The market reaction, however, is driven by what comes next. Management is signaling an aggressive investment cycle spanning AI chips, data centers, and satellite infrastructure. While strategically logical, this push weighs on near-term free cash flow and raises capital intensity. The investment debate now centers on timing: how long investors are willing to accept weaker cash generation in exchange for future AI-driven growth.

How was the last quarter?

Amazon $AMZN reported Q4 2025 revenue of $213.4 billion, representing 14% year-over-year growth. Adjusted for currency effects, growth was still a solid 12%, confirming that demand remains strong across regions and segments. North America grew sales by 10% to US$127.1 billion, while the international segment grew 17% to US$50.7 billion, with double-digit growth even after adjusting for FX.

The AWS segment was again a key driver of the results, with revenues jumping 24% year-on-year to $35.6 billion. This is the fastest growth rate in 13 quarters and a clear signal that demand for cloud and AI infrastructure is continuing to accelerate. AWS also generated an operating profit of $12.5 billion, a significant improvement from $10.6 billion a year ago.

Amazon's total operating profit reached US$25.0 billion, up from US$21.2 billion a year earlier. Adjusted for one-off items, it would have been as high as US$27.4 billion. Net profit rose to US$21.2 billion, or US$1.95 per share, up from US$1.86 in Q4 2024. Profitability therefore grew across the group, despite pressure on international retail.

• Full presentation with results.

CEO commentary

CEO Andy Jassy called the quarter one of the strongest in the company's history and highlighted that AWS' growth acceleration is a direct result of its long-term investment in innovation. He said that AWS, advertising and retail are benefiting from the rapid deployment of new technologies, particularly in AI, custom chips and automation.

A crucial part of his comments, however, was about the future. Jassy openly confirmed that Amazon is planning capital expenditure of around $200 billion in 2026, mainly in AI infrastructure, data centres, its own Trainium and Graviton chips, robotics and the Leo satellite project. He said these are investments with very high returns over the long term, but also acknowledged that they will be a strain on cash flow in the short term.

Outlook

For the first quarter of 2026, Amazon expects revenue in the range of $173.5 billion to $178.5 billion, implying year-on-year growth of 11-15%. Operating profit is expected to reach $16.5 billion to $21.5 billion, with the mid-point of the range slightly below what the market was expecting. The outlook already explicitly includes higher costs associated with AI infrastructure expansion, rapid delivery and price investments in international retail.

It is this combination of strong revenue growth but pressure on margins and cash flow that is the main reason for the negative market reaction.

Long-term results

A look at recent years shows a significant structural turnaround in Amazon's profitability. Revenues have grown from $469.8 billion in 2021 to $638.0 billion in 2024, with growth rates steady around 10-12% per year. However, the fundamental change has come at the level of operating profit.

While Amazon struggled with a drop in operating profit and margin pressure in 2022, 2023 marked a stabilization and 2024 has already brought a full return of operating leverage. Operating profit for 2024 reached $68.6 billion, nearly doubling year-over-year, and net income jumped to $59.2 billion. This trend continues in 2025, with Amazon reporting full-year operating profit of $80.0 billion and net profit of $77.7 billion.

In the long term, it is evident that AWS has become a steady cash generator, while retail is once again contributing to margins after years of investment. It is this combination that gives Amazon the room to fund an extremely capital-intensive AI cycle.

News

Amazon $AMZN significantly expanded its AI portfolio in the past quarter. AWS has entered into new strategic agreements with dozens of global clients including large banks, technology companies and the public sector. Trainium and Graviton's proprietary chips have achieved a combined annual run-rate of over $10 billion and demand is growing at triple-digit rates.

The company has also introduced next-generation AI agents, expanded the Bedrock platform, launched advanced Nova models, and enhanced AI functionality in e-commerce through its Rufus assistant, which is already generating billions of dollars in incremental sales. These moves confirm that Amazon is not investing in AI defensively, but is looking to dominate the entire value chain.

Shareholder structure

Amazon's stock is heavily owned by institutional investors, who hold approximately 67% of the shares. The largest shareholders are Vanguard, BlackRock, and State Street, which provides high stability in the ownership structure but also increases the stock's sensitivity to changes in cash flow and return on capital expectations.

