The key question is whether the company can build a second strong growth driver from its newer treatment and keep advancing what comes next. If it shows that revenue can become more diversified, the stock can be valued more like a high-quality healthcare business, not like a risky biotech story.

Top points of analysis

• Two FDA-approved therapies form a clear growth framework: stable foundation + new engine.

• 2024 revenue grew to $491.7 million. USD and for 2021-2024 this implies a very fast growth rate (high "commercial CAGR" from a low base).

• The gross margin is extremely high and the TTM net margin of ~37% shows that this is not a "powerpoint story" but a cash business.

• The company has high liquidity and therefore freedom: invest in growth, buyouts, or acquisitions.

• The biggest valuation variable is the rate of adoption of the second product and the ability to offset the pressure on the smaller part of the portfolio.

Company profile and why this model is rare in the stock market

Catalyst Pharmaceuticals $CPRX is at its core a commercial "rare disease" company (focus on rare diseases). It does not sell a broad portfolio of low-margin products, but targeted specialties where the key combination is: a diagnosed patient population, reimbursement from payers, strong clinical value, and relatively few direct competitors. This is a recipe that often generates high margins, stable cash flow and good pricing discipline in healthcare.

Unlike a typical biotech without revenues, there is already a demonstrable monetization capability here. In 2024, the company generated $491.7 million in revenue. The net profit was USD 163.9 million. USD. From these two numbers, you can see the point: very high profitability already at the current size of the company, and room for further growth to go into earnings disproportionately due to operating leverage.

It is also important for an investor that this is not a "one trick pony". Revenues and profits are not based on a single event, but on recurring treatment reimbursements and the ability to gradually expand the company within segments where it has real pricing power.

Experienced CEO

The firm states: Richard J. Daly became our President and Chief Executive Officer on January 1, 2024 and has served on our Board of Directors since February 2015. Prior to joining Catalyst, from January 2022 to August 2023, Mr. Daly served as President of CARsgen Therapeutics Corporation, an emerging oncology company focused on developing CAR-T therapies for liquid and solid tumors. From July 2018 to January 2022, Mr. Daly served as Chief Operating Officer of BeyondSpring Pharmaceuticals, a pre-commercial oncology-focused biotechnology company with assets in late-stage Phase 3 clinical trials. Prior to joining BeyondSpring, (i) from February 2016 to July 2018, Mr. Daly served as Chairman and Chief Executive Officer of Neuralstem, Inc. a biopharmaceutical company focused on the development of central nervous system therapies based on neural stem cell technology, and (ii) from October 2014 to September 2016, Mr. Daly served as a partner at RavineRock Partners, a commercial consulting practice focused on biotechnology and pharmaceuticals.

Two products as two different economies: stability + growth

1) Stable fundamentals: treating LEMS as a high-margin business

The first product is based on the rare diagnosis of Lambert-Eaton Myasthenic Syndrome (LEMS). This is the type of market where the game is not about volume, but about precision: identify patients, keep reimbursement, have clear clinical value and high retention. LEMS is a rare disease with a very low prevalence (on the order of one case per million population), so the market is small but stable and "price inelastic" due to the nature of the treatment.

The economics of such a product tend to be attractive: once the patient is on therapy and reimbursement works, it is a relatively predictable cash flow. It is also a business that can hold margins because the commercial infrastructure is narrow and marketing spend is not comparable to the mass pharmaceutical market.

The "defensive" aspect is also important. The company reports addressing product protection and the timeline of competition. For an investor, this means: a crucial part of the value is not just in the actual numbers, but in how long similar product economics can be sustained.

2) The new engine: Duchenne muscular dystrophy

The second product is in a completely different category. While Duchenne muscular dystrophy (DMD) is also a rare disease, in absolute numbers it is a much larger and more economically significant market than LEMS. DMD affects approximately 1 in 3,500-5,000 boys born. And because it is a chronic and progressive diagnosis, patients are on therapies for a long time - exactly the type of "addressable market" where a large commercial product can be built.

Moreover, the context of the market is important for DMD: there is an ongoing battle between different types of approaches (from steroid treatment to exon-skipping to gene therapies). Paradoxically, it is this dynamic that can play into the hands of more "practical" and widely applicable solutions, if they offer a good efficacy/tolerability ratio. And this is exactly the space that investors are looking at for such products: how quickly the drug gets into clinical practice, its position in the treatment pipeline, and the barriers to reimbursement.

Moreover, the DMD market is also growing in terms of overall size and investment in treatment. Commenting on developments in the DMD market, Reuters cites estimates that the global market may grow to ~$11.5 billion by the mid-1930s. This is important for investors: even a relatively "small" share of a growing market can have a major impact on the revenues of a mid-sized company.

Addressable market and monetization: where to win the most

For these companies, the most important thing is not just "how many patients there are", but how many of them are diagnosed, treated, reimbursed and retained in the long term. This creates 4 practical monetization levers.

The first lever is penetration within the existing standard of care. For DMD, this means that although the diagnosis is relatively well defined, the actual treatment practice is heterogeneous. Every percentage point shift in adoption within major centres has a much greater impact than in mass diagnoses because the annual per-patient economics tend to be high.

The second lever is expanding "share of wallet" in the same patient base. Rare disease products often start in one indication, but the greatest value is realized when the product becomes a structural part of care and a long-term standard, not an "alternative." In practice, this means more stable reimbursement, higher persistence, and less sensitivity to short-term shocks.

The third lever is geography and channels. For some orphan products, part of the monetization is built on partnerships outside the main domestic market, or licensing. These items are not headline numbers, but they often improve the quality of cash flow because they have a different cost structure.

The fourth lever is pricing and mix. In orphan segments, pricing is not primarily about inflation, but about value in the reimbursement system. If a drug strengthens its position, pricing power often manifests itself through mix and reimbursement stability rather than aggressive pricing.

Competition: why it's not just "few players = easy win"

For LEMS, competition is structurally limited by market size and regulatory realities. There are few direct alternatives and the key is to guard the legal/patent axis and the risk of generic entry rather than a "marketing battle" with dozens of brands.

For DMDs, the situation is reversed. It is a rare disease (focus on rare diseases), but a large market in terms of capital and media where multiple therapies meet. This increases the chance of rapid growth for the winners, but also increases the risk that the standard of care will shift. For an investor, it is therefore important to monitor how a drug anchors itself in real-world practice: whether it is seen as an add-on or as a "default" choice for certain patient groups.

The specific risk and opportunity is that the DMD market is sensitive to regulatory and safety events. When a safety issue arises in another part of the market, it can change physician and payer preferences toward more conservative and long-established approaches. That's not an automatic win, but it's why competition in DMD can be judged not just by "how many companies are out there," but by what the actual patient treatment journey looks like.

Long-term numbers: what's most important about growth

The company's revenue grew from €140.8 million to €1.5 million. USD 140.7 million in 2021 to USD 491.7 million in 2016. That's very rapid growth (from a low base), but it's no longer a "one-time jump" because profitability has improved at the same time that the company has moved into a mode where net income and EPS are growing.

Gross profit in 2024 reached 422.9 million. This implies a gross margin in the mid-80% range or so. For an investor, this is crucial: a high gross margin means that even with rising operating costs (for the commercialization of the second product), there is a chance to maintain very decent profitability.

Most interestingly, operating profit jumps to €195.1m in 2024. USD 195.8 million from USD 86.8 million in 2024. This is exactly the profile of a company that the market will start to value higher over time: it can grow while holding back costs.

What can drive 2026-2028 revenues

The biggest near-term driver is DMD product rollout. In absolute numbers, it couldn't yet make a difference in 2024 (approvals and commercialization are fresh), so the biggest question is: how quickly does it tip from "novelty" to standard, how many patients will realistically get on therapy, and what do the reimbursement dynamics look like.

The second driver is sustainability and modest growth of the "cash cow" product. This is not about the market exploding. It's about avoiding erosion and ensuring that the company can sustain the economics over the long term. For orphan products, often stability + modest expansion of diagnostics and coverage is enough to keep cash flow very good.

Valuation: 50% undervaluation

At first glance, the valuation looks relatively sober given the company's profile. A P/E around ~14 and EV/EBITDA around ~7.6 for a business with net margins in the teens and lower debt is a combination that often implies the market is in for a slowdown or higher concentration risk.

If we take a fair price estimate of around $36.5 (which implies roughly "+50%" versus the levels where the stock has often moved recently), it's not magic. It's typically just a re-rating of the multiple the moment two things are confirmed: that DMD's product is growing as planned and that erosion of a smaller portion of the portfolio is manageable. At that point, the "biotech discount" becomes a "quality multiple".

It is also important that the company is not financially pressured into any compromises. It does not have gigantic debt and has very high liquidity (Current ratio over 6), which reduces the risk of "bad" decisions at inopportune times and gives room for the equity story to improve with capital policy (buybacks, selective acquisitions, growth investments).

Risks: what can realistically go wrong with the story

The biggest risk is concentration. A rare disease company can have nice margins, but when a significant portion of cash flow is based on one core product, any change (regulatory, legal, reimbursement, competitive) has a multiples greater impact than a diversified farm.

The second risk is the adoption of the DMD product. DMD is a large and growing market, but it is also highly monitored, professionally complex and competitively dynamic. This means that approval alone is not enough. Investors are interested in speed of ramp-up, success rate with payers, willingness of centers to rewrite standards, and real persistence of patients on therapy.

The third risk is the erosion of a smaller portion of the portfolio after exclusivity expires. If generic competition comes in more aggressively, it can worsen mix, margins or growth in the short term. The company itself explicitly mentions this for the FYCOMPA patent axis. In a good scenario, this is just temporary noise; in a bad scenario, it slows down the whole story and the market will keep the "biotech discount" longer.

Investment scenarios

Optimistic scenario (rapid adoption in DMD + stable core): the DMD product will become a significant part of revenues during 2026-2028, adding several hundred million USD per year and, thanks to high gross margins, much of the growth will be written into profits. Cash remains strong, the company may add buyouts or smaller acquisitions. In that case, the market typically stops demanding a "biotech discount" and the multiple can move higher. The result can be a combination of EPS growth + higher P/E, which is exactly the mix that makes a "multi-year compounder".

Realistic scenario (stable core + gradual DMD ramp-up, some erosion elsewhere): DMD product grows, but gradually. The erosion of a smaller part of the portfolio bites off some of the revenue in the short term, but is covered by the growth of the other product. Margins remain above normal, with only a temporary slight deterioration in mix and commercialisation costs. The stock in this scenario often grows in a "staircase" fashion: first through results, then through a change in sentiment, and only finally through re-rating.

Negative scenario (slow adoption of DMD + faster erosion of a smaller portion of the portfolio): the DMD product grows slowly due to reimbursement, competition or caution by centers, while erosion after exclusivity expires is rapid. Company remains profitable, but headline numbers lose momentum and market reverts to cautious valuation. This is a scenario where "undervaluation" can appear to be a trap as the catalyst just shifts over time.

What to take away from the article

• The company already looks more like a highly profitable healthcare business than a typical biotech.

• Two FDA-approved products create a combination of stability and a growth "runway."

• The key catalyst for 2026-2028 is DMD product adoption and the ability to maintain high margins.

• The biggest risk is the concentration and ramp rate of the new engine, not financial stability (debt low).

So far, 2026 is showing an interesting shift in investor sentiment. Some capital is moving away from companies exposed to segments like software, cloud or AI infrastructure towards sectors and companies that are more cash, dividend and real cash flow driven. This is exactly the environment in which ETFs like $SCHD (focusing on dividend stocks), $XLE (energy) and $XLP (consumer staples) can significantly outperform the broader market. And that's what's happening in the market right now.

That's because when the market begins to more fully value the real cash flow that companies generate today, and isn't just found in the promise of the future, valuation and margin sensitivity typically increases. The defensive consumer discretionary sector (XLP) can hold margins even in a worse economic environment, while the energy sector (XLE) benefits from commodity cyclicality and a more moderate CapEx. The CapEx is one of the main reasons for the sell-off in the software and technology sector in 2026. We have analyzed the entire situation in detail in this article. Dividend strategy (SCHD) combines value, much less volatile companies with the quality of their cash flow. This is exactly what the market is pricing in the most this year.

Schwab U.S. Dividend Equity ETF $SCHD

The Schwab U.S. Dividend Equity ETF has long been one of the most respected dividend funds in the U.S. market. The fund tracks the Dow Jones U.S. Dividend 100 Index, which is constructed to select U.S. companies with both high dividend yields and strong fundamentals.

Unlike many pure income ETFs, $SCHD isn't built solely on chasing the highest dividend. The selection process combines several qualitative filters.

These are:

• Return on Capital,

• cash flow to debt ratio,

• dividend yield,

• five-year dividend growth.

The result is a mix of firms that not only pay a dividend but have a high probability of sustaining it in the future.

It is this combination of quality and yield that is the main reason why $SCHD often performs better than the broader market in an environment of higher rates and increased volatility. As investors become more concerned with free cash flow and capital discipline of technology companies, capital naturally moves into more stable dividend strategies. And this ETF has benefited greatly from that this year.

In terms of structure, it's a relatively concentrated ETF with about 100 U.S. stocks, typically among large and financially strong companies. Major sectors include energy, consumer staples and health care, and the fund intentionally does not include REITs or MLP structures. This reduces interest rate sensitivity relative to some other dividend ETFs.

Overview of the largest positions in the ETF

SCHD's expense ratio is also a big competitive advantage. The expense ratio is around 0.06%, which is among the lowest in the dividend ETF segment and significantly supports long-term performance for investors.

Thus, from an investment perspective, $SCHD represents a quality strategy focused on dividend-paying titles rather than chasing the highest single stock price appreciation. This means a lower yield than some aggressive dividend funds, but historically better stability, fewer drawdowns and a more balanced total return.

When we look at $SCHD through the lens of recent years, it's clear why the fund maintains a strong reputation among long-term investors. Historically, it has been able to combine an above-average dividend yield with relatively low volatility and solid price appreciation. It is this combination that is back in vogue in the current macro environment.

The ETF's dividend yield typically hovers around 3-4% annually, well above the S&P 500 Index. But even more important is the rate of dividend growth. Thanks to the fund's company selection methodology, it has a solid dividend CAGR over the long term, which means investors can grow income from the portfolio without the need for active intervention. This is a key difference from many dividend strategies that, while offering a high yield, offer no growth momentum.

From a valuation perspective, SCHD is currently in a relatively interesting position. Because the fund doesn't have significant exposure to the most expensive technology megacaps, it hasn't been as inflated by multiple expansion as the broad index in recent years. That's helping it this year. In an environment where the market is penalizing companies with high CapEx and a sensitive free cash flow profile, quality dividend companies are once again coming to the fore. The ETF's price is up 14% since the beginning of the year and is currently at all-time highs. As recently as December 2025, however, the price was at 2021 levels.

The sector structure is also very important. SCHD has historically had a higher weighting in financial services, industrials, energy and consumer staples, while technology makes up a smaller proportion than in the S&P 500. This means two things. On the one hand, the fund typically underperforms in pure technology bull runs. But on the other hand, it tends to be more resilient in moments of capital rotation out of growth titles and into value and dividend strategies - exactly the environment we are starting to see again in 2026.

Overview of the $SCHDportfolio allocation

Even with this type of investment, however, there are risks and investors should not overlook them. The first is sector concentration outside of technology. Should the AI boom get back into full swing and the tech megacaps resume strong multiple expansion, SCHD could be a relative laggard. The second factor is sensitivity to the economic cycle. While these are quality firms, a portion of the portfolio is tied to the traditional economy, which may pressure performance in a deeper recession in the short term.

The specific risk of dividend ETFs in general is also the interest rate environment. Should bond yields rise significantly, some investors may shift capital from dividend stocks back into fixed income. While SCHD is more resilient to this risk than REIT funds, it is not completely immune.

Overall, however, SCHD is benefiting from a very favorable combination of factors at this stage of the cycle: a return of capital to quality, a greater emphasis on free cash flow, and a more cautious market approach to extremely capital-intensive technology stories. That is why the S&P 500 index is outperforming this year.

Energy Select Sector SPDR Fund $XLE

The Energy Select Sector SPDR Fund is one of the most prominent sector ETFs in the U.S. market, representing a bet on the energy sector of the S&P 500 Index. The fund tracks the performance of the Energy Select Sector Index, which includes the largest U.S. oil and gas companies. Unlike broadly diversified ETFs, this is a highly targeted exposure that can significantly outperform the market at certain points in the cycle. And that's exactly what's happening this year.

From a design perspective, $XLE is a classic passively managed ETF that aims to replicate the sector-focused energy portion of the S&P 500 as closely as possible. The portfolio is made up of a relatively small number of titles and is thus highly concentrated. Companies such as ExxonMobil $XOM and Chevron $CVX have long held the largest weightings, and together they often make up more than 40% of the fund. Importantly. $XLE is not an evenly diversified energy basket, but rather a bet on the best companies in the energy sector. There are currently 22 companies in the entire ETF.

The largest positions in the $XLEETF portfolio

This concentration is one of the reasons for the growth this year, which has left the S&P 500 Index behind. Big oil companies entered the current cycle in very strong financial shape. After years of capital discipline, cost-cutting and CapEx investment optimization, they are now generating robust free cash flow even at relatively moderate oil prices. According to S&P Global data and individual company reports, the sector has significantly improved returns on capital and reduced debt over the past two years, making it a more attractive segment than in past cycles.

From a cost perspective, $XLE is among the very efficient ETFs. The expense ratio is around 0.08%, which is a competitive level for a sector fund. Moreover, the fund's liquidity is very high as it is one of the most heavily traded sector ETFs in the market. For institutional and retail investors, this means minimal spread and easy tradability even at higher volumes.

The dividend profile is another important feature. Energy companies traditionally pay above-average dividends, and XLE thus offers a yield that is typically above the broad market. Unlike pure dividend ETFs, however, the payout is not the fund's primary objective. Rather, it is a side effect of the strong cash flow of oil companies. The index's dividend yield is 2.82%.

From a macroeconomic perspective, it is important to understand that XLE is a highly cyclical instrument. Its performance is closely tied to oil and gas prices, investment activity and the overall state of the global economy. In an environment where capital is rotating out of expensive technology titles into value sectors and where commodities hold relative strength, XLE has a natural tailwind. Conversely, in a period of technology euphoria or a sharp drop in oil prices, the fund can quickly fall behind. Similar to $SCHD, the $XLE ETF has notched nice appreciation this year. The price per unit is currently up 20.65% year-to-date.

XLE's rise against the S&P 500 this year is the result of several structural factors that have been accumulating in the energy sector since the post-pandemic era. Energy companies have entered the current cycle significantly more disciplined (from a financial management perspective) than in past decades. After the painful period of 2014-2020, the sector has substantially reduced CapEx growth, reduced debt and begun to place much greater emphasis on return on capital and free cash flow. This change in management behaviour is one of the main reasons why energy stocks perform better in the eyes of investors today than in the past.

In terms of fundamentals, the big oil companies today generate very robust cash flow even at oil prices that are not extreme. Costs have fallen significantly for many producers, while dividend policies and share buyback programs remain relatively generous. According to S&P Global data and company reports, return on equity (ROIC) for large producers is above historical averages, supporting the interest of value-oriented capital. XLE, as a concentrated basket of these companies, directly benefits from this.

Unlike past cycles, the current dividend payout is not primarily funded by corporate debt growth or aggressive CapEx, but by truly strong operating cash flow. This is exactly what the market is pricing in a higher interest rate environment. Investors are now looking much more closely at the ability of companies to generate cash, and the energy sector is currently one of the strongest in this regard.

Another supportive factor is relative valuation. Energy stocks are trading at lower multiples than much of the technology sector even after this year's gains. The forward P/E of energy giants remains below the S&P 500 average, which increases their attractiveness in an environment of valuation compression for growth titles.

ETF Performance $XLE

On the flip side, it must be openly stated that XLE is the most cyclical ETF on today's list. The biggest risk remains the evolution of oil and gas prices. If the global economy slows significantly or there is an oversupply in the oil market, energy stocks could react quickly and negatively. History shows that price declines in the energy sector tend to be deeper than in other defensive segments.

Portfolio concentration is another risk. The dominance of a few titles means that specific issues for large players (such as regulatory intervention, acquisition missteps, or production declines) can have a greater impact on ETF performance than for broader funds. $XLE thus offers strong sector exposure, but at the cost of higher concentration.

Energy transition also remains a long-term structural theme. Although demand for oil and gas remains robust under most International Energy Agency (IEA) scenarios over the next few years, the push to decarbonise and investment in renewables are factors that could change valuations across the sector over the next decade.

Overall, however, the current macroeconomic environment, higher rates, an emphasis on free cash flow and rotation out of expensive growth titles is playing into XLE's hands.

Consumer Staples Select Sector SPDR Fund $XLP

The Consumer Staples Select Sector SPDR Fund is a sector ETF focused on consumer staples companies. The fund tracks the Consumer Staples Select Sector Index, a segment of the S&P 500 that includes companies that produce food, beverages, toiletries, tobacco or basic household products. It is a classic defensive sector that historically has exhibited lower volatility than the broader market and better resilience during economic slowdowns.

Structurally, $XLP is a passively managed ETF with a relatively concentrated portfolio. Traditionally, global consumer giants such as Procter & Gamble $PG, Coca-Cola $KO, PepsiCo $PEP, Walmart $WMT and Costco $COST have held the largest weightings (the ETF contains 33 positions in total). It is the dominance of these stable blue-chip companies that is a key reason the fund is outperforming the broader index this year. And not just by a few percent, but even after this week's ATH drop of 2.25%, the $XLP is still outperforming the S&P 500 index by more than 12%. That's because capital has been shifting massively from riskier technology and software titles to more defensive sectors since the start of 2026. We can see this not only in the performance of the ETF, but also in the individual companies that are included in it.

ETF $XPLPosition Overview

From an investment perspective, it is important to understand the economics of this sector. Firms in the Consumer Staples sector operate in areas with relatively inelastic demand. People buy food, beverages or hygiene products regardless of the phase of the economic cycle. This leads to several distinctive features:

• stable sales

• relatively predictable margins

• strong conversion of profits into cash

According to S&P Global' s long-term analysis, this sector is one of the least volatile parts of the index precisely because of the high repeatability of demand.

Moreover,$XLP is interesting because it combines a defensive nature with a dividend profile. The fund's dividend yield is typically around 2.5%-3% (currently 2.48%), above the S&P 500. More important than the actual yield, however, is the quality of the stocks included in the ETF. Most of the top positions in the fund are dividend aristocrats with decades of uninterrupted dividend increases. This increases the ETF's appeal, especially for investors seeking stable income and lower portfolio volatility.

From an expense ratio perspective, $XLP is one of the very efficient sector funds. The expense ratio is 0.08%, liquidity is high and the spread is low, making it an easily tradable instrument. This is one of the reasons why it is often used by both retail investors and institutional portfolio managers in sector rotation.

