March 2026 was a volatile and ultimately negative month for global markets, driven by macroeconomic uncertainty, geopolitical tensions around Iran, profit-taking in the technology sector, and renewed concerns about interest rates. My USD portfolio – composed of individual stocks, ETFs and cryptocurrencies – returned -2.50% in March, outperforming the S&P 500, which fell -5.09%.

Year-to-date (YTD, Jan 1 – Mar 31, 2026) my portfolio stands at -7.71%, while $^GSPC 500 recorded -4.63%.

I’d rather not talk about my CZK portfolio; after several strong months and years it’s at -3.22% M/M and -4% YTD.

Closed positions:

$NVO (Novo Nordisk) – risky investment closed with a loss of -49%

$NIO (NIO Inc.) – profit target reached, gain +30%

$EIX (Edison International) – profit target reached, gain +28%

$DELL (Dell Technologies) – profit target reached, gain +35%

$CVX (Chevron Corporation) – closed 4 positions with an average gain of +39%

Newly opened positions:

$BABA (Alibaba Group) – entry at 132 USD

$BA (Boeing) – entry at 210 USD

$META (Meta Platforms) – entry at 544 USD

$RR.L (Rolls-Royce Holdings) – entry at 1172 GBP

I also continued regular Wednesday purchases of cryptocurrencies ($BTC, $ETH, $ADA) as part of my DCA strategy.

All proceeds from holding and selling assets are either reinvested or held as free cash waiting for the right opportunity.

The portfolio remains well diversified with an approximate allocation of 80% equities / 3% ETFs / 17% crypto and a relatively low correlation to the S&P 500.

Why the current portfolio composition makes sense (medium to long term):

Broad diversification across quality stocks, ETFs and crypto provides resilience even in tougher periods

Exposure to structural trends (AI, digital advertising, cloud, blockchain) supports the potential for higher performance

Discipline in risk management – controlled position sizing, a cash reserve and regular rebalancing

Long-term potential thanks to companies with strong free cash flow and assets with significant network effects

Main risks for the coming weeks and months:

Macroeconomic uncertainty and central bank actions may trigger further volatility

Risk of an oil shock in case of escalation or non-resolution of the conflict with Iran

Regulatory pressure on big tech and cryptocurrencies (especially in Europe and Asia)

Sector concentration – potential slowdown among AI/tech leaders

High volatility in cryptocurrencies, which can amplify portfolio moves in both directions

Overall, March 2026 confirmed that the portfolio is (hopefully) well positioned for a medium- to long-term horizon. Active allocation and the crypto component should provide relative resilience to the risks mentioned and potentially higher performance compared to the S&P 500.

How do you view the current portfolio allocation? Would you add more crypto, or would you rather stay more in traditional stocks?

You can find the English version of this post on my eToro profile. If you'd like to follow me there or possibly copy my USD portfolio, I’d be happy!

LVMH $MC.PA is experiencing the worst start to a year in its history. The French luxury conglomerate's shares fell 28% in the first quarter of 2026, a worse result than during the 2008-2009 financial crisis, the Covid-19 pandemic in 2020 and the bursting of the dot-com bubble in 2001, according to a Bloomberg analysis.

The war in the Middle East has shaken the luxury market

The reason for the dramatic decline is the impact of the war in the Middle East, which has clouded the global economic outlook and exacerbated problems with demand for luxury goods. Attacks between the US, Israel and Iran have forced airlines to cancel thousands of flights.

According to a CNBC report, the Middle East averaged a mid-to-high single-digit percentage of luxury brand sales, but the region was the fastest growing luxury market last year, growing between 6 and 8 percent, while global growth was zero. The region now accounts for about 6 percent of global luxury sales.

Bernard Arnault's wealth plunged by $55.9 billion

LVMH's stock collapse means CEO Bernard Arnault 's net worth fell by $55.9 billion in the first quarter alone, according to the Bloomberg Billionaires Index, bringing his total fortune to about $152 billion. This is the second largest loss among the world's 500 richest people after Oracle founder Larry Ellison, according to a FashionNetwork analysis.

During the first quarter, the Arnault family's stake in LVMH crossed the symbolic 50 percent mark. According to John Plassard, director of investment strategy at Cité Gestion, "LVMH has become more than a luxury stock, it is now a barometer of global confidence".

The luxury sector has lost $100 billion in market value

The war conflict has wiped roughly US$100 billion of market capitalisation from luxury sector companies, with LVMH and Hermès each losing more than US$40 billion in value. According to a CNBC report, shares of major luxury companies have fallen 15 percent or more since the war began.

• Richemont:

Zurich shares down about 20 percent in first three months

• Hermès:

Lost almost a quarter of its value over the same period

• Kering and others:

Kering shares fell by 5%, Brunello Cucinelli by 4.6% and Burberry by 4.3%

Tourism and travel under pressure

The decline also reflects the disruption to travel and tourism on which sales of the most expensive items are so dependent. According to Luxuri analysis, around 60 per cent of luxury spending in the UAE comes from tourists, with Dubai's appeal resting on security, tax benefits and political stability.

Bernstein analyst Luca Solca told CNBC, "If people don't get back to normal and we have more problems with oil and gas supplies from the Gulf, then the likelihood of a global recession could increase, and that would certainly dampen discrete sectors like luxury".

The outlook remains uncertain

LVMH is due to release first-quarter earnings later this month. Its core fashion and leather goods division is likely to have seen a 0.65% rise in organic sales during the period, according to analysts' preliminary estimates. The division includes the biggest brand Louis Vuitton as well as Christian Dior Couture.

According to a UBS research report, luxury investor sentiment is "the most bearish in years", while "heightened geopolitical uncertainty is likely to weigh on near-term earnings and delay a long-awaited turnaround in fundamentals".

The company is a Norwegian software group built around a family of web browsers for desktop and mobile, complemented by its own advertising stack, content and gaming services plus a growing layer of AI and Web3 features. Its strategy is to use the browser as the default gateway to the internet for roughly 300 million monthly active users, then monetise that attention through search and ad revenue while differentiating with integrated AI tools, built in crypto wallets and a dedicated gaming browser aimed at users who spend a disproportionate amount of time and money online.

Top points of analysis

• The stock trades around $14, with an estimated fair value coming out at roughly $20.5 - a potential of nearly 50 percent without factoring in the dividend.

• Revenues in 2025 were roughly $617 million, plus 28 percent year-over-year, after previous growth of 21 and 20 percent in 2024 and 2023.

• Net income for 2025 rose to about $109 million, earnings per share of $1.21, a net margin of about 18 percent and an operating margin of just under 15 percent.

• Free cash flow in 2025 was over $115 million, growing over 40 percent year-over-year, with very low capital expenditures.

• The balance sheet is extremely conservative: debt-to-equity and asset ratios around one percent, Altman Z-score of 7.5, high liquidity, and cash of over $155 million.

• Valuation multiples are still moderate - price to earnings around 11-12 times, price to sales 2 times and price to free cash flow around 11.6 times.

• The company pays a dividend of $0.39 per share, at today's price about a five percent dividend yield, and has also authorized a buyback program of up to $300 million for the next two years.

The business and how Opera makes money

Opera $OPRA is a technology company in the Internet content and services industry, best known for its web browsers - from basic browsers for everyday users to mobile variants to specialized products for gamers and users focused on artificial intelligence. The basic principle is simple: bring as many users as possible into its ecosystem and then monetize their attention through advertising, search engine partnerships and add-on services, gradually moving the company from a "simple browser" to a smaller ad-fintech platform.

Revenue today consists primarily of two main components:

• advertising revenue - targeted browser ads, often tied to e-commerce and other high-margin segments

• Search revenue - a share of revenue from search engines for traffic brought in and user queries

According to the latest data, advertising already accounts for roughly two-thirds of total revenue, while search covers the remaining third - and advertising is growing much faster, e.g., growing at more than 40 percent year-over-year in Q2 2025, while search grew by the lower teens. The third, smaller but fast-growing component is financial services like MiniPay, which is already seeing its first meaningful revenue and future potential.

Products and sources of growth

Opera is building its growth on a combination of several product lines and the ability to select specific groups of users that it can monetise more effectively than a 'big' universal browser.

Major browsers

• Opera One and Opera Mini - for mainstream users, with an emphasis on speed, data savings (particularly important in Africa and other emerging regions) and built-in features such as ad blocking, VPN or integrated wallet.

• Opera Air - for users focused on a clean, lightweight experience and mobile usage, targeted especially at emerging markets where speed and low data usage are key.

Opera GX gaming browser

Opera GX is a dedicated browser for gamers, now used by tens of millions of users per month (over 30 million at last count). It offers features such as CPU, memory and data usage limitations, integrated game news, menus and deep appearance customization. This target audience is attractive to advertisers - they are often younger, tech-savvy users with a higher propensity to spend in games and technology - and allows Opera to sell advertising in this segment at higher prices.

AI browsers and the Aria assistant

Opera is integrating artificial intelligence across its browsers. In 2025, it launched new AI-focused browsers Opera Air and Opera Neon, which build on the integration of large third-party language models (such as $GOOG's Gemini) and its own "orchestration" - a concept where the browser is the hub through which the user interacts with various AI services.

Aria's AI assistant, available in several products, serves as a tool for searching, summarizing content, writing text, and other tasks directly in the browser - for Opera, it's a tool to increase user engagement and prepare for future charging for more advanced features via subscription in premium versions of the browser.

Fintech - MiniPay and wallets

MiniPay is a non-custodial wallet built on the Celo blockchain, integrated into Opera Mini while functioning as a standalone app. It allows you to send money between users virtually instantly and with low fees, and just via a phone number - targeting especially Africa and other regions where traditional banking services are not so easily available. MiniPay already has more than 10 million activated wallets , and the company openly says that these services are already profitable, although it is reinvesting much of the revenue into growth and partnerships.

The fintech component is important because it gives the firm additional leverage beyond pure advertising - transactional revenue from payments, cross-border transfers and potentially other financial products can make up a significant portion of revenue over time and better diversify the cyclicality of the advertising market.

Management and strategy

The company is headed by CEO Lin Song, who is leading Opera through its current phase of transition from an "underappreciated browser" to a broader platform combining browsers, AI and financial services. Management has a track record of delivering and raising guidance - for example, it has raised full-year revenue and adjusted EBITDA guidance several times during 2025, indicating relatively conservative target-setting.

Key strategic points that management reiterates:

• Product segmentation - preferring multiple specialized browsers for specific groups (gamers, AI users, data-constrained users in Africa) rather than one universal product

• Shift to higher monetization - focus on higher average value users, more e-commerce advertising and affiliate programs where conversion rates are higher

• Development of AI as a "control layer" - browser as a hub through which the user interacts with various AI services, with the possibility of premium pricing for advanced features in the future

• Extending fintech services - MiniPay as a tool to bring payments and financial services to users directly in the browser, building on the demographic growth of Africa and other regions

The way management handles capital shows a combination of growth and return on capital: alongside investment in products and marketing, dividends and a new buyback program are worth up to $300 million for the next two years, a number significant against a market capitalization of around $1.2 billion.

Where the company is growing the most

Opera's growth rests on three pillars:

1. Advertising and e-commerce - the fastest component of revenue, driven mainly by e-commerce partners, where user intent to buy is high, and thus the price of advertising is higher.

2. Gaming and AI browsers - Opera GX for gamers and AI-based browsers such as Air and Neon increase user engagement and deliver premium model capabilities.

3. Fintech MiniPay - a fast-growing wallet that has already surpassed 10 million activated accounts and opens up space for transactional revenue in underbanked areas.

Geographically, Opera has a very strong presence in Africa, where its data-saving browsers (Opera Mini) hold a mobile market share of around 7-8 percent and bring in hundreds of millions of users per month - the company has long invested in local partnerships and 'free data for browser use' campaigns. In addition, it is targeting users in Southeast Asia and Latin America, where smartphone and Internet adoption is still in a growth phase.

Competition and market position

Opera operates in an environment dominated by three giants - Chrome, Safari and Edge - with global market shares of tens of percent. Opera's share is around 2 percent, but that doesn't necessarily indicate a weak position: the company has chosen niche segments where it can offer something extra.

Opera compensates for its smaller share with higher monetization per user - thanks to segmentation (gamers, AI users, e-commerce users) and smart ad targeting, it can extract a higher average revenue from each active user than the average "free" service. It also benefits from being an early entrant and having a strong brand in many regions, such as Africa.

Valuation and fair price

At today's levels, Opera is trading at approximately:

• a price-to-earnings ratio of around 11.8 times

• price to earnings ratio of 2.0 times

• price to book value 1.23 times

• price to free cash flow of around 11.6 times

With sales of about $617 million and net income of about $109 million, this implies that the market is willing to pay about $11-12 for every dollar of earnings and two units of firm value per unit of annual sales. Fair value with a conservative setup (sales growth of about 15-20 percent, net margin gradually in the 15-18 percent range, and a stable dividend) comes out to about $20-21 per share.

Given that the company has virtually zero net debt, a very strong balance sheet and already pays a five percent dividend, the current valuation looks more like a cheaper entry into a growing ad-fintech platform than an overpriced growth title.

Investment scenarios

Base case scenario

• Revenues grow in the 15-20 percent per annum range, margins remain near current levels or improve slightly.

• Earnings per share grow in the higher single digits to lower double-digit percentages annually.

• Valuation approaches fair value around $20, dividend yield stays around 4-5 percent, buyback program improves earnings per share growth.

Positive scenario

• AI browsers and the gaming segment will add more than expected today; MiniPay and financial services will ramp up significantly, delivering higher ARPU and a new, less cyclical revenue component.

• Revenues grow closer to 25-30 percent annually, net margins move towards 20 percent, and the market is willing to pay 15-17 times earnings.

• The stock could move well above today's fair value estimate in a few years if Opera is confirmed as a stable player in browsers, AI and fintech.

A more cautious scenario

• Growth slows to single digits - competition from large browsers, weaker advertising market or slower monetization of MiniPay and AI products.

• Earnings per share stagnates or grows very slowly; valuation falls to 8-10 times earnings.

• The yield for the investor is then mainly the dividend and any buybacks, while the share price does not move much in the long term.

What may surprise Opera in the future

• Tighter monetization of the gamer community and AI products - higher engagement, premium features and subscriptions.

• Faster growth of MiniPay and financial services, especially in Africa and other emerging regions.

• Greater and more aggressive use of buyback programs if share price remains low relative to earnings and cash.

• Greater attention from analysts and funds, possibly inclusion in broader indices, which in itself may bring rerating multiples.

Risks - what can spoil the scenario

• Strong competition from large browsers, which will steal share even in segments where Opera is strong today.

• Changes in the advertising market, cookie regulation and tracking that will reduce the effectiveness of targeting and the size of advertising budgets.

• Lack of adoption of premium AI features and financial services - users are sticking with free versions with no willingness to pay.

• Currency and political risk in emerging markets where a large portion of the user base is.

What to take away from the analysis

• Opera is not just a small browser next to the big names, but a profitable growth company with a clean balance sheet, strong cash flow and a mix of businesses - advertising, AI and fintech.

• The current valuation of around twelve times earnings and twice sales doesn't look excessive given the growth and profitability, rather the opposite - especially when combined with the five percent dividend.

• The key to success will be in the ability to continue to increase revenue per user, develop MiniPay and premium AI browsers, and maintain discipline in capital - i.e. a combination of growth, dividends and buybacks.

Would you consider reducing your position in $OXY after a 50% gain, or would you still hold?

There are thousands of companies in the stock market, but only a handful of them can sustain a long-term return on equity above 20% while earning a buy recommendation from most analyst houses. ROE (Return on Equity) measures how efficiently a company turns shareholder capital into net income. In practice, a value above 20% means that for every dollar of equity invested, the firm generates more than 20 cents of net profit per year, well above the broad market average.

In 2026, this indicator becomes even more important. As higher interest rates increase the cost of debt financing, investors are increasingly looking for companies that can operate efficiently with equity capital and are not reliant on cheap debt. At the same time, the analyst consensus "buy" becomes an important filter because it signals that experts see room for further upside in a given stock even at current valuations.

Today's selection includes seven companies from very different sectors. From tech giants to financial infrastructure to the gaming industry. The common denominator is precisely the combination of high capital efficiency and positive analyst consensus. Let's take a closer look at each of them.

Amazon $AMZN

Amazon isn't just the world's largest e-commerce platform. In recent years, the company has increasingly profiled itself as a technology conglomerate whose most profitable segments lie outside of traditional retail. The cloud division of AWS generates around 60% of the group's operating profit and is growing at a rate of around 20% a year. Added to this is the advertising business, which is approaching $70 billion in annual revenues and growing at over 20% year-on-year.

Amazon's current ROE is around 22%, a historically strong level. As recently as 2022, the company was in negative territory due to massive investments in logistics during the pandemic. A return above 20% reflects a shift from a phase of aggressive investment to a phase of monetizing the ecosystem it has built. Meanwhile, the firm is planning capital expenditures in excess of $100 billion this year, primarily focused on AI infrastructure and data centers.

The analyst consensus is Strong Buy with an average target price of around $285, which at the current price of around $208 represents room for upside of approximately 37%. Regulatory pressures, including the FTC antitrust proceeding scheduled for October 2026, and the question of returns on massive AI investments remain a risk.

Walmart $WMT

Walmart tends to be seen as a defensive retail giant, but its current ROE of around 23% points to a company that can generate above-average returns even with low margins. The key is a combination of extreme sales volume, fast inventory turnover and a strong negotiating position with suppliers. The company reported sales in excess of $713 billion this year, with year-over-year growth of about 5.8%.

Walmart's earnings structure has been changing in recent quarters. The e-commerce segment is growing at a rate of over 27% annually, the Walmart Connect advertising division has added over 37%, and the Walmart+ membership program is strengthening customer loyalty. These segments have significantly higher margins than traditional sales, which helps maintain high ROEs even in an environment of consumer spending pressure.

The analyst consensus is Strong Buy with a target price of around $131. However, Walmart trades at a P/E ratio of over 45x, which is more than double Nvidia's $NVDA valuation. At such a tight valuation, the stock could experience increased volatility if new segment growth slows or if tariff policy increases the cost of imports.

Tencent $TCEHY

Tencent is China's largest technology company, operating an ecosystem that includes social networks (WeChat with 1.42 billion active users), game studios, cloud services, fintech and digital advertising. In 2025, the company reported record annual revenue of RMB 751.8 billion with 14% year-on-year growth. Gross profit rose 21% to RMB 422.6 billion, reflecting a shift in revenue mix towards high-margin segments.

The gaming segment remains the revenue driver. Domestic gaming revenue grew 18% year-on-year and international gaming revenue surpassed the $10 billion mark for the first time. The company invested approximately RMB 18 billion in AI in 2025 and plans to double this amount in 2026. AI is already contributing to improved advertising targeting and higher player engagement.

Tencent's ROE is around 21%, and the firm operates with minimal debt (Debt-to-Equity of 0.32) and holds nearly RMB500 billion in cash on deposit. The analyst consensus is Buy with an average target price of around $96, representing an upside of over 50%. The main risk remains the regulatory environment in China and geopolitical tensions between the US and China, which may affect foreign investor sentiment.

Intuit $INTU

Intuit is the operator of one of the strongest software ecosystems in the US economy. Its business combines accounting software QuickBooks, tax platform TurboTax, financial portal Credit Karma and marketing tool Mailchimp. The platform generates revenues of over $18 billion annually with year-over-year growth of around 15%. Key drivers are extremely high customer retention and growing average revenue per user through cross-product sales.

Intuit's ROE is 23.5% as the company benefits from a capital-light software model. The platform now generates approximately 77% of revenue from recurring subscription services. In addition, Intuit is aggressively integrating artificial intelligence into its products, which adds value to users and strengthens the traction of the ecosystem.

Shares of Intuit are down approximately 34% this year, a result of a broader sell-off in software titles in 2026. The analyst consensus remains Strong Buy with a median target price of $800, which at the current price of around $432 represents upside potential of up to 84%. The market is concerned about the impact of AI on traditional software models, but Intuit is among the companies actively using AI to its advantage, not as a threat.

Interactive Brokers $IBKR

Interactive Brokers is a global broker that provides access to more than 150 exchanges in 34 countries. Founded in 1977, the firm has built on technological automation of trading since the beginning. As a result, it achieves operating margins of over 76%, well above the brokerage sector average. In 2025, the firm saw client accounts grow 30% year-over-year to nearly 290,000 accounts in the fourth quarter, and options trading volumes grew 26%.

Interactive Brokers' ROE is approximately 20.4%, which is outstanding in a sector where the average is around 10%. The firm's five-year average ROE exceeds 20%. This efficiency is driven by an automated operating model that requires minimal human intervention and allows the firm to scale trading volume without a proportional increase in costs.

The analyst consensus is Strong Buy with an average target price of around $69. The firm is benefiting from growing retail investor activity, expansion into new markets and increasing interest in options trading. The risk is the dependence on market volatility, which directly affects trading volumes and thus commission income.

Cadence Design Systems $CDNS

Cadence Design Systems is one of the least known firms in the semiconductor value chain, even though no modern chip could have been created without its products. The company develops integrated circuit design and verification software that is used by virtually every major semiconductor manufacturer in the world. Annual sales exceed $5.3 billion with year-on-year growth of around 15% and gross margins of an impressive 86%.

Cadence's ROE is around 21.8%. The company is benefiting from the increasing complexity of chip design driven by demand for AI accelerators. The more complex the chip, the more licenses and compute time customers need, which directly increases the average order value for Cadence. In addition, the company is expanding into systems analysis, focusing on thermal simulation and electromagnetic analysis of datacenters.