Analyst expectations

Post-earnings, analysts agree that Amazon's operating performance remains very strong, but see increased risk in the near term in terms of capital intensity. For example, analysts at major US investment banks warn that planned investments of around USD 200bn per year may keep free cash flow under pressure over the next 12-18 months, although long-term return potential remains high.

Target prices are mostly above current market prices, but many analysts are lowering the short-term outlook and shifting the investment thesis more towards a multi-year horizon. The consensus can be summarized as Amazon is seen as one of the major winners of the AI era, but investors must accept a period of lower cash flow visibility and higher stock volatility.

Fair Price

Hi,

Stocks—mostly those of technology companies—have finally corrected a bit after a long time. I’m curious about your approach and how you plan your next steps. Personally, right now I’ll probably wait and save up more capital. At the same time, I’ll slightly trim my positions. For example $MSFT $NVO $BTCUSD $SPGI .....

Which stocks do you have on your radar? Are you planning to make larger purchases?

Investors have grappled with Estée Lauder’s performance as consumer demand patterns shift and costs related to tariffs and restructuring weigh on profitability. Earlier in the session, pre-market futures showed Estée Lauder lagging indices like the S&P 500 and Nasdaq, where EL was down double-digit percentages, underscoring how sharply sentiment has turned.

Key Financial Figures and Demand Weakness

For the second quarter of fiscal 2026, Estée Lauder reported net sales of approximately $4.23 billion, essentially in line with the analyst consensus estimate. Adjusted earnings per share came in at $0.89, slightly above the forecast of $0.84. However, the company’s projected full-year adjusted EPS range of $2.05 to $2.25 sat below the expected midpoint of roughly $2.16, and the sales growth forecast of 3 percent to 5 percent was also modest relative to investor hopes for a more robust recovery.

Tariff pressures were highlighted by management as a factor expected to reduce profits by roughly $100 million in fiscal 2026, mainly in the latter half of the year. Additionally, the company plans to absorb tariff costs that include 35 percent U.S. duties on Canadian imports and 39 percent on Swiss goods, contributing to anticipated margin contraction of about 50 basis points in the next quarter.

Structural Headwinds and Regional Challenges

Underlying Estée Lauder’s struggles are persistent demand weaknesses in key regions like the Americas and Asia Pacific, where consumer sentiment remains fragile and travel retail sales have lagged expectations. Historically, the Asia travel retail channel has been a growth driver for premium beauty brands, but recent data shows ongoing softness and structural changes in that segment, with organic net sales previously declining double digits in the region.

Additionally, broader historical data from earlier quarters showed Asia Pacific revenue declines of 11 percent year-over-year, in part due to weak consumer demand in China, a market that accounts for a high single-digit percentage of Estée Lauder’s global sales.

These regional issues compound more recent concerns. A deeper look at prior fiscal reporting shows organic net sales declines and restructuring actions aimed at transforming the company’s operating model in response to ongoing volatility.

ETF and Sector Impact

Estée Lauder’s sharp drop has had knock-on effects for consumer and luxury goods investment strategies. ETFs with significant exposure to prestige beauty and consumer discretionary stocks such as the Consumer Discretionary Select Sector SPDR Fund (XLY) and iShares Global Consumer Goods ETF (IXG) saw weighted contributions to index volatility as EL’s heavy weighting dragged on sector performance. As a result, some portfolio managers have adjusted sector weightings, hedging luxury and beauty exposure in favor of more defensive consumer staples and healthcare allocations.

In addition, ETFs like the Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD), which treats small and large consumer names more equally, demonstrated relative outperformance compared to cap-weighted indexes that lean heavily on major global brands like $EL.

Analyst Views and Divergent Opinions

Despite the stock’s dramatic fall, some analysts have pointed to possible longer-term value if the turnaround plan gains traction. For example, Deutsche Bank recently raised its price target on EL’s shares to $128, reflecting confidence in the company’s strategic initiatives and profitability improvements beyond the immediate cycle.

Similarly, earlier coverage has shown that analysts at other firms remain constructive on the long term competitive position and brand portfolio, despite acknowledging cyclical weakness in key markets.

What Investors Should Watch Next

Looking ahead, several key indicators will determine whether Estée Lauder’s sell-off reflects a temporary downturn or potentially deeper structural challenges:

Quarterly Sales Trends: Investors will track whether organic sales grow across regions, particularly in Asia Pacific and the Americas, where slow recovery has been a persistent issue.