The macroeconomic context of 2026 plays heavily into the hands of this ETF. Higher interest rates, pressure on valuations of growth titles and increased market sensitivity to free cash flow are leading investors to be more selective. This gives defensive sectors with predictable cash flow a relative advantage. XLP benefits from this rotation in a similar way to $SCHD, but from a different perspective. Not through dividend selection, but through the structural stability of the consumer sector.

However, it is important to note that this is still a sector ETF. Should the market return to a strong growth phase driven by technology, XLP has historically tended to lag relatively.

S&P Global's historical data has long shown that the consumer staples segment tends to outperform the market especially late in the cycle or during periods of heightened volatility, which is exactly what is happening in the market today.

From a fundamental perspective, the core of the story remains the pricing power of the major brands. Companies such as Procter & Gamble $PG, Coca-Cola $KO and PepsiCo $PEP have repeatedly demonstrated in recent years their ability to pass on inflationary pressures to end prices without dramatic volume declines. It is pricing power that is a key competitive advantage in an environment of higher inflation and tight margins. As a result, the sector has maintained relatively stable operating margins even as many other sectors have faced compression.

Most core positions in the ETF generate robust free cash flow and maintain a conservative payout ratio. This means that dividends are relatively well covered, a factor that investors are again valuing more highly in a higher rate environment. According to FactSet data, the ETF's sector has long been one of the highest converting earnings to cash sectors.

Valuation-wise, XLP currently trades at a slight premium to the sector's historical average, which is logical given the ongoing rotation of capital to the defensive. Forward multiples of major holdings are higher than at deeper stages of the cycle, but still remain below levels that could be described as extreme. The P/E is currently 21.55.

However, the risk profile of $XLP is significantly different from previous ETFs. The biggest near-term risk is not a collapse in demand, which tends to be relatively stable, but rather a change in macro sentiment. If interest rates begin to decline rapidly and the market returns to a strong growth phase, capital would, based on historical data, begin to flow back into technology and more cyclical sectors. In such a scenario, XLP tends to lag relatively, although it may still grow in absolute terms.

ETF Performance $XLP

Another factor is pressure on consumer preferences. Over the long term, we have seen a shift in some demand towards healthier products and private labels. The big players have so far been successful in adapting to this through portfolio innovation and marketing, but this is a structural trend that investors cannot ignore.

The evolution of input costs also remains a specific risk. Companies in this sector are sensitive to commodity prices, transport and wages. If inflationary pressures pick up again, margins could face pressure. So far, however, the sector is holding up relatively well.

Overall, XLP is acting as a classic defensive portfolio anchor at the current stage of the market. It is not a vehicle that would typically dominate a tech bull run, but in an environment of heightened uncertainty, higher rates and an emphasis on cash flow quality, it can easily outperform the broader market.

Conclusion

The current performance of select ETFs clearly shows that the market is becoming significantly more selective in 2026. While previous years were dominated by growth technology titles, today's environment more heavily rewards strategies built on stable cash flow, disciplined capital allocation and sector exposure. Thus, the rotation of capital into dividend, energy and defensive segments reflects changing conditions and investor psychology.

At the same time, however, it is important to perceive that such market phases are not permanent. If the trajectory of rates changes or the growth of the technology sector accelerates again, relative performance can quickly realign.

Rio reported revenue of $57.6B (+7%) and EBITDA of $25.4B (+9%). The mix mattered: copper and aluminum carried more of the momentum, while iron ore was less of a simple profit engine, helped by tighter cost control. Net profit was $10.9B and operating cash flow reached $16.8B, supporting the dividend profile. The trade-off shows up below the line: free cash flow dropped 28% to $4.0B as capex jumped 28% to $12.3B. Net debt rose sharply to $14.4B from $5.5B, reflecting that the company is funding future growth—copper, lithium and new projects—while accepting lower near-term cash and higher cycle sensitivity.

What was 2025 like?

The company built on 3 pillars last year: a record iron ore run rate from the Pilbara since April, the completion of the Oyu Tolgoi underground and the first iron ore ship from Simandou in December. These are three specific milestones that explain why Rio $RIO is highlighting +8% CuEq (copper equivalent) production growth and why EBITDA grew faster than revenue.

On a purely financial basis: operating cash flow was $16.8 billion (+8%), underlying EBITDA was $25.4 billion (+9%) and underlying earnings were essentially unchanged at $10.9 billion. Net income attributable to shareholders declined 14% to about $10.0 billion, a typical picture of a year in which the pricing environment is changing while reflecting taxes, royalties and one-time items differently in the accounts than in the "underlying" metrics. At the capital discipline level, the most visible jump is in investments: capex of $12.3 billion (+28%) pulled free cash flow down to $4.0 billion (-28%). And that's the difference between "operating performance" and "cash to shareholders" in any given year.

In terms of operational reasons, the company explicitly attributes the improvement mainly to the ramp-up of Oyu Tolgoi and the performance of Pilbara. In the background, on the other hand, it's clear that iron ore no longer forms as dominant a cushion as it used to and that Rio has to rely more on diversification into copper, aluminium and now lithium. This is a structural change that may stabilize cash flow across the cycle over time, but also means a higher investment phase today.

• Full presentation with results.

CEO commentary

Simon Trott openly builds communication on two lines. The first is safety and reputational risk: following the fatal incident at the Simandou project, he stresses "safety first" and full investigation, which is also critical for mining companies in terms of licensing and regulatory relations. The second is "stronger, sharper, simpler" corporate governance: tougher cost discipline, simplification of the organisational structure and moving decision-making closer to operations. Between the lines, it is a signal that Rio wants to translate volume growth into higher margins and that it does not want to run the investment cycle "on debt" with no return.

Outlook

The outlook for 2026 is built on iron ore stability and that new resources (Simandou) will start to add volume. Rio forecasts total iron ore sales at 343-336 million tonnes, with Pilbara (on a 100% basis) forecast at 323-338 million tonnes. Simandou is expected to contribute 5 to 10 million tonnes (on a 100% basis) for the first time, which is mainly a confirmation to the market that the project is moving from "story" to top-line.

For copper, the outlook is 800 to 870 thousand tonnes (on a consolidated basis), which in the company's context is more about "keeping the momentum" after a strong year and continuing to ramp up sharply where we can. Aluminium and bauxite are more normalising: bauxite 58 to 61 million tonnes, aluminium 3.25 to 3.45 million tonnes. Lithium (LCE) 61 to 64 thousand tonnes suggests Rio wants to ramp up this pillar faster - and it will be the part that will be most under the microscope, as lithium is both cyclical and capital intensive.

Long-term results

Rio Tinto's performance over the past four years clearly shows how sensitive the bottom line is to the commodity cycle and how important it is that the portfolio shifts towards copper and other metals. Revenues have fallen from $63.5 billion in 2021 to $55.6 billion in 2022 and held around $54 billion in 2023 and 2024, which is typical after an extremely strong post-covide period. Revenues pick up to 57.6 billion in 2025, but the quality of the growth is more important than the number itself: higher contributions from copper and aluminum partially offset pressure from iron ore.

At the profitability level, we see a gradual return of operating leverage: EBITDA rose to $25.4 billion in 2025, according to the company report, while underlying earnings remained stable at around $10.9 billion. In practice, this means that Rio is improving its operations and cost base, but net profit is still impacted by taxes and revenue structure across segments. That said, the biggest "volatility" going forward will not just be in pricing, but also in how quickly new projects translate into stable cash flow.

But the key detail of the last year is capital intensity. Capex has grown to $12.3 billion and free cash flow has fallen to $4.0 billion. From an operating leverage perspective, this makes sense: the company is investing in a pipeline to lift CuEq production by about 3% a year through 2030, but in the short term this reduces the "cash cushion" for buybacks or extraordinary payouts. This is the main axis of the Rio story for investors for several years to come.

News

The year 2025 was very much about project execution for Rio. The Oyu Tolgoi underground is complete, Simandou managed its first shipment in December and the Western Range opened on time and on budget in the Pilbara. On top of that, the company has kicked off construction of additional brownfield replacement mines in the Pilbara, exactly the type of investment to keep volumes and costs under control in the key cash cow segment.

Lithium is also strategically important: the Arcadium acquisition closed in March and Rio is framing it as a path to deliver capacity of around 200,000 tonnes of LCE per year by 2028. That's a big bet - potentially value-creating, but also cyclical and investment-intensive. The other significant thing is the productivity program: management cites annualized savings of $650 million (part already realized, the rest delivered by the end of Q1 2026) and a structural target to improve unit costs over the long term.

Shareholder structure

According to the data, the insider share is negligible and institutional holdings come out relatively low relative to how large and globally tracked Rio is. Practically, however, the main thing that matters to an investor is that it is a very liquid title with a broad shareholder base, where much of the capital flow is from global funds and index managers. The largest institutional holders cited include Fisher Asset Management, Goldman Sachs, State Farm and Morgan Stanley.

What this means in practice: with Rio, it is typically not decided by "one activist player" but rather how the market as a whole reads the commodity cycle, Chinese demand, cost developments in Australia and the pace of copper-lithium delivery.

Fair Price

This week in Los Angeles a legal battle is unfolding that everyone with Big Tech stocks—specifically Meta and Google—should watch closely. Mark Zuckerberg appeared before a jury on Wednesday in a trial that could become an absolute precedent for the entire social media sector.

This isn't about freedom of speech or content moderation. The plaintiffs are attacking directly the source of the money—the algorithm and product design themselves.

🧠 The core of the dispute: Is their algorithm an addictive weapon?

It was started by a twenty-year-old woman who claims that early and intensive use of Instagram and YouTube led to addiction, depression, and other mental health issues. Important to note, in my view, is that she herself said she spent 16 hours a day on social media. 🤣

Lawyers argue that the companies deliberately designed these apps to maximize screen time, even at the cost of harming young people's health.

TikTok and Snapchat, which were originally involved in the case as well, have already opted to pay out settlements. Meta and Google decided to risk a jury trial.

🤥 But Congress pulled internal emails

The most compelling moments came from Zuckerberg's testimony yesterday. Lawyers confronted him with his own words. As recently as 2024 in Congress, Zuck claimed that Meta did not set goals to maximize the time people spend in the app. But lawyers produced internal documents that suggested the opposite.

Zuckerberg's new defense? “People use our services more simply because they are useful to them.”

And how does Meta defend itself against the very accusation of addiction?

Instagram head Adam Mosseri said in court last week that, in his view, clinical addiction to social media does not exist.

Meta's lawyers argue that the plaintiff's problems stem from a complicated family background and that Instagram merely served as an escape for her.

📉 Three main risks for $META stock

Why should investors care? If Meta loses this test case, it opens Pandora's box:

1) A precedent for thousands more: This trial is the first of its kind. If the jury accepts the logic of “harmful design,” Meta could face thousands of additional lawsuits that would cost it huge sums in settlements.

2) Hit to cash flow: To avoid further lawsuits, Meta might be forced to limit aggressive notifications and recommendation algorithms for young users. The result is simple math: less time in the app = fewer ad impressions = a drop in advertising revenue.

3) Regulatory hammer: Politicians around the world are already looking for ways to restrict networks for children. A lost trial would give them the strongest possible argument for broad age-based bans.

Zuckerberg doesn't have it easy before the jury. If Meta appears arrogant and gives the impression that profit matters more to it than users' health, the market could quickly shift sentiment. 😬

Walmart posted revenue of $190.7B, up 5.6%, while operating income rose faster at 10.8%. Globally, e-commerce grew 24%, and advertising continued to accelerate, both pointing to a better long-term margin mix than pure retail. The stock reaction, however, was shaped less by Q4 and more by what Walmart did not promise: management signaled continued growth but avoided aggressive EPS expectations for the year ahead. Even with a new $30B share repurchase authorization, that “strong quarter, restrained outlook” mix is why the report landed as solid rather than catalytic.

How was the last quarter?

Walmart $WMT reported sales of $190.7 billion, up 5.6% year-over-year and 4.9% in constant currencies. Operating profit grew 10.8%, significantly faster than sales, and even after adjusting (in constant currencies) the company reports growth of around 10.5%. This is a key combination: when operating income grows faster than sales, it means that operating leverage, better mix and cost discipline are starting to filter through more into the results. The gross margin was helped by a 13 basis point improvement, primarily driven by the Walmart U.S. segment.

At the earnings per share level, Walmart reported GAAP EPS of $0.53 and adjusted EPS of $0.74. The difference is particularly important due to items related to revaluation/investment results: the company explicitly states that adjusted EPS excludes the impact of the (after-tax) net loss of $0.21 on equity and other investments. For an investor, this simply means that operating performance was stronger than how the GAAP number itself looks.

Digital was the main driver of the story. Global e-commerce grew 24%, and even 27% in the U.S. The company points out that growth was driven by store-fulfilled channels, i.e. pickup and delivery from stores. Expedited delivery from store-fulfilled channels grew more than 50% year-on-year, which is exactly the part that increases customer "stickiness" and improves purchase frequency. In the U.S., comparable sales excluding fuel grew 4.6%, with transactions up 2.6% and average spend up 2.0%. This shows that growth is not just through price inflation, but also through higher footfall and digital mix.

Advertising is adding a big contribution. Global advertising business grew 37% in the quarter (including VIZIO) and in the US Walmart Connect grew 41%. In addition, membership fee revenue grew 15.1% globally. For an investor, these are two "higher quality" sources of growth than pure retail because they typically have higher margins, better repeatability and often less sensitivity to short-term price cycles in grocery or general merchandise.

From a cash flow perspective, the company confirms that Walmart is not just a "defensive" story, but a high cash flow business. For the full fiscal year, the firm reported operating cash flow of $41.6 billion (YoY +5.1 billion) and free cash flow of $14.9 billion (YoY +2.3 billion). On the balance sheet, the company had cash of USD 10.7bn and total debt of USD 51.5bn. At the same time, the company has repurchased 85.0m shares for USD 8.1bn since the beginning of the year and announced a new buyback authorization of USD 30bn to replace the remainder of the previous program.

Segmentally, the quarter is "clean" and understandable. Walmart U.S. increased revenue to $129.2 billion (+4.6%) and operating income to $7.0 billion (+6.6%), with the company explicitly citing a combination of higher gross margin, better inventory performance and improving e-commerce economics. International grew faster in revenue, but with more volatility in profitability: revenue of USD35.9bn (+11.5%), +7.5% in constant currencies, and operating income of USD1.9bn (+36%), with some of the quarter-on-quarter momentum impacted by the timing of the big Flipkart event. Sam's Club had revenues of USD 23.8bn (+2.9%), comp sales excluding fuel +4.0% and e-commerce +23%, confirming that the membership model continues to grow steadily.

• Full presentation with results.

CEO commentary

John Furner comments on the results as evidence that Walmart is "leading" the change in retail towards speed, convenience and personalization. Significantly, management doesn't just talk about revenue growth, but repeatedly emphasizes growing operating profit faster than sales and improving the mix through e-commerce, advertising and membership. Between the lines, it's a clear message to investors: Walmart wants to be valued as a company that can combine defensive stability with higher-margin growth in digital, while guarding return on capital through dividends and buybacks.

Outlook

The Q1outlook calls for revenue growth of 3.5%-4.5% in constant currencies and operating profit growth of 4.0%-6.0% (also in constant currencies). Adjusted EPS is expected to be $0.63-0.65, with the company directly stating a comparable base for Q1 2025. In practice, this looks like a "cautious start to the year": growth continues, but Walmart doesn't want to overshoot profitability expectations in an environment where currencies, geopolitics, inflation and tariff policy can all play a role.

For the full year, Walmart expects constant currency sales growth of 3.5%-4.5% and adjusted operating profit growth of 6.0%-8.0%. Adjusted EPS is expected to be $2.75-2.85. The company also expects higher net interest expense of $200-300 million. USD 200 million, an effective tax rate of 23.5%-24.5% and a capex of about 3.5% of net sales.

Long-term results

For Walmart, the long-term story is that the company can grow even at its size while gradually improving earnings quality. Revenue has been growing at a steady pace in recent years: roughly $572.8 billion in 2022 to $611.3 billion in 2023, $648.1 billion in 2024, and $681.0 billion in 2025. Most recently, the company reports full fiscal year revenue of US$713.2 billion, confirming that growth is holding up even on a higher base. Gross profit is growing with sales, but more importantly, higher margin revenues are increasingly entering the mix: advertising, marketplace, fulfillment and membership.

Operating income shows that Walmart has been working with cost discipline and investment in digital in recent years so that it doesn't become "growth at any cost." In fiscal 2022-2025, operating income has ranged from c. $20.4bn (FY22) to c. $29.3bn (FY25), with the current year bringing an acceleration in adjusted operating income and Q4 profit growth significantly faster than revenue growth. EBITDA is also an important detail in the table, rising from c.USD30.1bn (FY22) to c.USD42.0bn (FY25), confirming that the company has solid operating leverage and can absorb investments in logistics and technology without breaking down cash generation.

Net income and EPS have clearly strengthened in recent years: basic EPS c.1.43 (FY22) → 1.92 (FY23) → 2.42 (FY24) → 2.87 (FY25), and the firm reports further cash flow growth in the current year as well as continued buybacks. In doing so, we see share count work as well: average share count dropped from ~8.376bn (FY22) to ~8.041bn (FY25) and further towards ~8.0bn in TTM.

News

Strategically, Walmart continues to move in two directions that reinforce each other. The first is an omni model(advanced AI systems) built on leveraging the store network as a logistical advantage for digital. You can see this in the results through the rapid growth of store-fulfilled pick-up and delivery and through digital adding hundreds of basis points to comp sales. The second direction is the monetization of traffic through advertising and marketplace. The advertising business has moved to "nearly $6.4bn" for the fiscal and is growing significantly faster than core retail, which is gradually improving the quality of the margin profile across the group.

The combination of membership and efficiency is also significant. Membership fee revenue is growing at double-digit rates and, for Sam's Club, is promoting stability and improved predictability. At the same time, Walmart is keeping inventory under control.

Shareholder structure

Walmart has a higher-than-average insiders share, which in practice is related to the long-term ownership of the founding family and the fact that the company has a stable controlling element. In addition, institutional investors are significant mainly in the free float: institutions hold around 38.85% of the shares.

The largest institutional holders include Vanguard (about 5.52%), BlackRock (about 4.39%), State Street (about 2.32%), and JPMorgan Chase (about 1.45%). This mix is typically supported by an emphasis on stable growth, disciplined buybacks, and predictable cash flow, as these are the factors that carry the most weight for long-term funds in "mega-cap" retail.

Fair Price

Prisma operates one of Argentina’s most established payment processing networks, handling credit, debit, and prepaid transactions across a wide merchant base. Through the same deal, $V will also acquire Newpay, which includes real time payment capabilities, the Banelco ATM network, and the PagoMisCuentas bill payment platform. Visa detailed the transaction in its official announcement at explaining that the combination will allow the company to scale innovative payment solutions and strengthen relationships with banks, merchants, and fintech players in the country.

From a strategic standpoint, this acquisition positions Visa closer to the core of Argentina’s financial infrastructure. Rather than simply partnering with local processors, Visa is embedding itself directly into transaction flows, ATM networks, and digital bill pay systems. In an era where fintech disruptors are building alternative rails and bypassing traditional card networks, owning these assets allows Visa to control more layers of the payments value chain. The Reuters coverage underscores that the deal significantly boosts Visa’s operational capabilities in the country reinforcing how strategically important this move is.

Technology integration will be central to the success of this expansion. Visa has emphasized that it plans to deploy advanced security, tokenization, and risk management tools across the newly acquired platforms. These upgrades are intended to enhance fraud protection and support real time payment flows that are becoming standard in modern financial ecosystems. As digital commerce continues to outpace cash usage in many parts of Latin America, Visa’s technology stack could provide a competitive advantage over both local and international rivals.

For investors, the macro backdrop in Argentina adds both promise and complexity. The country has a large, digitally connected population and a strong appetite for electronic payments, but it also faces currency volatility and regulatory unpredictability. By moving aggressively into this market, Visa is signaling confidence in long term structural growth despite near term economic headwinds. Emerging markets often deliver higher transaction growth rates than developed economies, and this acquisition may serve as a platform for broader regional expansion.

The deal also fits into Visa’s broader global strategy of diversifying revenue streams beyond traditional card interchange. Just days before the Prisma announcement, Visa revealed a strategic partnership in Europe aimed at integrating e invoicing and e payment services for small and medium sized enterprises, as reported by GlobeNewswire. This pattern suggests that Visa is building a multi channel growth model that combines consumer payments, business solutions, and infrastructure ownership.

On the stock market front, Visa shares have generally demonstrated resilience compared to more volatile fintech names. While acquisitions can introduce short term integration costs and margin pressure, investors often reward companies that proactively secure growth platforms in high potential regions. The Reuters article notes that the transaction strengthens Visa’s strategic position in Argentina’s payments ecosystem a narrative that could support positive long term sentiment if execution proceeds smoothly.

Ultimately, Visa’s acquisition of Prisma Medios de Pago and Newpay represents a forward looking commitment to owning infrastructure in markets where digital transformation is still accelerating. For stock blog readers, the key questions revolve around execution, regulatory approvals, and the speed at which Visa can translate this expanded footprint into revenue growth. If successful, this deal may not only strengthen Visa’s competitive moat in Latin America but also reinforce its broader positioning as a global leader in the next generation of payments.

What complicates the bearish view is that the underlying business still looks strong. In fiscal 2025 Adobe delivered record revenue of $23.77 billion, with high profitability and cash generation. The company’s FY2026 outlook calls for revenue of $25.9–$26.1 billion and further EPS growth. That is why the setup is polarized: a weak stock on one side, and a company that still guides to growth on the other.

Top points of analysis

• Adobe grew revenue 11% to $23.77 billion in 2025 and enters FY2026 with total ARR (annual recurring revenue) of $25.20 billion, implying further growth.

• The outlook for FY2026 is targeting USD 25.9-26.1bn in revenue and non-GAAP EPS of USD 23.30-23.50, continuing growth even in a more cautious market.

• Investors are most worried about one thing: whether AI will cheapen and simplify content creation enough to weaken Creative Cloud's pricing power. This fear is fed by pressure from competitors like Canva and the emergence of "non-Adobe AI tools."

• Adobe is responding by monetizing AI through "generative credits" and incorporating Firefly into key products to make AI a paid feature, not a free replacement.

• The second growth driver, often underestimated by the market, is Digital Experience: enterprise software for marketing, analytics and personalisation. In this segment, Adobe was still growing in 2025, keeping diversification out of the creative "price fight."

What Adobe actually sells and why it matters for valuation

Adobe $ADBE is a typical "subscription" company. Instead of one-off license sales, it builds on recurring revenue, where the value of accumulation is reflected in the ARR (annual recurring revenue from subscriptions) metric. In practice, this rests on three pillars.