The analyst consensus is Buy with a target price of around $410. The firm's market capitalization is around $75 billion. The P/E ratio of 66x reflects the premium valuation the market accords to companies with virtually irreplaceable products in the critical supply chain. The risk is sensitivity to investment cycles in the semiconductor industry and competitive pressure from Synopsys $SNPS, a major rival in this duopoly market.

NetEase $NTES

NetEase is China's second largest gaming company and one of the world's most important game developers. The company operates a portfolio including both massively popular titles for the Chinese market and internationally successful games. It reported annual revenue of RMB 112.6 billion in 2025, with year-on-year growth of just under 7%. Profit grew by nearly 14% due to a better product mix and cost control.

NetEase's ROE is 22.4%, which is remarkable for a gaming company. This efficiency is due to a combination of high margins on its own game titles, minimal debt (Debt-to-Equity of just 0.04) and disciplined capital allocation. The company holds more cash in its accounts than its total debt, which provides it with a significant financial cushion.

At a P/E ratio of under 15x, NetEase is by far the cheapest company on today's list. The analyst consensus is Buy with an average price target of around $157, which represents upside potential of approximately 30%. Additionally, the company is benefiting from Apple's recent $AAPL reduction in App Store fees in China, which should positively impact game developers' margins. The risk is the regulatory environment in China and the dependence on the success of new game titles.

Overview of key data

D/E = Debt-to-Equity ratio

Strategic view

Looking at all seven companies, several commonalities stand out.

1. The high ROEs of these companies are not the result of excessive debt, but reflect true operating efficiencies and strong competitive positions. Most of them operate with conservative debt-to-equity levels.

2. Firms differ significantly in their valuations. At one end of the spectrum, we find NetEase with a P/E below 16x and Tencent below 20x. At the other end is Cadence with a P/E of over 68x and Walmart over 45x. This dispersion reflects the market's differing expectations for future growth. Investors pay a premium for companies where they see a structural competitive advantage and a predictable growth story. But these are also the ones that carry more risk.

3. Most of these companies have direct or indirect exposure to the AI trend. Amazon is investing tens of billions in AI infrastructure through AWS, Tencent is doubling its AI spending, Intuit is integrating AI into its products, Cadence is benefiting from the growing complexity of AI chips, and Interactive Brokers is using the technology to automate trading. This AI exposure, while not speculative, is already embedded in real revenue and operational savings.

What to watch next

• Fed interest rate developments and their impact on valuations of growth companies, particularly for Intuit and Cadence

• Amazon's Q1 2026 results (due April 23), which will give clues about AI ROI

• Regulatory developments in China that may impact the valuations of both Tencent and NetEase

• The pace of trading volume growth at Interactive Brokers amid a potential decline in market volatility

• Walmart's ability to sustain growth in new segments (advertising, e-commerce) while maintaining margin discipline

• The evolution of investment cycles in the semiconductor industry, key to the sustainability of Cadence's growth

How to approach these companies

The combination of ROEs above 20% and strong analyst support provides a fairly exclusive filter that separates firms with real capital efficiency from those whose growth has been driven primarily by cheap debt and favorable sentiment. All 7 firms in today's selection managed to translate their competitive position into above-average returns on equity while maintaining the confidence of analyst houses.

At the same time, meeting these two criteria alone is not an automatic reason to buy. Valuations vary significantly from company to company and some are trading at historically tight multiples. Therefore, it is key to watch whether the fundamental thesis for each of these companies will be borne out in the coming quarters, especially in the context of the ongoing AI investment cycle, geopolitical tensions and a volatile interest rate environment.

At the same time, the “Win Now” turnaround program is deliberately putting extra pressure on near term earnings. Management is pruning lower quality product, resetting inventories and rebalancing channels away from an over concentrated DTC push, moves that create several points of revenue headwind and add severance and restructuring charges today, but are meant to leave a cleaner, more sport centric portfolio and healthier margin structure from fiscal 2027 onward.

How Q3 2026 turned out

• Revenue: $11.279 billion, virtually unchanged from $11.269 billion a year ago, down about 3% on a currency-adjusted basis.

• Nike brand revenue: approximately $11.0 billion, roughly +1%, with growth in North America offsetting declines in Europe and China.

• Wholesale: $6.5 billion, +5% (+1% on a currency-adjusted basis), the main driver of growth.

• Nike Direct: $4.5 billion, -4% (currency-adjusted -7%), digital -9%, owned stores -5%.

• Converse: $264 million, -35%, down in all regions.

Gross margin declined 130 basis points from 41.5% to 40.2%. The main reason for this is higher tariffs in North America, which increase unit costs of imports. Selling and administrative expenses increased 2% to $4.0 billion:

• "Demand creation" (advertising + sports marketing) was around $1.1 billion, roughly in line with last year - higher sports marketing spend and currency effects offset lower brand marketing.

• Operating overhead was up about 3% to $2.9 billion due to severance costs and foreign exchange effects, partially offset by lower other administrative expenses.

Operating profit fell from $844 million to $650 million (-23%). Net income fell from $794 million to $520 million (-35%), and diluted EPS fell from $0.54 to $0.35 (-35%). The effective tax rate jumped from 5.9% to 20% as last year's period included a one-time non-cash tax benefit that boosted after-tax earnings.

Inventories were approximately $7.5 billion, down 1% from a year ago - lower volume and a different product mix partially offset higher unit costs due to tariffs. Cash and short-term investments fell to $8.1 billion, about $2.3 billion less than a year ago, as operating cash flow was insufficient for a combination of dividends, debt repayments, capex and share repurchases.

• Full presentation with results.

Management Commentary

CEO Elliott Hill described the quarter as a period of "significant steps to improve the health and quality of the business". He stressed that the pace of improvement varies across the portfolio, but the areas that Nike has prioritised are already showing early signs of recovery. At the same time, he acknowledged that the work is not done, but he said the direction is clear and teams are moving forward with a focus on speed and discipline.

CFO Matthew Friend said third-quarter results were in line with internal expectations. However, he also pointed out that the "Win Now" actions will impact results for the rest of the calendar year - so the company expects the clean-up phase to be reflected in the numbers in future quarters. Still, he says the moves are intended to set Nike up for long-term profitable growth, even if they do worsen margins and earnings per share in the short term.

Why the stock fell after the results

The stock closed around $52.8 during the trading day, but fell about 9% to about $48.2 in after-hours trading after the results were released. There are several reasons:

• Earnings per share of -35% - EPS of $0.35 is noticeably weaker than last year, and the market is concerned that it will take longer to return to previous levels, especially since management itself says that "Win Now" will continue to hurt the numbers in the short term.

• Stagnant sales and weak Nike Direct - sales are flat and falling in real terms, with the channel that Nike has long bet on suffering the most: direct sales and digital. Investors see that growth is now being driven by wholesale, which has lower margins and less control over the brand.

• Pressure on margins due to tariffs - gross margins are down 130 basis points and the company says the main cause is high tariffs in North America. This isn't a simple problem that can be solved in one action - it's a structural pressure that can drag on for longer.

• Unclear turning point - management talks about discipline and long-term growth, but explicitly warns that restructuring will weigh on results for the rest of the year. The market doesn't see a specific point at which EPS and margins will start to clearly improve.

Combined with the trend of recent years (declining annual sales and earnings), this is leading investors to reassess valuations - Nike $NKE is still a strong brand, but no longer with a profile of steady earnings growth.

Long-term results

For the most recent full fiscal year (ending May 31, 2025), Nike earned $46.3 billion, down nearly 10% from $51.4 billion in the prior year. The year before, revenues were about $51.2 billion, and in 2022 they'll be about $46.7 billion, so the company is hovering around the same level rather than growing appreciably after a pandemic period.

Gross profit fell to $19.8 billion in 2025 from $22.9 billion in 2024. Meanwhile, operating expenses held high (around $16.1 billion, down only slightly from a year ago), so operating profit fell from $6.3 billion to $3.7 billion (-41%). Net income fell from $5.7 billion to $3.2 billion, and earnings per share from roughly $3.76 to $2.17.

The number of shares is down slightly due to share buybacks (about 1.61 billion diluted shares in 2022 and about 1.49 billion in 2025), but the drop in EPS is still significant. EBIT is down from about $6.3 billion to $3.9 billion, EBITDA from $7.2 billion to about $3.7 billion. So Nike has been generating solid profits over the long term, but the trend of recent years has been down, not up.

Shareholders

Insiders (management and directors) hold approximately 1.5% of Nike's stock. Institutional investors own around 83-85% of the stock and free float, which is typical of large US blue-chips.

The largest owners include:

• Vanguard Group with a stake of approximately 9.8%.

• BlackRock with approximately 7.7%.

• State Street around 5%

• Capital World Investors approximately 4%

This means that the share price is heavily influenced by the sentiment of the large funds. When they collectively decide that the growth profile and margins are weaker, there is a rapid repricing - just like after the current quarter.

News and action over the past quarter

• "Win Now" program - Nike continues a package of measures aimed at rapidly improving efficiency: layoffs, simplification of organizational structure, greater focus on key categories and channels. In the short term, this increases costs (severance), but should reduce the fixed cost base.

• Shift in sales structure - additional focus on wholesale partners in North America to clear inventory faster and strengthen share in key segments. This is a partial departure from the earlier "Direct-to-Consumer at all costs" strategy.

• Inventory Control - The company continues to work on reducing inventory in problem categories and better production planning so it doesn't have to rely as much on discounts.

• Marketing mix - Nike is shifting spending towards sports marketing (athletes, leagues, events) while pure brand advertising is more moderate. The goal is to strengthen the core brand in sports, not just lifestyle image.

• Dividend - The company paid about $609 million in dividends to shareholders in the quarter, up about 3% from a year ago, and continues to maintain a 20+ year streak of annual dividend increases.

What makes the Delta win more important than the raw fleet number is the strategic signal. Delta, which has been rolling out free Delta Sync Wi‑Fi across roughly 1,000 jets using Viasat and Hughes systems, is now adopting a multi vendor strategy where Amazon supplies both hardware and cloud links into AWS and digital services for 163 million SkyMiles members. In‑flight connectivity is becoming another front in the competition between hyperscale clouds, and with Kuiper Amazon is showing it is prepared to go after Starlink’s future high value airline revenue, not just challenge SpaceX in launch through Blue Origin.

What exactly Amazon has worked out with Delta

The deal calls for installing Leo terminals on Delta's new $DAL machines and launching the service in 2028 on flights within the continental US, with gradual expansion as the satellite constellation grows. According to internal materials referenced by WSJ and CNBC commentary, Leo is to offer speeds roughly 3-5X faster than Delta's current solution, with Wi-Fi to remain part of the "free Wi-Fi" for SkyMiles members - i.e., no direct paywall for passengers.

Delta now covers roughly 1,200 planes with satellite connectivity from Viasat and Hughes Network Systems, and boasts that 163 million passengers have already used its free Wi-Fi. So switching part of its fleet to Amazon Leo $AMZN means not only a technology upgrade, but also a realignment of relationships across the supply chain - from satellite operators to ground infrastructure to integration with cabin systems. For Amazon, it is also a reference contract where it can show other airlines that it can deliver end-to-end solutions: hardware, connectivity and cloud backend.

In addition, the contract is Amazon's second major win in the airline vertical in a short period of time. Back in 2025, JetBlue chose Project Kuiper (today's Leo) for roughly a quarter of its fleet, with the goal of deploying faster, free Wi-Fi by 2027. In combining with Delta, Amazon is thus acquiring two brands that pioneered free Wi-Fi in the U.S., building on their "stream anywhere" marketing - this time not over land lines, but via its own constellation of low-orbiting satellites.

How Amazon is building Leo and why it's a thorn in Starlink's side

Leo/Kuiper is one of Amazon's most ambitious side projects: the company has pledged at least $10 billion in capital to build a global satellite network to connect homes, businesses and carriers. As of April 2025, Amazon had put 214 satellites into orbit, and it plans to roughly double the pace in the next 12 months with more than 20 planned launches. In total, it has around 100 launches contracted with Blue Origin, United Launch Alliance and also SpaceX (Falcon 9), with an aggregate contract value of several billion dollars.

Yet today Starlink is far ahead technologically and infrastructurally: as of 2019, it has launched over 10,000 satellites and has become the largest satellite operator in the world, benefiting from its own reusable Falcon 9 rocket and vertical integration of manufacturing. This has allowed it to aggressively rollout services - from home internet to aviation, where it already has contracts with airlines such as United Airlines, Alaska Airlines, Hawaiian Airlines and, more recently, Southwest. Amazon is entering the field relatively late, but with a different package of advantages: money, cloud, a retail ecosystem and the ability to cross-sell services.

Amazon's weakness so far is the pace of deployment of the constellation. In January, the company asked the US FCC for a two-year extension to its original deadline (it was supposed to launch half of the 3,200 planned satellites by July 2026), prompting sharp criticism from SpaceX and regulators led by Commissioner Brendan Carr. Amazon has responded by saying it is doing "the best it can within what it can control" and that commercial launch of services is only "a few months" away - in small regions at first, with gradual expansion as the constellation grows.

Why Starlink has reason to be nervous about this for the first time

Starlink has so far built a position in aviation as almost the default solution for airlines looking to move Wi-Fi from a slow and paid service to a fast and often free one. Hawaiian, Alaska, United, and Southwest have gradually announced Starlink integration, creating a winner-takes-most effect: those who want to say "fastest Wi-Fi in the air" in marketing terms are reaching for Musk's network. The arrival of Amazon with Delta and JetBlue breaks this narrative - airlines now have two strong brands to pit against each other in tenders and price negotiations.

For Starlink, this threatens to erode future margins in a segment that at the same time has attractive unit economics: a commercial airline brings in thousands of paying passengers a day, with operating costs per megabit falling with each additional satellite. Adding Amazon to the game pushes up prices and bundling - Delta can combine satellite connectivity with AWS services (passenger analytics, content personalization, real-time operational data), something Starlink has no way to replicate.

Moreover, in terms of the strategic map, this is another front where Musk and Bezos clash indirectly: SpaceX vs. Blue Origin in launchers, Starlink vs. Leo in constellations, Tesla vs. AWS partners in automotive cloud solutions. Every big Delta-type contract now also takes on a symbolic "who the industry chose" dimension. For investors, this reinforces the thesis that satellite internet is no longer a one-horse race and that in verticals like aviation or trucking, Amazon and LEO can realistically bite off Starlink's piece of the pie.

What's in it for Amazon: more than just data in the air

Amazon isn't just gaining new revenue from connectivity with this move. Leo is another distribution channel for its entire suite of services - from Prime Video streaming to AWS cloud services to retail marketing. Delta talks about "the next era of connected travel and onboard digital experiences," which in practice means integrating personalized offers, entertainment and loyalty programs directly into the Wi-Fi portal. Who controls the onboard data feed can influence what services passengers see and what data goes back to the cloud.

Plus, it's a long-term locked-in customer. Installing terminals, certification for different aircraft types, integration into avionics and service contracts create high switching costs - an airline doesn't change its satellite Wi-Fi provider every year like a mobile operator. This gives Amazon a recurring B2B revenue stream with good usage insight (telemetry) and the potential to cross-sell other services (analytics, advertising platforms, cloud-based traffic solutions).

Another benefit is reputational capital in the regulatory and aerospace sectors. Contracts with major airlines help Amazon argue to regulators (such as the FCC) in favor of greater flexibility in constellation deployment timelines: it can argue that delays are not only technical problems, but also hinder innovation in key sectors such as aviation. From Blue Origin's perspective, moreover, each additional Kuiper/Leo satellite means an incentive to scale up New Glenn launchers more quickly - reducing Amazon's dependence on SpaceX to take out its own Starlink competition.

Anyone looking at the stock after that kind of run has to hold two ideas in their head at once. On one side sits a dominant, cash generative advertising machine that still earns tech leading margins and funds everything else; on the other is an AI and hardware investment program on a scale that recalls the original metaverse push, layered on top of more than 80 billion dollars in cumulative losses at Reality Labs that prove Meta is willing to go all in on long term bets. Whether this capex avalanche becomes the next great leg of the equity story or another expensive detour is exactly to otázka, kterou tenhle článek rozebírá číslo po číslu.

Top points of the analysis

• Q4 2025: revenue $59.9B (+24% YoY), operating income $24.7B (+6%), operating margin 41%, net income $22.7B (+9%), EPS $8.88 (+11% YoY) - all above expectations.

• 2026 outlook: Q1 2026 revenue $53.5-56.5B (above consensus), CapEx guidance $115-135B (vs. ~$72B in 2025, +73%), primarily into AI datacenters, GPUs and custom chips.

• Reality Labs: cumulative operating losses of over USD 80bn over the last 5 years, billions in losses again in 2025; Meta starts "pullback from metaverse", job cuts and more focus on AI products instead of pure VR/AR.

• Analysts' Predictions: 40+ analysts see Meta as a Strong Buy, then average 12-month target is ~$820-860, median around $850.

• Key disagreement: can Meta monetize AI (personalized assistants, recommendation systems, creator tools) so that higher CapEx yields higher future earnings, or is it repeating the Reality Labs pattern of burning FCF on an uncertain long-term outcome.

What has changed: from metaverse to "personal superintelligence"

Zuckerberg has practically reframed the company's story: from a "metaverse company" back to an AI-driven social & ads firm that additionally builds personal superintelligence for billions of people.

The reality is hybrid:

• The family of apps (Facebook, Instagram, WhatsApp, Messenger) is still the core of the business - accounting for $58.9 billion of the $59.9 billion in revenue in Q4 2025.

• Reality Labs had ~$1B in Q4 revenue (-12% YoY) but cumulative losses of over $80B, and Meta $META is reducing pace of investment, restructuring teams, laying off ~700 people as part of broader restructuring.

• AI is now officially "priority #1": Meta is building Meta Superintelligence Labs, buying GPUs in bulk, designing custom chips, building new datacenters, and pivoting product development as well (AI assistant in apps, AI for creators, AI search in social feed).

Zuckerberg explicitly described this as a shift from "metaverse first" to "AI first, metaverse later". This has two implications for investors:

• Positive: the AI story is much better understood by the market than the metaverse. AI helps the core ad business - better targeting, better performance, more engagement, more spend.

• Negative: CapEx numbers are massive, FCF is down and Real Labs is still burning billions.

How AI becomes money (and not just a second metaverse)

1) AI as the "engine" of the ad business

The most important layer is AI in advertising (the advertising arm). Already in 2023-2025, Meta has repeatedly said that improvements in AI recommendation systems will directly lift:

• the number of ad impressions

• relevance to users

• return on ad spend (ROAS) for advertisers

The Q4 2025 results confirm this: Family of Apps revenue +25% YoY, in an environment where digital advertising is growing less overall. Meta is getting a bigger share of digital ad budgets thanks to AI, and that's a net gain.

2) AI products for users and creators

Meta is introducing AI:

• As an assistant in Messenger, WhatsApp and Instagram

• as a content creation tool (generating images, text, video)

• as "personal superintelligence" - perzonalized answers, recommendations, search

In the short term, the monetisation of these features is low, but strategically there are two layers of value:

• They increase engagement (more time in apps → more ads).

• They open up space for new forms of advertising (branded AI experiences) and tools for creators/advertisers to charge a premium.

So AI is not just a "cool feature" but a direct multiplier for core business.

3) AI infrastructure and cloud monetization?

It's clear from the data above that Meta is primarily building AI for itself, not for external customers. Unlike Amazon or Microsoft, it doesn't have a traditional cloud, however:

• may eventually make some of its AI capabilities available externally (e.g. Llama-based APIs, B2B AI tools)

• already plays a role in open-source AI(Llama models) that increases its influence

CapEx shock: 115-135bn in 2026 - what this means for FCF and valuation

The CapEx plan for 2026 is the biggest number in all of "Big Tech" - $115-135 billion in one year, vs ~$72 billion in 2025. Most will go to:

• AI datacenters

• GPUs (Nvidia, custom chips)

• network infrastructure expansion

• partly to Reality Labs

Free cash flow in 2025 has already fallen 16% to $43.6 billion, even as revenue grows 22%. In 2026, we can expect:

• Further decline in FCF due to CapEx

• Strong EPS numbers (thanks to accounting - CapEx goes into depreciation gradually)

• FCF yield that may temporarily appear low (for cash-oriented investors)

This is why part of the market fears an "FCF squeeze": if Meta invests massively for several years in a row, the market may not be willing to pay P/FCF multiples at today's levels, even if the P/E looks reasonable.

Valuations and expectations

• Forward P/E: >25x on expected EPS (according to most models).

• Analyst consensus: Strong Buy, average 12m target ~$820-860, median $850, bullish scenarios up to $935-1,144.

• JPMorgan target: $825 (overweight), argument - revenue growth >20% even in 2026, better cost visibility.

• FCF 2025: USD 43.6bn, FCF margin ~30%, expected decline in 2026 due to CapEx.

Valuation - is this a falling knife or an AI overvaluation

Forward P/E around 25x on the company with:

• 20+% revenue growth

• 40+% operating margin

• 30+% FCF margins (when CapEx normalizes)

• extremely strong core business

Not overpriced per se - it's premium, but in light of AI and the competency position it makes sense.

The question is different: what's already priced into that price?

• AI ads effect: improving revenue growth to 20+% - we already see this in the numbers, so some of the AI value is "realized".

• Personal superintelligence, AI assistants, B2B AI: this is more of a long-term option that is not yet in the numbers.

For the investor who is "catching the knife" today, sensitivity is key:

• If Meta delivers 20% revenue growth and maintains a 40% margin, a P/E of 25× can be stable or even expand.