Tariff and Cost Mitigation Impact: How effectively the company manages tariff pressures and operational costs will influence profit margins and earnings per share.

Brand and Channel Performance: Evaluation of performance across portfolio divisions — skin care, makeup, fragrances and travel retail will signal broader consumer demand dynamics.

ETF Sector Flows: Continued flow data from consumer discretionary and luxury ETFs can signal whether broader investor sentiment is shifting away from prestige brands toward defensive categories.

Estée Lauder’s recent stock slide underscores the tension between near-term macro and regional headwinds and the company’s broader portfolio strength and strategic initiatives. The weeks ahead will likely be critical for investors weighing short-term volatility against potential longer-term turnaround opportunities.

At the same time, however, the results reveal a weaker part of the investment story - profitability. Although non-GAAP EPS grew slightly year-over-year, net income and GAAP EPS both declined, and the outlook for the next quarter anticipates a noticeable decline in earnings due to memory constraints in the smartphone supply chain. So the market got a combination of strong headline numbers and a cautious outlook, which typically leads to a choppy stock reaction.

How was the last quarter?

Qualcomm posted record revenue of $12.25 billion in the first fiscal quarter of 2026, up 5% year-over-year. On the surface, this is a solid result, but the structure of the growth is more important than the number itself. While revenue grew, GAAP net income fell 6% to $3.0 billion and GAAP EPS declined from $2.83 to $2.78. The non-GAAP view is slightly more favorable - adjusted EPS rose 3% to $3.50, suggesting that the pressure on profitability is largely related to one-time items and cost structure.

The QCT segment remains a key growth driver, generating $10.6 billion in revenue, or roughly 87% of the company's total revenue. QCT grew 5% year-over-year, while segment profitability remained strong, with QCT EBT margins of approximately 31%. The traditional handset business added only 3%, confirming that smartphones are no longer a growth driver, but rather a stable source of cash flow.

On the other hand, the automotive segment delivered a significantly positive surprise, with sales up 15% to USD 1.1 billion, marking the second quarter in a row that Qualcomm has surpassed the USD 1 billion mark. The IoT business added 9% to USD 1.69 billion, confirming that industrial and embedded applications are starting to play an increasingly important role. QTL's licensing division grew faster than QCT, up 6%, and its EBT margin further improved to 77%, stabilizing the group's overall profitability.

A significant signal of capital discipline is the return of cash to shareholders. Qualcomm returned $3.6 billion to investors in the quarter alone, including $2.6 billion in buybacks and nearly $1 billion in dividends, underscoring the company's strong cash-flow position.

• Full presentation with results.

CEO commentary

Cristiano Amon' s comments highlighted that Qualcomm is experiencing growing momentum in the personal, industrial and "physical AI" areas. He said the results are proof that the strategy of diversifying beyond smartphones is working, especially with strong traction in automotive customers and industrial applications. However, he also openly pointed to short-term issues in the handset segment, where memory constraints and related pricing pressures are hampering demand from some device makers.

The acquisition of Alphawave Semi is also an important strategic move, which Amon called an acceleration of Qualcomm's expansion into the data center space. This is a clear indication from management that the company wants to be relevant in the long-term in the AI infrastructure layer, not just on the end-device side.

Outlook

The outlook for the second fiscal quarter of 2026 is cautious and represents a major source of investor nervousness. Qualcomm expects revenue in the $10.2-11.0 billion range, a sequential decline from record Q1. QCT is expected to be in the $8.8-9.4 billion range, while QTL is expected to add $1.2-1.4 billion.

Profitability is expected to decline significantly in the short term. Non-GAAP EPS is only expected to be in the range of USD2.45-2.65, noticeably below Q1's USD3.50. Management explicitly states that this decline is due to memory constraints in the smartphone supply chain and related price and volume adjustments at key customers. On the other hand, Qualcomm confirms that long-term targets through fiscal 2029 remain unchanged, suggesting that management views the current weakness as temporary.

Long-term results

A look at the last four fiscal years shows that Qualcomm is going through a significantly cyclical period, but at the same time is able to quickly restore growth. After a record year in 2022, when revenues reached about $44.2 billion, came a sharp decline to $35.8 billion in 2023, driven by a global downturn in demand for consumer electronics and a correction in handset segment inventories.