The first pillar is the Creative Cloud, i.e. tools for creators: Photoshop, Illustrator, Premiere Pro, After Effects and more. This is the biggest and most visible part of the story - also the one most influenced by AI, as it is content creation that is being "democratized" by AI. The second pillar is Document Cloud: Acrobat and document solutions, including e-signing. This is less media attractive but more stable in an enterprise environment. The third pillar is Digital Experience: marketing and analytics software that helps companies target, measure and personalize customer campaigns.

For an investor, this structure is key. If the AI push really knocks down pricing power in the creative part, Adobe can still hold quality cash flow through the docs and enterprise segment. Conversely, if AI can be monetized, Creative Cloud can reassert a premium in valuation.

Why the stock looks "broken": it's not about the numbers, it's about confidence in the model

The reason the market is punishing Adobe is not one bad quarterly report. It's a combination of three long-term concerns.

The first concern is price: if the average user can make a "good enough" design or visual in a simple AI app, why pay a full Creative Cloud subscription. This argument sounds simple, but it is fundamental to valuation because Adobe is priced as a company with a long-term ability to increase average revenue per user. Once in doubt, multiples can be quickly compressed. This line has also been mentioned by some analysts in the context of the push for alternatives like Canva and how the quality of generative tools outside Adobe is improving rapidly.

The second concern is the monetization of AI. Adobe had a brand and distribution advantage, but the market wanted clear evidence that "AI features" would mean higher revenues, not just higher development and infrastructure costs. The third concern is the cyclicality of enterprise budgets: marketing and IT spending by companies fluctuates, so Digital Experience may have a weaker period just as Creative Cloud is addressing competitive pressures.

The result is a psychological problem: the business is still growing, but investors are less confident that growth will remain "easy to model" in the age of AI.

The numbers that say the business is "broken" are not

Fiscal year 2025 ended with record revenue for Adobe of $23.77 billion, up +11% year-over-year. Digital Media (creative + docs in this reporting) was $17.65 billion (+11%) and Digital Experience was $5.86 billion (+9%).

From a recurring revenue perspective, the ARR shift is also important: Adobe said it enters FY2026 with a total ARR of $25.20 billion, +11.5% year-over-year, with Digital Media ARR at $19.20 billion (+11.5%). This is exactly the metric that shows whether the subscriber model is keeping pace and not "leaving" the paying base.

And the third part of the picture is cash flow and capital allocation. Adobe reported record operating cash flow of over $10 billion for FY2025 and continued to buy back shares - 30.8 million units in FY2025 alone. These are signals that the company is not in "fight for survival" mode, but in growth financing and return on capital mode.

AI monetisation: how Adobe is turning the 'wow effect' into paying features

Adobe has gone down a path that is rational for the investor: it wants to give AI not just as a marketing bonus, but as a feature that can be accounted for and managed. Practically, it solves this through generative credits - the user has a limit within the plan, and with higher AI usage there is room for upsell or higher enterprise packages. This makes AI a measurable consumption, not just a vague "innovation".

The second element is integration: firefly is not a separate toy, but is at the core of the workflow in Photoshop, Illustrator or Premiere. This is important because competitors often offer "one" feature, while Adobe sells the whole process of creation, editing, versioning, exporting and collaboration. Once AI becomes part of the workflow, switching cost, i.e. the user's reluctance to migrate elsewhere, increases.

The third element is the ecosystem of models. Adobe has also publicly communicated integration and collaboration so that customers get a broader offering (and Adobe remains the "central interface" for creation). Reuters, for example, described Adobe's moves around Firefly and a broader strategy in generative AI.

For investors, the key thing to watch is whether AI at Adobe will lead to two things at the same time: higher value plans and sustainable ARR growth. If only "usage" but not monetization is confirmed, the market will continue to be skeptical.

Where Adobe can realistically grow between 2026-2028

1) Creative and video: AI as a reason to pay more, not pay less

Ironically, Adobe's biggest opportunity is in the same area where there is the most fear. If AI becomes the standard, users will address productivity and speed. This plays into the hands of the company that has the best workflow and highest trust in the professional segment. Firefly can work as a "reason to upgrade" - but only if Adobe maintains the quality of the deliverables while setting fair limits and pricing so the user doesn't feel they are paying twice.

2) Documents and e-signature: less visible but often more stable

The digitisation of documents and signatures is a long-term trend. Estimates of the size of the market vary, but even conservative scenarios foresee rapid growth of the digital signature segment in the coming years. Grand View Research, for example, puts the growth rate for digital signatures from units of billions of USD to well into the tens of billions over the next decade.
For Adobe, this doesn't mean that it will "win the whole market," but that Document Cloud has a structural tailwind and can offset the cyclicality of other parts.

3) Digital Experience: enterprise growth and a focus on measuring returns

At a time when companies are tightening budgets, there is increasing pressure on marketing measurability and personalization. This is exactly the environment where the Adobe Experience Cloud makes sense - if it can stay competitive with the other big players in enterprise software. This is where the investment story often breaks down on "bookings" and whether large contracts are renewed without price concessions.

4) Generative AI in media as a structural trend

For context, it's useful to note that generative AI in the media and entertainment industry is growing as a standalone market. The Financial Times, citing Grand View Research, put the growth framework from about $15 billion in 2022 to about $58 billion by 2030.
It doesn't say how much of that Adobe will take. But it does say that "AI content creation" isn't a one-year fad - it's an area where budgets will spill over.

Valuation: what the market is paying today and what would have to happen for a revaluation

At Adobe today, it's not about whether the company makes money. The game is about what multiple of profit and cash flow it deserves at a time when the long-term stability of Creative Cloud pricing power is being questioned.

Simply put: if the market believes AI is a monetization engine for Adobe, the space for higher multiples returns. If the market believes AI is mainly a pricing push and "commoditization" of the creative portion, multiples will remain lower even if the numbers continue to grow.

Leaning on guidance, Adobe is targeting FY2026 revenue of $25.9-26.1bn and non-GAAP EPS of $23.30-23.50, with non-GAAP operating margin targeted at 45%. These are the parameters of a company that still has a high-quality financial profile.
So the valuation question is all about confidence, not the ability to generate margins.

What to watch next: specific numbers and signals

• Total ARR and Digital Media ARR (annual recurring revenue) and especially the growth rate of "net new ARR" - showing whether the model is accelerating or just holding inertia.

• AI monetization share: how many users are switching to more expensive plans, how consumption and generative credits are growing.

• Margins and operating cash flow: whether AI investments are eroding profitability faster than revenue is growing.

• Digital Experience performance: sustaining growth while putting pressure on enterprise budgets.

• Share buybacks and return on capital: whether the company can continue to combine investments and buybacks without impairing the balance sheet.

Investment scenarios 2026-2028

Optimistic scenario: AI lifts plan value and Adobe accelerates ARR growth

In this scenario, Firefly and AI features are confirmed to be a "paid upgrade", not just a necessary defense. Users will accept higher tariffs or credit upgrades, enterprise customers will add AI to contracts, and at the same time there will be no significant outflow to cheaper alternatives. Digital Experience keeps a solid pace and margins remain high due to scale. In such a world, Adobe will meet and gradually exceed FY2026 targets, and the market will begin to re-price the stability of the model at a higher multiple. Underpinning the scenario is that the company is already showing high margins and ARR growth.

Realistic scenario: the firm grows as expected, but valuation returns only slowly

AI monetizes, but gradually. Part of the market will switch to cheaper tools for simple tasks, while the professional segment will stay with Adobe. ARR continues to grow, but without the "wow effect". Digital Experience is stable, but cyclical pressure sometimes slows the pace. In this scenario, Adobe is a quality business with growth and strong cash flow, but the return of confidence takes longer - the stock relies on incremental delivery of results and buybacks rather than a rapid shift in sentiment. FY2026 guidance is a good anchor for expectations here.

Pessimistic scenario: AI accelerates price pressure and ARR growth slows more than the market expects

Cheaper alternatives combined with non-Adobe generative tools will improve the quality of "good enough" outputs to the point that a portion of paying users will start to reduce tariffs or leave. Adobe has to respond with bundles and discounts, which will weaken ARR growth and eventually margins. Digital Experience will not cover the shortfall in creative as enterprise budgets remain under pressure. In such a scenario, the company is still not "weak" but loses an attribute that commands a premium: predictable growth with pricing power. The market then typically remains cautious even with solid absolute numbers. Competitive pressure in creative is exactly the factor mentioned by the more skeptical voices.

What to take away from the article

• Adobe is not a company in trouble: FY2025 brought in $23.77bn in revenue and ARR growth, confirming the strength of the subscriber model.

• The "stock problem" is mostly about confidence: the market is sorting out whether AI will weaken Creative Cloud's pricing power or strengthen it.

• Monetizing AI through generative credits is a key test, as it will show whether AI drives revenue, not just costs.

• Expectations for FY2026: $25.9-26.1 billion in revenue and non-GAAP EPS of $23.30-23.50 - the company is still targeting growth and high margins.

• The best "control panel" for an investor is ARR pace, net new ARR, margins and signals that AI is leading to upside, not price concessions.

$DIS I hold long-term in my USD portfolio and it currently represents approximately 1.2% of its total value. Current price (close 18 Feb 2026): 107.10 USD

Based on data from February 2022 to February 2026, DIS went through a notably volatile cycle. The development can be divided into four phases: a sharp decline in 2022, stabilization in 2023, a strong recovery in 2024–2025, and a current correction at the start of 2026.

Yearly performance

2022 – significant bear market The price fell from around 153 USD to 84.88 USD (−43.9%). The main factors were inflation, margin pressure, streaming losses, and macroeconomic uncertainty.

2023 – stabilization The stock traded between 77.50 USD and 110.61 USD, closing the year at 88.50 USD (+4.3%). The market reacted to restructuring and cost-saving measures.

2024 – return to growth The price rose by more than 24% to 110.13 USD. Growth was supported by successful film projects, stabilization of the streaming division, and improved operational efficiency.

2025 – volatile but positive year After a spring decline there was a strong rebound. The year ended at 113.77 USD (+4.2%). The company reinstated dividends, which supported long-term sentiment.

2026 (to 18 Feb) The price ranged between 101.02 USD and 117.73 USD; it is currently at 107.10 USD (−4.3% YTD). The decline so far reflects market caution more than materially negative fundamentals.

Long-term view

Since February 2022 the stock is roughly 30% lower. Although there has been partial recovery, the long-term uptrend has not yet been fully restored. Volatility remains elevated, especially due to competition in streaming and sensitivity to consumer spending.

Key support levels

77–80 USD – strong long-term lows from 2023 and 2025.

82–85 USD – repeatedly tested reaction zone.

100–102 USD – current short-term support (low 2026).

The 100–102 USD zone is currently critical. A break below it could open the way toward 90 USD.

Key resistance levels

110–112 USD – frequent peaks in recent years.

115–118 USD – the 2026 high.

120–125 USD – strong medium-term resistance.

A break above 118 USD would technically open the path to the 120–125 USD band.

Technical context

The 200-day MA around 100 USD acts as long-term support. The 50-day MA around 110 USD currently serves as short-term resistance. Price below the 50-day MA signals weakened short-term momentum.

The lower low in 2026 (101 USD) may indicate persistent investor caution.

Fundamental framework

A positive is the diversified business model (parks, film, streaming, licensing) and stabilizing cash flow. Risks include competitive pressure in streaming, high content costs, and sensitivity to the economic cycle.

Summary

DIS experienced a deep correction, followed by stabilization and partial recovery. In the short term, staying above 100 USD is key. To confirm a stronger growth trend, it would be necessary to overcome the 118–120 USD range.

Do you have $DIS in your portfolio or are you following it? Do you trade this stock technically or fundamentally? Or are you a long-term investor and not bothered by price swings? Please share your thoughts in the comments.

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

This analysis is based on historical data and technical indicators and does not constitute investment advice.

Personally, I avoid these stocks because to me they're pure speculation and most investors get burned. On the other hand, it's interesting to follow stories like $GME. You can learn a lot from them—for example, how strongly sentiment can affect a stock's price or what influence the media and various platforms have.

The year 2026 begins with a paradox in the markets. While technology companies are reporting strong revenues and solid operating profits, their stocks have come under pressure in recent weeks. The common denominator is a sharp rise in capital spending. In fact, the biggest tech players are planning to invest in infrastructure, datacenters and AI chips this year in a volume unprecedented in the history of the markets.

Analysts from Goldman Sachs, Morgan Stanley and Bloomberg Intelligence estimate that the largest companies alone could spend up to around $650 billion on CapEx in 2026. This represents a leap from the pre-AI boom period and a fundamental change in the capital discipline of the entire technology sector.

At the same time, the market is starting to react more sensitively than in previous years. Back then, aggressive spending was welcomed by investors as a necessary price to pay for dominance in AI. Today, however, the environment has changed.

Why high CapEx suddenly matters

What is CapEx, or Capital Expenditures: it's capital expenditures. It is the money a company invests in purchases, upgrades, or long-term maintenance of its fixed assets. Unlike normal operating expenses, these investments are intended to provide benefits for more than one year.

Capital expenditure is not in itself a problem. History shows that large investment waves have often preceded long-term technological winners. The problem arises when the pace of investment gets well ahead of the market's ability to monetise the expenditure.

This is precisely the concern that is beginning to emerge across Wall Street. High CapEx is:

• short term, it depresses free cash flow

• increases the capital intensity of the business

• extends the time to return on investment

• and increases the sensitivity of valuations to interest rates

In a zero-rate environment, this model was easily defensible. Today, with capital more expensive and discount rates higher, investors are beginning to look much more closely at the return on every dollar invested.

Where the pressure is most evident

The greatest nervousness is evident in hyperscalers and AI infrastructure. Companies like Microsoft $MSFT, Amazon $AMZN, Alphabet $GOOG and Meta $META are significantly increasing spending on:

• datacenters

• AI accelerators

• network infrastructure

• custom chips

For example, Amazon has already indicated CapEx of around hundreds of billions of dollars per year over the next few years (it plans to invest up to $200 billion in 2026 alone), Alphabet $GOOG is talking about a massive expansion of AI infrastructure, and Microsoft $MSFT continues to invest aggressively in cloud capacity. At the same time, Meta $META announced another wave of investments in AI and datacenters.

First cracks in sentiment

As a result, a gradual change in sentiment has been reflected in stock prices in recent weeks. Some technology titles have seen their longest streak of declines in years (Amazon $AMZN stock has fallen for 9 days in a row, its longest losing streak in 20 years) and volatility in the software and cloud segment is rising.

This is not yet a classic bear market, but rather a phase of reassessing expectations. This is typical of the late stage of the investment cycle, when the market stops pricing in spending growth per se and starts focusing on quality and monetization.

What stage of the cycle are we in

In terms of market dynamics, the technology sector is likely to move from a phase of early AI euphoria (2023-2024) to a phase of capital discipline and winner selection (2025-2027).

Historically, this transition has several typical features:

• a slowdown in the expansion of valuations

• higher sensitivity to free cash flow

• greater disparity between winners and losers

• pressure on firms with the highest CapEx

• rotation of some capital into more defensive sectors

This corresponds exactly to what we are now starting to see in the market.

The greatest pressure today is concentrated in a small group of the largest technology firms that are at the center of the AI race. Microsoft $MSFT, Amazon $AMZN, Alphabet $GOOG and Meta $META have all significantly rewritten their investment plans over the past few quarters, and the pace of capital expenditure growth for them has reached levels that the market did not anticipate just two years ago. The common denominator is the drive to build sufficient capacity to train and operate generative AI, which means massive datacenter construction, GPU accelerator purchases, and development of custom chips.

Amazon $AMZN is one of the most visible examples in this regard. The company has been openly communicating that a major portion of its CapEx is going into AWS infrastructure and AI capabilities. The surge in investment has been one of the reasons why trailing free cash flow has fluctuated significantly in recent periods, even as operating profit has grown. This is a crucial signal to the market: accounting profit is improving, but cash is under pressure in the short term. And in a higher rate environment, investors are watching just cash flow much more sensitively than before.

Microsoft $MSFT is in a similar situation, although its position is partially masked by strong growth in Azure and AI services. The company continues to aggressively expand its cloud infrastructure, and management comments suggest the pace of investment will remain elevated in the quarters ahead. This is exactly the moment when investor psychology is changing. In the early stages of the AI boom, high CapEx was interpreted as a competitive advantage. Today, the question is increasingly how quickly those billions will actually turn into monetization.

Alphabet $GOOG, meanwhile, is ramping up investment in datacenter and AI models in response to growing competition in generative AI. Google Cloud may be improving profitability, but the capital intensity of the entire ecosystem is growing faster than investors have historically been accustomed to with this company.

$META, then, presents a specific case. After a period of discipline from 2023-2024, the firm is once again accelerating investment in AI infrastructure and proprietary models. The market remembers well how sensitive it was to the first wave of Metaverse investments (the stock fell as much as 73% in 2022), and is therefore much more cautious today about CapEx's rapid growth.

What unites these companies is not weak business. On the contrary. The operating results of most of these companies remain very strong. The problem is the timing of cash flow. The investment wave is coming now, while full monetization of AI infrastructure may take several years. This mismatch is exactly the point where sentiment starts to break. Investors are demanding a more stable outlook and real profits.

From a market cycle perspective, this is a very typical phase of technology investment supercycles. First comes the euphoria and expansion of valuations, where the market values future opportunity almost regardless of cost. This is followed by a phase of massive investment, where companies start to build capacity in bulk. And it is often in this phase that the first sobering up occurs, as free cash flow suffers in the short term and investors start to demand proof of return.

The history of the semiconductor, cloud and telecom cycles shows that this period tends to be accompanied by increased volatility and selection of winners. Not all companies that invest the most will end up getting the highest returns. The market is therefore becoming much more sensitive to who can translate new CapEx into real margin growth and who is merely adding capacity without adequate monetisation.

This is why we are seeing the first cracks in tech sector sentiment today, even though the fundamental numbers look weak so far.

However, if we look back in history, we can find a direct example of the current situation and, coincidentally, with one of the companies that is investing the most money in development today. It's Amazon $AMZN. This company saw its stock price fall as much as 30% in 2014 as it invested massively in expanding its warehouses outside the US. It has also poured a lot of money into not always successful projects. One such project was the Fire Phone, which was a complete flop. So even big companies that are now going down have historically had experience with similar market sentiment.

Which segment is suffering the most

The most sensitive market reactions today are not seen in traditional hardware, but paradoxically in the software and cloud segment. The reason is simple, but uncomfortable for many investors. Software has been priced in recent years as a highly scalable business with low capital intensity and extremely high margins.

But with the advent of generative AI, it turns out that even large-scale software needs massive infrastructure. Model training, inference, and running AI services dramatically increase demands on computing power, data centers, and network capacity. This means higher depreciation, higher CapEx, and in some cases, pressure on gross margins. The market is starting to realize that parts of the software sector are moving closer to a capital-intensive model than it seemed just two years ago. At the same time, investors are concerned that rapidly evolving AI may replace some services from traditional software providers.

This shift comes in a very sensitive macro environment. Indeed, higher interest rates are increasing the discount rate that investors use to value future cash flows. Companies with high valuations and profits pushed far into the future are therefore by definition more vulnerable. Moreover, if free cash flow deteriorates in the short term due to an investment surge, pressure on multiples can occur even without a deterioration in the business itself.

Moreover, the software sector is specific in that a huge amount of capital has flowed into it in previous years and valuations for a number of companies have been well above historical averages. In such an environment, once there is even a slight uncertainty around margins or return on investment, the market reaction tends to be swift. This is not necessarily a questioning of long-term AI growth, but an overestimation of the timing and capital intensity of that growth.

Thus, the market cycle is beginning to show a shift to a phase where the scissors between companies are opening. The market is no longer rewarding the entire technology sector across the board, but is beginning to differentiate much more between companies that can fund growth from their own cash flow and those that must invest aggressively with uncertain short-term returns.

Whether today's investment wave is the start of a supercycle or a warning sign will not be decided in the next two weeks or on the next set of results. It will be decided over the next 24-36 months. After all, the market is not buying the information that companies are investing hundreds of billions of dollars today. The market asks only one thing: when and how those investments will translate into measurable revenues, margins and free cash flow.

In AI infrastructure, a specific rule applies. First capacity must be created, only then can it be monetized. In practice, this means that there is a natural paradox in the early stages of the investment cycle: operating profit may grow as demand for cloud and AI services rises, but free cash flow may decline as spending on datacenters and hardware grows faster. Moreover, accounting profit is "smoothed" by the fact that CapEx is not passed through all at once, but through depreciation over time. However, cash is gone immediately.

What the following years may look like

From this perspective, the years 2026-2028 can be framed by three realistic scenarios that differ primarily in how fast demand for AI capabilities will grow.

In the positive scenario, the market will see investment absorbed by demand quickly. That is, cloud segments will maintain or accelerate growth, capacity will be utilized, pricing will remain relatively healthy, and companies will begin to show improving returns. In such a situation, CapEx will cease to be a bogeyman and start to be interpreted as a long-term competitive advantage again. In practice, this translates into the fact that once the pace of investment stabilizes, free cash flow will once again start to grow faster than accounting profit. And the market will start to extend valuations again for those stocks that prove it with data.

The neutral scenario is both the most likely and the most treacherous. Demand for AI services grows, companies report solid numbers, but returns are slower than stock price expectations. CapEx stays high for longer, depreciation gradually increases, and free cash flow remains under pressure in the quarters ahead. In this scenario, the problem is not fundamentals, but valuation. The market may react by compressing multiples. This is exactly the type of environment in which technology companies can stagnate for an extended period of time even as their business grows.

The negative scenario comes when investment outstrips demand. The main risk here is what the market has begun to re-price in recent weeks: customers tend to go through a cycle of expansion and subsequent optimization. If it turns out that large enterprises slow investment after the initial AI euphoria and prices start to fall, some of the new capacity may be slower to monetize. Firms then bear high depreciation while struggling with pricing pressure. As a result, margins deteriorate and valuations become much tougher. Not because AI is not the future, but because the return on capital would be lower than the market had assumed.

How to spot a winner

Who can emerge as the winner will not necessarily be the one who spends the most. The winner will be the one who has the best combination of three factors:

• the ability to monetize AI demand in the cloud

• their own cost-reducing technology

• sufficient margin to ensure that the investment does not destroy the company's free cash flow profile

That's why things like custom chips, datacenter optimization, software ecosystems and pricing power in the enterprise cloud are so much in demand today.

The current wave of sell-offs shows one fundamental change in market thinking. Just two years ago, all it took was for a tech company to announce aggressive investments in AI, and valuations often soared. Today, the situation is different. Investors no longer value the future growth story itself, but are much more concerned with the quality of the return on capital and the impact of the investment on the company's cash profile.

In practice, this means that the CapEx amount itself is no longer key. What is critical is the structure of these investments and their future economics. Investors are now looking much more closely at technology companies to see whether capex growth is leading to revenue acceleration in cloud and AI services, how fast operating profit is growing in these segments, and most importantly, how free cash flow is evolving after adjusting for the investment cycle. Companies that can show that higher CapEx translates into higher capacity utilization and stable margins have a chance to regain market confidence relatively quickly. Conversely, companies whose CapEx grows faster than monetization may remain under pressure for longer periods of time even without deteriorating results.