• If CapEx pushes FCF margin down over the long term and AI products don't deliver new monetization, P/FCF compression can drag the stock down even with decent EPS numbers.

Macro and competition

Meta is struggling on several fronts:

• Advertising: competition from Google $GOOG, TikTok, Snap $SNAP. AI creates differentiation - better performing ads vs. others. So far it looks like Meta is gaining share, not losing.

• AI: competes with Microsoft $MSFT + OpenAI, Google, Amazon $AMZN, but on a different playing field - not in enterprise AI, but in "consumer + social" AI. Here it has the advantage of data, scale and distribution.

• Metaverse/VR: Reality Labs vs. Apple $AAPL (Vision Pro), Sony $SONY, Valve. Here Meta is "deep in the red" so far with no clear timeline on profitability.

Macro risk comes primarily from the advertising cycle: if a recession hits and advertisers cut budgets, sales will slow, and AI alone won't compensate.

Why Meta may be undervalued

1) Mismatch between CapEx cycle and investor horizon

The CapEx shock ($115-135 billion in 2026) happens in one to two years, but the AI infrastructure that Meta is thereby building will generate revenue for perhaps five to ten years. Most DCF models and retail investors tend to:

• Penalize the short-term downside of FCF

• while conservatively modeling the long-term impact of AI on revenues and margins

The result is a "time mismatch" - costs are fully visible, but revenues are only partially priced by the market so far. If Meta can show that AI infrastructure in the next 2-3 years:

• Holds 20% revenue growth

• and sustainably raises ARPU.

the current discount may disappear faster than models predict.

2) The added value of AI in the "private graph" that public markets can't price

Most of the AI narrative is built on LLM and the public internet. Meta has something different: the private social graph of billions of people, their behaviors, relationships, groups, interests. The AI that sits on top of that dataset has:

• a different type of "moat" than the models trained on the web

• a unique ability to personalize feeds, recommendations, social search

This translates in numbers as:

• Higher engagement (more time in apps)

• better ad performance

• less sensitivity of advertisers to the price per ad (because ROI is higher)

The market often values AI by "model parameters" and GPU spend, but doesn't underestimate the uniqueness of the data set - and this is where Meta can win over companies that have great models but less unique data. That's a layer of value that a standard P/E or P/S multiplier can't capture.

3) The Hidden Value of Reality Labs Restructuring

Reality Labs today looks like a pure capital burn - $80+ billion in accumulated losses, paltry revenues. But Meta:

• Already actively cutting back at Reality Labs (layoffs, reorganization)

• and is shifting some of the team and technology towards AI and "mixed reality" use-cases that may be more monetizable.

Implicit in the price today is the "Reality Labs = perpetual loss" scenario. Once Meta:

• Clearly limits the annual cash burn

• or shows the first product linkage between RL and AI that makes business sense (e.g. AI-driven productivity, gaming, B2B collaboration)

there is room for positive re-rating as the market re-evaluates how much of the capitalization RL "eats".

4) The unappreciated effect of buybacks combined with high growth

Even after CapEx, Meta generates tens of billions of FCF per year and has a long history of aggressive equity buybacks. If:

• EPS grows at a double-digit rate

• and the share count is declining in real terms every year

Standard valuation multiples (P/E) often understate the true growth in value per share. Investors look at headline revenue and EPS growth, but are less attuned to the effect that every future dollar of profitability is attributable to fewer shares. This creates situations where a company looks "fairly valued" on a P/E basis, but from a per-share compounding perspective is cheaper than it appears.

5) Psychology after the "Zuck comeback"

Meta has had a "comeback story" - after falling below $100 in 2022, it has become one of the biggest winners of the AI rally. Psychologically, this creates two effects:

• a portion of investors still have the old Metaverse "faceplant" in their heads and are extremely skeptical of any big CapEx announcement

• another part is "late to the party" and waiting for the perfect entry

This may keep sentiment and multiples lower than would be consistent with pure fundamentals until Meta $META delivers several consecutive quarters where:

• Revenue growth

• Margins

• and FCF

clearly show that AI CapEx was an investment, not another metaverse gamble.

Risks

1) CapEx overshoot

115-135 billion USD in 2026 is a brutal number. If:

• Adequate revenue/EPS growth doesn't materialize, or AI products fail to monetize.

Could repeat Reality Labs pattern - years of FCF pressure with no clear ROI. This would lead to valuation compression even if the core business remains strong.

2) Reality Labs "black hole"

80+ billion in cumulative losses, yet no clear path to significant revenue. Unless Meta makes a clearer capital allocation for RL (e.g. annual loss cap, milestone-based investing), RL may continue to drag down FCF and margin.

3) Regulation

Antitrust, privacy, content moderation. Meta is permanently under political and regulatory pressure in the US and EU. Any interference (data restrictions for AI training, fines, restrictions on targeting) can reduce the effectiveness of ads and limit growth.

4) AI competition

If AI capabilities become a commodity (everyone has similarly good recommenders and assistants), the Meta vs. other differentiation will fall. In that case, AI investments would be a necessary hygiene investment, but not an edge that would justify higher valuations.

5) Post-run sentiment

Meta has more than tripled since 2022. Even small negatives (e.g. weaker guidance, signals that AI products are not delivering expected returns) can lead to sharp corrections as a portion of investors are "hot money" looking for AI stories.

Investment scenarios

Optimistic scenario

• Revenues grow 20-22% annually 2026-2028.

• Operating margins hold at 38-42% even with high CapEx.

• AI products (assistants, tools for creators) start to deliver a new revenue stream.

• Reality Labs partially restructures, losses are capped.

• P/E remains 25-28x on EPS approaching e.g. $45-50 in 2028.

→ Price >$1k over 3-4 years, 12-15% annual return.

Realistic scenario

• Revenue grows 15-18%, margin gradually declines to 35-38% due to investments, but FCF stabilizes after 2026.

• AI is a strong tailwind for ads, but new AI products are more of an add-on.

• Reality Labs remains loss making but in a sustainable range.

• P/E compresses slightly to 20-23x on EPS of $35-40.

→ Price around $800-920, annual return of 8-11%.

Pessimistic scenario

• CapEx becomes unsustainable - FCF falls, market starts looking at P/FCF.

• Revenue slows below 12-14% due to weaker advertising, AI effect wears off.

• Regulatory/antitrust restrictions hit Meta's data advantage.

• P/E compression to 15-18x, EPS $30-35, sentiment is tipping.

→ Price $450-630, potential -10 to -35% from today's level in one of the worst case scenarios.

What the investor should take away

• Meta has an extremely strong core today - advertising with 40+% margin, 20+% revenue growth and one of the strongest AI stacks in the consumer world.

• AI is not "new business" but a turbo for existing business - giving Meta more share of digital ads, more engagement, more spend.

• CapEx of 115-135bn in 2026 is two-sided: could create a huge moat, or an FCF trap - key will be how quickly AI monetization shows up beyond pure ad improvement.

• Reality Labs remains a black hole, but the firm is also clearly "flipping" priority to AI - investors should watch whether RL remains a controlled experiment or rampant capital burn.

• Valuation is not cheap, but not meaningless either - forward P/E >25x reflects real growth and AI optionality; upside is interesting, but volatility will be high.

As investors, we are once again in "headline trading" mode: one leaked report about a possible end to the war, unconfirmed and without details, is enough to trigger a positive reaction in stocks, even though the fundamentals — a closed Strait of Hormuz, uncertain supplies, strained reserves, and the risk of persistently higher energy prices — remain unchanged. This is exactly the kind of moment when it's worth asking whether we're responding to a real shift in reality, or to politically convenient "spin" of the story that tomorrow's headline may rewrite within a few hours.

The Fed at a crossroads

On 30 March 2026, US Federal Reserve Chairman Jerome Powell spoke to nearly 400 students at Harvard University as part of an introductory macroeconomics course. His address was one of his last public speeches before his second term as Fed chairman expires on 15 May 2026. Markets followed his words with extreme attention, not only because of the content but also because of the context in which the speech was delivered.

The Fed is currently in an unprecedented situation. The key interest rate remains in the 3.50% to 3.75% range, where the central bank moved it after three quarter-percent cuts at the end of 2025. The oil shock caused by the conflict in the Middle East, which has entered its fifth week, has driven the price of Brent crude above $112 a barrel and brought new inflationary pressures. The core personal consumption expenditures indicator, excluding food and energy, is holding at 3%, still well above the Fed's 2% target. Adding to all this is the question of who will be running the central bank in six weeks.

Powell's speech at Harvard

Rates are in the right place

In a discussion moderated by Professor David Moss, Powell repeatedly emphasized that he believes the current monetary policy settings are appropriate for a wait-and-see approach. The central bank, he said, is in a position where it can monitor developments without having to react immediately by changing rates. The key argument was precisely the temporary nature of the oil shock. Powell recalled that energy shocks have historically come and gone quickly, while the effects of monetary tightening have been much delayed. If the Fed were to raise rates now, the effect would come at a time when the oil shock would likely have passed and the economy would be unnecessarily burdened.

This wait-and-see setup is confirmed by market data. According to CME FedWatch, the markets are currently assigning a 95.3% probability that rates will remain unchanged at the April FOMC meeting. The probability of a rate hike is just 4.7% and markets are not currently pricing in a cut at all. The dot plot from the March meeting still points to one cut during 2026 and another in 2027, but most analysts expect that under current conditions it will not occur until the second half of the year at the earliest.

Powell's speech at Harvard

Inflation, tariffs and the oil shock

Powell candidly named the three main inflationary layers facing the US economy.

• The first is tariffs on imports, which he estimates add about 0.5 to 1 percentage point to inflation.

• The second layer is the oil shock itself, which directly affects energy costs and feeds through to the prices of goods and services.

• The third layer is structural factors in the labour market, where labour shortages persist in some sectors and wages in services remain above a level compatible with the 2% inflation target.

In its March projections, the Fed revised its estimate of PCE (Personal Consumption Expenditures) inflation for 2026 to 2.7% in both headline and core inflation components. This represents a significant shift from the December projections, when the central bank expected headline inflation at 2.4% and core inflation at 2.5%. Meanwhile, Powell said that without the impact of tariffs, inflation would be closer to the 2% target, suggesting that trade policy remains one of the main factors preventing a return to price stability.

Private credit market under scrutiny

Powell's comments on the private credit market also attracted market attention. In recent months, nervousness has increased in this segment after the failed merger of Blue Owl Capital sparked a wave of requests to buy back fund shares. The situation has also been complicated by concerns that artificial intelligence could disrupt the business models of software companies whose bonds make up a significant portion of private credit fund portfolios. A direct example of this was the sell-off in $BLK shares, which fell by as much as 7% in a single day. Our analyst team has produced a comprehensive video about it on the Bulios channel.

Powell called the situation a correction, not a systemic risk. He stressed that the Fed is monitoring the links to the banking system and looking for potential channels of a possible emerging problem, but has not found them yet. Still, he acknowledged that regulators are paying close attention to this fast-growing segment. An important milestone will be June 30, 2026, when private credit funds and investment companies will publish semi-annual reports and have to revalue their positions to fair market value, which may bring the first real transparency about the extent of losses in the sector.

Artificial intelligence and the labour market

In a section of the discussion focused on the future of work, Powell advised students to invest time in mastering artificial intelligence tools. He identified large language models as tools that significantly increase productivity, and admitted that he himself actively uses them. But he also acknowledged that graduates are entering one of the most difficult job markets in recent years, with both technological changes and adjustments in immigration policy contributing to weaker job creation.

The question of Powell remaining in office

Transition of power: Powell versus Warsh

President Donald Trump has nominated Kevin Warsh to be the new Fed chairman on January 30, 2026. Warsh, a former Fed governor from 2006 to 2011, is known for his historically hawkish stance on inflation, but has recently shifted his position, arguing in favor of lowering rates that productive gains from AI technology allow monetary policy to be eased without the risk of rekindling inflation.

The formal nomination was submitted to the Senate on March 4. But the confirmation process has become complicated. Senator Thom Tillis has announced that he will block any nominee for Fed chairman until the investigation into the $2.5 billion renovation of the central bank's headquarters is resolved. Meanwhile, US Attorney Jeanine Pirro subpoenaed Powell for questioning in connection with the renovation, but the court quashed her subpoena and she appealed the decision. The Senate Banking Committee has scheduled a hearing on Warsh's nomination for the week of April 13.

If the Senate does not confirm Warshe by May 15, when Powell's term as chairman expires, Powell could technically remain in office as acting chairman by virtue of his membership on the Board of Governors, which runs through February 2028. That situation would create an unprecedented period of uncertainty about the leadership of the world's most important central bank.

Jerome Powell, Kevin Warsh

What a change in Fed leadership would mean for markets

Historically, every change in the Fed's leadership brings a repricing of assets across the yield curve.

The yield curve is a chart that shows what interest rates (yields) government bonds have depending on their maturity. On one side are short-term bonds, such as 3 months or 2 years, and on the other side are long-term bonds, such as 10 or 30 years. This chart shows investors how the market perceives future developments in the economy and interest rates).

The transition from Alan Greenspan to Ben Bernanke in 2006 heralded a fundamental change in the approach to crisis management. The transition from Bernanke to Janet Yellen was key to the exit from quantitative easing. And the arrival of Powell in 2018 brought a period of quantitative tightening that generated significant market volatility.

Warsh's arrival could bring a combination of lower short-term rates and more aggressive Fed balance sheet reduction. Analysts at JP Morgan $JPM expect Warsh to push through a series of rate cuts once he takes office, with the first quarter-percentage-point cut coming as early as June 2026. At the same time, however, the Fed could shift from a passive approach to actively selling securities from a portfolio that currently stands at about $6.6 trillion. This approach, referred to as QT-for-cuts, would create conflicting pressures on different parts of the yield curve.

Market context and reaction to Powell's speech

Source: FOMC projections (March 2026), Trading Economics, EIA

The S&P 500 Index fell 0.39% on Monday, March 30 and was approximately 9% below its all-time high. The technology sector led the decline with a drop of over 1%, while financials and value stocks posted modest gains. The VIX volatility index crossed the 30 mark, signaling increased investor nervousness. Oil remains a key factor. Brent crude oil rose over 55% in March, the steepest monthly increase in the benchmark's history.

The bond market reacted to Powell's speech with a drop of around 10 basis points in US 10-year Treasury yields. The markets interpreted his words as confirmation that a rate hike was out of the question for the remainder of his term. With the probability of a rate hike at just 2.2% at the April meeting, the most likely scenario is that Powell leaves office with rates exactly where they are today.

A strategic view

For investors, the current situation represents a classic case of tension between mandates. The Fed faces both downside risk on the labor market side, which would play in favor of keeping rates low, and upside risk on the inflation side, which in turn could require a more restrictive approach. Powell has openly named this dilemma and acknowledged that the central bank is actively operating with these inputs.

From an asset allocation perspective, the Fed's wait-and-see stance creates an environment that favors defensive sectors and shorter-dated bonds. The energy sector is the only segment of the S&P 500 in positive territory for March with a gain of over 9%. Conversely, growth technology stocks remain under pressure as higher inflation expectations reduce the present value of future cash flows.

The political dimension of the Fed's leadership transition introduces a type of risk to markets that cannot be quantified by standard models. Should fears of an erosion of central bank independence be confirmed, historical precedents from the 1970s show that the consequences could be far-reaching. At that time, political pressure from President Nixon on then Fed Chairman Arthur Burns contributed to keeping rates too low, allowing inflation to spiral out of control. The subsequent tightening under Paul Volcker required rates to rise to 20%, plunging the economy into recession.

What to watch next

• Kevin Warsh Hearing (week of April 13): The key will be what stance Warsh takes on Fed independence and whether he will reaffirm his recent dovish rhetoric on rate cuts. Senators' questions will suggest how complicated the path to confirmation will be.

• March inflation data (CPI and PCE): the first hard data to capture the effect of the oil shock. The key will be whether higher energy costs start to spill over into core inflation or remain confined to headline.

• April FOMC meeting (April 29): penultimate meeting under Powell's leadership. Markets expect rates to be left unchanged; tone of communication and any dissents will be key.

• Oil price developments and the situation in the Strait of Hormuz: Analysts warn that a crossing of the $120 per barrel mark for Brent could trigger a recession. Conversely, any progress in diplomatic negotiations could bring a rapid decline in prices.

• Private credit funds' semi-annual reports (30 June): the date when the true extent of losses will become apparent. Revaluation to fair value may trigger another wave of redemption requests.

The Fed's stance

Powell's speech at Harvard yesterday confirmed that the Fed is sticking to a wait-and-see strategy in the final weeks of his tenure. The central bank has decided to overlook the oil shock as a temporary phenomenon and not to resort to further tightening even though inflation remains well above target. This decision is slightly positive for equity markets in terms of funding costs, but it also signals that the Fed sees enough risks on the growth side to tolerate higher inflation rather than risk a contraction in the economy.

The question of a change in Fed leadership adds an element to the equation that markets are only beginning to fully appreciate. Warsh's ascension could bring a paradoxical combination of lower short-term rates and higher long-term yields, which would fundamentally change the environment for asset allocation.

Investors should keep a close eye not only on macroeconomic data in the coming weeks, but also on the political process surrounding the confirmation of a new Fed chairman, as this may be as important to market sentiment as the inflation and employment numbers themselves.

But at the same time, it's not just about the logo on the pitch. The partnership is designed to bring tangible benefits to cardholders, strengthen fans' attachment to the Amex card and demonstrate whether the company can turn an expensive sports contract into measurable revenue growth and customer loyalty.

What exactly is Amex gaining

The deal gives Amex $AXP cardholders priority access to advance ticket sales, special on-site experiences and other benefits at select NFL events in the U.S. and abroad. This includes the Super Bowl, NFL Draft, international league games and other "marquee" events where Amex plans branded zones, priority entries and promotions.

As a first swallow, Amex is opening early-access to pre-sale for the Los Angeles Rams - San Francisco 49ers game in Melbourne in September 2026, the first ever NFL regular season game in Australia. The partnership fits into Amex's broader expansion in sports: the company now has over 50 contracts with leagues, teams, arenas and major events around the world and is now the official payment partner of MetLife Stadium, Mercedes-Benz Stadium, the New York Giants, Jets and Atlanta Falcons.

How much money is involved and why the NFL was on the hook

Noofficial terms have been announced, but according to the Sports Business Journal, the deal is a seven-year contract worth roughly $910 million to $950 million - or roughly $130+ million per year. That's roughly 2.5 times what Visa, which had been an NFL partner since 1995 and decided not to renew the contract after 30 years, was paying for the same category.

For the NFL, it's a net boost in sponsorship revenue, plus the ability to separately monetize other financial categories like retail banking or peer-to-peer payments that were previously bundled with Visa $V. For Amex, it's an expensive but strategic entry into the biggest sports business in the U.S., where fan loyalty often translates into payment card choices.

What American Express hopes to get out of this

Amex has long built its brand on exclusivity - "membership" is supposed to bring access to things others can't. The NFL deal extends that story to the sport with the highest viewership in the US.

The company can promise three main effects from this:

• image enhancement and acquisition channel: fans who switch from another card to access pre-sales and league-related rewards because of the NFL Extra Points Amex card benefit

• Higher spending: Amex cardholders will be incentivized to pay with Amex at stadiums and around NFL events (merch, travel, hospitality), which raises transaction volume and fees for Amex

• Deeper data on premium customer behavior that overlaps with NFL audiences (corporate hospitality, high-spend segment), which can be leveraged in other products and partnerships

On the product side, Amex is set to launch the NFL Extra Points American Express credit card issued by Comenity Capital Bank in the US this year to reward NFL-related purchases - from tickets to merch to travel. This creates a direct channel for the company to monetise its fan base outside of game time itself.

Possible scenarios

1) Partnerships as a growth engine

The NFL still has the highest viewership in the US and the league is aggressively expanding abroad - London, Frankfurt and now Melbourne. If Amex can systematically use presales and experiences as a magnet for new clients, the NFL could become one of the most important acquisition channels for premium and co-branded cards, especially in the US and select markets. In such a scenario, an annual investment of around $130 million can pay off in the form of higher fees, interest income and client loyalty that competitors (including Visa) cannot replicate.

2) Brand "must-have" but financially only neutral

The more moderate option is that the NFL deal will boost brand perception, but the benefit in numbers will be more spread out - hard to separate from the entire Amex sports portfolio, which already includes dozens of leagues and events. The partnership, then, fulfills a primarily marketing role: Amex is "visible wherever there is something going on", but the return on an individual contract cannot be accurately calculated. In such a scenario, the bottom line is that the NFL simply must have an Amex - because if it weren't there, the space would be occupied by competitors.

3) An overshot bet on a crowded advertising market

The pessimistic scenario assumes that sports marketing in the United States is already so saturated that the next big contract brings dilution rather than enhancement of the effect. The NFL is full of partners, fans are overwhelmed by promotions, and a portion of the audience additionally watches games in environments where Amex benefits are not relevant (international streaming, secondary ticketing). In addition, if the league's growth abroad does not meet expectations, a seven-year, nearly $1 billion contract could retroactively appear to be an expensive ticket into a space where Amex is hard to differentiate from the competition.

What this means for the league and for Visa

For the NFL, the arrival of Amex is a clear demonstration of strength: after thirty years, it was able to replace Visa with a new partner for roughly 2.5 times the annual fee and still retain the ability to sell other financial categories separately. The league also fits into Amex's portfolio as a global brand - which is important for international matches and building the NFL as a global sports brand.

