors.

Meta paid approximately $14.3 billion for a 49% stake in Scale AI, securing both the technology and the talent. Wang brought part of his team - the "Scalien" employees - to Meta, along with the know-how in data annotation, data infrastructure and practical deployment of AI in large organizations. Combined with Meta's in-house capabilities, this creates one of the largest integrated AI workplaces in the world.

Mark Zuckerberg is personally orchestrating the recruitment of this new generation of AI leaders. Meta has poached more than twenty researchers from OpenAI and other leading labs and is purposefully building a team to compete with Silicon Valley's elite research groups. Wang also maintains a close relationship with the US government - his Scale AI has won contracts to supply AI tools to the Pentagon, and Wang attended President Donald Trump's inauguration.

Meanwhile, the reorganization within Meta is one of the biggest in the company's history: AI is shifting from its role as a support tool for advertising to a central pillar to influence all major products - from feed and recommendation algorithms to messaging to virtual and augmented reality. Mango and Avocado are the first visible output layer of this transformation, but the real impact will depend on how quickly the company manages to transform internal processes, product teams and the development cycle around the next generation of models.

A partially open approach: between community and competitive advantage

Meta has long profiled itself as a proponent of a relatively open approach to models - something it has already demonstrated with the Llama family. With Mango and Avocado, however, the company is opting for a more sophisticated, "partially open" strategy.

Unlike competitors' fully closed models, Meta wants to make its models available to a wide range of users and developers around the world. The goal is clear: to create the largest possible ecosystem of applications and tools built on its models, thereby locking in its position as the preferred AI platform for consumers in the long term.

But at the same time, the company doesn't want openness to undermine security and its own competitive advantage. For Avocado, for example, it will not include the full range of capabilities to generate advanced cybersecurity or exploit code in publicly available versions. These features will remain limited or only available in a regulated environment to reduce the risk of exploitation.

This "calculated trade-off" is intended to keep Meta in an advantageous position: open enough to attract developers and users, but closed enough to maintain a technological edge where the most valuable capabilities are concerned. At the same time, the company is counting on its models not being the best "across the board," but it wants to dominate in a few strategic segments-for example, optimizing to run on mainstream PCs and end devices, where Meta can leverage its experience with mass-market consumer products.