Thus, from an investment perspective, it becomes critically important to monitor a few specific metrics. Free cash flow and margins show how much cash the company actually has left after investments. ROIC (return on invested capital) is becoming a key test of whether new projects are creating value above the cost of capital. And the evolution of depreciation over the next few years will give a clue as to how much of the investment wave will gradually make its way into the income statement. It is the combination of these indicators that will help distinguish between firms that are building a long-term technology moat and those that are merely adding capital intensity without a corresponding return. By the way, all this data can be found in the detail of each stock on Bulios.

So the current market phase is not purely negative. Rather, it is selective. The history of the technology sector repeatedly shows that the biggest investment waves over long periods of time often create and then reward future winners, as well as punish companies that invested too aggressively or too early. This is why periods of heightened volatility can also be the moment when the next long-term market leaders begin to take shape. And that has always brought with it the best investment opportunities.

Conclusion

The current wave of giant capital expenditures shows that the technology sector has entered a new phase of the investment cycle, where not only revenue growth is no longer enough, but the quality of the return on capital is critical. The market has shifted from unconditional valuation of AI companies to a much more rigorous assessment of free cash flow, margins and investment efficiency. Investor nervousness is thus not necessarily a signal of structural weakness in the sector, but rather a natural reaction to the environment of higher rates and the extreme capital intensity of building AI infrastructure.

Future developments will depend primarily on how quickly the current investment wave turns into monetization of cloud and AI services. If companies can demonstrate high capacity utilization and steady growth in operating profit, the current pressure on valuations may gradually ease. However, if returns on capital lag the pace of investment, the period of heightened volatility may persist for longer.

Q4 itself shows why that flexibility is valuable. Occidental posted a net loss on an accounting basis, but reported solid adjusted earnings and strong cash performance even though realized prices for oil, NGLs, and gas moved against it. The dividend increase to $0.26 signals management believes free cash flow can be protected through spending discipline and capital flexibility, not through a perfect price environment.

How was the last quarter?

Occidental $OXY reported a net loss attributable to shareholders of -$68 million, or -$0.07 per share, in the fourth quarter of 2025. But on an adjusted basis, the company reported a profit of $315 million, or $0.31 per share. The difference between GAAP and adjusted earnings is substantial and, in this case, also quite "readable": it's mainly the costs and transaction items associated with the sale of OxyChem, which hurt the accounting result in the short term but don't say as much about the operating health of the core business.

The most important numbers this time are in cash flow. Operating cash flow was $2.6 billion and operating cash flow before working capital changes was $2.7 billion. The company invested about $1.8 billion in capital expenditures (including discontinued operations), and even after accounting for minority contributions, generated free cash flow before working capital changes of about $1.0 billion. This is exactly the type of result that matters most to OXY, because in a cyclical sector, the winner is often the one that can maintain cash even at weaker prices while reducing debt or raising return on capital from it.

On the operating side, the company beat expectations on volume. Total production came in at 1,481 mboe/d and was above the high end of guidance, driven by Permian and Rockies. At the same time, the midstream and marketing segment also performed well, with pre-tax adjusted earnings ahead of the top end of guidance and the quarter a significant improvement over Q3. This is important for investors as it is the "non-upstream" part that often helps to cushion the impact of commodity fluctuations.

The pressure on the bottom line was primarily price driven. In the upstream, pre-tax profit fell from $1.3 billion in Q3 to $0.7 billion in Q4, and management explicitly says that on a comparability-adjusted basis, the main driver was a decline in realized prices across products. In Q4, WTI averaged around US$59.14/bbl and Brent around US$63.09; the realised price of crude oil fell 9% q-o-q to US$59.22, NGLs fell 15% q-o-q to US$16.68 and domestic gas fell 24% q-o-q to US$1.12/Mcf. This is exactly the part of the story that explains why OXY may be able to "produce" strong cash flow, but accounting profitability is price sensitive in the short term.

The big shift comes on the balance sheet. The completion of the sale of OxyChem on January 2, 2026 has put the company in a different position in terms of debt: Occidental reports that it has reduced debt by $5.8 billion since mid-December 2025, bringing "principal debt" to about $15.0 billion. That's a number that will resonate with investors perhaps more than EPS alone, as OXY's credit profile and pace of de-leveraging is one of the key valuation parameters.

• Full presentation with results.

CEO commentary

Vicki Hollub built her commentary around three points: operational excellence, cost efficiency and capital program flexibility. Importantly, management avoids triumphalism over earnings, instead emphasizing "meaningful production and operating expense outperformance" and the ability to beat full-year guidance in both oil and gas and midstream. Between the lines, this implies an effort to shift the perception of OXY from a "high debt commodity bet" to a company that has a significantly stronger balance sheet after the sale of OxyChem and can more consistently generate free cash flow even at worse prices.

Outlook

In the Q4 results material itself, the company's main focus is that both production and midstream result have surpassed the top line, and that it will maintain flexibility in its capital and development programmes following the transaction. However, for the 2026 outlook, it is useful for investors to set this in the earlier corporate outlook: Occidental has communicated in the past that it expects rather stable production and lower capex for 2026, with capex in a range of approximately US$6.3-6.7 billion. In practice, this means setting "cash flow protection": not chasing volumes at all costs, but holding returns and room for debt and dividend.

The interpretation is more conservative to defensive. When a company cuts capex and aims for stable production, it is usually saying that it wants to be prepared for a scenario where commodity prices do not record euphoria. Moreover, following the sale of OxyChem, it is clear that some of the "new" space will go primarily into balance sheet and capital return, not aggressive production growth.

Long-term results

Occidental is a typical example of a company where the long-term picture is made up of two layers: the commodity cycle makes for big swings in revenues and earnings, while cost structure and capital discipline determine how well the company survives the leaner years. In 2022, when the sector benefited from an exceptionally strong pricing environment, OXY posted revenue of $36.25 billion, operating profit of $13.28 billion, and net income of $13.22 billion. EPS shot up to 13.41, showing how brutally fast upstream leverage translates into the stock when price, volume, and margin come together.

Then came normalization. In 2023, sales fell to $28.33 billion and net income to $4.67 billion, and in 2024, sales fell further to $27.10 billion and net income to $3.04 billion. EPS pulled back from 13.41 to 4.22 and then to 2.59 in two years. Importantly, it's not just "less profit" but how quickly the margin cushion shrinks: gross profit fell from $17.05 to $9.65 billion and EBIT from $15.15 to $5.25 billion between 2022 and 2024. This is exactly why investors in OXY are so concerned about the balance sheet and debt - because in a worse cycle, the margin for error shrinks dramatically.

From an operating leverage perspective, EBITDA is interesting to watch because it often better captures "cash earning power" than net income loaded with depreciation and one-time items. EBITDA has fallen from $22.16 billion in 2022 to $14.54 billion in 2023 and $12.72 billion in 2024. It's still a high level, but the trend is clear: the company has moved from an exceptional year to a mode where it must compensate for weaker pricing with disciplined investment, cost optimization and capital structure. In this context, the sale of OxyChem and the rapid debt reduction makes sense as a move to stabilize OXY for just "average" years, not just boom years.

News

The biggest change is the sale of OxyChem, which closed on January 2, 2026. The company is reclassifying OxyChem into discontinued operations because of this, which will change the structure of results and the perception of OXY going forward: the business is becoming more purely "oil & gas + midstream", increasing sensitivity to the commodity cycle, but also freeing up capital and accelerating de-leveraging. The deal immediately became a balance sheet catalyst, as Occidental reports a $5.8bn reduction in debt over a short period and a drop in principal debt to around $15bn.

The second line is the return of capital. Occidental raises its quarterly dividend by more than 8% to $0.26 per share and notes that the dividend per share has doubled in the past four years. This is significant for investors because OXY historically had a reputation as a company where the dividend and balance sheet were "subservient" to growth and acquisitions; today, management is trying to show the opposite story - resilient cash flow and financial flexibility is the priority.

Shareholding structure

Occidental has an extremely strong "insider" footprint, which in practice is mainly associated with Berkshire Hathaway. The insider share is reported at around 27.18%, while the institution holds around 51.88% of the shares and approximately 71.25% of the free float. In such a structure, the title often responds not only to oil but also to how the market reads the long-term role of the strategic shareholder and its tolerance for debt, buybacks or transactions.

The largest institutional shareholder is Berkshire Hathaway with approximately 26.89% of the shares, followed by Vanguard, Dodge & Cox and BlackRock. For title stability, this has a twofold effect: on the one hand, it can reduce short-term "panic" in a bad cycle, as a large long-term shareholder tends to be less sensitive to quarterly noise; on the other hand, it increases the importance of capital discipline, as large holders typically push the firm to use free cash flow not to fund expansion at any cost, but to improve the balance sheet and shareholder returns.

Fair Price

At the same time, I find it significant that Nvidia is pushing into CPUs as well: Meta is rolling out Grace CPU-only servers and plans Vera CPU-only systems in 2027. That’s exactly the kind of shift that could eventually hurt traditional server vendors (Intel/AMD), because a hyperscaler that starts taking a CPU platform from Nvidia is no longer buying just "GPU accelerators" but a chunk of the entire data center architecture. And Meta will also deploy Confidential Computing on GPUs for WhatsApp, which signals that this is not just research but real production use cases.

Decoupling reflects cautious positioning, not stagnation

The sharp drop in correlation comes at a time when Mega-cap tech stocks have been whipsawed by AI-related volatility and valuation recalibration. Analysts widely point out that concerns over runaway capital expenditures and AI spending cycles fueled by pressure to keep up with generative AI developments have weighed heavily on the Nasdaq and broader tech indices. Yet Apple’s business model remains heavily anchored in hardware sales and services, with its relative absence of massive AI infrastructure outlays shielding it from some of the market’s fear dynamics. This contrast has traders and portfolio managers viewing Apple’s trading behavior as a distinct risk-off alternative in a highly charged environment.

Investor sentiment shifts amid AI arms race fatigue

The decoupling story fits into a larger market context where investors are becoming increasingly discerning about the true winners and losers of the ongoing AI arms race. A recent MarketWatch analysis highlights that much of the recent downturn in AI-linked tech stems from investor fatigue and valuation repricing, not just macroeconomic pressures. Traditional narrative drivers like expectations of perpetual growth based on artificial intelligence dominance are being reassessed, and that has made stocks with less volatility and predictable earnings streams more attractive. Apple’s stock outperformance relative to peers is at the center of this rotation.

Fundamentals underpinning Apple’s resilience

Underlying the decoupling trend is solid performance on the fundamentals front. While $AAPL has deliberately taken a measured approach to AI spending, its core businesses are reporting healthy growth. Strong iPhone sales and services revenue bolstered by record quarterly results and robust consumer demand have helped keep earnings relatively stable even as AI fears batter the broader tech sector. This earnings resilience has played a key role in investors’ willingness to view Apple as distinct from other high-growth tech peers whose valuations are more tightly tied to future AI revenue projections.

AI strategy debate: risk or strategic discipline?

The divergence in Apple’s stock performance has reignited debate among market commentators about the merits of its AI strategy. Whereas some traders argue that Apple’s cautious stance on artificial intelligence could leave it behind in the long run, others see benefit in strategic discipline. Analysts for Wedbush Securities reiterated an outperform rating and a high price target for AAPL this week, arguing that the sell-off is unwarranted and that Apple’s careful approach to AI integration could position it well as the market sorts out winners in the next wave of software innovation.

Short-term volatility meets long-term narratives

Despite the decoupling, Apple’s stock hasn’t been immune to volatility. Reports indicate occasional pullbacks driven by concerns over delayed AI features such as updates to its Siri assistant which have disappointed parts of the investor base more focused on cutting-edge software integration. Yet, even amid these short-term swings, Apple continued to outperform the Nasdaq 100 on several trading days this month, highlighting how performance divergence can persist even within turbulent environments.

Market positioning reflects broader risk appetite

The broader market reaction this week suggests that many investors are rethinking how they allocate risk in tech portfolios. With major indices like the Nasdaq showing sensitivity to AI spending news and volatility spikes, the outlier status of Apple offers relative stability that some traders now prize. This shift mirrors a subtle but meaningful rotation out of highly correlated AI-linked stocks into names that offer consistent cash flow and a clear earnings runway, even if those names aren’t at the forefront of AI hype.

What the decoupling means for traders and investors

For stock blog readers and market participants, Apple’s decoupling from the Nasdaq represents more than just an anomaly. It highlights how investor psychology adapts in periods of rapid thematic change. While artificial intelligence remains a dominant secular trend, its market impact is proving uneven across sectors and companies. Apple’s strategic positioning this week underscores the ongoing tug-of-war between growth ambition and risk management, and it may well serve as a bellwether for how diversified portfolios navigate the next leg of tech market evolution.

Investors are watching because this is treated as a bellwether. It is among the first cases from a much larger wave, and a plaintiff win could make it easier for many similar claims to move forward by framing the issue as product design and platform conduct rather than third-party content. The outcome can set expectations for years of litigation costs, potential settlements, and tighter regulatory pressure around youth safety.

Why this is more sensitiveto $META than a regular lawsuit

It's not just about the amount of potential damages in one story. This lawsuit may show whether social networks can be legally challenged over "product decisions" (design and features), not just the content users upload. This is what is crucial for the entire industry: if a jury accepts the logic that the damage was not caused by the "content" but by the "mechanics" of the app, it may open the door to more lawsuits and pressure for product changes.

At the heart of the dispute: what the plaintiffs claim and how they defend Meta

The lawsuit was filed by a 20-year-old woman going by the name Kaley, along with her mother. She claims that she began using YouTube as a child and Instagram from around the age of nine, with the apps designed to "keep" her online for so long that it contributed to anxiety, self-esteem issues and suicidal thoughts. Themes such as bullying and sexual blackmail also feature in the case.

Both Meta and Google $GOOG deny the allegations. The defense rests on two pillars: first, that the company had safety features in place (such as parental monitoring tools and "teen" modes), and second, that the plaintiff's mental health problems had significant causes beyond social media. In other words, the dispute will revolve around the question of whether Instagram was a substantial factor in her problems or just one of many influences.

Why Zuckerberg's testimony is key

Zuckerberg won't just explain what Meta is doing today. What will be important to the jury will be what management knew in the past and how it responded: how the company worked with internal knowledge about the impact on young users, how it made decisions about features that reinforce repeat use, and whether security measures were actually designed to limit risks or, more likely, to assuage public criticism. Reuters describes that Zuckerberg has faced questions specifically on the internal findings and whether Meta did enough.

Alongside the facts, the "human" side will also play a role: testifying before a jury is not a press conference or a congressional hearing. If the jury gets the impression that management is being evasive, or that it is downplaying the impact on children, that can affect the outcome even without considering the technical details of the product. That's a reputational risk that's hard to fix with marketing.

The biggest risks for Meta

1) Legal precedent and an avalanche of further litigation

The biggest threat is not the "compensation" itself. It's the precedent: if this test case turns out badly for Meta, the plaintiffs will have a very strong guide for how to argue other cases. Reuters writes about thousands of similar lawsuits and how the litigation could rewrite the boundaries of liability for big platforms.

2) Product interference that hits the business model

Even without a social networking ban, there may be "uncomfortable" changes: restrictions on certain recommendation mechanisms for minors, harder default settings, less room for aggressive notifications, or other elements that increase the frequency of app returns. This can ultimately reduce time spent in the app and thus advertising reach to a key part of the user base. The plaintiffs in the lawsuit are specifically targeting design elements and incentives to keep kids online longer.

3) Regulatory pressure at home and abroad

The lawsuit comes at a time when some countries are tightening rules on minors' access to social media and others are considering it. While the rules vary from country to country, the direction is clear: more pressure on age, parental supervision and platform obligations. An unfavorable court story may provide policymakers with arguments that "voluntary measures" are not enough.

Possible impacts: three scenarios worth keeping in mind

Scenario A: Meta wins, but pays in reputation

Even if the jury believes the defense, the trial may uncover internal communications and uncomfortable details. The market can often forgive a legal win, but is less forgiving of long-term brand damage on the subject of children. In practice, this would mean continued pressure for more voluntary restrictions and repeated political attacks.

Scenario B: "Half" loss - no dramatic damage, but a clear signal

This is the most uncomfortable middle ground for Meta: the jury may accept some of the plaintiffs' arguments, award some compensation, and at the same time send a signal that design choices have consequences. In that case, the likelihood grows that other lawsuits will move more quickly through the courts, and Meta will have to consider broader changes and higher damages.

Scenario C: A hard loss and a change in the rules of the game

If the jury accepts the logic of "intentionally designed addiction" and also comes down with higher penalties, it opens the door for a chain reaction: more lawsuits, tougher regulation, and rapid product intervention. Reuters directly notes that the case could reshape the legal liability of large tech companies.

What to watch in the days ahead

• How the court works with internal materials: what exactly Meta knew about the impact on young people and how it factored that into the decision.

• The language of the defense: whether Meta is building to "we're doing our best" or "the problem is elsewhere" - the jury may be very sensitive to the difference.

• Cues about settlements: if they start talking about broader agreements, this will be an indicator that the risk of precedent is growing.

The 2026 test is operational, not existential. The question is whether recent capital spending produces measurable improvement in revenue per available room and in operating profit stability. If that shows up in the numbers, the dividend becomes easier to defend and buybacks become more realistic. That is the path from a “quiet” 4% yield to a credible 28% upside.

Top points of analysis

• The dividend of around 4% is now covered by cash and FFO, it is not a "desperate" payout.

• The hotels are free of mortgages and the company has no debt maturities before the end of 2026 after mortgage repayments, significantly reducing near-term financial stress.

• 2024 was weaker in profitability, but free cash flow remained positive (FCF $170 million) and operating cash flow $170 million. USD 170.

• Management targets visible improvement in 2026.

• Valuation by P/FCF ~11 and P/B below 1x makes sense especially for investors who want to see assets + cash flow.

Company performance

Sunstone Hotel Investors $SHO is a hotel REIT. In practice, that means the company owns the hotel assets and the return to shareholders is based on the operating performance of the hotels (occupancy, average room rate, revenue per available room) and how effectively it manages costs, renovation investments and financing. The portfolio has a total of 15 hotels and 7,253 rooms as at 31 December 2024.

It is important to understand that for a hotel REIT, "sales" are not the same as stable rent as for an office or warehouse. Revenue varies from day to day based on demand, season, conferences, air travel and people's willingness to spend on travel. Therefore, results are inherently more volatile and an investor needs to look at operating metrics, not just book net income.

In practice, Sunstone is betting that by investing in specific hotels it will lift their quality, rates and demand mix. In 2024, it completed the conversion and rebranding of the Renaissance Long Beach to the Marriott Long Beach Downtown, and the shift is expected to deliver higher quality business and higher rates in 2025.

• Portfolio view

Management and capital discipline

CEO Bryan Giglia builds communication on three things: skillful capital management, portfolio investment and return of capital to shareholders. Importantly, in his commentary on last years results, he openly links hotel investment to expected earnings growth, while also talking about good dividend cover and the ability to buy back shares.

From an investor's perspective, it is relevant that the company is also working with buybacks. In 2024, it bought back 2,764,837 shares at an average price of $9.83, for a total of $27.2 million. It still has authorization for further buybacks. In a hotel REIT, this is a signal that management does not view the stock as expensive and wants to take advantage of the discount.

Bryan A. Giglia is the chief executive officer and a member of the board of directors. Prior to this appointment, Mr. Giglia served as Sunstone's Chief Financial Officer and held various financial positions after joining the Company in March 2004. From August 1998 to August 2002, Mr. Giglia held various accounting positions with Hilton Hotel Corporation. From August 2002 until joining the Company in March 2004, Mr. Giglia attended the Marshall School of Business at the University of Southern California, where he received an M.B.A.

Long-term results

The year 2024 shows how tough the hotel cycle can be even without a "disaster" in the economy. Revenue in 2024 fell to $905.8 million. USD 986.5 million. Gross profit fell by 11.6% to USD 421.7 million in 2023. USD 2.6BN. Operating profit fell by a third to USD 78.6mn. Net profit fell from USD 206.7mn in 2023 to USD 7.8mn in 2023. USD 43.3 million. This is exactly the moment for investors when fundamental ratios and ratios (P/E, P/B, P/S) start to become misleading.

But when we look at operating metrics, the story is less dramatic than net income. The company reports 2024 RevPAR (revenue per room) of $214.06 (-2.4% YoY), occupancy of 68.8% (down 110bps) and ADR of $311.13 (-0.8% YoY). This is not a collapse in demand, but rather weaker pricing power and mix.

Even more interesting is the "without Confidante" view, a hotel that is in the midst of a major redevelopment. In this adjusted view, RevPAR for 2024 = $221.73, occupancy of 71.2% was even higher, and ADR was $311.42. This tells investors that some of the weakness is largely "self-inflicted" - the company has temporarily worsened its numbers due to a project to boost future earnings.

In terms of profitability, EBITDAre is also good to see. In 2024, Adjusted EBITDAre was $229.7 million. Still, this is a level that can still generate cash and service debt, it is just more sensitive to further deterioration in the cycle.

• EBITDAre = Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate.

Cash flow and dividend: the key is to cover the payout, not the accounting profit

For 2024, the company reports operating cash flow of $170.4 million. USD 170.4 million and free cash flow of USD 170.4 million for 2024. USD 170 MILLION. This is more important than the net profit of 43.3 million. USD because the dividend is paid out of cash over the long term. In 2023, FCF was 198.1 million. USD, so down year-on-year, but still clearly a positive base.

At the same time, we need to explain why cash on hand has fallen from $493.7m. USD 180.3 million. USD. The reason is not "bleeding" operations. The reason is investment cash flow -386.3 million. This is typical of a period when a company is actively investing or repurchasing a portfolio. And it matches what the firm describes: it has invested $157.4 million in the portfolio. It was mainly the redevelopment of the Andaz Miami Beach and Marriott Long Beach Downtown and the renovation of the Wailea Beach Resort.

The dividend itself: according to the payout data, the quarterly dividend is $0.09 per share (which at 4 payouts gives $0.36 per year) and the dividend yield comes out to about 4%. The company's commentary talks directly about the "well-covered dividend" and links it to liquidity and "embedded earnings growth" for 2025. For a quick reference: at ~203 million shares (guidance for 2025 puts diluted shares at 203 million), the annual cash dividend expense is about $73 million. USD 73. Against that, FCF stands at $170m. USD 170m in 2024 and guidance Adjusted FFO of USD 175-200m. USD in 2025. This gives the dividend a solid "cushion" even if the cycle would not be ideal.