Visa loses a long-standing "hero" contract but gains the freedom to redirect marketing money elsewhere - to the Olympics, football, digital payments and fintech, where it may be more strategically positioned. So it is essential for investors to watch whether Amex's NFL partnership will bring a visible acceleration of acquisition and spendy on key cards, or remain primarily a symbol that Amex belongs to the clubs of brands that can afford the most expensive sports rights in the world.

Today's wording—"we trust the FAA to do its job" and "we have no indications that Boeing is not responding properly"—is actually a calming signal for the market: it’s not praise for Boeing, but rather an indication that there is no open conflict among the main regulators and that certification and production are being addressed through functioning dialogue, not through the media and political pressure. For Boeing this doesn't rewrite the fundamentals (quality and reputational issues haven't disappeared), but it reduces the regulatory risk that Europe would go its "own way" against U.S. oversight.

For the investor: EASA is showing Boeing/FAA a yellow, not a red card—the pressure and oversight remain, but the framework is cooperative and predictable. In an environment where Boeing needs years of calm certification and stable production, such a signal from Europe is a small positive, even though it doesn't materially change the long‑term investment thesis on its own.

Bill Ackman is reading the same tape very differently. In a letter to investors he describes the current turmoil as an advantage, not a hurdle, arguing that macro driven selling is allowing his fund to buy leading US companies at what he views as attractive valuations, even as the S&P 500 still trades around 20,6 times forward earnings, down from roughly 22 times at the start of the year but above its long term average. With prediction markets putting the odds of a US recession by the end of 2026 at just under 30% and the top ten S&P names expected to grow earnings by more than 20% annually over the next two years, he believes today’s multiples on global giants in tech, healthcare and consumer platforms are not only defensible but, in some cases, starting to look outright cheap.

The S&P 500 is down 5.4% since the conflict began

The S&P 500 $^GSPC has fallen 5.4% since the war with Iran began on February 28 . Thursday's 1.7% drop was then the worst since January, dragging the index to its lowest closing level since September, with eight of 11 sectors ending in the red.

The technology-focused Nasdaq 100 fell 2.4%, led by big names such as Nvidia Corp $NVDA and Meta Platforms Inc $META. The S&P 500 hit a seven-month low, while the Dow Jones fell 1.73%.

Energy stocks rose 18% for the month

The conflict with Iran has significantly restructured US equity markets. The energy sector rose 18.2% during March - Exxon Mobil $XOM gained 16.4%, Chevron $CVX 14.8%, ConocoPhillips $COP 21.3% and Pioneer Natural Resources 19.7%.

Defense stocks gained 14.7%, with RTX $RTX (formerly Raytheon) up 22.1%, Lockheed Martin $LMT up 19.4%, Northrop Grumman $NOC up 17.2% and L3Harris $LHX up 15.8%. Meanwhile, Congress approved $45 billion in emergency defense spending in March.

West Texas Intermediate (WTI) crude is up nearly 50%, while Brent crude futures, the international benchmark, are even higher.

Ackman: Chaos is an advantage, not a hindrance

In a letter to investors, Ackman explicitly called chaos "an advantage, not a hindrance." He argued that stock market disruption helps his fund buy high-quality companies at bargain prices because of macroeconomic events that may not affect their long-term intrinsic value.

Bettors at prediction market Polymarket put the probability of a recession in the US by the end of 2026 at around 29%, with Ackman reportedly able to amass the $10bn he needs to find bargain buys in his current position.

He believes current valuations are justified

According to Motley Fool analysis, the S&P 500 is now trading at about 20.6 times aggregate estimates of future earnings. That's still well above its long-term average, but well below the 22 times earnings at which it traded at the beginning of the year.

Ackman points out that the 10 largest companies in the S&P 500 are expected to grow earnings per share by more than 20% on average over the next two years. As a result, their higher-than-average valuations are justified. In fact, some of them look like bargain buys at today's prices.

The top "10" S&P 500 stocks by weight

These advantages include "their global size, dominant market position, access to low-cost capital, and leadership in artificial intelligence and related technologies." Ackman concludes, "The market's P/E multiple is justified and can remain sustainably higher than historical averages."

History points to a rapid recovery after geopolitical shocks

Strategists at Carson Group compiled a list of 40 major geopolitical and historical events over the past 85 years and calculated the S&P 500's returns in the months ahead. On average, the S&P 500 lost 0.9% in the first month afterward, but rose 3.4% in the six months following the event.

The average weekly decline in the Standard & Poor's 500 Index after the initial geopolitical shock is 1.09%, according to a Stock Trader's Almanac analysis of 17 incidents since 1939. Twelve months after each crisis, the S&P has posted an average gain of 2.92%.

In addition, it returns a significant portion of every billion in free cash flow to shareholders through dividends and buybacks, while continuing to invest in the growth of equipment protection and housing. This makes it more of a quiet growth title for the patient investor than a traditional insurance company.

Top points of analysis

• Revenues reach about $11.9 billion in 2024, with net written premiums, fees and other income from core segments increasing to $12.35 billion in 2025, implying growth of about 8% in the core business.

• Adjusted EBITDA grew 11% and adjusted earnings per share grew 12% (excluding catastrophe events) in 2025, marking the ninth consecutive year of profitable growth and the third consecutive year of double-digit earnings per share growth.

• The Global Lifestyle (Mobile Devices, Electronics, Autos) segment reported adjusted EBITDA growth in the mid-single-digit percent range in 2025, with the number of protected mobile devices increasing by nearly 2 million to more than 66 million, and the number of protected vehicles reaching 57 million.

• The company returned $468 million to shareholders in 2025 - $300 million in share buybacks of 1.4 million shares and $168 million in dividends - while maintaining liquidity in the holding company of $887 million.

• For 2026, management expects adjusted EBITDA and adjusted earnings per share, adjusted for favorable reserve development from 2025, to be at least flat or grow in the mid-to-higher single-digit percentages, with Global Lifestyle expected to be the primary driver.

• The company itself communicates a target of around $14.2 billion in revenue and $1.2 billion in profit by 2028, which implies average revenue growth of around 5% per year and roughly half a billion more profit than today - at today's earnings multiple of around 13x, this is a solid compounder in a less cyclical insurance segment.

Introducing the business and the model

Assurant $AIZ is a specialty insurer that focuses on protecting large consumer purchases and assets - from cell phones to electronics and autos to housing and renters. It doesn't sell traditional life insurance policies, but products that are tied to specific transactions: buying a cell phone from a carrier, financing a home through a bank, signing a lease, buying a car from a dealer.

Headquartered in Atlanta, it has a history dating back to the 19th century and is now a Fortune 500 company that employs over 14,000 people and operates in more than 20 countries. From an investor's perspective, it is important that it is not an extremely capital-intensive insurance company: because of its risk-sharing model, reinsurance and fee structures, much of its revenue resembles a fee-based business with high gross margins, not pure insurance risk as in some life insurance companies.

Distribution is exclusively through large partners: carriers (e.g., T-Mobile $TMUS, Verizon $VZ through the Total Wireless brand), electronics manufacturers, large retail chains, automobile dealers, and banks. Thus, Assurant does not primarily sell to the end customer, but acts as an "insurance engine" behind what is already a familiar brand to the customer - a phone carrier, an electronics retailer, or a bank. This creates a barrier to entry for competitors, as integration into the partner's systems, claims handling, equipment logistics and data handling are long-term and data-intensive processes.

Global Lifestyle segment - devices, cars, electronics

Global Lifestyle is at the heart of Assurant's growth. It includes protection programs for mobile devices and electronics, extended warranties, vehicle protection and services around large consumer purchases. In 2025, the segment reported mid-single-digit percent adjusted EBITDA growth, with the core Connected Living (mobile devices and technology) component growing similarly and the number of protected mobile devices growing by nearly 2 million to more than 66 million worldwide.

A key element here is the concept of device reuse and logistics. Assurant has processed and re-launched over 160 million used devices in recent years, aided by newly enhanced logistics facilities, including a dedicated centre for T-Mobile in the United States. The acquisition of RL Circular Operations has added technology to this part of the business, using artificial intelligence to optimise reverse logistics - that is, deciding whether to repair, resell, recycle and how to maximise value for the partner.

In vehicle protection, the "Global Automotive" segment added nearly 2 million new protected vehicles in 2025, bringing the total to 57 million. Improved claims experience (fewer costly repairs, better risk calculation) has led to profitability growth in this part of the segment as well, despite more costly repairs on modern cars full of electronics. In addition, the launch of new protection programs with partners such as Total Wireless is expanding the addressable market into the prepaid and contract-flexible segments where protection programs were not as prevalent previously.

Global Housing segment - stability with disaster risk

Global Housing includes lender-placed insurance (when a borrower does not have a policy in place, the bank "places" it through Assurant), renters insurance, insurance for prefabricated homes and flood insurance. This segment is more sensitive to catastrophe losses (hurricanes, floods), but that is why the company consistently differentiates "including catastrophe" and "without catastrophe" results in the numbers, so that the core business can be seen.

In 2025, Global Housing's adjusted EBITDA was over $1 billion, with double-digit growth when excluding catastrophes, and claims ratios improved due to lower large events and better exposure management in high-risk regions. Renters insurance was up 15%, partly due to Cover360, a digital platform that makes it easy to arrange insurance when signing a lease, and lender-placed policies were up 5%.

Geographically, the company is actively reducing its concentration of risk in the most exposed areas, particularly Florida, and shifting growth to California and Midwestern states where the mix of growth and risk is more favorable. This is important to investors because reducing concentration in "catastrophic" regions greatly improves the predictability of future results.

CEO

Keith W. Demmings has been President and Chief Executive Officer of Assurant, Inc. since January 2022, where he also sits on the Supervisory Board. After twenty-five years of service in various capacities, he now leads the Company's global operations in the Global Lifestyle and Global Housing segments. Under his leadership, Assurant is focused on developing services for the connected world - from smart devices to connected cars to smart homes. Demmings is pursuing a growth strategy based on innovation, profitability and long-term value for customers, employees and shareholders, with the clear goal of helping people enjoy the benefits of modern connected living.

Demmings is known for its emphasis on talent development, diversity and inclusion, as well as fostering creative collaboration and new ideas that improve the customer experience. He has already made a significant impact as president of the Global Lifestyle division, where he has led expansion through innovation and acquisitions since 2016 - most notably through the $2.5 billion purchase of The Warranty Group, making the division the largest part of Assurant. His career began in 1997 as a sales trainee in Toronto, from where he rose to President of the Canadian office (2005) and eventually to Global Leader with responsibility for the company's international growth across continents.

Profitability, cash and return on capital

In terms of numbers, Assurant is a typical "compounder" - not growing aggressively, but steadily and with good discipline in working with capital. In 2024, the company achieved sales of $11.88 billion, gross profit of $9.11 billion, and operating profit of $927 million; these figures continued to grow in 2025, with net income of $760 million and earnings per share of $14.55 in 2024. A return on equity of around 15.7% is very solid in the insurance sector, especially with a gross margin of over 77% and an operating margin of over 8%.

Operating cash flow in 2024 was $1.33 billion, capital expenditures were only $221 million, leaving free cash flow of over $1.11 billion, up nearly 19% year-over-year. These numbers translate into the firm's ability to return capital: $468 million was returned to shareholders in 2025, $300 million of which was in the form of buybacks and $168 million in dividends, yet the firm ended the year with a holding liquidity of $887 million.

The balance sheet is moderately leveraged: the debt-to-equity ratio is around 0.38, and an interest coverage ratio of over 10 times says that operating earnings more than comfortably cover interest expense. Altman's Z-score of around 0.5 for financial institutions cannot be interpreted in the same way as for industrial firms, but the combination of strong liquidity, stable cash flows and controlled exposure to catastrophe suggests that this is not a "fragile" balance sheet, but an institution that can afford to combine growth and shareholder payouts over the long term.

Dividends and buybacks

Assurant is not a high yielding dividend, but rather a middle and growing dividend. The current dividend is $0.88 per quarter, which at today's price equates to roughly 2% of the annual yield. In November 2025, the board of directors approved a 10% dividend increase along with a new share repurchase program of up to $700 million, beyond the existing mandate of about $141 million remaining.

Thus, in 2025, the combination of dividends and buybacks will have delivered nearly $470 million to shareholders, which, with a market capitalization of about $11 billion, equates to a "shareholder return" of about 4% per year from these two channels alone - in addition to earnings per share growth. For an investor looking for a combination of moderate income and value growth, Assurant is thus a "total return" vehicle rather than just a pure dividend rate.

Growth potential and outlook to 2028

Today, management and analysts are working with a target of getting to about $14.2 billion in revenue and about $1.2 billion in net income by 2028. This implies average revenue growth of about 5% per year and an increase in profits of about $500 million from today's level of about $700 million. The drivers of this growth are several:

• More connected devices, higher device value, and a greater willingness to pay for protection programs.

• Expansion of programs with existing partners (T-Mobile, Verizon/Total Wireless) and new partner agreements in home warranty and home insurance.

• Continued growth in the Housing segment, where improved claims experience and exposure management are enabling increased profitability even with relatively modest volume growth.

For 2026, the firm expects adjusted EBITDA and adjusted earnings per share to grow at mid to upper single-digit percentages after adjusting for one-time favorable reserve development in 2025, with Global Lifestyle expected to be the primary driver and Housing expected to hold steady and profitable. If this scenario comes to fruition and the company continues to return capital at a rate of $400-500 million per year, then at today's earnings multiple of around 13x, we are looking at a defensive growth title that can deliver interesting compounded appreciation over a few years without extreme volatility.

Valuation in the context of the sector

Today, Assurant trades at a price-to-earnings ratio of around 13.2 times, a price-to-earnings ratio of 0.87 times and a price-to-free-cash-flow ratio of around 10.7 times. Compared to select specialty insurers, that doesn't look overpriced:

Thus, Assurant trades at roughly a similar multiple to Aflac, while having a higher return on equity and business in segments that benefit from the long-term trend of digitalization, aging equipment and growth in home values.

Fair value according to models is around $218 per share, roughly in the range of today's market price, suggesting that this is not an extremely undervalued title, but rather a quality company at a reasonable price - where the combination of earnings growth and shareholder payouts will do the trick for investors.

What may surprise Assurant in the future

• Faster growth in equipment protection. If the market for higher-end mobile phones, tablets and laptops continues to grow and people are more willing to pay for protection programs, Global Lifestyle could grow faster than the projected few percent per year. This also applies to the expansion of programs to new types of devices in the home, such as smart home appliances or photovoltaics.

• New partner agreements. Signing a few larger contracts with other operators or electronics manufacturers can be very good for the stock, as such contracts tend to be long-term and challenging to replace. The market usually reacts quickly to such news as it immediately increases the visibility of future revenues.

• Stronger buyback effect. In a situation where a stock is trading only slightly above estimated fair value, more aggressive use of a buyback program (up to $700 million) can significantly accelerate earnings per share growth, even if operating earnings themselves grow at only a moderate rate. At a lower share price, management may load up on buybacks even more.

• Transforming the Housing Portfolio. A further shift in exposure away from the riskiest areas toward regions with better premium-to-risk ratios could gradually reduce swings in performance during catastrophe years. If the firm is able to simultaneously expand rental and other less volatile products, the overall stability of results could improve noticeably.

Risks - what can disrupt the scenario

• Significant catastrophe year. A severe hurricane season or series of floods can severely depress Housing segment profitability and weigh on results in the short term, although over the long term insurers typically reflect such years in pricing and terms.

• Loss of a major partner. The termination or major curtailment of a key partner such as T-Mobile, a major electronics manufacturer or a bank would have a material impact on the Global Lifestyle segment and investor sentiment.

• Regulatory pressure. Tightening rules for extended warranties or lender-placed insurance could reduce margins or restrict certain products, particularly in the U.S. where regulations vary from state to state.

• Competition and technological change. The entry of other technologically strong competitors in the equipment protection and digital insurance space may increase pressure on pricing and margins if Assurant is unable to maintain its technological edge in claims processing and data handling.

New developments in recent years

• Two consecutive years of double-digit earnings and EPS growth in 2024, driven primarily by the Global Housing segment, while management expects continued profitable growth in 2025.

• The firm has partnered with Australia's Telstra (the country's largest mobile operator), acquired iSmash (a tech repair brand in the UK) and renewed a multi-year partnership with a large US mobile client - all with the aim of long-term growth in telecoms services.

• In the automotive business (Global Auto), margins on service contracts and GAP products have stabilised, and management is "excited" about the trajectory of this segment to 2025.

• In 2025, they announced a strategic partnership with Plug, a D2C platform for certified refurbished equipment; Assurant will invest in Plug and leverage its global network of refurbished inventory and testing capabilities to accelerate growth in the aftermarket and drive circularity.

• As well, it is newly partnering with Ciocca Automotive to sell vehicle protection products across its dealer network, including dealer training and compliance support, strengthening Assurant's position in the auto segment.

• In mobile, it is expanding its collaboration with Verizon through a new Total Wireless Protect product to support further growth in Connected Living.

Investment scenarios

Base case scenario

In the base case setting, it makes sense to count on what management itself communicates - revenue growth of around 5 percent per year, adjusted EBITDA and earnings per share in the mid to upper single-digit percent range, mainly driven by the Global Lifestyle segment and a stable Housing business. In that case, at today's valuation of around 13 times earnings, Assurant can offer a combination of total returns in the lower double digits annually, composed of earnings per share growth, a dividend of around 2 percent and buybacks. This scenario assumes no extremely strong hurricane year and no loss of any key partners.

Positive scenario

The more optimistic scenario relies on two things: stronger growth in equipment and auto protection and higher share buyback rates. If the company were able to expand programs at existing partners like T-Mobile or Verizon more quickly than planned and sign a few larger new contracts in Europe or Asia, adjusted earnings per share growth could remain in the upper double-digit range for more than just three years in a row. Combined with a new buyback program of up to $700 million, that could then cause a reassessment of the multiples upward - perhaps causing the market to decide to value the company at more like fourteen to fifteen times earnings.

A more cautious scenario

At the other end of the spectrum lies a situation where a weaker year in the Housing segment combines with higher margin pressure in Equipment Protection. A strong hurricane season or major flooding could depress profitability in Housing in the short term, while pricing pressure on protection programs may come from mobile operators or new digital competitors. In such a year, adjusted earnings per share could stagnate or grow only in the low single-digit percentages, and the market could push the multiple toward 10 to 12 times, which, at current levels, would imply a sideways trend rather than share price growth. However, even in such a scenario, stable cash flows and dividend yields would remain attractive to the long-term investor.

What to take away from the article

• Assurant is not a traditional life insurer, but an equipment, auto and home protection specialist that capitalizes on large consumer purchases and has a business tied to the long-term trend of connected equipment and property value growth.

• The company has had nine straight years of rising profits, three consecutive years of double-digit growth in adjusted earnings per share and free cash flow of over one billion dollars a year.

• Underlying the growth is the Global Lifestyle segment, where the number of protected devices and cars is growing and reverse logistics services using data and artificial intelligence are being added to boost margins.

• The Housing segment adds stability to the business even though it carries catastrophe risk, so Assurant actively manages exposure in at-risk regions and reports results even after adjusting for catastrophes.

• The combination of a relatively reasonable valuation of around 13 times earnings, a dividend of around two percent and buyback programs makes for an attractive mix for an investor looking for a stable "total return" rather than a bet on a quick doubling of capital in one year.

The financial sector is a fairly specific segment of the stock market. Unlike technology companies, which attract investors primarily with the promise of rapid growth, financials often offer a combination of stable dividends, high returns on capital and direct exposure to macroeconomic developments. This is why they are among the cornerstones of the portfolios of institutional and retail investors around the world.

The year 2026 brings several significant themes for the financial sector. The regulatory environment in the United States is beginning to loosen after years of tighter oversight, opening up room for greater capital flexibility for banks and a potential wave of mergers and acquisitions. Interest rates remain relatively high, which has been good for banks' net interest income, but has also put pressure on the quality of loan portfolios.

At the same time, there is a wide variety of business models among the largest companies in the financial sector. From the diversified conglomerate Berkshire Hathaway, to the universal banking giant JPMorgan Chase, to the payment networks Visa and Mastercard with their minimally capital-intensive model. Each of these firms approaches value creation differently, and it is this diversity that makes the financial sector an interesting space for investors with different strategies.

Berkshire Hathaway $BRK-B

A conglomerate in a new era

Berkshire Hathaway represents a complete oddity within the financial sector. It is not a traditional bank or insurance company, but a diversified conglomerate that brings together insurance operations, rail transportation, energy, manufacturing and retail under one roof. As of January 2026, the company is led by a new CEO, Greg Abel, who took over the reins from the legendary Warren Buffett after sixty years of his leadership.

The company has a market capitalization of around $1.04 trillion, making it one of the largest companies in the world. Annual revenues for fiscal year 2025 reached $371 billion. However, the key number of the moment is the cash reserve, which stood at a record $373 billion at the end of 2025. This huge figure effectively represents a strategic store for future acquisitions and investments.

Challenges for the new management

The transition to new leadership has not come without complications. Operating profit for the fourth quarter of 2025 dropped nearly 30% to $10.2 billion, with the main reason being a decline in profitability in the insurance segment, where underwriting profits fell 54%. The entire insurance division, including GEICO, posted a 38% decline in results, which Abel directly acknowledged as a trend that may not break in the short term. Shares fell as much as 5.3% after the results were released.

On the other hand, in his inaugural letter to shareholders, Abel clearly signaled continuity of values, capital discipline and a willingness to aggressively use cash reserves for strategic opportunities. Berkshire has already completed the $OXY.7 billion acquisition of OxyChem from Occidental Petroleum $OXY in January 2026, showing that the new management is not passive. The company's ROE is currently around 10%, below the historical median, but reflecting the reduced profitability of the insurance segment and a massive cash balance that is reducing the effective return on capital.