The year 2024 marked a turnaround, with sales rising to US$39.0 billion, and in 2025 Qualcomm accelerated growth again to US$44.3 billion, a near return to all-time highs. Importantly, growth is no longer driven solely by smartphones, but increasingly by automotive and IoT, which are less cyclical and have longer contract visibility.

Profitability is more volatile. Net profit in 2025 has fallen to $5.5 billion, down significantly from $10.1 billion in 2024. However, this decline is largely due to the extreme increase in tax burden, not the collapse of the operating business. In contrast, operating profit is up 23% to US$12.4 billion in 2025, confirming that the core business remains strong.

The continuous decline in the number of shares outstanding is also a positive long-term trend, supporting EPS in growth years and dampening its decline in leaner years. EBITDA increased to $14.9 billion in 2025, indicating solid cash-flow generation even in a less favorable fiscal year.

News

The most significant strategic news of the quarter was the completion of the Alphawave Semi acquisition, which strengthens Qualcomm's position in high-speed interfaces and data centers. This transaction clearly fits in with the company's efforts to expand its footprint in AI infrastructure and reduce reliance on the handset cycle.

Another important point is the record performance of the automotive segment, where Qualcomm further consolidates its position as a key supplier of chips for infotainment, ADAS and connectivity. It is this segment that is often seen by investors as a long-term valuation stabilizer.

Shareholding structure

Qualcomm has a very stable institutional base. Approximately 82% of shares are held by institutional investors, with Vanguard, BlackRock and State Street being the largest shareholders. The low insider stake confirms that the title is primarily held by long-term funds, which typically reduces extreme volatility but also implies sensitivity to changes in the outlook.

Analyst expectations

Analysts agree in their assessment that the short-term outlook is weaker, but the long-term story remains attractive. For example, investment bank JPMorgan maintains an Overweight recommendation on the stock, arguing that the current pressure on EPS is temporary and that automotive and AI infrastructure will be key growth pillars in the coming years.

Fair Price

Management is explicitly framing the strategy as a turnaround, a notable shift for a company long viewed as defensive and mature. The plan rests on three pillars: aggressive operating cost reductions, a renewed push for customer growth, and a recalibration of investment priorities following the Frontier integration. The investment case now hinges on whether these levers can sustainably improve cash flow, protect the dividend, and reshape valuation expectations.

Top points of the analysis

• Verizon openly admits it is in the midst of a turnaround story, not a cosmetic optimization.

• The $5 billion OpEx savings target in 2026 is structural and changes the company's cash-flow profile.

• The acquisition of Frontier shifts Verizon from price wars in mobile to a converged mobile + optics model.

• The significant reduction in CapEx creates room for higher free cash flow, buybacks and a stable dividend.

• Ambition of up to 1 million postpaid net adds in 2026.

• Execution remains the biggest risk : frontier integration and network quality.

• If the plan works out, Verizon could once again become an attractive cash-flow headline.

The $5 billion in savings: why it's not cosmetics, but structural change

The announced goal of generating $5 billion in savings in 2026 is one of the most important points of the entire presentation. These are not one-off cuts, but a deep intervention in the way the company operates. Management talks about reducing headcount, eliminating duplication after acquisitions, rationalizing the real estate portfolio, rethinking marketing spend and renegotiating supplier contracts harder.

Importantly, these savings are not pitted against growth, but are intended to fund it. Verizon has long struggled with the problem that high costs have stifled its ability to respond to competition without destroying margins. If the $5 billion in savings can actually be realized, it will create room for investment in customer experience, technology and targeted marketing - without hurting profitability.

Moreover, it's not just about 2026. Management openly talks about "three waves of efficiency " - organizational, complexity simplification and automation. This suggests that savings are not a one-time goal, but a long-term change in the company's DNA. This is what is key for an investor: the ability to generate higher EBITDA on like-for-like sales.

Frontier as a strategic breakthrough: optics instead of chasing the 5G illusion

The integration of Frontier fundamentally changes Verizon's investment story $VZ. The company is taking it to more than 30 million fiber passings (the total number of residential or business sites) and openly targets 40 to 50 million in the medium term. This is a dramatic shift from the past, when Verizon was seen primarily as a wireless carrier dependent on price wars.

Optical infrastructure has completely different economics than the mobile business. Lower churn (customer churn), higher customer lifetime value, better upsell opportunity, and lower long-term operating costs. In addition, management has raised its estimate of run-rate synergies to more than $1 billion per year by 2028, double the original plan. This is not just an accounting effect - it is a real cash flow improvement.