What this implies practically: the dividend is now more of a "return component" than an aggressive growth story. If the improvements in RevPAR and EBITDAre for 2025 and beyond materialize, there is room for either a gradual increase in the dividend, or higher buybacks, or a combination of both. If, on the other hand, the cycle worsens, the dividend has a chance to remain sustainable precisely because the payout ratio relative to FCF/FFO does not look tight.

Valuation

The P/E for hotel REITs often does not give a clean signal. The reasons are twofold: (1) hotel properties are book depreciating, which knocks down book earnings even when cash is flowing; (2) net income can jump due to one-time items, valuation changes, asset sales, or transformation expenses. Therefore, it makes more sense to work with cash flow and FFO/AFFO-type ratios.

According to the metrics, Price to Cash Flow comes out to roughly 11.1x and FCF margin to 16.8%. This is a rather moderate valuation for a hotel REIT, if we believe that 2024 was a transition year and 2025 will bring normalization (which management implies in the numbers). This is where it is important to link valuation to outlook: the company itself forecasts Adjusted EBITDAre of 245-270mn. USD 245-250 million and Adjusted FFO of USD 175-200 million. USD 250 million for 2025, plus RevPAR growth of +7% to +10%.

"Discount to NAV" means a simple thing: the market is valuing the stock lower than what the hotel assets themselves are estimated to be worth, net of debt. NAV is not an accounting number, it's an estimate. For hotels, NAV is sensitive to capitalization rates and how the market values future operating cash flow. The firm explicitly states that the 2024 buybacks were at what it considers a "substantial discount" to consensus NAV estimates. To an investor, this is a signal that management considers its own stock to be cheap relative to asset value.

It's fair to add the flip side: cheap P/B (0.9x) doesn't automatically mean "cheap hotels". Book value for real estate may be historical, it may not reflect current market value. Therefore, it makes sense to combine P/B with cash flow metrics and with operational KPIs (RevPAR/ADR/occupancy). For Sunstone, the combination so far adds up to a logical picture: assets are going through an investment cycle, hurting results in the short term, but cash is still flowing in and the outlook points to a return to growth in 2025.

Where the company can grow in the future

The first growth lever is purely operational: the return of RevPAR and a shift in ADR due to a better mix. Back in 2024, total RevPAR was $214.06, but "excluding Confidante" was $221.73. This means that a portion of the portfolio is already performing at a higher level, and once Andaz Miami Beach reopens, the total numbers should theoretically come close.

The second lever is the completion and monetization of investments. The company says outright that the Marriott Long Beach Downtown is positioned to generate solid numbers and deliver growth after the renovation and rebrand.

The third lever is capital allocation. If the stock is below the estimated NAV and the company has authorization of $427.5 million. USD on buybacks, in a stable cash flow environment, buybacks can be a very effective way to grow FFO/share without hotels growing double digits.

Risks: what can destroy the "cheap stock + covered dividend" thesis

The biggest risk is the travel cycle and corporate budgets. For hotels, weaker demand will quickly translate into occupancy, ADR and margins. In 2024, a relatively small decline in RevPAR (-2.4%) was enough to send EBITDAre down 12.8%. This is typical operating leverage: downward works as fast as upward.

The second risk is refinancing in 2026 and beyond. While the company says it has no debt maturing before 2026 and the hotels are free of mortgages, that doesn't mean refinancing will be "free". If rates stay higher and hotel valuations come under pressure, the cost of debt may cut into FFO space that would otherwise go into dividends or buybacks.

The third risk is foreclosure of projects. Andaz Miami Beach-type redevelopments make sense, but carry the risk of delays, budget overshoots, or weaker-than-expected ADR growth after reopening. When such a project fails, the investor gets weaker cash flow and lower NAV at the same time.

Investment scenarios

Optimistic scenario: projects turn into growth

In this scenario, Andaz Miami Beach will quickly take off and Marriott Long Beach Downtown will improve the mix and ADR. The entire portfolio will deliver RevPAR growth at the top end of guidance (+10%) and EBITDAre will approach the upper end of the $270 million range. FFO grows towards USD 200mn. USD and as dividend payout is roughly ~73mn. USD 73 per year, there remains a large surplus for buybacks. The market starts to price the stock less "cyclically" and more "on cash flow", which in practice means a higher FFO/FCF multiple and a closing discount to NAV. The result can be a combination of share price growth and gradual dividend growth.

Realistic scenario: stabilisation, gradual improvement, return to higher FFO/share

RevPAR grows more in the middle of the range (+7-8%), EBITDAre 255-260mn. USD 185-190m, FFO 185-190m. USD 185. Dividend remains at USD 0.09 per quarter as management wants to be sure before 2026 refinancing. Buybacks continue, but more cautiously, e.g. in the tens of millions per year. The stock behaves like "value + income" in this scenario: less dramatic growth, but a more stable return due to the dividend and slow increase in intrinsic value.

Negative scenario: cycle worsens, hotels lose pricing power

RevPAR does not grow as planned, ADR is under pressure and occupancy declines. EBITDAre stays near 2024 levels or weaker, FFO stays below 175mn. USD. Dividend is still theoretically sustainable, but buybacks will stall and the market will start pricing in higher refinancing risk. The stock can stay "cheap" for a long time as the discount closing catalyst disappears. In this scenario, the biggest risk is not the dividend itself, but the lost time and poor return on capital.

What to watch next

1. RevPAR, ADRs and occupancy quarter by quarter, and especially the "whole portfolio" vs. "no Andaz/Confidante" distinction - because it is the projects that are supposed to change the earnings mix.

2. Adjusted EBITDAre and Adjusted FFO vs. guidance for 2025 (EBITDAre $245-270m, FFO $175-200m).

3. Portfolio investment pace for 2025 (firm expects USD 80-100mn) and whether this will start to translate into higher rates and margins.

4. Buybacks: if the firm continues to actively use the 427.5m authorization. USD 5.5 billion and at what rates.

5. Debt and preparing for 2026: interest expense trends, interest coverage and refinancing strategies.

What to take away from the article

• For a hotel REIT, cash flow and operating metrics, not P/E alone, are the deciding factors.

• Sunstone has a dividend yield of around 4% and at current FCF/FFO, the payout looks covered.

• The investment thesis is that investing in Andaz Miami Beach and other improvements will boost earnings in 2025 and beyond.

• Valuation may be interesting if RevPAR/EBITDAre/FFO outlook really comes to fruition and the market stops penalizing cyclical risk.

2026 is not yet a year of aggressive growth for the S&P 500.

While even in previous years the market has been driven by technology titles and valuation expansion, this year's environment is significantly more selective. Higher interest rates, pressure on margins due to high CapEx investments (capital expenditures that a company invests in buying, upgrading or repairing fixed assets) and the market's sensitivity to free cash flow have caused investors to become more discerning between pure growth stories and companies with real strength.

This is where dividend stocks come into play.

Historically, in an environment of higher rates and slowing growth, the companies that tend to outperform the market:

• generate stable free cash flow

• have a disciplined capital allocation

• increase the dividend over the long term

• do not need extreme CapEx to sustain growth

According to S&P Global' s long-term data, it is the dividend aristocrats that often outperform the broader index during periods of heightened volatility because their total return is not only dependent on valuation expansion, but also on reinvested dividends.

This year shows a very interesting shift in capital. While parts of the software and AI sector are coming under pressure due to giant infrastructure investments, more defensive dividend titles are combining:

• share price growth

• stable cash flow

• regular dividend payments

Some of the companies on today's list have raised the dividend for more than 20 years in a row. Some even over 40 years. And their total returns this year beat the S&P 500 by dozens of percentage points.

So are we seeing a temporary rotation of capital to the defensive today, or are we beginning a longer period where the market will value cash flow stability more than aggressive growth as it has in recent years?

McDonald's $MCD

McDonald's today is much more than a fast food chain. It is a global franchise ecosystem with more than 40,000 restaurants around the world, with most locations operating on a franchise model. This is a major difference from the traditional restaurant business. McDonald's primarily collects royalties, rent and a percentage of sales, which means more stable cash flow and significantly higher operating margins than companies that directly operate restaurants. This structure is one of the main reasons why the company has shown above-average returns on capital over the long term.

This year's rise relative to the S&P 500 is no accident. In an environment of increased volatility and concerns about high capital expenditures by tech giants, investors are looking for stability and predictability. McDonald's offers both. The company is able to pass some of the inflationary pressures on to customers thanks to its strong brand, while benefiting from the efficiencies of digital ordering, drive-thru segment and cost optimization. Moreover, in a weaker economy, there is often a "trade-down" effect, where some customers switch from more expensive restaurants to more affordable alternatives. This has historically helped stabilize sales and margins.

In terms of dividend quality, McDonald's is one of the most disciplined companies in the market. It has increased its dividend for more than four decades in a row, making it one of the longest growing dividend payers within the U.S. market. The dividend yield per share of $MCD is currently 2.27%. The key, however, is that this dividend is not funded by accounting gimmicks, but by real free cash flow. The company has long generated billions of dollars of free cash flow, which covers not only dividends but also share buybacks and investments in plant upgrades. The payout ratio may be higher than some industrial companies, but the dividend remains well covered thanks to a stable franchise model.

From a valuation perspective, McDonald's typically trades at a premium to the broader market. And that remains true today. The stock is currently 28% above its intrinsic value, according to the Fair Price Index . Investors are willing to pay a higher multiple for margin stability, a strong brand and predictable cash flow. In an environment of higher interest rates and selective growth, it is companies like these that are coming into focus.

Of course, there are risks. Pressure on consumer spending, wage growth in the service sector, or potential valuation compression as sentiment changes can all trouble a company. However, this year McDonald's is seen as a defensive pillar of the portfolio rather than a cyclical title. It is the combination of pricing power, disciplined capital allocation and a long-term dividend history that explains why the stock has held up significantly better than the broader index this year.

Coca-Cola $KO

Coca-Cola is one of the best-known examples of dividend stability in the U.S. market. The company has been in business for more than 130 years, and its business model is built on global distribution of beverages through licensed bottlers. Similar to McDonald's, the asset-light model plays a key role here - Coca-Cola owns the brand, the recipe, the marketing and pricing power, while the actual production and distribution are largely outsourced. The result is high operating margins and strong profit-to-cash conversion.

Coca-Cola is one of the dividend titles that has outperformed the broader market this year, largely due to its stability. At a time when investors are questioning the return on giant technology investments in AI infrastructure, Coca-Cola's model is easy to read. Soft drink consumption is relatively uncyclical, and the company has a huge global distribution network and a strong brand that allows it to gradually increase prices without dramatically impacting demand. This is a key competitive advantage in an environment of inflationary pressures.

Coca-Cola's dividend history is one of the longest in the market. The company has raised its dividend continuously for more than 60 years, making it one of the most prominent dividend aristocrats. This speaks to its ability to generate stable cash flow across all economic cycles. Free cash flow has been in the billions of dollars per year for a long time, allowing the company to not only pay a dividend (currently at 2.56%), but also to conduct share buybacks and invest in marketing or portfolio innovation.

In terms of valuation, Coca-Cola tends to be valued at a premium to the broader market precisely because of its stability. In periods of heightened volatility, this premium is often maintained or even slightly widened as investors seek a defensive haven.

But there are risks here too. Pressure on consumer preferences towards healthier products, regulatory interventions or currency fluctuations abroad. However, the company's diversified brand portfolio and global reach provide some protection.

However, even $KO stock has not escaped a high valuation thanks to this year's steep price rise. According to the Fair Price Index on Bulios, which calculates a company's intrinsic value based on DCF and relative valuation, the firm's stock is 10% above its intrinsic value.

PepsiCo $PEP

On the surface, PepsiCo is a similar company to Coca-Cola, but from an investment standpoint it is a different business structure. While Coca-Cola is almost purely a beverage company, PepsiCo combines beverages and food. Brands such as Pepsi, Gatorade and Mountain Dew are complemented by a strong food portfolio led by Lay's, Doritos and Quaker. This diversification is the key to its stability. The company is not dependent on just one consumption segment and can better balance fluctuations in each category.

This year, PepsiCo has done significantly better than the broader index primarily because of this combination. The food segment tends to show more stable demand even in a slowing economy. While consumers may cut back on some spending, staple foods and mainstream branded products remain part of everyday consumption. Moreover, PepsiCo has been able to pass on higher costs to prices quite effectively in recent years without dramatically hurting sales volumes. This has helped maintain margins even in an environment of higher inflation. The stock has appreciated nearly 14% since the beginning of 2026. However, they were still up 5% in early February.

PepsiCo's dividend history is almost as impressive as Coca-Cola's. The company has raised its dividend for more than 50 years in a row, making it one of the most stable dividend stocks in the U.S. market. The key is that the dividend is backed by robust free cash flow. The company has long generated billions of dollars of free cash flow, which has allowed it to fund not only shareholder distributions, but also investments in innovation, marketing and portfolio expansion. The payout today stands at 3.43%.

From a valuation perspective, PepsiCo mostly trades at a premium for quality and predictability. Investors appreciate the combination of a strong brand, global distribution, and relatively low cyclicality. Today's setup, however, is different. Thanks to the stock's plunge over the past three years, the share price has moved significantly closer to its intrinsic fair value. They are currently 17.7% below their 2023 peak, and as a result are only overvalued by less than 3% according to the Fair Price Index. Thus, they can be said to be currently fairly valued.

The risks lie mainly in the pressure on consumer preferences towards healthier alternatives (as with $KO), the price sensitivity of consumers and the potential pressure on margins as input costs continue to rise. However, diversification between beverages and snacks gives the company more flexibility than, say, Coca-Cola.

At the start of this year, PepsiCo typifies how a stable consumer business with a long dividend history can act as a counterweight to more volatile market sectors. The stronger performance than the S&P 500 index has now is a reflection of the capital shift toward companies with predictable cash flow and disciplined capital management.

Walmart $WMT

Unlike the previous two titles, Walmart is less of a traditional dividend aristocrat in the eyes of investors, but its role in this year's capital rotation is particularly interesting. The company generates sales in excess of hundreds of billions of dollars a year and is one of the largest retailers in the world. Its strength lies in volume, logistics and bargaining power with suppliers. In an environment of higher inflation and pressure on consumer budgets, Walmart has historically been a company that benefits from the shift of customers towards cheaper alternatives.

The rise against the S&P 500 is largely due to this "trade-down" effect. When the economy slows or uncertainty grows, some consumers look for savings and shift their purchases to discount chains. In addition, Walmart has invested heavily in e-commerce, digitalisation and supply chain optimisation in recent years. The result is more efficient logistics, higher inventory turnover and better margin control. The company is thus not only a traditional brick-and-mortar retail player, but also a modern distribution platform.

From a dividend perspective, Walmart has more than 50 years of uninterrupted dividend increases under its belt. This puts it among the dividend aristocrats and confirms its long-term cash flow stability. While the dividend yield is not extremely high (currently 0.73%), it is supported by strong free cash flow and a conservative capital structure. Walmart has long generated billions of dollars of free cash flow (some of the largest on the planet) to fund both dividends and investments in technology and infrastructure.

But Walmart's valuation has moved to historically high levels in recent years. Indeed, investors have begun to appreciate the company's ability to act as a defensive anchor in a portfolio. That has worked great over the past few years, but the P/E ratio is now well above 40 points, which for Walmart, as our research team found, has historically meant that a sell-off in the stock has come. And it's down at least 13% from its peak. So the valuation has stabilized and the stock has gradually regained its upside in the years since. So it's a good idea to take this into account in your own analysis. This is confirmed by the fair price calculation, which is now glowing red.

The risks lie mainly in the pressure on margins due to price competition and the capital intensity of infrastructure upgrades. Yet the company benefits from enormous size and efficiency that smaller competitors often lack.

Realty Income $O

Realty Income is the cleanest dividend story on today's list. Structured as a REIT (a company that owns, operates, or finances income-producing properties), the company focuses on commercial properties with long-term leases where the tenant bears most of the operating costs. This model delivers extremely stable and predictable cash flow, which is a key reason the company has earned the nickname "The Monthly Dividend Company." It pays a monthly dividend and increases it over the long term.

In 2026, Realty Income is performing significantly better than the broader market due to a combination of stable income and relative independence from the technology cycle. While part of the market is addressing the return on giant CapEx investments in the software sector, the REIT model is based on a very different logic. The source of value is portfolio occupancy, tenant quality and long-term leases. Realty Income has a diversified portfolio of thousands of properties across the U.S. and Europe, and tenants include strong retail brands with investment-grade ratings.

Dividend history among REITs. Realty Income has increased its dividend for more than 25 years in a row and has paid hundreds of monthly dividends without interruption. Since REITs are required by law to pay out the majority of earnings to shareholders, the dividend policy is directly tied to operating cash flow, or metrics such as FFO (FFO represents cash generated by the trust's core operating activities. It strips net income of accounting items unrelated to actual cash flow) and AFFO (Adjusted Funds From Operations: Considered the best indicator of how much cash is actually left for shareholders). It is the stability of these ratios that allows a company to hold and gradually increase payouts over the long term. The current dividend on $O stock is 4.87%.

The risks with this type of company are primarily macroeconomic. Higher interest rates increase the cost of financing and can put pressure on real estate valuations. Therefore, Realty Income is more sensitive to bond yields than the previous four companies. On the other hand, stable occupancy, long-term contracts and gradual portfolio expansion help dampen volatility.

However, similar to the previous companies, Realty Income is currently overvalued by 17% according to the Fair Price Index on Bulios. This is due to the steep rise in the share price since the beginning of this year (+16%).

Conclusion

This year so far shows us that the market is no longer just pricing in stories of technology and software growth at any price. In an environment of higher interest rates, pressure on margins and concerns about the return on huge capital expenditures, capital is starting to flow more into companies that can combine stable free cash flow with a disciplined dividend policy. The performance of selected dividend titles is thus not random, but a reflection of a broader rotation of capital towards quality, predictability and real cash. Total return here is not just based on share price growth, but also on a regularly reinvested dividend that significantly boosts yield over time.

At the same time, it cannot automatically be assumed that this rotation will be permanent. Dividend stocks may underperform at certain points in the cycle, especially if strong growth sentiment and valuation expansion return. Therefore, the key is not to blindly follow the trend, but to understand why the titles are currently outperforming the market and whether this is a structural strength of their business model or just a temporary shift of capital.

Zatímco $TSLA Tesla sticks to its controversial “Vision Only” approach without using radars or LiDARs, its direct competitors in autonomous trucking are taking a radically different and safer route. They employ an advanced combination of sensors including long-range LiDAR, radars, and cameras, which allows their systems to detect objects at distances exceeding a thousand feet and to operate safely even in challenging lighting conditions that cause problems for Tesla. Unlike Tesla, which uses its customers as beta testers on public roads, the competition emphasizes transparent testing and system redundancy—an approach far more acceptable to institutional investors seeking stability and safety than Musk’s unpredictable development and his empty promises that Tesla will be autonomous “next year” for several years running.

The response from Elon Musk and Tesla to these safety failures has been consistently dismissive, with company leadership often remaining silent or blaming driver inattention instead of admitting the technological limits of their software. This “dead bug” strategy culminated in 2026 with a fundamental change to the FSD business model and terms, when Tesla effectively ended the option to buy the software outright and moved exclusively to a subscription model. This move is a legal workaround intended to shed liability for unfulfilled promises of full autonomy, because with a monthly subscription the user pays only for the current, albeit imperfect, service—thereby legally eliminating Tesla’s obligation to deliver true driverless capability in the future. To me, this shift is just further evidence that Tesla is effectively admitting an inability to deliver the promised technology in the foreseeable future and prefers a legal dodge that shields it from class-action lawsuits by dissatisfied owners who previously paid large sums for the software in the hope of an “asset” that would appreciate over time.

Devon’s Q4 2025 made the “discipline” case. It generated $702 million of free cash flow, delivered production above the high end of guidance, and kept unit costs moving down. The income statement was solid too, with adjusted EPS of $0.82 on $4.12 billion of revenue. The cautious tone comes from what follows: Q1 2026 volumes are expected to take a hit from extreme weather, realized oil prices remain lower than a year ago, and investors are still trying to frame what Devon becomes after the Coterra combination.

How was the last quarter?

Devon $DVN posted a net profit of $562 million in Q4 2025. USD 562, or USD 0.90 per share. Adjusting for items that analysts typically exclude, "core" earnings came in at $510 million. USD 0.82 per share. The just-adjusted profit was very close to the market consensus and was mainly supported by operating performance, not a one-off accounting effect.

At the revenue level, the company reported $4.12 billion, down roughly 6% year-over-year, consistent with realized oil prices being noticeably weaker in the quarter than a year ago. Reuters reports an average realized oil price of $34.52 per barrel versus $40.32 a year earlier, which naturally puts pressure on overall revenue and the margin profile if the company offsets the price pressure with higher volumes and savings.

Volumes, on the other hand, have been a strength. Total production came in at 851k boe/d, beating the top end of guidance; oil alone was 390k b/d and represented 46% of the mix. In practical terms, this means that Devon has been able to squeeze more out of the highest quality parts of its portfolio in a lower price environment, particularly in the Delaware Basin, where the report cites above-average performance from new wells.

Cash flow is key investment language for Devon. Operating cash flow in the quarter was $1.5 billion and free cash flow was $702 million. The company still invested actively. Capital expenditures excluding the acquisition component were $883 million. Capital expenditures were USD 88 million, about 4% below the midpoint of guidance, which management attributed to a combination of cost management and timing of some infrastructure investments. In other words, operating leverage was evident in the quarter: high volumes + lower unit costs can stabilize cash flow even in a weaker pricing environment.

Another important point is the cost side. Production costs including taxes fell to USD 10.99/boe, 4% lower than in the third quarter. The largest item - a combination of operating and transportation/processing costs - was $8.60/boe, about 3% better than the company's expectations. This is a valuable signal to investors as it shows that the cost savings program is not just a presentation, but translates into real unit metrics.

The balance sheet remains conservative. At the end of the quarter, the company had cash of $1.4 billion, an undrawn credit line of $3 billion, total debt of $8.4 billion and a net debt to EBITDAX ratio of 0.9x.

• Full presentation with results.

CEO commentary

CEO Clay Gaspar built communications on two pillars: 'execution discipline' and 'accelerating return on capital through optimization'. In his vocabulary, it is significant that he considers "outstanding results" to be not just earnings, but free cash flow and "meaningful cash returns," which is exactly what is most valued in a producer over the long term.

The second part of the announcement is purely strategic: he presents the merger with Coterra as a move to put Devon in a different weighting, creating a platform with higher cash flow, better margins and the ability to return more capital than either company could on its own. Between the lines, it's a clear message that management wants DVN to trade as a "higher quality, more stable and scalable" story, not a run-of-the-mill cyclical producer with no clear plan for cash.

Outlook

In the short term, the outlook is more cautious. Devon expects Q1 2026 to be hit by winter weather: production is expected to be cut by around 1%, or 10k boe/d (roughly half the impact in oil). Adjusting for this "downtime", the company targets an average of 823-843k boe/d. Q1 capex is expected to be around 900mn boe. The company's capex is expected to be USD 900mn, slightly above Q4 levels, suggesting that it does not want to put the brakes on activity just because of a one-off weather event.