JPMorgan Chase $JPM

Global banking giant

JPMorgan Chase is the largest U.S. bank by assets, exceeding $4.4 trillion. The firm's market capitalization is currently around $780 billion and TTM revenues exceed $193 billion. Led by CEO Jamie Dimon, the bank covers virtually all segments of financial services, from retail banking and wealth management to investment banking and trading.

For 2025, the bank reported total net income of around $54 billion with a return on equity(ROE) of 15-17% depending on the quarter. The dividend yield is around 2.1% and the P/E ratio at 14, which is a rather attractive valuation for the world's largest bank.

Growth engine: capital markets and payments

JPMorgan's key growth driver is the Corporate & Investment Bank (CIB) segment, where trading revenue grew 17% and the payments segment reached a record $5.1 billion. The bank also opened 1.7 million new checking accounts and issued 10.4 million new credit cards for 2025. In the Asset & Wealth Management division, revenues grew 13% to a record $6.5 billion for the quarter, with client assets exceeding $7 trillion.

For 2026, JPMorgan profiles itself as one of the main beneficiaries of the expected recovery in M&A activity and the IPO market. In addition, the lower regulatory burden in the US allows for more efficient capital allocation, including share buybacks. In the last quarter of 2025, the bank returned $12 billion to shareholders through dividends and buybacks. The potential deterioration in the quality of the loan portfolio remains a risk factor if the economy slows significantly. The bank already made a $2.2 billion provision in the last quarter to take over the Apple Card portfolio.

Visa $V

Payments infrastructure as a license to print money

Visa is the largest payment network in the world, operating in more than 200 countries. The company does not lend money, does not carry credit risk and has no loans on its balance sheet. Instead, it collects fees for each transaction processed through its network. This model is extremely efficient, as evidenced by gross margins in excess of 81% and net profit margins in excess of 50%.

The firm's market capitalization is around $570 billion, TTM revenue is $41.4 billion and ROE is a remarkable 54%. Valuation is not low. The P/E ratio is currently around 28, 16% below the firm's 10-year average but well above the financial sector average. However, investors are comforted by consistent growth in processed transactions of around 10% per year and a strong share buyback program.

Growth catalysts

In the first fiscal quarter of 2026, Visa reported revenue growth of 15% year-over-year to $10.9 billion, with GAAP earnings per share up 17%. The company describes itself as a "payments hyperscaler" and is investing heavily in expanding higher value-added services, commerce solutions, and foreign payments. The structural shift from cash transactions to digital payments remains a key long-term growth driver as a huge proportion of payments globally are still made in cash.

Mastercard $MA

Eternal rival with its own pace

Mastercard is the second largest player in global payments and operates on a virtually identical business model to Visa. It has a market capitalization of around $431 billion, TTM revenues of $31.5 billion, and a P/E ratio of roughly 30. However, Mastercard's ROE is extremely high, exceeding 200%, due to an aggressive share buyback policy and relatively low equity levels compared to the balance sheet. This figure should therefore be interpreted with caution and cannot be directly compared to the ROE of traditional banks.

Mastercard has reported revenue growth of 16.7% and earnings per share growth of 12.6% in recent quarters. In addition, the company announced a new $14 billion share buyback program and increased its dividend by 14.5%. Compared to Visa, Mastercard has historically had a faster rate of growth in processed transactions, although that rate has begun to level off in recent quarters.

Where Mastercard is moving

An interesting part of Mastercard's strategy is to expand into higher value-added services such as analytics tools for merchants, cybersecurity solutions and open banking platforms. These segments are growing faster than the core payments business and are gradually increasing the company's revenue diversification. Regulatory pressure remains a risk factor for both payments giants. The US FTC has recently launched an investigation into the practices of payment processors and the threat of regulatory intervention into firms' fees remains a concern in both the US and Europe.

Bank of America $BAC

The second largest U.S. bank

Bank of America is the second largest US bank with total assets of $3.4 trillion and a market capitalisation of around $337 billion. For the year 2025, the bank reported revenues in excess of $107 billion and net income of $29 billion. The firm's ROE is around 10.6%, an improvement of more than 100 basis points from the previous year. The P/E ratio of 12.6 is below that of JPMorgan and offers a relatively attractive valuation.

Growth on all fronts

The bank has achieved 15 consecutive quarters of year-over-year growth in trading revenue in the past year and has seen record earnings in the Equities segment. The Consumer Banking segments acquired approximately 680,000 new checking accounts and consumer investment assets grew 16% to $599 billion. The bank also increased small business lending by 7% year-over-year.

Compared to JPMorgan, Bank of America is significantly more dependent on net interest income, making it more sensitive to interest rate movements. If the Fed were to move to more vigorous rate cuts, the pressure on net interest margin would be more pronounced than at the more diversified JPMorgan. On the other hand, the current environment of higher rates is strongly in the bank's favor.

Comparison of key metrics

Note: Mastercard's ROE is visually extremely high due to the low level of equity on the balance sheet (a result of aggressive share buybacks). Numbers are rounded and based on end-March 2026 data.

Competition and sector position

The financial sector is one of the toughest in the US market and each of the companies listed faces different competitive dynamics. Berkshire Hathaway has no direct comparable competitor as it is a unique conglomerate. JPMorgan $JPM competes with Goldman Sachs $GS, Morgan Stanley $MS, and Citigroup $C, holding steady as the number one in key investment banking rankings. Bank of America $BAC operates in the same space, but with a greater reliance on retail banking and net interest income.

Visa $V and Mastercard $MA form a virtual duopoly in global payment networks. Their main competitors are not so much each other as alternative payment solutions like PayPal $PYPL, Block $XYZ or the growing Chinese platforms Alipay and WeChat Pay. In addition, regulators on both sides of the Atlantic are increasingly scrutinizing the interchange fees and dominance of these two players, a long-term risk factor for both firms.

A strategic view

The financial sector enters 2026 from a position of relative strength. Banks are benefiting from higher interest rates, the regulatory environment is easing in the US and sector consolidation is accelerating. Payments giants are benefiting from a structural shift to digital transactions that continues regardless of the economic cycle.

From a valuation perspective, banks offer a more attractive entry point than payment networks. JPMorgan, with a P/E of around 14 and a dividend yield of over 2%, is attractive to investors looking for a combination of value and quality. Bank of America, with an even lower P/E of around 12, offers a more significant valuation discount, but at the cost of higher cyclicality. In contrast, Visa and Mastercard are valued at a significant premium, justified by their capital-light model, high profitability and predictable growth. The question is whether the current valuation of around 30 times earnings leaves sufficient room for further appreciation.

Berkshire Hathaway represents a specific category. Under the new leadership of Greg Abel, it offers exposure to a broadly diversified business with a huge cash reserve that can be deployed at any time in down markets or strategic acquisitions. The risk lies in the uncertainty around the management transition and the short-term weakness in the insurance segment.

What to watch next

• Bank results for the first quarter of 2026, expected around April 14. Key indicators will be the evolution of loan portfolio quality and net interest margins.

• The Fed's interest rate decision and its impact on banks' net interest income. Any signal of a more drastic rate cut could significantly impact profitability, particularly at Bank of America.

• Regulatory developments in the U.S., particularly the potential increase in the threshold for the most stringent supervision from $50 billion to $700 billion in assets, which would significantly change the competitive landscape.

• Regulatory developments and FTC investigations against payment processors, including Visa and Mastercard.

• Greg Abel's actions as head of Berkshire Hathaway, particularly how he will handle the $373 billion cash reserve in an environment of increased market volatility.

Summary

The financial sector offers a diverse range of investment opportunities in 2026, but requires careful differentiation between business models. Traditional banks such as JPMorgan and Bank of America offer more attractive valuations and higher dividend yields, but carry higher risk associated with the credit cycle and macroeconomic developments. Payments giants Visa and Mastercard stand at the opposite end of the spectrum with minimal cyclical risk but at the cost of higher valuations.

Berkshire Hathaway, on the other hand, represents a unique category where the investor is not buying one company, but an entire ecosystem of value-driven businesses. It is this diversity of the financial sector that makes it a space where the conservative dividend investor and the growth-oriented trader can find opportunity. The key is to understand exactly what you are getting for the price.

The jury did more than accept that social media can be harmful. It found that the companies deliberately built features to keep young users hooked, knew about the risks, failed to give adequate warnings and that an ordinary user could not realistically see what was happening, making Meta and Google liable for 6 million dollars in compensatory and punitive damages. For parents, schools and US states preparing thousands of similar suits, the verdict is a clear signal that this legal strategy can work and that attention based business models will now be tested in court, not just in public opinion.

What this litigation is really about

The case, referred to as JCCP 5255, involved a young woman who began using social networking sites at age 10 and, according to the lawsuit, developed a "dangerous addiction" to them, accompanied by anxiety, depression, self-harm and impaired self-perception. The jury found that:

• Meta and YouTube knew about the risks of their platforms' design

• ordinary users were unaware of these risks

• the companies still failed to warn them, even though a 'reasonable operator' would have done so

The plaintiff and her mother were awarded a total of $6 million in compensatory and punitive damages. Both Meta $META and Alphabet $GOOG plan to appeal, so the litigation is far from over.

How the lawyers got around Section 230

For many years, the rule of thumb was that lawsuits against social networking sites ended at a wall called Section 230. This law protects internet companies from liability for content posted by users and allows them to moderate what they deem harmful in "good faith." The traditional "content on the platform is harmful to children" argument has mostly been quickly dismissed by the courts.

This time, however, the lawyers have done an about-face: they are not judging the content, but the design. They're targeting:

• endless scrolling

• likes and other feedback

• Notification

• algorithms that maximize engagement

He says these are active design decisions, not passive hosting of someone else's content. If it destroys mental health, Section 230 doesn't apply by that logic. That's the construction on which the verdict rests.

Free speech vs. algorithm liability

The next round of the battle will be over free speech arguments. Legal experts expect Meta and Google to build an appeal on that:

• algorithms and the way they classify and display content

• as well as interface design

are a form of speech and therefore protected by the constitution.

If higher courts say that companies can be sued across the board for design and algorithm choices, there is a risk of a "chilling effect."

• Either platforms will become much more cautious and limit addictive mechanisms, or they will start aggressively filtering controversial topics to minimize legal risk - thereby narrowing the space for online debate.

It is possible that the dispute will eventually end up in the Supreme Court, which will have to decide where the line between technical design and protected speech lies.

Three possible trajectories

1) The verdict will be upheld on appeal

If the Court of Appeal decides that:

• Section 230 applies to algorithms and design

• or that the lawsuit is an impermissible attempt to circumvent statutory protection

the verdict will not stand and the wave of other lawsuits will weaken significantly. The "let's attack design" legal strategy will lose its charm and the litigation will revert to piecemeal cases, not a systemic attack on a business model. For both Meta and Alphabet, this would mean that the reputational pressure would remain, but the legal and financial risk would be manageable.

2) The verdict will stand, but will only lead to incremental changes

The second option is that the court upholds the ability to claim liability for certain design choices, but sets a high bar:

• It will require clear proof of a causal connection between the feature and the specific harm

• limit liability to extreme cases

In practice, this would likely mean:

• more "wellbeing" features (time limits, reminder breaks, stronger parenting tools)

• more careful handling of notifications for teenagers

• more transparency around algorithms

The mindfulness-based business model would remain at the core, but companies would have to account for ongoing legal and compliance costs.

3) The verdict will set a precedent for an avalanche of lawsuits

The harshest scenario comes if higher courts uphold that:

• Section 230 does not apply to design

• companies can be held liable for the "addictiveness" of their product

• and Congress does not decide to modify the law in favor of platforms.

Result:

• Thousands of similar lawsuits from parents, schools and states

• Pressure from investors to modify products to reduce the risk of addiction (even at the cost of lower engagement)

• Real interventions in algorithms and UX - limiting infinite scroll, different default settings for minors

Technology platforms would legally start to approach "regulated products" like tobacco or gambling. This would have a major impact on company valuations, growth multiples and expected profitability.

Global pressure: from Australia to Brazil

The Los Angeles trial is not an isolated event. Tougher rules are already emerging in other countries:

• Australia has banned the use of social networking sites by children under 16

• Brazil has banned infinite scrolling features for certain user groups

• Other countries are developing a combination of age limits, mandatory "safety by design" features and mental health impact tests

This raises a new issue: how to verify age in practice? Without some form of identification (e.g. state or private ID systems), laws are difficult to enforce. This runs into privacy concerns and the risk of misidentification, where adults would mistakenly fall into 'child mode' and have to prove their age.

What to take from this

The verdict against Meta and Google is not yet a revolution, but it is the first serious tug on the lifeblock of the "the more time online the better" digital model. Decisions will be made in the coming years:

• Whether algorithms and design will remain legally protected like content, or whether it will become an area where companies will be held specifically responsible for the impact on the health of users, especially children and teenagers.

When people hear about nuclear weapons, most switch off automatically. Too abstract, too remote, too apocalyptic. Yet right now there’s a shift playing out behind the scenes of global politics that will have concrete effects on oil prices, defence budgets, bonds and arms manufacturers’ stocks. This is a topic investors can’t afford to ignore.

The conflict between the US, Israel and Iran is entering its second month. And instead of the world seeking a path to de‑escalation, it’s doing the opposite — seriously discussing who else might acquire a nuclear bomb.

Iran was closer than anyone admitted

Let’s start with the facts. The International Atomic Energy Agency confirmed that before the June strikes by Israel and the US, Iran had almost 441 kilograms of uranium enriched to 60 percent.

For context: military‑grade enrichment is 90 percent. Experts estimate that material could have been assembled into fuel for nine nuclear devices.

An even more chilling figure came from US defence intelligence: it would probably take Iran less than a week to produce enough weapons‑grade uranium for a first bomb. One week.

The strikes damaged some of those capabilities. Targets included, among others, the heavy‑water reactor at the Arak complex and a uranium ore processing plant in Yazd province. The Iranian programme was halted, perhaps damaged — but destroyed?

No one can swear to that yet.

Macron’s grand plan or grand theatre?

At the other end of the world, Europe is responding to American unreliability under the Trump administration in a way that would have been unthinkable five years ago.

French President Emmanuel Macron announced an expansion of the nuclear arsenal, stopped publishing its exact size, and offered eight European countries — including Germany, Poland, the UK and Sweden — participation in a so‑called “advanced deterrence” programme.

German Chancellor Friedrich Merz discussed cooperation with France under a new nuclear umbrella. Polish Prime Minister Donald Tusk went further and hinted that Poland might consider its own nuclear weapons.

France currently possesses roughly 290 nuclear warheads, the UK about 225. These are arsenals designed for deterrence, not for total great‑power war. They’re not sized to give Europe the same security shield that the US nuclear umbrella historically provided through NATO.

Back to 1962?

The situation resembles, though does not reach the same intensity as, the Cuban Missile Crisis of 1962. Back then the world stood on the brink of nuclear war over Soviet missiles in Cuba. Paradoxically, the crisis led to stronger control mechanisms: the Moscow–Washington hotline was created and the first limits on nuclear testing were signed.

Today we see the opposite. The New START treaty, which limited US and Russian nuclear arsenals, has expired, and the 55‑year‑old Non‑Proliferation Treaty is under the greatest strain in its history. Instead of new agreements, we hear a country’s prime minister talking about getting his own bomb.

Back then the world survived the crisis and struck deals. The question is whether there is the political will to do the same this time.

Macron: saviour or gambler?

I have to be honest — I have mixed feelings and I won’t sell you a simple story.

On one hand, I understand Macron’s logic. If Trump is truly weakening the US commitment to NATO, Europe needs its own deterrent. By offering a “shared French umbrella,” Paris is trying to prevent every country from getting its own bomb — which would be the worst possible outcome.

On the other hand, this looks like political theatre with very serious consequences. A French arsenal of 290 warheads simply cannot replace the American shield.

And that’s what worries me most. Once “having the bomb” becomes a legitimate part of European debate, other regional powers will ask: why not us?

What this means for your money

Now to what investors care about most.

Defence stocks: This is probably the clearest opportunity. European defence budgets are rising fastest since the Cold War. Germany has breached its own “debt brake” because of defence spending, and Poland is spending over 4% of GDP on its military. Companies like $RHM.DE, $LDO.MI, $SAABF and $BSP.DE are direct beneficiaries of this trend. The market has priced some of this in, but the structural increase in spending is a long‑term story for years to come.

Oil and energy commodities: Conflict in the Persian Gulf is a classic catalyst for rising oil prices. Investors looking to hedge portfolios against escalation traditionally turn to oil names or ETFs.

Bonds and safe havens: Geopolitical uncertainty historically drives capital into safe havens. Gold in particular is very sensitive to nuclear uncertainty.

Risk to markets in general: If the conflict escalates, we’re talking about a scenario where markets react with a sharp correction. No one can precisely estimate the probability of such a scenario, but ignoring it is gambling.

The nuclear debate in Europe is not just an abstract issue for political scientists. It’s a signal that the world is entering a phase of higher geopolitical instability, which always feeds through to markets. The defence industry is structurally on the rise. Oil remains a volatile commodity dependent on escalation or de‑escalation in the Gulf. Gold and defensive positions gain sense as portfolio insurance.

Do you hold oil company shares, or do you think their price is already inflated by the conflict and preferred to sell?

I don’t like getting into politics, especially on Bulios, but macroeconomics and the geopolitical situation are, in today’s world, almost everything that moves the markets.

Last week the European Parliament voted on something that will directly affect goods prices, the competitiveness of European companies and geopolitical tensions for years to come.

Result: 417 in favor, 154 against.

The deal passed. Yet some lawmakers call it bad.

How come? How can an agreement meant to bring stability and freer trade provoke such resistance?

The answer is simple: the two sides are not playing by the same rules. And the vote tally hides a much more important story.

Let's break down what the agreement actually contains and what it lacks.

What the EU offered:

Reductions in import tariffs on American industrial goods. Better access for American agricultural products. Continued zero tariffs on American lobsters — this was originally negotiated back in 2020.

Overall, this is a significant opening of the European market toward the USA.

What the USA offered:

The base tariff of 15% remains. It's not an exception for the EU; it's the standard condition Trump introduced broadly for almost the entire world.

And now the part usually missing from headlines: one month after the agreement was signed in Turnberry, the USA introduced 50% tariffs on the steel and aluminum content of products like wind turbines and motorcycles. In other words, exactly on the industry where the EU exports the most. The deal was signed in July — in August the new tariffs arrived. That's no coincidence. It's testing the limits.

So why did Parliament vote in favor anyway?

Because the alternative is worse. Without a deal, full escalation is a real risk. And the EU exports a record volume of goods to the USA — in 2025 it was €555 billion. This exposure creates structural pressure to conclude any agreement, even on unfavorable terms. Rejecting it would mean a trade war, which European industry, frankly, simply isn't prepared for.

Three safeguards that Parliament secured:

Parliament wasn't willing to approve the deal unchanged, and that's an important detail. Lawmakers pushed through three safeguard mechanisms that weren't in the government's original November version.

The sunrise clause means that the EU's tariff reductions will only take effect once the USA demonstrate they have fulfilled their part. No automatic concessions up front.

The sunset clause says the whole agreement expires on March 31, 2028. If no consensus to extend is found, the EU's tariff concessions automatically lapse. This mechanism is important — the EU is leaving itself a backdoor in case Trump or his successor changes course.

The suspension clause allows the EU to suspend the agreement if the USA violate the terms or if there is a devastating surge in American imports.

Parliament also demands that the USA lift the mentioned 50% tariffs on the steel and aluminum content of industrial products — a direct reaction to Washington's August move.

These are sensible guarantees. The real question is: will they work?

My thoughts

I follow this agreement with very mixed feelings and I don't want to mask that with artificial optimism.

On one hand, I understand the pragmatism behind this decision. Europe cannot ignore a market the size of the USA. A trade war would hit sectors that are key for economies like Germany, Italy or the Czech Republic. So a deal in any form is better than escalation.

On the other hand — this agreement is structurally uneven and I think everyone in Brussels knows it. The EU cuts tariffs, the USA hold at 15%. The EU exports at record levels but is negotiating from the position of the supplicant, not the partner. And the sunset clause until 2028 essentially says this: even Europe itself doesn't believe the deal will hold in its current form. Otherwise the sunset clause wouldn't be necessary.

I see a larger pattern. America under Trump systematically tests how far it can go — in trade, in NATO, on the question of Greenland. And the answer it gets is: pretty far.

For me as an investor this means one concrete thing: this vote is not the end of the story. It's the start of another round. Be prepared for the path to a final agreement to be winding.

The European Parliament voted for a deal that might be a reasonable choice, but definitely not the best. It's a compromise struck from a weaker position, with safeguards whose real strength will only be tested in practice.

On April 13 trilogue talks between the Parliament and the Council of the EU begin. Final voting is expected no earlier than June. Until then nothing will be settled.

Will this agreement become the new standard in geopolitics for Europe?

The loan is being underwritten by a syndicate of global banks including JPMorgan Chase, Goldman Sachs, Mizuho Bank, Sumitomo Mitsui Banking Corp and MUFG Bank, with SoftBank signaling that part of the repayment will come from future asset sales. For investors, tohle je učebnicový příklad toho, jak moc je skupina ochotná riskovat bilanci ve jménu expozice na jeden z nejžhavějších AI příběhů současnosti.

Total investment in OpenAI will reach $64.6 billion

Upon completion of the follow-on investment, SoftBank $SFTBY s total investment in OpenAI is expected to reach $64.6 billion, representing approximately 13% ownership stake, according to SoftBank's official statement.