The change in CapEx profile is also fundamental. Verizon plans to invest $16-$16.5 billion in 2026, roughly $4 billion less than the combined CapEx of Verizon and Frontier in 2025. In other words: more infrastructure, less investment. This is exactly the type of transition that long-term investors in telcos want to see.

Customer growth: why 1 million postpaid net adds is not an unrealistic goal

A target of 750,000 to 1 million postpaid phone additions in 2026 looks ambitious at first glance - especially when compared to 2025. But management makes it clear that this is not an aggressive promotional strategy, but a combination of churn reduction and better service convergence.

The key is simple math: if Verizon reduces churn by just 5 basis points, it is already "halfway" to the goal, according to management. This is important because reducing churn is much cheaper and better quality growth than chasing new customers with high incentives. In addition, the convergence of mobile and broadband - now over 16 million broadband customers - is increasing loyalty and lifetime customer value.

The Q4 numbers are a positive sign: 616k postpaid phone net adds and 372k broadband net adds, the best volumes in six years. This in itself does not indicate a sustained trend, but it does show that the changes in supply and execution are starting to work.

AI-first Verizon: buzzword or real shift?

The statement that Verizon wants to become an "AI-first company" may sound marketingy. But in the context of the whole conversation, it fits into a broader logic: automation, cost reduction and improved customer experience. It's not about developing proprietary AI models, but about deploying AI into operations - network management, customer support, churn prediction and offer personalization.

If Verizon can truly use AI to reduce operating costs and churn, it has a direct impact on EBITDA and FCF, not just investor presentations. This is where the credibility of the whole "turnaround" story will be broken.

What's in the share price today - and where the real growth potential may lie

From a stock investor's perspective, the critical distinction with Verizon Communications is what the market already believes in Verizon and what it doesn't yet appreciate. The current share price reflects a rather cautious to skeptical scenario in which cash flow improves, but growth remains limited. It is in this gap between expectations and potential reality that the investment asymmetry arises.

The market today is essentially counting on the wireless business remaining structurally weak. Wireless service revenue is seen as more or less flat in projections for 2026, and the ambitious target of up to 1 million postpaid net adds is taken as an upper bound rather than a baseline scenario. In other words - the market does not yet "trust" Verizon to return to customer base growth, but rather to stabilize after previous years of disappointment.

Similarly with the announced savings. The $5 billion OpEx savings is seen by the market primarily as a necessary cost structure recovery, not as a source of future growth. These savings are now seen more as a way to protect the dividend and stabilize free cash flow, not as a catalyst for re-rating valuations. That said, a positive surprise in a foreclosure can have a bigger impact on a stock than it first appears.

Conversely, the least appreciated element of the story remains the post-Frontier integration optical infrastructure. While the market is taking note of the CapEx reduction and synergies, it is not yet fully appreciating the changing economics of the business. Fiber has lower churn, higher lifetime value and better service bundling options. If Verizon is able to systematically increase fibre penetration and bundle it with mobile tariffs, the quality of the entire customer base, not just the size of it, may gradually improve.

Growth projections: where Verizon can realistically improve numbers

In the short term (12-24 months) we cannot expect dramatic revenue growth. The real room for improvement lies elsewhere - in margins, churn and capital efficiency. If Verizon delivers on its planned CapEx reduction to roughly $16-16.5 billion per year while maintaining operating cash flow around $37 billion, free cash flow can move sustainably above $22 billion per year. This is a level that is no longer just "defensive" but creates room for active capital allocation.

In the medium term (2027-2029), growth in the quality of returns, not their volume, becomes the key factor. If it can reduce churn by a few basis points and increase mobile + broadband convergence, Verizon can achieve modest but steady service revenue growth in the range of 1-2% per year. In the context of the telecom sector, that's no small feat - especially if the growth is accompanied by improving margins.

In the long term, then, the potential lies primarily in a gradual shift in the market's perception of the company. Verizon is now valued not as a growth title, but as a highly leveraged telco with a dividend. If it becomes a company with lower CapEx, stable customer base growth, and predictable cash flow, there may be a gradual re-rating of valuation - not by leaps and bounds, but gradually as plan execution is confirmed.