Long-term results

Devon is a textbook cyclical story, with two worlds alternating on the financial statements: the "commodity tailwind" and the "commodity headwind". In 2022, revenue jumped to $19.83 billion and operating profit to $8.58 billion, an extremely strong year supported by energy prices. This was matched by net profit of USD 6.02 billion and EPS of 9.15. However, 2023 saw a normalisation, with sales falling to USD 15.14 billion and operating profit to USD 4.79 billion, which translated into a drop in net profit to USD 3.75 billion and EPS to 5.86. In 2024, sales rose slightly to US$15.57bn, but it was a weaker year margin-wise: gross profit and operating profit fell to US$4.27bn and US$3.77bn respectively, while net profit fell to US$2.89bn and EPS to 4.57. In practice, this is confirmation that Devon can manage costs, but the oil and gas price cycle still has a dominant impact on the bottom line.

What is interesting though is the resilience at the operating leverage level. Between 2021 and 2024, operating costs have held relatively steady in absolute terms (in the order of hundreds of millions of USD), while fluctuations have mainly gone through sales and gross profit. This is exactly the type of structure where profitability can accelerate quickly when realized prices and volumes rise, while when prices fall, the company tries to "maintain" cash flow through efficiency. Similarly, EBITDA shows that even after the boom fades, the business remains robust: from $10.38bn in 2022, it has fallen to $7.57bn in 2023 and $7.43bn in 2024, still a high level for a company with a strong return on capital.

An important nuance is working with the share count. The average number of shares has gradually declined between 2021 and 2024 (from 663 million to 623 million), which means that some of the return to shareholders has gone systematically through buybacks, increasing the "EPS per share" effect even in worse commodity years. In the Q4 2025 results, this framework is even more visible: the company bought back 7.1m shares for 250m in the quarter. It has returned $4.4 billion since the program's inception and says it has retired roughly 14% of its shares. This is key to Devon's investment thesis: it's not just about how much it makes in a given year, but how consistently it can convert cyclical gains into more sustainable value per share.

News

The biggest strategic development is the planned merger with Coterra. The transaction is expected to be all-stock, closing in the second quarter of 2026, and the new entity will be named Devon Energy. Upon completion, existing Devon shareholders are expected to own approximately 54% and Coterra shareholders 46% of the combined company. The main investment argument is scale and synergies: the companies are talking about $1 billion of sustainable annual pre-tax synergies by the end of 2027, which is expected to come through optimizing the capital program, improving operating margins and simplifying corporate costs.

The internal optimization program is also worthy of note. Devon reports that it has already achieved 85% of its $1 billion "business optimization" target and is aiming for full achievement by the end of 2026. For an investor, this means that some of the cost improvements should be structural, not just temporary, increasing the chances that even at average commodity prices the company will be able to hold solid free cash flow.

Shareholding structure

Devon is a typical "institutional" stock. Insiders hold approximately 0.83% of the stock, while institutions control approximately 81.36% of the total shares and 82.05% of the free float. This typically means two things: greater sensitivity to changes in the macro view of energy and oil (as institutional money rotates sectorally), but also a more stable capital base that often supports disciplined capital allocation and cash returns.

Passive managers dominate among the largest holders. Vanguard holds approximately 12.99%, BlackRock 9.83%, State Street 5.67% and Geode 3.06%. In practice, this reinforces the "index" nature of the title and gives management a relatively clear mandate to focus on the metrics that large funds track most: free cash flow, expense structure, balance sheet and return predictability for shareholders.

Analyst expectations

In terms of specific names, it's good to work with the fact that DVN has had mixed but mostly constructive analyst sentiment in recent months. JPMorgan, for example, raised its December 2025 recommendation to Overweight and set a target price of $44, arguing just the optimization plan and valuation relative to intrinsic value. More recent commentary following the announcement of the deal has also seen more cautious voices, with RBC Capital reportedly holding Hold with a target price of USD45.

At the broader market level, the consensus is in a range of roughly USD 34-62 per share, with the average target estimate appearing around USD 46-48. This is matched by the prevailing Buy/Moderate Buy recommendation, but with a visible Hold component, which is common in commodity titles: investors want a clear framework for cash returns while keeping an eye on the oil price cycle

Fair Price

What makes the move stand out is the portfolio context. Nvidia now represents about 2.63% of Bridgewater’s U.S. equity portfolio, which is valued at roughly $27.4 billion, and it is the fund’s largest single stock position in that book. For a shop known for diversification and macro positioning, that level of concentration reads as a deliberate expression of conviction rather than noise.

Nvidia as the backbone of the AI equity cycle

The timing of the purchase is interesting. Shares of Nvidia $NVDA have been virtually stagnant for the past six months and doubts have begun to arise among investors. Revenue growth has still been strong, but the pace is not as explosive as in the early waves of the AI boom. At the same time, there were questions around:

• the sustainability of margins

• increasing competition (AMD, proprietary hyperscaler chips)

• extreme dependence on investments from a few big players

Bridgewater, however, probably sees Nvidia not as a short-term growth story, but as a key infrastructure element of the new technology cycle. Nvidia isn't just a chip maker - it's a de facto "toll collector" on the AI infrastructure highway. As long as companies like Microsoft $MSFT, Amazon $AMZN and Alphabet $GOOG invest tens of billions of dollars a year in datacenter and computing power, Nvidia will remain a central supplier.

From a macro perspective, the fund may view AI as a multi-year capital cycle comparable to the advent of the Internet or cloud computing. In such a scenario, the key is not whether quarterly growth is 35% or 45%, but whether the infrastructure will still be needed five years from now.

Bridgewater Associates

Bridgewater Associates is one of the largest capital managers in the world. It bases its strategies on how growth, inflation, interest rates, currencies and commodity prices are trending. That's why it typically doesn't work by betting only on the success of individual companies, but it composes its portfolio to make sense in different economic conditions. He typically serves mainly large institutional clients, such as pension funds or endowments, and often combines multiple markets at once.

In terms of size, Bridgewater managed roughly $92 billion as of September 30, 2025, according to Reuters. At the same time, it's good to know that some of the information people see in stock position summaries shows only a slice of reality: such summaries capture mostly U.S. stocks, but a significant portion of the overall portfolio may be built on bonds, currencies, and commodities, and those positions often don't make it into lists like this at all.

Portfolio construction: a broader bet on the AI ecosystem

Nvidia is not the only technology pillar in the portfolio. According to available data, the largest positions also include:

• Lam Research $LRCX - about 1.90% of the portfolio

• Salesforce $CRM - approx. 1.87%

• Alphabet $GOOG - approx. 1.82%

• Microsoft $MSFT - approx. 1.74%

• Amazon $AMZN - approx. 1.64%

• Broadcom $AVGO - approx. 1.47%

• Oracle $ORCL - approx. 1.33 %

• AMD $AMD - approx. 1.29 %

The top 10 positions account for approximately 36% of the entire US portfolio, indicating a relatively concentrated structure, but at the same time not extreme dependence on any one name.

This suggests that Bridgewater is not betting on just one winner, but on the entire value chain:

• chip design and manufacturing (Nvidia, AMD, Broadcom)

• manufacturing equipment (Lam Research)

• cloud and application layer (Microsoft, Amazon, Alphabet)

• enterprise software and AI monetization (Salesforce, Oracle)

This is therefore a comprehensive thematic exposition, not a one-sided speculation.

Active rebalancing: what can the fund track?

The latest 13F report shows:

• 191 new purchases

• Increases in 450 positions

• full exit from 165 titles

• reductions in 395 positions

• Portfolio turnover of about 29.5%(Portfolio turnover measures how much of a portfolio a fund has exchanged - i.e. bought and sold- over a period of time - usually a year.)

This suggests high activity and portfolio adjustment to changing macro conditions. In particular, Bridgewater may respond to:

1. Expectations of interest rates and inflation

2. The phase of the business cycle

3. Capital flows between sectors

4. Valuation extremes

Nvidia's raise may be a combination of structural belief in AI and tactical exploitation of a period of relative price stagnation. If the fund believes that the next wave of AI monetization (e.g., enterprise applications, autonomous systems, robotics) is yet to come, it may view the current valuation as an attractive entry point.

Risks that cannot be ignored

Despite the strong story, there are obvious risks:

• Hyperscalers may limit capex if the economy slows.

• Competing solutions (Google, Amazon or Microsoft's own chips) may gradually reduce dependence on Nvidia.

• Geopolitical constraints (e.g. export restrictions on China) may hit growth.

A macro fund like Bridgewater is aware of these risks. That's why Nvidia is only 2.63% of the portfolio, not the dominant double-digit allocation.

What investors can take from this

Bridgewater's move is not a speculative shot, but a strategic allocation to core AI infrastructure. Combined with exposure to Microsoft, Amazon and Alphabet, it is a thoughtful bet on the continued digitization and automation of the economy.

For the individual investor, the question of time horizon is key. If one expects quick gains in a matter of months, Nvidia may look expensive and sentiment-sensitive. But if one believes that the computing intensity of the economy will continue to grow in five years, then it makes sense to see why the world's largest macro fund is strengthening that particular position.

With this move, Bridgewater is making it clear that it believes the AI story is not over. Rather, it is entering the next phase - less euphoric but structurally deeper.

Revenues have risen by more than 50%, operating margins have nearly doubled, and operating cash flow has increased by almost 150%. 📊

Yet the stock price has only risen by 20%. 📈

When he took over as CEO of Amazon, the company had a 60x P/E; now it's 27x P/E. It's hard to take over a company with such a high valuation. 🙌

Shares Rebound, Then Retrace on Mixed Sentiment

After the initial sell-off tied to heavy spending plans, Google’s Class C stock climbed modestly as investors digested the Wiz acquisition clearance, but price action remains volatile. According to recent trading reports, the stock bounced back from lows seen earlier this week before settling into a broader market retrenchment. This kind of whipsaw price move reflects the tension between bullish growth expectations and short-term profit concerns among traders.

EU Moves to Probe Ad Pricing Practices

Regulatory headlines also influenced sentiment as the European Union notified advertisers about a potential probe into Google’s Search ad auction pricing, raising questions about whether pricing dynamics disadvantage smaller advertisers and distort competition. As Reuters reports, the move is not yet a formal antitrust case, but signals that Brussels is watching Google’s core advertising business closely.

Alphabet Pushes Back Against Tech Sovereignty Walls

On the same regulatory front, Google’s senior leadership warned the EU against erecting digital “walls” in its tech sovereignty agenda, arguing that overly restrictive policies could impede innovation and market access. This back-and-forth highlights the increasingly delicate balance between regulatory oversight and global tech integration as EU policymakers draft their digital strategy.

EU Clears Landmark Wiz Acquisition

In a major strategic win that helped stabilize sentiment, European regulators granted unconditional approval to Google’s $32 billion acquisition of cybersecurity firm Wiz, its largest deal to date. The European Commission determined the acquisition does not harm competition and noted credible alternatives still exist in cloud security, a sector where Google lags behind Amazon and Microsoft.

Aggressive Capital Spending Sparks Mixed Market Views

Beyond these headlines, the company’s broader financial stance continues to spark debate. A recent Reuters report highlighted that Alphabet plans to nearly double its capital expenditure in 2026 as it scales AI infrastructure and Cloud capacity, a strategy that has excited long-term growth bulls but made near-term investors cautious.

Earnings Strength Helps Counter Uncertainty

While spending headlines have weighed on investor psychology, Reuters-linked coverage of $GOOGL recent earnings suggests operating performance remains solid, with revenue and profit beating analyst expectations and Google Cloud showing strong growth. This contrast strong fundamentals versus heavy future commitments is a key theme driving stock narratives right now.

Trader Outlook: Volatility and Opportunity Ahead

Looking ahead, the market’s reaction this week paints a clear picture: near-term caution coexists with long-term strategic confidence. Traders are sensitive to capex disclosures and regulatory signals, while longer horizon investors are betting on AI momentum and strategic acquisitions. With the stock continuing to pivot off key psychological levels, this week’s price swings may foreshadow broader sector rotation or a renewed leg up if cloud and AI growth translate into accelerating earnings.

That is why the late-year signal mattered. The discussion shifted from general AI excitement to a concrete indicator: €38.8bn in orders, consistent with planning that is speeding up again for the next generation of fabs. When orders start to confirm the capex cycle, ASML stops being a “quality hold” and starts being priced as a multi-year growth compounder again.

Top points of analysis

• Orders jumped to €13.2bn in Q4 2025, of which EUV was €7.4bn - the type of signal that typically outpaces sales by several quarters.

• Backlog reached €38.8bn.

• The firm targets 2026 revenues of €34-39bn at gross margins of 51-53%, while the customer investment cycle continues to be fed by AI and more demanding production nodes.

• EUV is no longer just a "next-gen" story: €11.6bn of EUV revenue is recognised in 2025 on 48 systems, with the first piece of High-NA squeezed into the numbers.

• Alongside machine sales, the "silent engine" is growing: the installed base and services bring in around €8.2bn in 2025 - this stabilises the whole cycle.

What's so important about these orders

In Q4 2025, $ASML reported orders of €13.2bn - and this is not a "cosmetic number". For ASML, simple logic applies: when orders accelerate sharply, it means customers stop "waiting for warehouses to clear" and start planning ahead for production again. Indeed, in semiconductors, the most expensive mistakes are made in capacity planning - those who invest late then fail to keep up with demand.

Even more tellingly, a significant proportion of those orders went into EUV (€7.4 billion), the machines that are key to the most advanced production. An EUV order is not a "production upgrade of a few percent". It is a decision that the company wants to produce cutting edge - and that it dares to spend billions with a payback horizon of several years.

And with ASML delivering €32.7bn in sales in 2025 and holding very high profitability, it is a combination that the market typically sees as "demand returns, margins hold, visibility of future profits grows".

EUV as a "toll gate" to the 2nm era

For the investor, it is good to distinguish two layers of the story:

1. EUV today - the machines without which modern high-performance chip manufacturing cannot be done.

2. EUV "tomorrow" (High-NA) - the next generation that pushes transistor density and efficiency further.

By 2025, EUV was no longer just the future: in 2025, ASML reported €11.6 billion in revenue from EUV systems (48 recognized machines), while at the same time making its first contribution from High-NA(EXE:5200B).

This is important because High-NA is not a "marketing label" but a technological leap that will start to materialize in sales and margins in the years to come - and at the same time can differentiate winners and losers across the supply chain.

Moreover, High-NA is also taking off institutionally: for example, IMEC is due to get a High-NA system in 2026 for research and ecosystem preparation.

Why the 2026-2028 "setup" just got better

ASML itself gives a framework for 2026 of €34-39bn revenue and 51-53% gross margin.
But what's key is what's behind this range: the firm suggests that customers have stronger long-term confidence in AI demand, and therefore a greater willingness to plan capacity ahead - exactly the type of behavioural change that will write itself into the years ahead.

The wider sector context supports this thesis. Reuters pointed out in January that ASML has gotten over $500 billion in market capitalization in an environment where the largest customers (typically TSMC) are increasing investment plans and the market is "pivoting" into the semiconductor cycle again.

Quite simply: the orders didn't come out of nowhere. This seems to be a reaction to high-end chips (AI and data centers) ceasing to be "one product wave" and starting to be long-term infrastructure for which production needs to be secured for several years in advance.

Market size: how the environment that ASML feeds can grow

For ASML, it is fair to look at the market through two lenses - the entire chip fabrication equipment market and the narrower EUV lithography market.

1) The entire equipment market (macro wind in the sails)

In past outlooks,SEMI has worked with the scenario that chip fabrication equipment spending will re-accelerate after weaker years and may be headed for new records in the years ahead (with increasing emphasis on AI, memory and advanced nodes).

Growth estimates (SEMI)

• 2026: USD 145 billion

• Year 2027: USD 156 billion

2) EUV lithography (the top league where ASML has the strongest position)

For EUV, various market estimates show high growth trajectories through the end of the decade as EUV expands across node generations while adding High-NA.

Growth estimates (EUV)

Option A (Research and Markets: 2025 → 2030, CAGR 11.5%)

Year 2026: ~$12.86 billion
Year 2027: ~$14.33 billion
Year 2028:~$15.98 billion

Option B (SkyQuest: 2023 → 2028, CAGR 21.8%)

Year 2026:USD ~16.99 billion
Year 2027:USD ~20.69 billion
Year 2028:USD ~25.20 billion

What this implies for ASML's "share"

In EUV, ASML is practically the key supplier, so the game is less about whether they keep their share and more about how fast the pie itself grows and how much of it goes to the highest configurations (more expensive machines, more service contracts, more upgrades). This is where the mix is the most important thing for an investor: how much will be "standard EUV" and how much "High-NA EUV" - because that has a direct impact on margins and long-term revenue growth.

The numbers an investor should watch

1) Orders and their quality: who buys and what exactly they buy

The most important thing is not the sales of the last quarter itself, but the orders. They tell whether customers are really committed to spending in the next 12-24 months. In Q4 2025, ASML reported net orders of around €13.2bn, with EUV accounting for around €7.4bn. This is a crucial mix: EUV is not "just another product", but a top-end machine class where margins, bargaining power and technological edge are broken.

What to read from this investment-wise:

• if EUV makes up a large part of orders, the likelihood that customers are driving to higher technology nodes increases and that capex is not decreasing.

• If orders jump quarter on quarter, this is normal for ASML (large contracts), but the market will want to see that the order book remains robust after a strong quarter.

2) How much work has the company already secured

This is the main reason why the €38.8bn order backlog figure is so watched. In practice, this is already signed demand that will gradually translate into sales once the machines are manufactured, tested, installed and taken over by the customer. With ASML, it's more than just a reassuring "cushion" - it's certainty and predictability.

3) Outlook 2026: revenues are up, but margins are temporarily under pressure

For 2026, ASML is targeting revenues of €34-39bn and gross margins of 51-53%. This is an important signal for investors because the company is saying two things at the same time:

• demand (and supply) have room to accelerate

• margins may remain lower in the short term as a new generation of technologies takes off and production is fine-tuned

I.e. - if ASML maintains margin even as new systems ramp up while delivering, it means that the monopoly position translates into results even in the challenging phase.

4) High-NA EUV: catalyst 2027-2028, but also margin and execution risk

Classic EUV is pulling orders today. High-NA EUV is the next step to be relevant just for nodes where the physics and economics of production are already breaking down. Investment-wise, it's a "two-way street":

• on the one hand, it is a technology that can increase lithographic intensity (more lithography per chip, more machines, more service)

• on the other hand, it is a complex ramp-up where there is a short-term pressure on margins and risk of delays

5) Market growth: why it is important to monitor capex and factory equipment

ASML is sensitive to how much money is actually being translated into factories in the sector. Here's a useful "macro framework": according to SEMI's outlook, investment in 300mm factory equipment is set to continue to grow, tentatively to $116bn in 2026, $120bn in 2027 and $138bn in 2028. This is not directly "ASML market size", but a good barometer that the sector is planning further multi-year expansion.

How does this translate for ASML:

• When corporate spending on equipment grows, typically demand for the most critical technologies grows as well

• ASML is particularly sensitive to investment in the most advanced nodes, which are now accelerated by AI and HPC

6) Regional mix: China as a source of volatility

For ASML, the China theme is important not because of one quarter's variance, but because of how export restrictions are changing the regional mix. The market is already working on the fact that China's share of sales may fall significantly from the past, increasing pressure to make up the shortfall with orders from top customers in Korea, Taiwan and the US.

7) Return on capital: buybacks as a "hedge" against cycle volatility

ASML announces a new buyback program of up to €12bn by the end of 2028 while increasing the dividend. For the equity investor, this is a signal that the company:

• believes in long-term demand

• while smoothing out cyclicality by aggressively returning capital in good years

Risks: where the story may get stuck

The biggest risk is not that ASML "loses the technology". Rather, the risks are systemic:

• Cyclicality: semiconductors can go from euphoria to pause faster than the stock can go cheap. Orders are great, but all it takes is for a few customers to push back investment by 1-2 quarters and the mood turns.

• Export restrictions and geopolitics: ASML has been operating in a mode of restricting some exports for some time, which can affect the regional mix and pace of shipments.

• High-NA execution: technology leap usually means higher costs, risk of delays and "learning" in the field. First pieces are a signal, but scaling is a different discipline.

• Organizational efficiency: the ASML talks about savings and reorganization (including job cuts) at the same time, which can be positive for productivity, but is also an execution hit.

Investment scenarios (2026-2028)

Optimistic scenario: EUV stays strong, High-NA takes off and the market adds a premium

What needs to happen

• Order book stays strong after a strong quarter and EUV mix is maintained

• High-NA starts to transition to wider deployment in 2027-2028 without major delays

• Customer capex will remain strong especially in advanced logic and AI memories

What the numbers might look like (illustrative)

• 2026: revenue near the high end of guidance, say €38-39bn, margin ~52-53%

• 2027: sales €41-44bn, margin ~53-55%

• 2028: sales €45-48bn, margin ~54-56%

What this means for the stock

The market typically starts to value ASML more as a "strategic infrastructure" than as a cyclical engineering business. The biggest change wouldn't be that revenues will grow, but that results will become more predictable, and that's exactly the point where re-rating comes in.

Realistic scenario: market grows but intermittently; High-NA adds value incrementally

What needs to happen

• EUV demand will remain healthy, but some customers will stretch supply

• High-NA takes off, but early years are more about skills and productivity than mass volume

• Regional mix adjusts to export rules without major "shock"

What the numbers might look like (illustrative)

• 2026: revenues in the middle of the outlook, say €35-37bn, margins ~51-52.5%

• 2027: sales €38-41bn, margin ~52-54%

• 2028: sales €42-45bn, margin ~53-55%

What this means for the stock

ASML remains a quality core in the semiconductor cycle, but investors will be sensitive to "gaps" in orders and comments on installations. The return for an investor in this scenario typically rests on a combination of steady growth, buybacks, and not seeing a major cyclical downturn.

Pessimistic scenario: memory cycle falters, customers stretch capex and High-NA will have a longer run-up

What needs to happen

• some orders are deferred (not cancelled)

• Margins pushed down by mix, next generation ramp-up and price negotiations

• Export constraints or geopolitics will worsen regional mix more than market expected

What the numbers might look like (illustrative)

• 2026: revenues near the low end of the outlook, say €34-35bn, margins ~51% or slightly lower

• 2027: sales €34-38bn, margin ~50-52%

• 2028: sales €37-41bn, margin ~51-53%

What this means for the stock

In this scenario, "cyclical discipline" returns to investors: the title may be volatile, though the long-term thesis remains. Paradoxically, this often generates the best entries, but only if it is clear that it is about deferrals and timing, not structural loss of technology or share.

What to take away from the article

• The€13.2bn of orders and €7.4bn of EUV in Q4 2025 is a signal that capacity planning for years ahead is improving.