SoftBank has invested a total of $34.6 billion in OpenAI through SoftBank Vision Fund 2 as of September 2024. Financing for the follow-on investment will initially be provided through bridge loans and other financing arrangements from major financial institutions and then replaced over time by leveraging existing assets.

OpenAI completes historic $120 billion funding round

In February of this year, OpenAI raised $110 billion in a deal that valued the company at $730 billion, representing the largest round of funding for a startup to date, according to a Bloomberg report.

OpenAI is raising another $10 billion from investors as part of the historic funding round, bringing the total raised to over $120 billion, as confirmed by the company's CFO, according to a CNBC report. Amazon $AMZN invested $50 billion, Nvidia $NVDA invested $30 billion, and SoftBank invested $30 billion in this round, with the investment boosting OpenAI's valuation to $730 billion before the funding was completed.

Masayoshi Son exceeds own debt limits for AI bet

SoftBank has its own debt ceiling of 25% - the maximum ratio of net debt to portfolio value it can afford under normal conditions. SoftBank's CFO Yoshimitsu Goto has publicly acknowledged that the ratio, which has already risen from 16.5% to 20.6% in recent months, is likely to temporarily exceed that limit due to AI commitments, according to a FinTech Weekly analysis.

S&P lowered SoftBank's credit rating outlook to negative from stable while maintaining its long-term credit rating at BB+ - below investment grade. S&P concluded that OpenAI is among SoftBank's investments with the "weakest" credit quality, according to a report by European Business Magazine.

Son's response is basically: the rules were written for normal times, and these are not normal times. SoftBank and OpenAI were among the companies behind last year's Stargate Project, which aims to invest up to $500 billion over four years to build AI infrastructure in the United States. Son and then-President-elect Donald Trump announced in December 2024 that SoftBank planned to invest $100 billion in AI and related infrastructure in the U.S. over four years.

SoftBank's investment strategy represents one of the most aggressive bets on AI in the current tech boom era. It confirms the company's position as a key player in the global race for AI dominance, even as it faces growing criticism over its debt levels and investment concentration.

2025 was the first real test of whether this ambition works in practice. Our article breaks down why the company exceeded its binding synergy target and what that means for the outlook for margins and free cash flow, what valuation looks like when looking beyond the superficial P/E, and why the shift from plastics to paper is a structural driver that the market is not fully pricing in today, what the numbers say about the balance sheet, and how quickly the integration phase can turn into a period where a company starts to return capital more significantly to shareholders - and whether the current near fair value price is a real opportunity or just a fair valuation.

Top points of the analysis

• Smurfit Westrock was formed in July 2024 by the merger of European leader Smurfit Kappa and US player WestRock, instantly becoming the world's largest listed packaging company with revenues of over $31bn and a presence in over 40 countries.

• The company exceeded its binding integration savings target of $400 million in 2025 and closed some 600,000 tonnes of inefficient capacity, demonstrating that the mega-merger is not just on paper but delivers real results.

• Adjusted operating profitability at the EBITDA level reached about $4.94 billion in 2025 with a margin of about 15.8%, with analysts estimating a move to $5.2 billion in 2026 due to a second wave of synergies.

• A valuation of around 29 times earnings looks expensive at first glance, but looking at EBITDA and operating flow, the valuation is more sobering - the market value of the company roughly matches the enterprise value and the P/S is only 0.66, well below 1, signaling an ever-present discount for a global industry leader.

• The dividend of $0.45 per share represents a yield of around 3% and signals that management believes in the stability of the business even in a challenging macroeconomic environment.

• The investment story rests on whether Smurfit Westrock can convert the largest merger in the history of the packaging industry into consistently higher margins, strong free cash flow and gradual deleveraging - if so, today's valuation could be a springboard for solid appreciation over the next two to three years.

Company introduction

Smurfit Westrock $SW is the world's largest listed packaging company today, formed in July 2024 through the acquisition of US-based WestRock by Ireland's Smurfit Kappa. Smurfit Kappa itself bears the name of the founding family - John Jefferson Smurfit laid the foundations of the family packaging business in Ireland and his grandson Tony Smurfit now heads the company as President and CEO. The combination of two continentally dominant players has created a group with revenues of over $31 billion, a presence in over 40 countries, over 500 converting plants and 63 paper mills, serving customers ranging from small regional companies to the world's largest consumer and industrial corporations.

The company focuses on paper and corrugated packaging, i.e., packaging boxes, shipping containers and consumer packaging made from recycled or virgin paper. It's a business that doesn't look exciting at first glance, but a closer look reveals deep barriers to entry: its own paper mills, large-scale processing plants, long-term contracts with customers and a logistics network that can't be built overnight. Geographically, the company is highly diversified - North America accounts for around 60% of earnings and is identified as the biggest opportunity for value creation in the medium term, while Europe, Latin America and the rest of the world bring geographic balance and access to differently evolving markets.

The company earns on the volume of tonnes of paper processed and on the conversion margin between the input paper price and the selling price of the final packaging. Vertical integration - i.e. ownership of both paper mills and converting plants - gives Smurfit Westrock greater control over costs and ensures more stable margins in periods when raw material prices fluctuate unfavourably. The customer base is broad and includes the food industry, e-commerce, pharmaceuticals, consumer electronics and industrial companies - this brings some stability as demand for packaging follows overall economic activity rather than one particular sector.

Management and CEO - a family heritage with a global vision

The company is headed by Tony Smurfit, grandson of the founder of the packaging dynasty, born in 1963, with a lifelong career in the family business. He's not a manager brought in from the outside to restructure - he's a man who built the entire company from within, and who had a clear vision from the start: to create a global leader in paper packaging capable of competing with even the world's largest customers from a position of strength, not as a regional player. The merger with WestRock was the logical culmination of this strategy and the biggest test of its ability to drive integration in the history of the sector.

Its approach in the first year after the merger showed a combination of operational toughness and strategic clarity: the company closed some 600,000 tonnes of inefficient capacity, laid off over 4,600 employees in North America, and exceeded its integration savings targets while maintaining the dividend. The CEO himself did not disguise at the February 2026 earnings presentation that the macroeconomic environment was "the toughest of his career for such a long period of time," but he also emphasized that the company had passed this test and was ready for the phase when integration turns into organic growth.

Market and industry - stable demand with a significant shift away from plastics

The paper and corrugated packaging market is globally large, relatively stable and driven by structural factors that work regardless of short-term cyclical fluctuations. Paper-based packaging is a mainstay of e-commerce logistics, the food and pharmaceutical industry and industrial supply chains - sectors that will not disappear in the foreseeable future. As the world's largest corrugated packaging manufacturer, Smurfit Westrock serves this market from a position of advantage that is hard to replicate.

The key driver for future growth is the shift from plastic to paper alternatives. Regulatory pressure in Europe and the United States, as well as consumer demand for sustainable packaging, is pushing manufacturers to replace plastic packaging with paper. Smurfit Westrock estimates that the untapped market for replacing plastics with paper solutions is worth over $10 billion globally, and the company is seeking to address it through a combination of innovation in materials and proximity to customers in key segments.

On the other hand, the short-term outlook for the corrugated packaging market in Europe is challenging. Tony Smurfit himself said in October 2025 that the market there is "pretty bad right now", but also added that when it turns around, it will turn around quickly and sharply. A number of paper mill operators in Europe have been forced to close plants, market capacity is declining, and once economic activity picks up, the supply/demand balance could quickly tip in favour of producers. In North America, the situation is much better - around 70% of Smurfit Westrock's corrugated operations there are "solidly profitable", according to management, and the region is showing marked improvement since the merger.

The merger as an investment story - what it delivers, what it costs and what it promises

The Smurfit Kappa and WestRock merger was not just a transaction on paper - it was a strategic move that leapfrogged years of organic growth and immediately delivered global scaling, access to the US market for the European leader and the ability to offer customers consistent packaging solutions across multiple continents under one roof. The original savings target from the integration was set at $400 million per year - the company exceeded it in 2025 and management now suggests that the total potential synergies could reach over $800 million by 2027.

But the cost of this transformation is not small. Investments in integration, restructuring, plant closures and manufacturing base upgrades have swallowed up much of the operating cash flow in 2024, when free cash flow fell to just $17 million. Meanwhile, in 2023, the company generated free cash flow of over 600 million, showing the temporary impact of integration costs on cash generation. The key question for investors, therefore, is how quickly this investment will be recouped in the form of higher sustained free cash flow and reduced debt.

Management unveiled a medium-term plan in February 2026 that positions North America as a major source of value creation. The plan envisions a large volume of smaller capital projects - the average project is less than $4 million, with no project over $200 million - suggesting deliberate discipline in capital allocation and a desire to maximize the return on every penny invested rather than making big bets. For 2026, analysts estimate adjusted EBITDA growth of about $5.2 billion and adjusted earnings per share of about $3.15, with a second wave of synergies expected to gradually improve margins and boost free cash flow back to historically stronger levels.

Financial performance and numbers

Smurfit Westrock's revenues have grown to around $31.2 billion in 2025, up from $20.4 billion in 2024, with the jump largely reflecting the first full year of Westrock's consolidation following the July 2024 merger. Gross margin is around 19%, operating margin around 5.6% and adjusted EBITDA margin around 15.8% - numbers that are acceptable for an integrating industrial colossus in a challenging macro environment, but show where there is room for improvement.

Net income for 2025 was around $660 million, earnings per share around $1.25, with average share count up by a third due to the merger issues. Return on equity is around 4.6%, return on invested capital around 3.8% - both low numbers, but consistent with the integration phase and high one-time costs. In a normalised operating environment without integration costs, these indicators would look significantly different.

Operating cash flow reached $1.48 billion in 2024, but the investment in integration and capacity projects consumed almost all of it, leaving free cash flow to be symbolic. This is a key number for investors to watch - a turnaround to strong free cash flow is a prerequisite for deleveraging, dividend increases and potential share buybacks. Management for 2025 reported adjusted free cash flow of $679 million in the fourth quarter alone, indicating that a turnaround is indeed underway.

Balance sheet and debt

Smurfit Westrock's balance sheet is one of the key metrics we monitor - the merger was funded with a combination of equity and debt, and the resulting structure is not as conservative as companies that do not accumulate assets through large acquisitions. An Altman Z-score of around 1.3 is in the zone of heightened attention and signals that the firm is not in the safe part of the band. At the same time, it is important to distinguish between "credit distress risk" and "a firm in an integration phase with temporarily high debt" - Smurfit Westrock is more likely to be in the latter category, as operating cash flow is strong and the assets the firm holds have real value.

Interest cover of around 4.7 times is acceptable - the firm generates operating profit to cover interest with sufficient headroom. The equity ratio of around 41% says that most of the funding is still coming from equity, not debt, and the debt-to-equity ratio of 0.02 is paradoxically very low - this probably reflects the specifics of accounting consolidation and the way liabilities are reported. For a complete picture, one would also need to monitor net debt to EBITDA, where management is focused on gradually reducing to target levels.

Valuation and what is included

At first glance, a P/E of around 29 times looks expensive - and looking at 2025 net income, which is loaded with integration costs, it is. But the relevant metric is more likely to be adjusted EBITDA, where the company trades at significantly more favourable levels, and a P/S of 0.66 shows that the market is not paying a premium multiple for earnings. The fair value according to the data is $38.44 per share, and the current price is close to that - so the discount is not that significant, but the upside exists in the form of gradually improving margins and a move to stronger free cash flow.

For the valuation to move favourably, Smurfit Westrock needs to meet a combination of conditions over the next two to three years: get adjusted earnings per share into the $3 to $4 area (analysts estimate $3.15 for 2026), increase free cash flow to sustainable levels of over $1 billion a year, and convince the market that integration is past its peak. If this succeeds and the market assigns the sector a P/E multiple in the 15 to 18 range, we have room for real appreciation in the stock - without having to speculate on a significant economic expansion or commodity price movement.

What could surprise the company in the future

Synergies are the biggest source of positive surprise - management promised $400 million per year in the merger, topped that in 2025, and now hints at the potential for over $800 million by 2027. If the integration savings prove to be structural and not one-off, and if organic price and volume growth is added, EBITDA could move well above current analyst estimates.

The second source of surprise is the shift away from plastics. The market for replacing plastic packaging with paper solutions is estimated to be over $10 billion globally, and Smurfit Westrock is uniquely positioned to benefit from this transition more than anyone else due to its size, innovation capabilities and customer relationships. Regulatory pressure in Europe, which is gradually spreading to other regions, can significantly accelerate this transition and create a revenue stream for the firm that the market has only conservatively factored into models today.

A third catalyst may be the divestment of unneeded assets. Analysts expect the firm to divest non-core assets - land, specialty chemical operations or other parts of the portfolio taken with WestRock - during 2026 and use the proceeds to reduce debt or buy back shares. Each step in this direction improves the balance sheet, reduces complexity and increases focus on where the company is actually creating value.

Investment scenarios

In a positive scenario, the company meets or exceeds its synergy target of $800 million by 2027, the European packaging market turns around faster than the market expects, and the transition away from plastics adds further momentum to organic growth. Adjusted earnings per share reach $3.5 to $4 over two years, free cash flow exceeds $1 billion annually, debt declines to target levels and the dividend grows. In such a world, the market assigns a higher multiple to the company and the stock can approach values well above today's price.

In the base case, integration proceeds as planned, but the pace is more moderate. The synergy target of 400 million is consistently met, the second wave brings in another 200 to 300 million, the European market recovers slowly and North America holds its role as the main source of earnings. Adjusted earnings per share approach $3, free cash flow gradually rises toward $1 billion, and the stock slowly moves from "integration story" to "stable industry leader" - with the market assigning a slightly higher multiple and the investor profiting from both earnings normalization and a modest rerating effect.

The negative scenario will occur if the macroeconomic environment deteriorates significantly, demand for packaging declines, integration synergies prove harder to realise than planned and the European market remains under pressure for longer. In such an environment, free cash flow under pressure would limit the scope for deleveraging and payouts to shareholders, Altman Z-scores near the borderline zone would draw more analyst attention to the balance sheet, and valuations could fall as the market reassesses the premium it is willing to pay for an "integration story" without a clear outcome.

What to take away from the article

• Smurfit Westrock is the world's largest listed packaging firm, formed by merger in 2024, and 2025 was the first real test of whether the mega-merger works - the results show it does, although margins and free cash flow are still below potential due to integration costs.

• The company has exceeded its synergy target of $400 million and indicates potential of over $800 million by 2027, with a second wave of savings expected to significantly improve free cash flow and open up room for debt reduction or higher payouts to shareholders.

• The valuation is not dramatically cheap on the data - the current price is near fair value at $38.44 - but upside exists in the form of incremental margin improvement, normalization of earnings per share to an estimated $3.15 for 2026, and potential revaluation upon successful completion of integration.

• The Altman Z-score of around 1.3 and low free cash flow in 2024 are signals that investors need to watch - they are not acute crisis signals, but they are indicators that need to improve over the next two years for the story to make sense.

• The structural story of the transition from plastic to paper packaging and a market estimated at over $10 billion are factors that may not be fully reflected in today's price and that may be a source of positive surprise in the longer term.

• For an investor looking for an industry "compounder" with global reach and a clear strategy, Smurfit Westrock is an interesting candidate - but it requires patience and a willingness to track integration milestones quarter by quarter, as true value will be revealed incrementally, not all at once.

Four ultimatums and four retreats

Since the beginning of March Trump has issued at least four public ultimatums to Iran regarding the strait. Each time he warned that a harsh retaliation would follow if conditions weren’t met. And each time he stepped back. Most recently, last Saturday he promised an attack on Iranian power plants within 48 hours. On Monday the deadline was extended to Thursday, and on Thursday at a press conference in front of his ministers he announced a further extension of the deadline by another 10 days to April 6.

His poll numbers are falling

The public is noticing the war, and Americans are beginning to lose tolerance for it.

A poll from March 20 to 23 recorded Trump's overall approval at just 36%, while 62% of Americans disapprove of his performance. Prices and inflation are Trump’s weakest point with voters, rated at minus 39 points, and this indicator is worsening every month.

Pew Research Center, in its survey from March 16 to 22, found that 61% of Americans disapprove of Trump's handling of the conflict. Only 37% approve.

Support among independent voters has fallen especially sharply: only 24% of them approve of Trump's handling of Iran, while 63% disapprove. A week ago it was 30 to 53. Independents are a key group for the November election.

Is a less favorable deal looming?

The longer the war continues and the more Trump's support falls, the greater the pressure will be to end the conflict quickly. And a quick end may mean terms that do not fulfill the original American objectives.

Bloomberg summed it up succinctly: the “rally around the flag” effect in wartime, where a president’s popularity usually jumps, did not appear in this case at all.

For energy markets this means one thing. Until there is a clear agreement guaranteeing the opening of the strait, the geopolitical risk premium in oil will not disappear. And that transmits directly into companies’ results—from airlines through chemical companies to retail.

How do you see it? Do you believe that some agreement will actually be reached by April 6, or should we expect another extension and oil to remain above $100?

The year 2026 has returned oil to the centre of the markets' attention in a way that few predicted at the start of the year. The conflict between the US and Israel on the one hand and Iran on the other has triggered a blockade of the Strait of Hormuz, one of the world's most important shipping arteries, through which around a fifth of global oil supplies flow. The result has been a sharp rise in the price of 'black gold', with the price of Brent crude still above USD 100 per barrel and temporarily above USD 114. In this environment, the energy sector has become by far the strongest segment of the US stock market, while technology titles are losing ground under the pressure of macroeconomic uncertainty.

For investors who wish to participate in these developments through ETFs, there are essentially four basic instruments, which differ significantly in structure, risk and exposure to oil prices. Each brings different investment characteristics, benefits and pitfalls that need to be well understood before allocating capital. Here they are.

United States Oil Fund $USO

The United States Oil Fund (USO) is the most straightforward oil price exposure vehicle available in the U.S. market. The fund does not invest in oil company stocks, but directly in West Texas Intermediate (WTI) crude oil futures contracts, the U.S. benchmark for light crude oil delivered to Cushing, Oklahoma. The fund aims to track daily movements in the spot price of WTI, not the performance of oil companies.

This structure makes USO a fundamentally different vehicle from the other funds in today's review. If the price of oil rises 3% in a day, USO should mirror that movement almost exactly. In contrast, oil company earnings can be affected by many factors such as costs, hedging or capital allocation, and their shares move differently from the spot price of the commodity.

Contango and structural risk

A fundamental $USO issue that every investor needs to be well informed about is the so-called contango. This is a situation in which oil futures contracts with a later expiry date are more expensive than contracts with a closer expiry date. Because the USO has to sell expiring contracts and buy new ones every month, it sells cheaper and buys dearer virtually every month. This effect can cause the fund's performance to fall significantly over a longer period of time from the actual movement of the spot price of oil. Contango thus makes USO a tool primarily for short-term and tactical trading, not for long-term investing.

You can read exactly how contango works and why it can reduce returns here.

Another specificity is tax complexity. A USO is structured as a limited partnership, which means investors receive a Schedule K-1 tax form instead of a standard 1099-DIV. This complicates tax filing and may discourage more conservative investors.

Performance and Key Data

This year, $USO has clearly benefited from the sharp rise in oil prices. The fund is priced at $117 per unit, with a 52-week range of approximately $61 to $125. Over the past 12 months, the fund has gained approximately 54%, with over 50% gained in the past 30 days, indicating extreme momentum in response to geopolitical events.

Energy Select Sector SPDR ETF $XLE

The Energy Select Sector SPDR ETF (XLE) is easily the largest and most liquid energy ETF in the U.S. market. The fund tracks the S&P 500 Energy Sector Index, which includes 22 of the largest U.S. energy companies selected directly from the S&P 500. It is therefore a pure large-cap exposure to the energy sector, combining integrated oil giants, exploration and production companies, refiners and oil and gas transportation infrastructure.

XLE's dominant positions are ExxonMobil $XOM and Chevron $CVX, which together account for over 40% of the fund's total weight. This concentration brings the advantage of high liquidity and stability, but also means that the performance of the fund is largely determined by these two giants. The fund is rounded out by companies such as ConocoPhillips $COP, EOG Resources $EOG, Williams Companies $WMB and Schlumberger $SLB.

Lowest expenses and a regular dividend

XLE is one of the most affordable sector ETFs on the market. The expense ratio of just 0.08% per year is extremely low, even compared to other sector funds. In addition, the fund pays a regular dividend with a yield of around 2.5%, making it an attractive instrument even for income-oriented investors. This year, the annual dividend yield is around 2.54%.

XLE's price level currently stands at around $60.57 per unit. The fund's market capitalization exceeds $42 billion. The energy sector as a whole has significantly outperformed the broader market this year. Analysts at Wolfe Research have pointed out that the sector has gained approximately 30% in the last 2.5 months or so of 2026, although a temporary consolidation has come in recent days in response to hints of possible peace talks between the U.S. and Iran. Since the beginning of the year, the $XLE price is then 38% higher on the exchange.

Benefits and limitations of the fund

The high concentration in ExxonMobil $XOM and Chevron $CVX gives investors the advantage of relatively stable cash flow and lower volatility compared to pure exploration companies. These firms have diversified operations, including upstream, refining and petrochemicals, and are able to generate solid results even in the event of a temporary downturn in oil prices. On the other hand, it is this structure that does not allow them to participate fully in extreme movements in commodity prices as more specialised funds can.

SPDR S&P Oil & Gas Exploration & Production ETF $XOP

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) differs from XLE in two key ways. First, it focuses exclusively on the upstream segment of the oil and gas exploration and production industry and does not include refiners, integrated giants or infrastructure. Second, it uses an equal-weight methodology that assigns all companies in the portfolio approximately the same weight, regardless of their market capitalization.