• A backlog of €38.8bn reduces the fear of a "sudden void" in 2026-2027.

• The biggest play going into 2026-2028 is not just "how much AI" but the mix of EUV vs. High-NA + installed base growth (services and upgrades).

• Biggest risks are cycle, High-NA execution and geopolitical constraints, not loss of technology edge.

Amazon is no longer just an e-tailer today. It's a combination of three big businesses with different economics and cyclicality. It is retail, an advertising platform tied to customer shopping behavior, and cloud infrastructure (AWS). This diversification is why Amazon often behaves differently in the stock market than pure retail or pure technology companies. Its results and valuations are a mix of logistics, software margins and capital intensity.

In 2025, Amazon reported revenues of $716.9 billion (+12% y/y) and operating profit of $77.6 billion.

In terms of segments, it is useful to divide Amazon into three main parts.

• North America is the biggest driver of sales, with US$426.3bn (+10% y/y) in 2025.

• The international region added $161.9 billion (+13% y/y),

• AWS, which delivered $128.7 billion in revenue (+20% y/y).

Retail is a volume-driven business with low margins, but with the huge logistical competitive advantage that Amazon $AMZN has. Cloud, on the other hand, is a giant-margin infrastructure that often determines the direction of profitability for the entire group, and advertising (which is included in the company's retail segments in its reports) is also a very attractive layer from a margin perspective.

Amazon's strategic strength thus rests on two things:

• A distribution network that is extremely difficult to replicate on a similar scale,

• an ecosystem of services that increase the frequency of purchases and reduce price sensitivity.

In this sense, Amazon Prime is a complement that increases retention and allows the company to monetize the customer across categories. Into this comes the marketplace model (third-party sellers), which allows Amazon to grow through assortment without carrying all of the inventory on its own balance sheet while creating room for further monetization.

So from an investor's perspective, the most important thing to understand is that the focus of valuation has shifted towards AWS and advertising, services and logistics efficiency in recent years, while retail itself is more about volume stability and cost optimization. That's why the market is often more responsive to signals from cloud, AI and infrastructure investment than to the growth of e-commerce itself.

And this is where we come to what is currently happening in the market around Amazon. The company has reported solid numbers, but investors have been unnerved by the scale of its planned capital expenditure in recent days. Amazon is projecting CapEx (capital expenditures) of around $200 billion in 2026 (primarily in the context of AI and infrastructure), which has raised concerns about the impact on cash flow and margins.

Amazon's latest results and why the market reacted so nervously to them

In its 4Q 2025 results, Amazon confirmed that it is a "money machine", although at the same time investors began to address the cost of this growth. Net income came in at US$21.2bn, equivalent to US$1.95 per share, up from US$20.0bn a year earlier (US$20.0bn; US$1.86). Operating income rose to US$25.0bn in the quarter (vs. US$21.2bn a year earlier). Amazon also highlighted one-off items totaling roughly USD 2.4bn (tax, severance), without which operating profit would have been even higher.

On a full-year 2025 basis, the company reported revenue of USD 716.9bn (+12% y/y) and operating profit of USD 77.6bn (vs. USD 68.6bn in 2024). This is important: Amazon proves again today that it can scale profitability even at giant scale, and that the margin improvement is not just coincidental.

What really drives profit

For Amazon, the same pattern repeats itself: retail will deliver volume, but the key to profitability is a combination of more efficient logistics + ads + AWS. In 4Q 2025, this was seen directly in the profits of each segment:

Amazon North America posted an operating profit of $11.5 billion (vs. $9.3 billion a year earlier), International $1.0 billion (vs. $1.3 billion), and AWS $12.5 billion (vs. $10.6 billion).

These numbers are extremely important to the market because they confirm that AWS is still the earnings driver for the entire group, and any signal about the pace of cloud growth or margins at AWS is often more important to the stock than the company's core e-commerce business that we all associate with Amazon.

CapEx: shock and resetting expectations

The results themselves weren't bad. The problem was what the company announced with them. In recent weeks, the market has begun to focus on the fact that Amazon is significantly increasing its infrastructure investments (especially for AI and cloud). According to our analyst team's findings, the firm is projecting capital expenditures (capex) of around $200 billion in 2026, a jump that has unnerved investors as it may push free cash flow in the short term and raises the question of returns. Indeed, it is a 58% year-on-year increase from $131bn.

This means that Amazon can continue to accelerate AI/cloud infrastructure to capture more of the future demand, but the market (at least at this point in the cycle) wants to see a clearer return on this massive investment and when that investment will translate into margins and cash flow.

The longest losing streak in nearly 20 years

Concerns about the high CapEx have also been reflected in the price of $AMZN stock itself. The company posted 9 consecutive losing sessions in February, the longest daily losing streak since 2006.

Such a streak is not in itself a fundamental problem, but it is a strong signal of a change in sentiment.

From a historical perspective, it is interesting to note that similar streaks at Amazon have often come at times when the company has invested massively in new infrastructure (for example, building fulfillment centers after 2010 or AWS's cloud-first expansion).

Why investors are suddenly addressing CapEx more than earnings

Back in 2024 and much of 2025, the market was still valuing tech giants primarily based on their exposure to AI. Companies that invested aggressively in AI infrastructure were rewarded with higher multiples as investors discounted long-term dominance in the new technology cycle.

But by the turn of 2025/2026, change began to come. Investors began to ask not "who is investing the most" but "who is actually generating cash flow from these investments." And this is where Amazon came under pressure.

As reported by Reuters, Amazon is planning capital expenditures of around $200 billion in 2026, primarily for data center expansion and AI infrastructure.

That kind of CapEx is unprecedented not just for Amazon, but in the context of the entire sector. And the market has begun to address a simple question:

How quickly will this investment be recouped and what will be its impact on free cash flow over 1-3 years?

Bond yields and valuation pressure on growth titles

Another factor is the macroeconomic environment. Higher interest rates increase the discount rate that investors use to value future cash flows. This makes companies with large investments more sensitive to yield movements than defensive titles with immediate cash distributions.

Amazon is squarely between these worlds. It's not a pure growth company like in the past, but it's also not a dividend value title. So a high CapEx means:

• Short-term pressure on free cash flow,

• higher capital intensity,

• greater sensitivity to changes in the discount rate.

And that's why the sell-off came despite solid operating results.

But Amazon isn't the only one facing questions about AI ROI. All of Big Tech is now under investor scrutiny. The difference is that Amazon has:

• A lower-margin retail business,

• a high-margin cloud business,

• and an extreme investment plan.

• It's building another long-term competitive advantage (AI + cloud dominance),

• Transitionally sacrifices cash flow for future growth, which may be slower than the market expects today.

Fundamentally, Amazon does not look weak. Operating profit is growing, AWS is generating high margins, the advertising segment is expanding.

The problem is that valuations of technology companies are more sensitive to cash flow today than in a zero-rate environment. And if CapEx lowers FCF in the short term, multiples can compress without impairing the business itself.

• Long-term strategy (building AI infrastructure),

• and short-term cash flow optimization.

This is where the decision is made whether the current selloff is an overreaction or the start of a longer valuation normalization.

AWS and the cloud: the profitability engine

If there is one part of Amazon that is the biggest long-term valuation driver in the eyes of the market, it is AWS. The reason is simple: the retail segment (albeit massive) is a volume business with low margins, while the cloud has the ability to generate high operating margins and spill over into company-wide profitability.

In 4Q 2025, AWS earned $35.6 billion, which was +24% y/y - and Amazon directly pointed out that this is the fastest growth in 13 quarters. AWS' operating profit in the same quarter was $12.5 billion (vs. $10.6 billion a year ago).

On a full-year 2025 basis, AWS reported $128.7 billion in revenue (+20% y/y) and $45.6 billion in operating profit (vs. $39.8 billion in 2024).

This is important to read in the context of the current sentiment: the market is willing to tolerate high investments as long as it also sees that AWS is not stunting growth and that the cloud can maintain robust profitability. Q4 delivered on this.

AWS today is not just about compute/storage and classic enterprise migrations. In 2026, the cloud market is de facto tipping into a race for AI infrastructure: datacenters, accelerators, network capacity, and most importantly the ability to offer customers the power to train models.

Amazon described in the report that its own Trainium and Graviton chips already have a combined annual revenue run-rate of over $10 billion and continue to grow. It also cited specific adoption within Bedrock and the scaling of Trainium generations (including that the Trainium 3 processor is expected to be virtually sold out by mid-2026).

From an investment perspective, this is extremely significant: custom processors are one of the few ways to improve cloud economics over the long term, maintain margins, and not be so dependent on external suppliers. At the same time, though, this is why Amazon needs massive CapEx. After all, development costs huge money.

Competition

This year, it's no longer enough for investors that AWS is the biggest cloud on the market. Investors are also looking at who is monetizing AI demand faster.

In its FY2025 annual report, Microsoft $MSFT reported that Azure surpassed $75 billion in annual revenue for the first time, growing 34% year-over-year . Then in Q4 2025, Microsoft reported that Azure and other cloud services grew 39% (which the market often reads as a signal of how fast AI-demand is taking off in the cloud).

Google Cloud, on the other hand, reported revenue of $17.7 billion (+48% y/y) and operating profit of $5.313 billion in Q4 2025 (vs. $2.093 billion a year ago). Alphabet $GOOG announced that it expects CapEx of USD 175-185bn in 2026 due to demand for AI and cloud.

What does this imply for Amazon?

In the eyes of the market, AWS is not only comparing itself to its own history, but also to how aggressively Azure and Google Cloud are growing and investing. This increases the pressure for Amazon to be able to explain to investors that the AI investment wave will translate into sustainable growth for AWS and a return on capital.

Why investors were scared of CapEx

The biggest friction in recent weeks isn't whether AWS is growing. It's the price of that growth. Amazon itself has admitted that trailing free cash flow (over the past 12 months) has fallen to $11.2 billion (from $38.2 billion in the prior period), citing a $50.7 billion year-over-year increase in equipment purchases for AWS, primarily reflecting investments in artificial intelligence, as the main reason.

Where CapEx is headed

Public comments on the results suggest that the focus of investment is in AI and cloud infrastructure. AWS grew 24% y/y to $35.6 billion in 4Q 2025, and Amazon directly linked this growth to demand for AI capabilities. At the same time, the company has repeatedly highlighted its own Trainium (AI accelerators) and Graviton (CPUs) chips. According to our analysis, these chips have combined for annual revenue of over USD 10bn.

Amazon's CapEx since 2013 in billions of USD

Scenarios 2026-2028

For Amazon, the next 2-3 years will revolve around one thing: how quickly investments in AI/cloud infrastructure turn into monetization. Three scenarios can be considered:

Scenario A: Monetization will keep pace with investment (positive)
AWS will maintain growth acceleration (Q4 has already shown acceleration) while maintaining strong operating profit. In this scenario, much of the CapEx is absorbed by rapid demand, so FCF will start to grow again once the pace of investment stabilizes.

Scenario B: Demand grows, but returns are slower (neutral)
AWS grows solidly, advertising maintains its current pace, retail maintains improved efficiency, but CapEx remains high longer than the market expects. In this case, accounting earnings may continue to improve (as CapEx goes through depreciation) but FCF stays pinched longer. This usually leads to valuation pressure rather than a fundamental problem. The result can be compression of multiples even with decent earnings growth.

Scenario C: CapEX flips to optimization (negative)
Cloud customers (and hyperscale clients) move from aggressive expansion to optimization phase, margins deteriorate, and new capacity fills more slowly. In such a scenario, the big investment wave risks washing into higher depreciation, while monetization is not fast enough. The market then usually reacts the most. This is also why the entire sector went into AI spending payback fear mode in February 2026.

What can help Amazon and what can further harm it

The biggest short-term risk is return on capital in an environment of extreme investment.

The second key risk is the pricing and capacity dynamics of AI in the cloud: If inference (the stage where an already finished and trained model thinks and answers a specific query) starts to expand rapidly (pressure on pricing) or if hyperscalers (the tech giants that dominate the cloud market and own a vast network of giant data centers around the world) move into the optimization phase after a wave of investment, this can slow the monetization of new capacity and increase the depreciation burden without adequate revenue growth.

The number one positive catalyst is that AWS is growing.

The second catalyst is advertising. According to Reuters, advertising revenue jumped 22% to $21.3 billion in Q4, which is exactly the type of revenue that can improve profitability without the same capital intensity as datacenters.

And the third catalyst is ROI: once Amazon starts showing in the data that new AI capabilities have high availability and that AWS growth can absorb the investment wave, the market typically stops penalizing CapEx and starts reading it again as building a long-term moat. This is similar to what historically happened with earlier investment waves around AWS/Prime.

Retail and advertising - an underappreciated margin driver outside of AWS

Amazon has long been seen primarily as a giant e-commerce player with extreme sales but relatively low margins. This view is now simplified. The retail segment underwent a hard optimization after the pandemic - closing redundant warehouses, shortening delivery distances, better dividing the delivery network into regional hubs.

As a result, the segment is now generating significantly higher operating profit than two years ago, even as the global economy slows.

Importantly, Amazon is no longer building the network just for volume growth, but for unit efficiency. That means lower cost per delivery, higher shipment density and better use of warehouse capacity. In an environment of higher wages and energy, this is a major competitive advantage.

Prime

Prime is not just a transportation service today. It's a subscription service that combines logistics, content (Prime Video) and now advertising. This model creates high switching costs - customers with Prime spend significantly more than those without a membership and remain more loyal even in an economic slowdown.

Prime is also key to why advertising on Amazon works differently than on traditional digital platforms. That's because Amazon works with data about actual shopping behavior. This increases the effectiveness of advertising and allows the company to monetize each marketplace visit with more than just margin on sales.

Advertising

The advertising segment is one of Amazon's fastest growing pillars today with high margins.

Yet advertising is a completely different business than retail. It does not require physical infrastructure to the same extent and therefore delivers significantly higher operating margins. The key point for investors is that advertising acts as a margin stabilizer. When retail margins are in the single-digit percentages, the advertising layer can significantly improve the profitability of the entire group.

In addition, Prime Video (including the advertising model) is also gradually monetizing, which can provide an additional revenue layer in the future without the need for massive logistical investments.

How retail and advertising are changing Amazon's valuation

If Amazon were focused solely on retail, the market would value it more as a large, efficient but low-margin distributor. If it were AWS only, it would be a pure cloud with a high margin and higher multiple. The reality is a combination of these segments, and advertising is the industry that brings this combination together.

With AWS under the microscope due to CapEx and AI investments, it is the retail efficiencies and advertising growth that can help stabilize overall operating profit and ease valuation pressure.

What does this imply?

Amazon is now entering a new phase of its evolution, defined by massive investments in AI infrastructure, proprietary processors and expanding cloud capabilities. AWS is re-accelerating growth and continues to generate a key portion of the company's overall operating profit, while the advertising segment adds a high-margin layer on top of the retail ecosystem. At the same time, however, the sharp rise in CapEx and temporary decline in free cash flow are changing the company's near-term valuation profile and increasing the stock's sensitivity to any disappointment in the pace of monetization of these investments. Thus, the longest losing streak in nearly two decades is not primarily a reflection of a deterioration in the business, but an overestimation of return on capital expectations in a higher rate environment.

Amazon's long-term investment story thus rests on its ability to translate the current investment wave into sustained growth in AWS, steady expansion of its advertising business, and continued optimization of its retail network. If the company can demonstrate that the giant CapEx delivers higher capacity utilization, strong margins, and renewed free cash flow momentum, the current phase could prove to be another strategic milestone in building competitive advantage. However, should monetization lag the pace of investment, valuations may remain under pressure even with solid revenue growth. Therefore, it is not the sheer volume of investment that will be decisive, but its return over the next few years.

This is interesting for several reasons. SpaceX recently absorbed xAI, effectively linking cutting-edge space and defense hardware with Musk’s own AI platform. If the company were to win such military contracts, it could significantly boost its valuation even before the IPO that’s being talked about for this year. Defense contracts also mean long-term cash flow and strategic positioning, which is a completely different league for investors than purely commercial space projects.

Paradoxically, Musk signed an open letter in 2015 against “offensive autonomous weapons.” Today his companies are participating in a competition precisely in that area.

The more important context is what 2025 represented. It was a transition year in which the COVID revenue decline was fully absorbed and the growth narrative shifted back to the standard levers of big pharma: portfolio performance, pipeline progress, and disciplined capital allocation. Viewed through that lens, the results look less like weakness and more like consolidation before the next cycle.

How was the last quarter?

The fourth quarter of 2025 delivered revenues of $17.6 billion, down 1% year-over-year on a reported basis and down 3% on an operating basis. On the face of it, this is a weak result, but the revenue structure is significantly better than the aggregate number suggests. The main negative remains the continued decline in the covide products Comirnata and Paxlovid, but this was largely offset by solid growth in the key non-covide drugs. Adjusting for these, Pfizer $PFE s quarterly revenues rose 9% operationally, which is more material information for investors than the decline itself.

Profitability remained under pressure in the quarter. Pfizer posted a reported loss per share of $-0.29, while adjusted earnings per share came in at $0.66, up 5% year-over-year. The difference between the reported and adjusted numbers is again a reminder that the company is still undergoing restructuring, cost optimization and integration of earlier acquisitions. From a long-term investor's perspective, the trend in adjusted EPS is more important than the short-term volatility of reported results.

At the product level, the quarter clearly showed where Pfizer's growth pillars lie today. Abrysvo vaccine posted 136% year-over-year operating revenue growth, driven by indication expansion and international expansion. Oncology biosimilars grew 76%, mainly driven by price mix in the US. Eliquis added 8%, driven by strong global demand and favorable pricing in the U.S. following changes to Medicare Part D. The Prevnar family of vaccines also posted solid growth, driven primarily by the expansion of CDC recommendations in the U.S. for the 50-64 age group.

• Full presentation with results.

CEO commentary

In his comments, CEO Albert Bourla made it clear that 2025 was about execution and setting the stage for the next growth phase. He said Pfizer strengthened its fundamentals in 2025, stabilized cash flow and prepared the pipeline for a period when new key products will start to materialize. From management's perspective, 2026 is set to be a catalyst-rich year, particularly with around 20 key pivot study launches planned.

CFO David Denton added an emphasis on financial discipline. He highlighted that the non-covid portfolio delivered 6% operating revenue growth in 2025 and that cost control had enabled growth in adjusted EPS despite an unfavourable revenue mix. Management is thus making it clear to investors that Pfizer does not want to grow at any cost, but is building a return to growth on a combination of pipeline, selective investment and disciplined capital allocation.

Outlook

Pfizer confirmed full-year guidance for 2026. Revenue is expected to be in the range of $59.5 billion to $62.5 billion, with roughly $5 billion still expected to come from covid products. Adjusted earnings per share are expected to be in the range of $2.80 to $3.00, implying relative stability in profitability compared to 2025.

The outlook also reflects several structural factors. The company anticipates a negative impact of approximately $1.5 billion from the loss of exclusivity on select drugs, a higher tax rate, and adverse regulatory impacts including most-favored-nation pricing and tariff actions. On the other hand, Pfizer is planning R&D investments of $10.5 billion to $11.5 billion and continued pipeline strengthening, which is expected to be a major value driver beyond 2027.

Long-term results

A long-term view of Pfizer's financial performance clearly illustrates the extreme cyclicality of recent years. 2022 was the strongest year historically due to a peak in covenant revenue, with sales exceeding $100 billion and operating profit reaching nearly $38 billion. However, this peak was clearly unsustainable and subsequent years have brought a sharp normalisation.

By 2023, revenues had fallen by more than 40% to just under $60 billion and operating profit had fallen by almost 86%. 2024 had already brought stabilisation and a modest recovery, with revenues rising to $63.6 billion and operating profit more than tripling to $16.5 billion. These developments indicate that the worst of the downturn is likely behind the company, although a return to the pre-crisis trajectory will not be rapid or linear.

Earnings per share confirm this story. EPS is gradually improving after the collapse in 2023, but still remains well below 2021-2022 levels. A positive sign is the relative stability in the number of shares outstanding, suggesting that the firm is not yet diluting shareholders and maintaining flexibility for future capital decisions.

Shareholder structure

Pfizer's shareholder structure remains highly institutional. Approximately 68% of shares are held by institutional investors, with Vanguard, BlackRock and State Street being the largest owners. The share of insiders is negligible, which is typical for pharmaceutical giants of this size. The stable institutional base suggests that Pfizer continues to be viewed as a long-term defensive component of portfolios, not a short-term speculative title.

Analyst expectations

The analyst consensus is gradually shifting from skepticism to cautious optimism for Pfizer. The major investment houses view 2026 as a transition year, with limited earnings growth but increasing pipeline visibility beyond 2027. In particular, analysts highlight the potential of late-stage clinical trials in obesity, oncology and immunology, and management's ability to sustain the dividend in a period of lower earnings.

Target prices are mostly in the range of moderate to moderate growth potential, with regulatory pressure on US drug prices and uncertainty around the success of individual clinical programs remaining key risks. Thus, for investors, Pfizer today represents a story of a gradual return to growth rather than an immediate turnaround.

Fair Price

Wall Street Reaction and Media Narratives

The reaction from Wall Street analysts has been measured yet undeniably more reserved compared to earlier bullish outlooks. Reports from outlets such as Reuters have emphasized investor hesitation and a recalibration of expectations rather than outright fear. One recent piece discussing broader technology market pressure can be seen here which illustrates how analysts are framing the situation as part of a wider sentiment adjustment rather than an isolated company failure. Meanwhile, commentary aggregated on Yahoo Finance highlights how institutional investors are increasingly scrutinizing forward guidance and profit margins rather than celebrating raw revenue growth. This dual narrative of caution mixed with analytical curiosity has created a layered perception that fuels both volatility and opportunity.

Capital Spending and Investor Anxiety

A central factor contributing to the decline is the company’s aggressive capital expenditure outlook, which has sparked debate about the balance between innovation and profitability. Financial observers frequently note that heavy investments in infrastructure, logistics expansion, and artificial intelligence capabilities may delay short term earnings visibility. Coverage compiled on Yahoo Finance such as shows how analysts are dissecting expenditure figures and comparing them to historical investment cycles. Investors who prioritize predictable quarterly performance often interpret large spending plans as uncertainty, even if those investments promise long term dominance. This psychological tension between future potential and present valuation is one of the strongest forces driving the current downward momentum.

Earnings Expectations Versus Delivered Results

Markets rarely move purely on performance numbers; they move on the difference between expectation and delivery. Even when revenue growth appears solid on paper, disappointment can arise if projections fall short of analyst forecasts. Bloomberg’s market coverage, accessible through summaries and partner distributions such as , has repeatedly emphasized how expectation gaps influence stock trajectories more strongly than absolute earnings figures. For traders, this distinction is critical because a company can report growth and still face a selloff if optimism had previously been priced in too aggressively. The Amazon situation this week illustrates how perception, narrative framing, and forecast revisions can outweigh the raw financial data itself.

Technical Signals and Market Psychology

Beyond headlines and analyst commentary, technical analysis has added another layer of intrigue to the stock’s behavior. Chart based traders often look at momentum indicators, moving averages, and relative strength metrics to gauge whether a stock is approaching oversold territory. Several market analysis columns referenced through Yahoo Finance aggregations suggest that $AMZN technical readings are nearing levels that historically precede stabilization or short term rebounds. This dynamic creates a psychological split in the market where long term investors focus on fundamentals while short term traders hunt for entry points driven by price patterns. The coexistence of fear and calculated optimism contributes to rapid intraday swings and heightened trading interest.

Influence of the Broader Technology Sector

$AMZN decline is not unfolding in isolation, as the broader technology sector has also experienced uneven performance this week. Sector wide rotations toward defensive industries and dividend paying stocks have reduced enthusiasm for high valuation technology names. Reuters market summaries such as illustrate how multiple large technology firms are facing similar valuation pressures. When sector momentum weakens collectively, individual stocks often experience amplified reactions because investors adjust entire portfolio allocations rather than targeting a single company. This interconnected movement explains why Amazon’s slide feels more dramatic than its individual metrics might otherwise justify.

Long Term Growth Story Versus Immediate Volatility

Despite the current turbulence, many institutional investors continue to underline the company’s expansive ecosystem and diversified revenue streams as pillars of long term resilience. Cloud computing, digital advertising, and logistics innovation remain strong narrative drivers that analysts frequently revisit in their outlooks. Bloomberg opinion and feature pieces available through often stress that temporary price weakness does not necessarily undermine structural advantages. For stock blog audiences, this contrast between immediate volatility and enduring business models provides a compelling storyline, as it frames the decline not simply as a loss but as a moment of strategic evaluation.

Investor Outlook and What Comes Next

Looking ahead, the trajectory of $AMZN share price will likely depend on upcoming economic data, analyst revisions, and shifts in global risk appetite. Financial portals like Yahoo Finance and Reuters continue to update their coverage daily, offering evolving perspectives that traders closely monitor. The coming weeks may reveal whether the stock finds a technical support level or continues drifting under pressure from cautious sentiment. For readers of stock focused blogs, this period represents more than a market dip; it serves as a vivid example of how narratives, expectations, and collective psychology can influence price action just as strongly as balance sheets and earnings reports.

PepsiCo’s Q4 2025 delivered that kind of stability. The company accelerated revenue growth and improved operating efficiency, which supported a double-digit increase in earnings per share. Management also reaffirmed its 2026 outlook and raised the dividend again, extending its long history of dividend growth. The broader message is that PepsiCo’s mix across regions and categories helps it balance weaker conditions in North America with stronger momentum in emerging markets.

How was the last quarter?

The fourth quarter of 2025 delivered 5.6% year-over-year revenue growth on a GAAP basis, with organic growth of 2.1%. More importantly, however, was the acceleration in momentum from previous quarters, which management specifically identified as sequential acceleration. This was driven by both the North American business and international operations, which has long been a key stabilizing element for PepsiCo $PEP.

Profitability has improved significantly more than sales alone. GAAP earnings per share jumped to $1.85, up 68% year-over-year, while adjusted earnings per share reached $2.26, up 11% year-over-year at constant currencies. This difference clearly demonstrates how strongly one-off items factored into last year's results, particularly on a 2024 comparative basis.

From a segment perspective, the quarter was characterised by significant divergence. PepsiCo Foods North America faced a 6% decline in operating profit, mainly due to higher operating expenses, restructuring charges and the absence of exceptional positive items from the prior year. Conversely, the Beverage Division in North America benefited from the unwinding of depreciation and an improved price mix. The international segments, particularly Europe, Middle East and Africa, recorded very strong operating profit growth, supported by a combination of pricing, savings and favourable currency developments.

Overall, the quarter is evidence that PepsiCo can sustain profitability growth in an environment of slowing demand, primarily through cost discipline and selective price increases.

• Full presentation with results.

CEO commentary

In his comments, CEO Ramon Laguarta highlighted in particular the acceleration in sales growth and operating margins, which he said confirmed the soundness of the strategic moves made in recent years. He highlighted the strong productivity savings that have made it possible to finance investments in brands and innovation without negatively impacting profitability.

Laguarta said the company enters 2026 with a clear plan: to reinvigorate key global brands, expand product innovation in functional and "better for health" categories, and offer consumers more attractive value in an environment of increasing price sensitivity. It also announced a 4% increase in its annual dividend, marking PepsiCo's 54th consecutive year of dividend growth, underscoring its position among the most stable dividend-paying stocks in the market.

Outlook for 2026

Management reaffirmed guidance that calls for organic revenue growth in the range of 2-4% and adjusted earnings per share growth of 4-6% at constant currencies. Including the favourable currency effect and acquisitions, this outlook implies overall revenue growth of around 4-6% and EPS growth of around 7-9%.

PepsiCo also expects capital expenditures to remain below 5% of sales and free cash flow conversion to exceed 80%. It plans to return about $8.9 billion to shareholders in 2026, most of which will be in dividends, supplemented by a smaller amount of buybacks.

Long-term results

A look at 2021 to 2024 shows a very consistent growth profile. Revenue has increased from just under US$79.5 billion in 2021 to almost US$91.9 billion in 2024, with growth driven by both volumes and a successful long-term pricing strategy. Gross profit grew even faster than sales, reflecting the company's ability to pass on higher costs to consumers while optimizing manufacturing processes.

Operating profit increased from roughly $11.2 billion to nearly $12.9 billion during the period, with margins improving steadily despite inflationary pressures. Net profit grew steadily, from US$7.6 billion in 2021 to US$9.6 billion in 2024, and earnings per share increased from US$5.51 to US$6.98. An important element of this development is the gradual reduction in the number of shares outstanding, which supports EPS growth even at a more moderate rate of net income growth.

Over the long term, it is evident that PepsiCo is not an explosive growth company, but rather a defensive compounder that combines low single-digit growth rates with high cash flow stability and regular dividend increases.

Shareholder structure

The ownership structure remains very stable and institutionally oriented. Approximately 80% of the shares are held by institutional investors, with Vanguard, BlackRock, JPMorgan and State Street among the largest. Insider participation is minimal, which is typical for a company of this size and maturity.

Analyst expectations

Analysts generally view PepsiCo as a stable title with limited risk but also limited growth potential. The consensus focuses on continued low-to-mid single-digit revenue growth, stable margins and an attractive dividend yield. Expectations for 2026 are near management's confirmed guidance, with the evolution of consumer demand in North America and the company's ability to continue to offset cost pressures with pricing and productivity remaining key drivers.

Fair Price

This company sits right on that fault line with VK2735. The upside case isn’t a clever story about market size; it’s a narrow question about whether efficacy and tolerability can coexist without forcing compromises that limit adoption. In 2026 the “maybe” phase ends: late-stage work and the cadence of updates start putting hard boundaries around what’s realistic, and execution speed becomes almost as important as the data itself.

Top points of the analysis

• The company is a pre-revenue biotech: revenues are zero, the investment story stands on pipeline and clinical milestones.

• VK2735 in injectable form is heading into Phase 3; published data shows up to ~14.7% weight reduction in 13 weeks (including high dose).

• Oral VK2735 has shown efficacy up to 12.2% at 13 weeks, but the market is addressing tolerability at the highest dose.

• The cash position is strong; however, at the same time, the pace of cost accelerated significantly in 2025.

• 2026 as a key year of execution.

Company performance

Viking Therapeutics $VKTX is a clinical-stage biotechnology company that is now de facto selling "time and probability." Time in the sense that the investor is paying for the next few years of clinical steps that must result in registration and a commercial product. And probability in the sense that each new datapoint pushes the odds of a "best-in-class" profile - or, conversely, reveals a limit that would kill valuation.

At the heart of the current story is VK2735, a candidate in obesity and metabolic disease that is heading into a giant and fast-growing segment dominated by Novo Nordisk and Eli Lilly. In the context of the market, it's important that Viking isn't just playing one card: it's developing both an injectable and an oral form, and in doing so is trying to cover two different patient preferences and two different treatment economics.

In addition to VK2735, the company also has other metabolic programs in its portfolio (e.g. VK2809), which is mainly important for investors as "option value": even if the obesity program is dominant, secondary assets can increase bargaining power in a partnership or in a potential M&A scenario.

VK2735 injected: why phase 3 and the "efficiency curve" are the main axis of valuation

Injectable VK2735 is the biggest value driver for Viking today, as the injectable GLP-1 market already has a clearly defined standard: the Zepbound/Mounjaro and Wegovy have set the bar for efficacy and expectations for adverse events. For a smaller player to justify a commercial breakthrough (or a premium price in M&A), it must either deliver comparable efficacy or offer better tolerability, possibly combined with smart dosing.

Viking published data in January 2026 while communicating late-stage progress: at high doses, the firm reported up to ~14.7% weight loss after 13 weeks in the study, while also ramping up/advancing the Phase 3 VANQUISH program to "prove" both the scalability of the effect and the safety profile in a larger sample.

For the investor, the key here is to read the numbers correctly: a 13-week reduction is an excellent signal, but in obesity therapies, the progression over time (plateau effect), the ability to maintain the reduction and, most importantly, tolerability at titration are also critical. Therefore, studies focusing on the maintenance phase and longer-term dosing regimens are equally important - and this is the type of data that can fundamentally shift risk perception in 2026.

Oral VK2735: a huge opportunity, but the market will punish the "tolerability tax"

The oral form is the holy grail of the segment: if someone offers a pill with competitive efficacy and reasonable tolerability, it opens up a massive market expansion - in terms of adherence, availability and patients' willingness to enter treatment earlier. Reuters summarized in February 2026 that Viking has shown efficacy with oral VK2735 to ~12.2% weight reduction after 13 weeks, while planning to move into late phase in Q3 2026.

But this is exactly where the market "penalty" comes in: the highest dose was described by MarketWatch as having a significantly higher percentage of patients who discontinued treatment (around 38%), which immediately raises the question of whether the effect can realistically be "sold" outside the clinical setting where the patient is supervised and motivated.

This is not a detail. In obesity, adherence and longevity to therapy is the economic core of the whole business. If tolerability is weaker, the company must either adjust titration, lower doses, reformulate, or accept lower efficacy - and each of these steps has a direct impact on the addressable market, pricing, and ultimately whether it makes sense to build its own commercial infrastructure or rather license to a big player.

Competition: why it's a battle not just for efficiency, but for supply, form and "commercial muscle"

Viking is in an arena where two dominant players have already set the pace for innovation, marketing and manufacturing. That said, clinical data is only the first filter. The second filter is the ability to produce the substance in volume and over the long term - and the third filter is access to payers, formularies, and distribution.

Competitors like Novo Nordisk $NVO and Eli Lilly $LLY are also pushing into oral forms (and the market is very sensitive to tolerability even with their candidates), so Viking won't be judged in a vacuum. Among other things, MarketWatch has likened the market reaction to Viking's oral data to the reaction to competitors' data - a signal that investors today evaluate "profile" very strictly and prefer a clean, easily transferable effect to real-world practice.

The investment conclusion: Viking must win either technologically (profile) or strategically (partnership/acquisition/quick execution), ideally both. Otherwise, it risks becoming "just another player" in a crowded field where the best economics are reaped by those with the largest distribution network and production capacity.

Management

The company's CEO is Brian Lian. For him, the market in 2026 will value less "vision" and more execution: how quickly and cleanly the company moves through Phase 3, how transparently it communicates tolerability, and how realistically it sets expectations to avoid the "hype-disappointment" cycle that can destroy biotech valuations in days.

The strategic question that may be critical for shareholders is: will Viking build its own commercial apparatus or opt for a partnership (or sale) before final data? In an environment where the big players need pipelines and the smaller players need manufacturing and commercial "muscle", it's a real open game - which is why Viking's acquisition attractiveness is a recurring consideration.

Financial performance: if you don't have revenue, watch the burn rate

The numbers show a reality typical of clinical biotech: revenues are zero across 2022-2025, while costs accelerate as the company expands clinical programs. Operating expenses rise from ~$70m to ~$1.5m. USD 170m (2022) to ~USD 393m (2022). That's a jump that tells investors one thing: the company has entered a phase where "speed" costs a lot of money.

The net loss corresponds to this: ~-69 mil. USD (2022), ~-86 mil. ~-$86 million (2023), ~-$110 million (2023), ~-$110 million (2023). USD 1-10 million (2024) and ~-360 million (2024). In practice, this means that the book loss and cash burn are likely to continue to fluctuate in the coming quarters depending on how aggressively Phase 3 runs and what the payments for production, CRO and other services are.

The anchor is cash. Reuters reports that Viking had cash of about $706 million at the end of 2025. USD. Combined with minimal debt, that gives the company a solid "runway" but it's not an infinite cushion - especially if Phase 3 runs big and the company were to push an oral program in parallel. Investors should keep a simple logic in their heads: the more a company spends on speed, the more likely it is to need capital before commercialization.

Valuation: how to value a company without revenue and why P/B in this case tells only part of the story

A P/B of 4.83 at the pre-revenue stage is not inherently expensive or cheap - rather, it mirrors the fact that book value is made up of cash and equity, while the real value is in the probability of future cash flows from the drug.

It is more practical to look at valuation as a bet on scenarios: how big a market VK2735 can serve, what profile (efficacy/tolerability) it will realistically deliver, and what economics (partnering vs self-commercialization) the company will choose. Therefore, it is also important to see where the analyst consensus is heading and how it changes with each datapoint.

For Viking, there are distinctly bullish views: Barron's, for example, mentions a target price of around $110, alongside the fact that part of the market sees the firm as a potential acquisition target if the data maintains its "best-in-class" ambition. That doesn't mean it will happen - but it does explain why the title is capable of sharp moves on relatively "small" changes in perceived probability of success.

What could be a game-changer in 2026: milestones that rewrite probabilities

The first big catalyst is the oral program: Reuters explicitly shifts the focus to Viking's plans to go late-stage in Q3 2026. This is important because oral is potentially the biggest valuation multiplier - but only if the company demonstrates that it can improve tolerability (titration, dosing, formulation) without killing efficacy.

Another catalyst is strategic manufacturing and scaling decisions. In obesity, the "manufacturing moat" is often as important as the molecule. Once a company indicates that it has a robust supply plan, its bargaining power with partners and payers grows - and so does the likelihood that someone bigger will want to buy it before it's too late.

Risks: what can break an investment thesis, even if the data looks good

The biggest risk is clinical and practical at the same time: tolerability. With the oral form, the market has already shown that it can punish even good data if a high percentage of patients don't complete treatment. MarketWatch mentions the high completion rate at the highest dose and thus the issue of transferability to practice.

The second risk is competitive dynamics. If Novo and Lilly push the standard of efficacy further (or offer more convenient regimens and better delivery), the relative value of Viking's candidate may fall without Viking "getting anything wrong". In such a market, it's not enough to be good - you have to be better, or significantly smarter in strategy.

The third risk is capital: burn rate vs runway. Even with cash of around 706 mil. You have to take into account that Phase 3 can be expensive and the market may be unfavorable for funding at a certain window. When sentiment turns, even a quality biotech may be forced to fund on worse terms, leading directly to dilution.

Investment scenarios

Optimistic scenario

Injection Phase 3 proceeds smoothly, with additional data confirming that high efficacy is not redeemed by unacceptable tolerability. At the same time, the oral program will show that the dropout problem is solvable (better titration, dose optimization) and the company will enter late-stage with a more compelling strategy than just "higher dose = higher effect".

In such a scenario, the market stops valuing Viking as a binary bet and starts valuing it as a partnership or acquisition candidate. At the same time, if some analysts' highly bullish target prices hold, there may be room for a sharp revaluation just based on the probability shift, not earnings.

Pricing would typically imply a "step-change" after key dates, not a linear rise. The investor here has to factor in that even in an optimistic scenario, volatility is extreme - it just shifts the trend.

The realistic scenario

The injection program continues, but without spectacular surprises. The market is willing to give the company credit for execution, but the oral form remains under scrutiny and sentiment will be sensitive to any signal that tolerability remains an issue.

In this scenario, valuation relies on the fact that VK2735 can be very effective but may not be "best-in-class" on all dimensions. This usually leads to the stock trading in a wide range and reacting to interim milestones - with the market wanting to see more data from longer horizons and from different stocks.

The price trajectory is then a series of waves following the news, rather than a clear trend - and the investor has to get to grips with position management as the headline risk remains high.

The pessimistic scenario

Oral program remains "effective but hard to sell" - high treatment discontinuation and GI profile fails to improve significantly. Injectable formulation continues but without a sufficiently differentiated profile against market leaders. This reduces the chances of a premium partnership and increases the chances that Viking will have to reach Phase 3 alone and fund a longer journey.

This usually shows up quickly in the share price: all it takes is one weaker datapoint or a loss of confidence that "ploughing on" is a solvable problem, and the market will reprice the probabilities to the downside.

The size of the market in which it operates

1) Anti-obesity market (AOM/GLP-1) - fastest growth

• More conservative to medium scenarios often work with the global market being around US$80-120bn by 2030 (with some estimates undergoing downward revisions due to pricing pressure, competition and the gradual emergence of generics).

• Some projections are considerably more aggressive, pushing the "peak" market further out in time, e.g. to ~$150bn around the mid-30s (this is typically already a scenario with massive penetration and longer usage).

2) "Obesity treatment" in healthcare (therapies + devices, etc.) - high growth, smaller base

• Estimated market size ~$15.9bn (2024) and growing to ~$60.5bn (2030), corresponding to a CAGR of ~22%.

3) Broad "weight management" market (programs, services, diets, digital, etc.) - highest volume, lower pace

• Estimate ~$142.6bn (2022) → ~$298.7bn (2030), a CAGR of ~9.9%.

• Other methodologies (narrower definitions) are based on a CAGR of ~7.6% from 2025-2030 and a smaller absolute market size because they do not include the entire "ecosystem" as broadly.

What to take away from the article

• Viking is a pure clinical bet: no revenue, rapidly rising costs, and a valuation built on probabilities.

• Injectable VK2735 holds a strong efficacy narrative (up ~14.7% at 13 weeks), but only late-stage will give the final verdict.

• Oral VK2735 is a potential valuation multiplier, just that tolerability and "dropout" risk are the main impediments so far.

• Cash on hand of around 706m. USD gives time, but Phase 3 can quickly increase burn and lift dilution risk if partnerships don't come in.

• 2026 is an execution year for the investment thesis: milestones will shift the perceived probability of success more than any "story".

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

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

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

Micron Technology $MU

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

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

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

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

ROE

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

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

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

Free Cash Flow

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

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

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

AstraZeneca $AZN

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

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

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

ROE

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

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

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

Free Cash Flow

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

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

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

Palantir Technologies $PLTR

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

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

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

ROE

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

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

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

Free Cash Flow

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

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

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

Cisco Systems $CSCO

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

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

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

ROE

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

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

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

Free Cash Flow

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

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

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

AT&T $T

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

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

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

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

ROE

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

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

Free Cash Flow

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

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

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

Other financial metrics

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

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

Deere & Company $DE

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

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

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

ROE

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

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

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

Free Cash Flow

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

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

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

Other financial characteristics

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

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

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

Conclusion

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

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

The board of Warner Bros. $WBD is discussing whether Paramount could offer better terms regarding the sale. No decision has been made yet, so the board may continue to stick with the current agreement with Netflix.

Last week Paramount improved its offer to buy Warner Bros. It offered additional cash and agreed to pay a breakup fee if the contract with Netflix were terminated.

Paramount now values the transaction at $108.4 billion including debt, which corresponds to an offer of $30 per share for $WBD.

Both companies (Netflix and Paramount) would, by acquiring it, gain rights to very popular films and series from $WBD's catalog such as Harry Potter, Superman, or Game of Thrones.

Who do you think will win?

Currently imports are blocked by a 100% tariff, but if brands like BYD $BY6.F , Geely (Zeekr, Lynk & Co) or others were to build factories directly in the US, that barrier would effectively fall. President Trump has already hinted that if they produce on American soil and hire local workers, the administration won’t object. China now manufactures a third of all cars in the world and exports over 8 million vehicles a year, and in electric vehicles BYD has already surpassed Tesla globally. If some of that capacity starts to flow into the US, competition will intensify dramatically.

For American consumers this would mean more choice and likely pressure on prices – the average price of a new car in the US is around $50,000, while the average export price of a Chinese car is roughly $19,000. The question is, who will bear the cost? Tesla $TSLA , Ford $F , GM $GM ? Or will the market expand so much that everyone gets their share?

I personally see this as a potential structural pressure on the margins of American manufacturers – but also as an accelerator of EV adoption. How do you see it? Is the entry of Chinese brands into the US a threat to the stocks of traditional players, or a catalyst for the whole sector?

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

Quarterly results

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

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

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

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

• Full presentation with results.

Full Year 2025 Results

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

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

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

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

Management commentary

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

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

Outlook

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

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

Long-term results

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

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

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

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

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

Shareholder structure

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

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

Fair Price

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

Stellar Growth Track Record Sets Expectations High

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

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

What Wall Street Is Watching

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

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

Key Metrics That Will Drive the Market Reaction

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

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

Strategic Tailwinds: Expansion & Product Diversification

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

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

Market Reaction & Investor Sentiment

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

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

Investor Takeaway: A Defining Earnings Moment

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

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

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

How was the last quarter?

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

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

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

• Full presentation with results.

Segment performance: where value is created

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

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

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

CEO comment

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

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

Outlook for 2026: growth with better quality

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

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

Long-term results

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

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

News and capital discipline

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

Shareholding structure

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

Fair Price

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

The Cloud Engine That Keeps Gaining Momentum

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

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

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

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

AI Investment: Boon or Burden? An Analyst Perspective

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

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

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

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

Beyond Cloud: Productivity, Gaming, and Enterprise Software

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

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

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

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

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

Stock Valuation: What the Market Is Pricing In

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

• Past earnings beats lifted sentiment.

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

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

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

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

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

What Comes Next — Key Indicators for Investors

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

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

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

Analyst Voices and Market Sentiment

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

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

Investor Takeaway

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

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

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

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

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

Cystic Fibrosis Franchise Continues to Power the Engine

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

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

Expanding Pipeline and Diversification Beyond Core Treatments

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

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

Margins, Cash Position and Operational Strength

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

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

Market Reaction and Valuation Metrics

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

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

Forward Outlook and What Investors Are Watching

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

Investors are closely monitoring several evolving indicators:

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

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

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

How was the last quarter?

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

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

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

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

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

• Full presentation with results.

Full year 2025 in numbers

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

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

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

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

CEO comment

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

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

Outlook for 2026

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

Expected Costs:

• Cost of sales: approximately $0.9 billion

• R&D: approximately USD 3.0 billion

• SG&A: approximately USD 1.0 billion

• Capex: USD 0.2-0.3 billion

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

Long-term results

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

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

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

News

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

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

Shareholding structure

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

Analysts' expectations

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