This combination has a major impact on the performance of the fund at different stages of the cycle. The equal-weight structure gives more weight to mid-sized and smaller exploration and production companies, which tend to perform significantly better than integrated giants when oil prices are rising. This is why this fund has historically outperformed XLE during oil price spikes, but at the cost of significantly higher volatility.

Portfolio and exposure

The fund invests in 50 companies. The largest positions include Venture Global $VG, APA Corporation $APA, SM Energy $SM, PBF Energy $PBF, and Murphy Oil $MUR. Each of these make up approximately 2.6% to 3% of the portfolio, the result of just an equal-weight approach. The fund's total AUM is around $3.5 billion. The expense ratio is 0.35% per year, still very acceptable. The fund pays a quarterly dividend with a yield of approximately 2.08%.

The current price of XOP is around $185 per unit. Data from the beginning of the year shows that the fund has temporarily reached around $182, an increase of over 80% from last year's lows.

Leveraged exposure to the oil price

One of the key features of XOP is its so-called leveraged exposure to the price of oil. Exploration and production companies have very high operating leverage because their costs are largely fixed and margins increase sharply with each additional dollar of higher oil price above the breakeven point. If the price of oil rises from $80 to $100 per barrel, the profits of many exploration companies can increase by substantially more than 25%. This effect explains why $XOP outperforms other funds so significantly in a straight oil price uptrend.

VanEck Oil Services ETF $OIH

The VanEck Oil Services ETF (OIH) brings a very different perspective to the energy sector. Unlike $XLE or $XOP, it does not invest in companies that extract oil, but rather in companies that sell equipment, technology and services to mining companies. This is the so-called oilfield services segment, which includes manufacturers of drilling equipment, subsea and surface technologies for production, seismic surveys or pumping systems.

The fund tracks the MVIS US Listed Oil Services 25 Index and invests in the 25 largest such companies listed on the US market. The largest position is $SLB (formerly Schlumberger) with a weighting of approximately 20.25%, followed by Halliburton $HAL (6.91%), Baker Hughes $BKR (11.88%) and TechnipFMC $TFI (6.46%). The Fund has a significant concentration in the top 10 positions, which comprise over 70% of the total portfolio.

Why service companies react differently than miners

Service firms operate on the principle of direct dependence on the capital expenditures (CapEx) of mining companies. When oil prices are high and producers are doing well, they invest in new drilling and exploration projects. This translates directly into the companies' orders in $OIH. However, this mechanism has a time lag. Service firms benefit most when oil prices are high over the long term and oil companies increase their capital spending, not necessarily in the first week of a price shock.

Multiple oil shocks have historically shown that service firms like $SLB or Halliburton benefit from structurally higher oil prices because producers are incentivized to invest more in production.

Performance and key data

OIH has a YTD performance of approximately 45%. The fund's AUM ranges from $1.2 billion to $2.6 billion, with a three-month increase of approximately $1.08 billion in response to the energy boom. The expense ratio is 0.35% per year and the dividend yield is around 1.23%. The fund's beta to the market is 1.25, so OIH tends to be more volatile than the market as a whole.

Comparison of funds and their key differences

The four funds analysed cover the energy sector in four very different ways and are suited to different types of investors and investment horizons. Below is a clear comparison of their basic parameters.

In terms of expense ratio, $XLE is the absolute leader at 0.08% p.a. and offers the cheapest route to the energy sector. Conversely, $USO is the most expensive of the group at 0.70%, adding contango risk and a complex tax structure. XOP and OIH stand at identical 0.35% but offer significantly different portfolio characteristics.

In terms of liquidity, XLE is the unrivaled leader with AUM in excess of $42 billion. The fund's bid-ask spread is typically one cent, making it ideal for institutional investors moving large amounts of capital. Other funds are liquid enough for most retail and mid-sized institutional investors, but fall short of XLE's liquidity.

Strategic view

A key macroeconomic factor in the energy sector this year is the geopolitical premium in the price of oil. The conflict in the Middle East and the blockade of the Strait of Hormuz have triggered a sharp price shock that is directly translating into the performance of all four funds described above. Analysts at Raymond James have flagged the risk as asymmetric in favour of a growth scenario for stocks with direct exposure to oil prices, while UBS has raised its Brent crude price forecasts for 2026.

At the same time, the geopolitical premium is inherently volatile. Any signals of conflict de-escalation can quickly push oil prices back and with them the performance of these funds. This is what was seen over the past week, when news of potential peace talks caused Brent crude to move intraday from $114 towards $100 per barrel, or over 10% in a single day.

From a strategy perspective, it is useful to think of these funds in three scenarios. If an investor believes in short-term price shock research without structural reassessment, USO offers the most straightforward exposure, but only on a horizon of days to weeks due to the contango effect. If they believe in a longer energy cycle with structurally higher oil prices, XLE is the safest choice due to its diversification, dividend and extremely low cost. For investors with a higher risk tolerance and a belief in further oil price increases, XOP offers potentially the highest returns but also the highest volatility due to its equal-weight structure and leverage to exploration companies.

OIH is a specific choice for those who believe high oil prices will encourage producers to increase CapEx over the long term. Service companies like SLB or Halliburton directly benefit from the production boom that comes with a time lag behind the price shock. If oil prices remain at higher levels for longer, it is service companies that may surprise positively in the quarters ahead.

What to watch next

• Developments in the Middle East conflict and the state of Hormuz Strait passage. A full opening of the Strait would quickly depress the geopolitical premium in the oil price.

• OPEC+ decision on production quotas. If the cartel maintains or reduces production, oil prices will remain higher for longer. Any increase in production would, in turn, help to normalize them.

• CapEx plans of major oil companies. If ExxonMobil, Chevron or ConocoPhillips increase investment in exploration and production, this will be a positive signal, especially for OIH.

• Macroeconomic developments in the US and China. Strong demand from China and a stable US economy are supporting higher oil consumption. Conversely, a possible recession or a significant slowdown would push prices down.

• Technical contango level in the oil futures market. It is crucial for USO investors to monitor whether the structure of the futures curve is in contango or backwardation, as this directly affects the fund's actual return compared to the spot price.

• Earnings of oil companies for Q1 2026. The results of Exxon, Chevron, ConocoPhillips or SLB will show how high oil prices translate in real terms into earnings and cash flow, and give a hint about the sustainability of dividend policy.

Summary

Energy ETFs are a phenomenon in 2026 that has returned investor attention to a sector that until recently was seen as outside the technology mainstream. The four funds in today's roundup offer different paths to the same thematic opportunity and differ significantly from each other in structure, risk profile and expense ratio.

In light of current geopolitical developments and the continued uncertain outlook in the Middle East, the energy sector remains one of the most important market segments of 2026. The question remains, however, whether today's oil prices are structurally sustainable or whether this is a temporary geopolitical premium that will quickly diminish at the first sign of de-escalation.

At the heart of the dispute is that Anthropic refuses to have its models run in autonomous weapons or for domestic surveillance — and the government responded by placing it on a list of risky suppliers without giving the company a real chance to defend itself. Anthropic framed the case around the Constitution: an infringement on free speech and the right to due process. The court is now saying: stop, at least until the entire proceeding is properly reviewed.

The company is effectively testing how far it can push average revenue per user without triggering meaningful churn. With guidance calling for 50.7 to 51.7 billion dollars of sales next year, higher prices are set to do a significant part of the heavy lifting alongside subscriber growth and expanding ad revenue.

Standard plan without ads priced at $19.99

The ad-free Standard plan now costs $19.99 per month, an increase of $2 from the previous $17.99. At the same time, the premium plan also increases by $2 to $26.99 per month. The cheapest standard plan with ads increases by $1 to $8.99 per month.

New members will see the new prices starting March 26, while existing subscribers will gradually transition to the new prices over the coming months. Existing members will be notified by email a month before the new prices are applied.

Non-household sharing pricing

Netflix $NFLX is also increasing the cost of adding non-household users at the same time - it now costs $6.99 for plans with ads instead of the original $7.99, and $9.99 instead of $8.99 for plans without ads. This change follows the crackdown on password sharing that Netflix launched in 2023.

Content investment to reach $20 billion

The price hike comes at a time of massive investment in content. Netflix plans to spend approximately $20 billion on content in 2026, a 10% increase from the previous year. The company is expanding its offerings to include live events, including NFL games, MLB matches, WWE broadcasts and boxing matches.

CFO Spence Neumann mentioned at the investor conference that key drivers of revenue growth will be pricing, growth in the membership base and roughly doubling advertising revenue to about $3 billion .

Shares react positively after the exit from Warner Bros acquisition

The pricing comes a month after Netflix abandoned plans to buy the studio and streaming division of Warner Bros. Discovery after Paramount Skydance submitted a higher offer of $31 per share, and Netflix received a $2.8 billion compensation fee.

Netflix shares ended yesterday at $93 with a market capitalization of $394.18 billion. This puts the stock in a 52-week range of $75.01 to $134.12.

Netflix boosts pricing power in competitive environment

The higher prices show Netflix's perceived "pricing power" relative to rival services, with the company, which has more than 325 million customers at the end of 2025, expecting increased revenue per subscriber to make up for the eventual exodus of some of its clientele.

The price increase represents an average 11% increase across Netflix's product offerings, according to TD Cowen analysis. With the new prices, average revenue per subscriber in the US and Canada will increase by 6% year-on-year.

This puts Netflix among the streaming services that have systematically increased prices in recent years. Most of the major streaming services have been increasing in price in recent years in an attempt to achieve the difficult-to-achieve profitability of subscription services.

What price increases can bring

1) Optimistic scenario - most subscribers will stay

In the optimistic scenario, management's thesis that Netflix has "pricing power" will be confirmed and customer churn will remain minimal. For example, if 90% of US subscribers accept the price increase and 10% leave or switch to a cheaper plan, the higher ARPU would still lift revenues in the region by several percentage points above current estimates on a net basis. In this case, the price hike would help to achieve the top end of the $51.7 billion outlook without significantly impairing profitability or engagement. This would confirm that Netflix has definitively gone from a pure growth story to a "pricing power" business akin to cable or premium TV channels.

2) Medium scenario - some subscribers will leave, but ARPU will make up for it

More realistic is the middle scenario, in which the price increase will cause a more noticeable subscriber churn, but higher prices will partially offset it. Imagine 20-25% of US users either canceling their subscription, switching to a cheaper plan, or sharing their account more. With an average 11% price increase and roughly 6% ARPU growth in the US/Canada, total revenues in the region could still remain slightly higher than in 2025, albeit below the high end of the corporate outlook.

Higher revenue per subscriber, higher share of ad-supported plans, significantly higher monetization for those who stay. For the stock, this may mean that the market stops seeing price through the number of users and focuses more on margins, ARPU and free cash flow.

3) Pessimistic scenario - a larger proportion of subscribers will cancel their subscriptions

In the negative scenario, price increases cross the psychological threshold, especially for the standard plan without ads, which has swung above $20, and the premium plan approaching $27. If, for example, a third of subscribers in the most expensive segments left, or a significant portion switched to a cheaper plan with ads, Netflix could see its advertising revenue component grow, but overall subscription revenue would fall short of its $50.7-51.7 billion target.

In that case, the company would appear to be hitting the limit of households' willingness to pay more money for streaming in an environment where almost everyone is getting more expensive. The "pricing power" narrative would get a crack, and investors would start to re-price Netflix more as a cyclical consumer title dependent on household wallets than as a "must-have" digital service with unlimited pricing power.

Caterpillar shows no signs of stopping; year after year it delivers great results and its stock performance is solid. It's a cash machine and I don't see much reason why its growth should slow down significantly. The shares have been rising over the long term and major drawdowns aren't very common, so I'm thinking about buying even at the current price.

Looked at in context, though, this looks more like a classic overreaction to a complex research update than the start of a new downcycle. TurboQuant is an early stage algorithm aimed mainly at making inference more efficient on conventional DRAM, while the structural story in high bandwidth memory, the stacked chips bolted next to GPUs and critical for training large AI models, is still defined by tight supply, rising demand and full order books at the key suppliers.

Breakthrough technology sparks market panic

Google Research $GOOG has unveiled a new memory compression algorithm called TurboQuant , which researchers say can compress key cache memory used in large language models at least six times faster with up to eight times faster inference, without sacrificing accuracy .

The market reaction was immediate and dramatic. On Thursday, shares of the world's two largest memory chip makers, SK Hynix and Samsung $SSNLF, fell 6% and nearly 5% respectively in South Korean trading. Samsung Electronics closed down 4.71%, while SK Hynix fell 6.23%, pulling the South Korean benchmark KOSPI index down 3.22% .

A similar trend continued in the US markets, where shares of companies such as Micron Technology $MU, which fell 7% , and SanDisk $SNDK, which fell 6.8% . These moves followed declines in SanDisk and Micron shares in the US on Wednesday .

How TurboQuant works and why it scares investors

TurboQuant represents a revolutionary approach to solving one of AI's biggest bottlenecks - the enormous memory requirements during inference operations. TurboQuant is a compression method that achieves high model size reduction with zero loss of precision, making it ideal for supporting both key cache (KC) compression and vector search.

The technology works in two phases. The first phase uses PolarQuant, which thinks about mapping high-dimensional space differently. Instead of using standard Cartesian coordinates (X, Y, Z), PolarQuant converts vectors into polar coordinates consisting of a radius and a set of angles. The breakthrough lies in the geometry: after random rotation, the distribution of these angles becomes highly predictable and concentrated.

The second phase acts as a mathematical error corrector. Even with the efficiency of PolarQuant, a residual amount of error remains. TurboQuant applies a 1-bit quantized Johnson-Lindenstrauss (QJL) transformation to this residual data.

The actual market impact remains a question

Despite the immediate market reaction, analysts caution against exaggerated concerns. Ray Wang, a memory analyst at SemiAnalysis, said Google's research won't necessarily lead to the need for fewer chips. Cache values are "a key bottleneck that needs to be addressed for better models and hardware performance," he said. Wang said it will be "hard to avoid higher memory consumption" as a result of improving the performance of models .

It is also important to distinguish between different types of memory. It should be noted that compared to standard DRAM chips, this technology will have less impact on HBM (High Bandwidth Memory). TurboQuant is mainly used to optimize the inference of AI models, a phase that mostly requires only ordinary DRAM chips. However, HBM remains a necessity in the AI training phase.

According to a CNBC report, despite Thursday's stock drop, a perfect storm of factors continues to support the memory market over the long term. Significant demand coupled with supply shortages pushed memory prices to unprecedented levels and supported gains for Samsung, SK Hynix and Micron .

Structural fundamentals remain solid

It is also key to remember that TurboQuant is still only a research project. It is worth noting that TurboQuant has not yet been deployed on a larger scale; it is still a laboratory breakthrough at this time. This makes comparisons to something like DeepSeek, or even the fictional company Pied Piper, more difficult.

Data shows that the HBM market size will grow 58% to $54.6 billion in 2026, accounting for nearly 40% of the DRAM market. The sudden increase in demand has led to an imbalance between supply and demand. Despite Samsung, SK Hynix and Micron allocating 70% of their new/additional capacity to HBM, there remains a 50-60% capacity gap for HBM.

According to Wells Fargo analysts, the Google TurboQuant update could actually be a positive for memory companies. Although this kind of breakthrough might look negative for memory companies, the idea of the Jevons paradox suggests that the opposite can happen - making AI more efficient reduces costs, which can actually encourage much wider use and demand .

Structural drivers tied to AI infrastructure, supply constraints and tight HBM markets support a resilient long-term outlook. Investors should distinguish between short-term noise and fundamental trends anchored in persistent memory shortages and AI workload expansion .

For a long term investor, the question is not whether the story sounds exciting, but whether the current price already assumes too much. That means looking beyond headlines to growth rates, capacity build‑out, regulatory decisions and the rest of Lilly’s pipeline to see how much of future cash flow really comes from obesity and how much from other areas. Only vdetailní analysis of these moving parts can show whether Lilly is genuinely the best positioned big pharma name for the next 5 to 10 years, or whether expectations have pulled too far ahead of fundamentals.

Top points of analysis

• Lilly achieved record revenues of $65.2 billion in 2025 (+44% YoY), with tirzepathide (Mounjaro + Zepbound) contributing $36.5 billion, more than 56% of total revenues.

• Q4 2025 delivered revenue of $19.3 billion (+43% YoY), adjusted EPS of $7.54 (8.7% above consensus), management issued 2026 guidance for revenue of $80-83 billion and non-GAAP EPS of $33.50-35.00.

• Mounjaro (diabetes) generated roughly $23 billion in 2025 (+99% YoY), while Zepbound (obesity) added another $13.5 billion (+175% YoY), both figures well ahead of analyst estimates.

• The historic agreement with the Trump administration and Medicare brings GLP-1 drug coverage to millions of new patients at a copay (fixed amount) of $50 starting in July 2026, one of the biggest demand expansion catalysts in Lilly's history.

• Lilly has invested over $18 billion in manufacturing capacity (US, Ireland, Germany, China) since 2020, with the new $9 billion Indiana plant being the largest single investment in drug synthesis in US history.

• Valuation matches "premium growth" status: forward P/E of around 28-30× on 2026 EPS, analysts estimate growth of $1,260-$1,500.

What's changed: from mediocre pharmas to the most well-supplied obesity bet

Back in 2021, Lilly $LLY was a solid dividend title with a diversified portfolio (insulin, oncology, immunology, neuroscience) but no clear "next big thing". The breakthrough came with the results of the clinical program of tirzepathide, which was the first ever to combine both GIP and GLP-1 receptor agonism and achieve +20% weight reduction in obese patients in the SURMOUNT-1 trial - numbers that previous generation drugs (GLP-1 monotherapy like semaglutide) were unable to achieve.

Zepbound received FDA approval in November 2023 for obesity and Mounjaro was approved for diabetes back in 2022. Since then, Lilly has essentially been out of production. Demand has outstripped capacity, the stock has become one of the most followed titles on Wall Street, and management has reframed the entire industry around one thesis: obesity as a treatable chronic disease, not a cosmetic problem.

The deal with the Trump administration in November 2025 was a watershed moment not only from a medical perspective but also from an investment perspective. For the first time in history, Medicare agreed to cover GLP-1 drugs for obese patients (not just diabetics), opening access for an estimated tens of millions of previously uncovered patients in the US. Implementation is planned to begin in July 2026, when the "GLP-1 payment demonstration" model begins, and transition to a more permanent balance model in 2027.

What needs to work for this to work

• Mounjaro and Zepbound must maintain dominant market shares despite increasing pressure from Novo Nordisk and others.

• Oral GLP-1 orforglipron must get regulatory approval and establish itself as an alternative to injections.

• The Medicare deal must actually generate new patient volume and not just shift existing payments to lower prices.

• Manufacturing capacity must ramp up fast enough that Lilly does not lose share due to the unavailability of the drug.

• Retatrutide and other pipeline must deliver positive clinical data and perpetuate the "next big thing" story after tirzepatide.

How does that become money

1) Tirzepatide as a global bestseller - now and historically

Tirzepatide (Mounjaro + Zepbound) exceeded $24.8 billion in sales in the first 9 months of 2025, surpassing Keytruda (Merck's $MRK pembrolizumab ) as the world's best-selling drug in the period under review. This is an extraordinary fact: a drug that has been on the market for less than 3 years has reached the top of the global pharmaceutical ranking.

Projections to 2030 envisage tirzepathide sales of around USD 62 billion per year if the combination of Mounjaro (T2D) and Zepbound (obesity + new indications) continues to grow. This assumes maintaining about 58% market share in the US in GLP-1 prescribing, which Lilly currently holds, and expanding into new geographies (China, Japan, Europe).

2) Medicare deal as a demand gamechanger

Until November 2025, Medicare coverage of GLP-1 drugs for obese patients was minimal or non-existent - the 2003 Medicare law explicitly excluded drugs for "lifestyle" conditions. Trump's deal with Lilly and Novo Nordisk effectively circumvents this rule through a demonstration model: copay $50/month for eligible patients, Lilly agrees to a lower realized price, Medicare pays the rest.

If an estimated 10% of the Medicare population is eligible for GLP-1 coverage (and this number may continue to grow as indications expand), this is additional demand in the order of millions of patients who previously paid out of pocket or did not receive treatment at all. For Lilly, this means potentially hundreds of millions to units of billions of dollars of additional Medicare revenue per year, albeit at a lower unit cost. The exact balance (lower price vs. higher volume) remains to be seen in reality after July 2026, but the logic is clear: massive volume growth.

3) New indications for tirzepathide

Tirzepate is not just a cure for obesity and diabetes. Lilly is actively expanding indications, the most important being:

• Heart failure with preserved ejection fraction (HFpEF) - a huge unmet need in patients where there is not yet a good pharmacological therapy. Positive study results may add millions of potential patients.

• Sleep apnea - FDA recommends Zepbound as a treatment for obstructive sleep apnea in the obese - was approved in 2024, making Zepbound the first approved pharmacological treatment for this condition.

• MASH (NASH, metabolic liver disease) - tens of millions of patients in the US and Europe.

• Prediabetes, cardiovascular prevention - repeated studies show benefits of tirzepatide beyond weight reduction.

Each new approved indication expands the addressable population and reduces the risk of "single-indication" dependence. In particular, HFpEF and MASH are indications where other treatments are virtually non-existent, so Lilly could become a sole or first mover, giving a strong pricing position.

4) Orforglipron - a revolution via the tablet

The biggest debate in the GLP-1 space is whether an oral (tablet) drug can be effective. The current top products (Zepbound, Wegovy) are injectable, which puts off some potential patients and limits penetration in countries where patients refuse or cannot inject.

Lilly'sOrforglipron achieved -12.4% weight loss in 72 weeks in Phase 3 - a figure that is significantly higher than older oral GLP-1 candidates (for example, the semaglutide tablet Ozempic/Rybelsus achieves around -15% at a higher dose but with necessary food intake restrictions).

Nevertheless, orforglipron remains a potentially transformative product because:

• it's a tablet with no restrictions on food or water intake (unlike semaglutide tablet).

• It targets a segment that refuses or cannot inject.

• may dominate in developing countries and Asian markets where injections are less accepted.

Lilly plans a regulatory filing in 2026 and approval is also expected later this year. If the Medicare deal also covers oral GLP-1, orforglipron could catch a wave of new demand immediately after launch.

5) Retatrutide - the "nextgen" tirzepatide with historic numbers

If tirzepatide was a breakthrough, retatrutide is potentially a revolution. It is a triple agonist of GIP, GLP-1 and glucagon - the first such molecule in the clinical pipeline.

In the TRIUMPH-4 trial (phase 3), retatrutide achieved a mean weight reduction of -28.7% at 68 weeks, met all primary and key secondary endpoints, and produced results in pain and physical function in patients with musculoskeletal problems. This figure is higher than anything previously achieved in a clinical programme for the pharmacological treatment of obesity - by comparison, tirzepatide achieves around -20%, semaglutide (Wegova) around -15-17%.

In its Drugs to Watch 2026 report, Clarivate identified orforglipron and retatrutide as "defining next-generation GLP-1 candidates", highlighting the combination particularly in the context of "metabolic innovation beyond replicating existing GLP-1 therapies". If retatrutide makes it through the regulatory process and gets approval, Lilly will have products on the market in three efficacy generations: oral (orforglipron, -12%), injectable tirzepatide (-20%) and ultra-effective retatrutide (-28%). That's a portfolio that no other player in the industry has.

6) Production capacity as a strategic moat

One of the most underappreciated aspects of the Lilly story is manufacturing. GLP-1 drugs are chemically complex and manufacturing intensive - you can't just start "copying" them overnight. Lilly has invested over $18 billion in manufacturing capacity since 2020, with the new Indiana plant alone receiving a $9 billion investment - the largest-ever investment in drug synthesis in the US.

Parallel expansions are underway in Ireland (Limerick), Germany (Alzey), North Carolina and China (Suzhou, +$200 million). This infrastructure creates a real barrier to entry for competitors: even if someone were to announce a comparably effective drug today, it would take them years to build production capacity at a similar level. Lilly is effectively 'closing' the space before the big competitors get there.

The numbers that support this thesis

• Revenues: $34.1 billion (2023) → $45.0 billion (2024) → $65.2 billion (2025), a CAGR of roughly 38% over 2 years.

• Mounjaro: 5.2bn (2023) → 11.5bn (2024) → US$23.0bn (2025, +99% YoY).

• Zepbound: launch November 2023 → USD 4.9bn (2024) → USD 13.5bn (2025, +175% YoY).

• Q4 2025: revenue $19.3bn (+43% YoY), adjusted EPS $7.54 (+42% YoY), beating consensus by 8.7%.

• Q2 2025 gross margin: 85% (non-GAAP), operating margin around 44%, operating profit +63% YoY.

• R&D spending 2025: $13.3bn (+21% YoY), around 20% of sales.

• Outlook 2026: revenues USD 80-83bn (midpoint +25% YoY), non-GAAP EPS USD 33.50-35.00 (midpoint +35% YoY).

• Tirzepatid as the world's #1 bestseller: surpassed Keytruda with USD 24.8bn in the first 9 months of 2025.

• 58% market share in US GLP-1 prescribing (2025).

• Investment in manufacturing by 2020: over $18 billion.

Dividend and financial health

Lilly pays a conservative dividend - payout ratio is deliberately low, with the company prioritizing reinvestment in R&D and manufacturing capacity. The annual dividend is roughly around USD 5-6 per share, so the yield is only 0.5-0.6% at a price of around USD 989 - not a dividend story, but a growth story.

Financial health is solid: gross margin around 85% (pharma products are high margin after fixed costs), operating margin increasing towards 44-45% as sales grow faster than costs. R&D spending of $13.3 billion (20% of sales) is enormous in absolute terms, but necessary in the pharma industry to maintain pipeline.

Free cash flow is very strong and management is using it to:

• reinvestment in production and R&D.

• Acquisitions/partnerships (complementary pipeline).

• Moderate buybacks and dividends.

Valuation - what's included and what's not

Lilly is not a cheap stock even in the most optimistic scenario. Forward P/E on 2026 EPS (~$34) at a price of around $989 implies a multiple of around 29×, well above the S&P 500 average and typical pharmaceutical titles (P/E 15-20×). Thus, the market is paying a large premium for:

• Revenue Momentum: 44% revenue growth in 2025 is not the norm, but the exception.

• Pipeline: orforglipron, retatrutide and new indications of tirzepatide are priced in as likely positives.

• Structural position: dominance in the fastest growing segment of pharma.

To rerate (or maintain) multiples, companies with a P/E of 29× must regularly beat guidance, otherwise there is a "de-rating" effect where even a slight slowdown causes the stock to fall 20-30%.

A basic valuation framework for an investor:

• With EPS 2026 guidance midpoint of $34.25 and P/E 30× → implied value of ~$1,028 (slightly above price).

• At 2027 EPS (guidance around USD 45-50) and P/E 28× → implied value of USD 1,260-1,400.

• At a P/E compression of 20× (scenario where growth slows more significantly) and EPS of 34 USD → risk downside to ~680 USD.

Macro and market

The global obesity epidemic is a structural, not a cyclical trend: 1 billion adults globally now meet clinical criteria for obesity and the numbers are growing. Penetration of pharmacological treatments is still extremely low - estimated at less than 3-5% of eligible patients actually take the drug, although interest is growing. This means that Lilly is operating in a market that is still largely untouched.

The market for GLP-1 drugs is estimated at $157.5 billion today, with Lilly having a market share of around 58% in the US. At 25-30% market share in this market (Lilly vs. Novo Nordisk and new competition), this would imply revenues from obesity and diabetes alone in the tens of billions, which would be only one part of the overall portfolio.

Risks

1) Price pressure

The agreement with Medicare and Medicaid lowers the realized price of GLP-1 drugs relative to the listing price. Zepbound sells for a $50 copay to Medicare patients at a significantly lower price than commercial insurers pay. If similar pricing pressures spread to the commercial market, it could compress margins despite rising volume. This is a key issue for 2026-2027, when the Medicare model rolls out in full.

2) Competition

Novo Nordisk's semaglutide (Wegovy for obesity) is a direct competitor with proven cardiovascular efficacy (SELECT study) and a strong position especially in Europe. Amgen, AstraZeneca, Roche and a number of others have GLP-1 or GLP-1 combination candidates in the pipeline. If any of these candidates achieve efficacy comparable to retatrutide at a lower cost, Lilly's market share could be eroded.

3) Orforglipron expectation gap

While the -12.4% results in Phase 3 were clinically meaningful, the market expected 13-14% and the response was negative. If orforglipron achieves lower adoption after launch than management expects (because patients and physicians prefer the stronger injectable tirzepatide or future retatrutide), the contribution to sales may be lower than projections.

4) Manufacturing and supply chain risks

At $65 billion in revenue, tirzepathide accounts for over 56% of revenue - that's an extreme concentration per molecule and per production line. Any problem at the plants (contamination, natural disaster, regulatory footprint) would have an immediate impact on revenues. Geographic diversification of production (US, Ireland, Germany, China) reduces but does not eliminate this risk.

5) Political and regulatory risk

The Trump administration is now in favor of expanding access to GLP-1 drugs, but the political equation could change quickly. Potential "drug pricing negotiations" under the IRA (Inflation Reduction Act) or pressure on Medicaid rebate structures could affect realized prices in the U.S., a key market for Lilly.

Checklist of risks

• Significant compression of realized prices in the U.S. following the rollout of the Medicare model.

• Entry of a strong new competitor with better efficacy or a more favorable price tag.

• Lower than expected adoption of orforglipron after launch.

• Manufacturing incident or supply chain issue with tirzepatide capacity.

• Regulatory setback with retatrutide or new indications for tirzepatide.

• Policy change in the US around GLP-1 pricing or access.

Investment scenarios

Optimistic scenario

In the optimistic scenario, Lilly executes on all fronts. Tirzepate maintains dominant market share, Medicare deal generates massive new volume, orforglipron makes inroads as an oral alternative, and retatrutide gets approval for obesity by 2027-2028.

• 2027 revenues: $90-95 billion.

• Non-GAAP EPS 2027: around US$45-50.

• Valuation: P/E 32-35× → share price $1,440-1,750.

• Annual return from today's price: around 15-18% per year.

Realistic scenario

Lilly delivers solid numbers, but faces increasing competition, modest price compression from Medicare, and orforglipron reaches moderate adoption. Retatrutide is in registration or early launch phase.

• 2027 revenues: $80-87 billion.

• Non-GAAP EPS 2027: around $40-45.

• Valuation: P/E 28-32× → share price $120-1,440.

• Annual return from today's price: about 7-12% per year.

Pessimistic scenario

Medicare pricing pressure seeps into the commercial market, orforglipron disappoints, competitive pressure builds, and the pipeline hits a regulatory slowdown. Revenues stagnate around $75-80 billion.

• Non-GAAP EPS 2027: around USD 30-35.

• Valuation: P/E compression at 20-25× → share price of USD 600-875.

• Downside from today's price: -10% to -40%.

• This is a scenario where "premium valuation" hints at slowing growth.

What to watch next

• Mounjaro and Zepbound quarterly earnings - maintaining momentum is key to 2026 outlook.

• Details of Medicare GLP-1 model launch in July 2026, especially new patient volume vs. impact on realized prices.

• Regulatory filing and timeline for orforglipron approval (expected 2026).

• Phase 3 data on retatrutide for other indications and potential submission to FDA.

• Study results for HFpEF (heart failure) and MASH as new indications for tirzepatide.

• Competitor development - especially pipeline Novo Nordisk (cagrisema), Amgen and new entrants.

• Management comments on manufacturing capacity and ability to meet demand in 2026-2027.

• Developments in the policy environment around drug pricing in the US (IRA, Medicaid rebate).

What to take away from the article

• Lilly is the best-stocked pharma company in the obesity space today with tirzepatide dominance, a rich pipeline and massive manufacturing investment as a moat.

• The numbers for 2025 are extraordinary, $65.2 billion in revenue (+44%), but the outlook for 2026($80-83 billion) shows the story doesn't end there.

• The pipeline in the form of orforglipron (oral GLP-1) and retatrutide (-28.7% weight, triple agonist) gives Lilly the potential to dominate the obesity market over the next decade.

• The Medicare deal from July 2026 is the largest structural demand catalyst in the history of the GLP-1 segment.

• Valuation is challenging (forward P/E ~29×) but consistent with "high visibility growth" status. The main risk is P/E compression in a slowdown, not the fundamental breakup of the business.

• For an investor looking for a company with a visible 5-10 year growth story in one of the biggest healthcare trends of the generation, Eli Lilly remains the most compelling bet in the obesity space despite its premium valuation.

When the story overcomes reality

The year 2021 has been a dream come true for a certain category of stocks. Pandemic created a seemingly ideal environment for companies offering virtual fitness, telehealth, game engine or augmented reality technologies. Low interest rates reduced the discount rate on future earnings to a minimum, allowing extreme valuations for companies whose profits were years away. Investors were paying astronomical multiples for the mere promise of what could be.

Then came the turnaround. Rates began to rise, the pandemic premium began to fade, and the market began to demand concrete results instead of grand visions. The result has been declines unprecedented in history. Slump percentages are not mere statistics; they are a memento mori for anyone who buys purely on the basis of story without regard to valuation.

At the same time, it does not automatically mean that these companies have no investment value. The question that more and more analysts are asking today is different: is there a real catalyst for a comeback in any of these companies, or is it a value trap where the cheap price beckons but the fundamentals don't justify it?

Vuzix Corporation $VUZI

From the hype of AR glasses to reality

Vuzix Corporation is one of the pioneers of industrial smart glasses and augmented reality technologies for the enterprise segment. The company offers products such as the M-Series or Vuzix Shield that find applications in logistics, medical, defense, and industrial manufacturing. On paper, the business model is solid: it sells hardware to companies that integrate it into operational processes where it increases efficiency. The problem is that this vision has hardly been reflected in the numbers so far.

In April 2021, VUZI's share price hit an all-time high of around $32.43 apiece. Back then, the hype around AR technology was at its peak and investors believed that smart glasses were the next big hardware segment to replace smartphones in industrial settings. The reality is markedly different.

The company's quarterly revenue is around $1 million and the company reports negative EPS every quarter. Net losses exceed sales. The market capitalization today stands at $200 million, and the firm has no dividends and hedge funds hold zero stake in it. A negative EBITDA margin exceeding 450% is unique even by the standards of technology startups.

Where are the bright spots

There are some positive signs. Vuzix has entered into a strategic partnership with Taiwan's Quanta Computer, one of the world's largest ODM electronics manufacturers. In February 2026, it received new FCC and CE certifications for the LX1 model of smart glasses, opening the door for the company to further commercial deployment. The company holds over 246 patents and pending patents in the area of waveguide optics, a key technology for future next-generation AR headsets. The partnership with Garmin $GRMN to develop nanoscale optical projection systems also indicates that the company has customers in the premier league.

However, competition is strong. Meta Reality Labs, Apple Vision Pro, and new projects from Google are competing for the same segment, with multiples larger R&D budgets. It is structurally very difficult for a small company with revenues of a few million dollars to compete with these giants.

Overview of key metrics

Peloton Interactive $PTON

From pandemic star to giant drop

The story of Peloton is perhaps the most dramatic example of how quickly sentiment can turn. The company, which makes premium bikes and treadmills with a connected streaming ecosystem of trainers, experienced explosive growth during the pandemic. Investors have been snapping up shares of the company, whose revenue has been growing at triple-digit rates. At its peak in January 2021, the stock traded over $171. Today, they are trading around $4, down more than 97%.

The decline is due to a combination of factors that reinforce each other. Consumers stopped buying home fitness equipment after pandemic restrictions were eased. Demand for the expensive $1,500 bikes the company sells has plummeted. But in the meantime, the company invested massively in production and expanded capacity, leading to a huge inventory surplus. The company's operations swallowed up a cumulative total of over $2.7 billion between 2021 and 2024.

There were product sales at reduced prices, layoffs, CEO replacements, and founders leaving. Each of these moves dealt another blow to the stock price. A company that appeared to be the definitive winner of the pandemic fitness trend has turned into a cautionary tale for investors.

Is there a realistic recovery scenario?

Yes, there is, but it is very narrow. Peloton has focused in recent quarters on what it can influence: drastic cost cuts and cash flow optimization. In January 2026, the company laid off another 11% of its workforce. This brought it close to positive free cash flow for the first time, reaching $324 million in fiscal 2025. Net debt decreased 52% for the year to about $319 million.

On the other hand, fundamental issues remain. Subscriber numbers continue to decline and have reached a four-year low. Sales in FY2025 were $2.49 billion, down 7.77% year-over-year, and management projects a further decline to about $2.4 billion in FY2026. This is the fifth straight year of declining sales.

The company is expanding into the commercial segment, where it now offers bikes and treadmills for hotels, fitness centers and apartment complexes. Whether the move can stem the erosion of the customer base remains a question mark. The stock is trading at a price-to-sales ratio of around 0.7x today, but analysts say a low valuation without improving fundamentals is not an argument to buy.

Overview of key metrics

Unity Software $U

Game engine seeks comeback via AI advertising

Unity Software is the dominant game engine for mobile and indie games, powering over 70% of mobile games worldwide. The company went public in September 2020 and soon became a favorite of tech-oriented investors. In November 2021, the stock reached an all-time high of over $210. Today, they are around $18, down over 90%.

The road to the bottom has not been a straightforward one. Unity merged in 2022 with ironSource, a controversial mobile advertising platform that caused a massive exodus of developers. In 2023 came the so-called Runtime Fee, a fee charged to developers for each game installation. The community reacted with fury, and many studios began switching to the competing Unreal Engine or other alternatives. Eventually, under pressure, management had to abolish the Runtime Fee. But the reputational damage was palpable.

In May 2024, new CEO Matthew Bromberg, former COO of Zynga, stepped in. His first steps were clear: abolish the Runtime Fee, reduce the workforce by thousands of positions, rebuild trust with the developer community, and emphasize monetization through the AI-powered ad network Unity Vector.

Unity Vector as a key catalyst

Unity Vector is an AI-enhanced mobile ad network that has become a focal point for investors. In January 2026, it reported 72% higher ad revenue year-over-year. Analysts at Barclays $BCS have raised their 2026 growth estimate for the advertising segment to 17%. The Grow Solutions segment's total revenue reached $1.23 billion in 2025, and a potential run-rate of over $1 billion per quarter by the end of 2026 would be transformative for the company. More on Unity's advertising model can be found in their developer documentation.

On the other hand, the Q4 2025 and full fiscal year results were disappointing. Revenue for Q4 was $545 million, only 3% year-over-year, and the outlook for 2026 calls for only 5-7% growth, a dramatic drop from the historical 20% pace. The company is coming from a position of huge reputation loss and the rebuild is taking longer than expected.

The big structural threat is $APP, a direct competitor in mobile advertising that has been significantly outperforming Unity in efficiency in recent quarters. Losing mobile ad market share to Apple and Android games is a real risk that could slow or stop the rebound of Grow Solutions.

Overview of key metrics

Teladoc Health $TDOC

Telehealth giant that failed to deliver on its promises

Teladoc Health is the world leader in virtual healthcare. The company operates two main divisions: Integrated Care, which offers virtual medical consultations and chronic disease management, and BetterHelp, the world's largest online psychological counseling platform. As of February 2021, TDOC's stock price had reached over $308. Today, it is around $5.5, a drop of over 98% from its all-time high.

This dramatic drop is the result of a series of setbacks. The biggest was the acquisition of Livongo Health in 2020 for approximately $18.5 billion, one of the largest health-tech transactions in history. The integration did not succeed to the extent expected and the company subsequently had to book a huge goodwill impairment. Total write-downs over the years exceeded tens of billions of dollars, with the firm coming up with new losses quarter after quarter.

BetterHelp, which was considered the fastest growing part of the business, began to slow down significantly in 2024 and 2025. Revenues in Q4 2025 were down 7% year-over-year, and adjusted EBITDA for the entire segment was down 46% for 2025. The problem is the highly competitive online therapy market, where Hims & Hers $HIMS, Cerebral, and a number of other platforms are outbidding customers through aggressive marketing.

The struggle to stabilise

Management is trying to restructure on multiple fronts. In the Integrated Care segment, it projects 2026 revenue of about $1.61 billion, up slightly year-over-year. The company is expanding its preventive care offerings with the acquisition of Catapult Health in February 2025 for $65 million. Enrollment (number of registrations) in chronic programs (diabetes, hypertension) is also growing, where retention is higher and ARPU (Average Revenue Per User) is more favorable.

However, the overall market dynamics remain a structural problem. The expiring ACA subsidy (health care law) may reduce the number of insureds using telehealth. The outlook for Q1 2026 calls for revenues of $598 million to $620 million, well below the consensus of analysts who were expecting over $633 million. Overall guidance for FY2026 (EPS of -0.70 to -1.10) was weaker than market expectations. As a result, Leerink Partners lowered its February 2026 target price from $8.50 to $5.50.

The firm's market capitalization has fallen below $1 billion.

Overview of key metrics

Comparison Table: Four bubbles that popped

A summary of key data for all four firms:

Strategic view

Looking at these four companies as a whole reveals one key lesson about investing: valuation at the time of purchase is arguably the most important factor in long-term performance. All four firms had compelling businesses in real and growing market segments. The issue was not what the companies did, but what their shares sold for years ago.

At the height of the hype, investors were paying for valuations that implied decades of flawless execution without any problem. Once reality set in, it wasn't just revenues or profits that fell, but more importantly, reassessed valuations, causing declines that multiplied for both factors.

For conservative investors, these stocks are more of a cautionary tale than an opportunity. For speculative-oriented players with a high tolerance for risk and the ability to react quickly to changes in fundamentals, Unity $U in particular may offer asymmetric opportunities, but only with great respect for positional risk and stop-loss discipline.

What to watch next

• $VUZI: Orders from Quanta Computer and commercialization of the LX1; development of quarterly sales above $2 million would signal real scaling

• $PTON: Declining or stabilizing churn in sub-script base; new commercial segment results (hotels, fitness centers); free cash flow development in FY2026

• $U: Unity Vector's quarterly run-rate to end FY2026; whether it will reach $1 billion in annualized ad revenue; results compare to AppLovin in mobile advertising

• $TDOC: Evolution of BetterHelp enrollment after ACA subsidies expire; adoption of AI-enabled clinical programs at Integrated Care; whether management will deliver on top end guidance in 2026

Final lessons learned

These four companies share a common story: extreme valuations at the moment the story overtook reality, and a subsequent brutal return to basics. For investors, the lesson is clear. No thematic thesis, no structural trend or pandemic premium justifies ignoring valuations at the point of purchase.

The common denominator for those who can survive is discipline. The ability to reduce costs, generate positive cash flow and refocus the business model on segments with real demand. Companies that manage this may never return to their historical highs, but they can offer compelling returns from today's levels. Firms that fail to do this will remain a deterrent from the investing textbooks.