Investment scenarios: how the Verizon story may evolve

Optimistic scenario: the turnaround is real and the market will start to price it in

In the optimistic scenario, Verizon Communications manages to meet most of its stated objectives. The OpEx savings of $5 billion will translate into EBITDA faster than the market expects, and Frontier will start to generate visible synergies. Churn will be reduced, convergence of mobile and broadband will improve the quality of the customer base, and a target of around 1 million postpaid net adds will prove achievable without disruptive promotions.

In this scenario, free cash flow could sustainably exceed USD 22 billion per year, leading to greater flexibility in capital allocation. The market would gradually stop perceiving Verizon as a stagnant telco and start valuing it as a stable infrastructure with moderate growth. The result would not be explosive share price growth, but a gradual re-rating of valuation and a solid total return combining dividend, buybacks and modest share appreciation.

Realistic scenario: better cash flow but no dramatic growth

The realistic scenario assumes that Verizon will meet some of its targets, but the pace of turnaround will be slower. Savings are realized, CapEx remains in check and Frontier is gradually integrated, but churn remains higher than management would like. Customer growth will be more at the lower end of the outlook and wireless revenues will remain more or less flat.

In this scenario, Verizon operates as a very stable dividend title that generates strong cash flow but does not offer significant growth. The stock is trading in a relatively narrow range and the bulk of the yield comes from the dividend and modest buybacks. For conservative investors, this is a defensive portfolio anchor, not a growth story.

Pessimistic scenario: foreclosure fails, turnaround delayed

The pessimistic scenario occurs if Verizon encounters problems integrating Frontier, churn remains elevated, and planned savings prove difficult to realize without negatively impacting the customer experience. Competition could intensify pricing pressure and management would be forced to resort to costly promotions again.

In such an environment, while Verizon would remain cash-flow positive and able to pay a dividend, the investment story would revert to a perception of "long-term stagnation." The stock could become a dividend trap with limited upside potential and higher sensitivity to macro and interest rates.

What to take away from the article

• Verizon speaks the language of execution, not promises, for the first time in years

• $5 billion in OpEx savings and lower CapEx fundamentally changes cash-flow dynamics

• Frontier's strategic shift to a lower churn, higher customer value model

• Customer growth is worth more in reduced churn than in marketing incentives

• The biggest risk is not debt, but the ability to complete the operational transformation

• If the plan succeeds, Verizon could return to being an attractive infrastructure dividend stock

From an investment perspective, Verizon today stands not on the cusp of a growth cycle, but at a point where it is deciding whether to become a stable infrastructure cash-flow title - or just another telco that cheaply traded CapEx for stagnation.

Which stock have you had the biggest loss on so far this year?

The significant weakening of the US dollar that we have seen in recent months is not a random phenomenon, but part of a broader macroeconomic transition. The currency market, which often acts as one of the most sensitive indicators of global tensions and investor expectations, is sending a clear signal today. The dollar's dominance is coming under pressure and capital is beginning to spill over in a different direction. We'll break down the actual developments later in this article, but it's worth looking at the chart to think about when this move began. Yes, it was at the turn of 2024 and 2025 when Donald Trump took power in the US. Therefore, this movement is based on a combination of monetary policy, divergent economic growth rates, interest rate changes, geopolitical expectations and the new government in the United States.

From the point of view of European investors, the situation is all the more interesting because the weakening of the dollar comes at the same time as the euro and, in particular, the Czech koruna are strengthening significantly. The koruna is reaching its strongest levels against the dollar since 2018, fundamentally changing the balance between the domestic economy, foreign earnings and the real value of investments held in foreign currencies. The specific impacts have been analysed by our team and are detailed in this analysis.

Chart of the CZK/USD currency pair since 2017 (weekly)

A weaker dollar also affects global commodity prices, international trade and capital flows between regions. For US companies, it can mean an improved export position, while for European and Czech investors it may not be so simple. Forex (currency) changes are also often underestimated by many investors, yet can have a significant impact on their investment returns. Find out everything you need to know about this topic and the current situation here.

The impact of a weakening dollar on the economy

The weakening of the US dollar has much deeper economic implications than just the revaluation of currency pairs themselves, and therefore exchange rates, that most of the population deals with when going on holiday. Indeed, the dollar plays a unique role in the global economy. It functions not only as the domestic currency of the US, but also as a major reserve currency, a unit of account for international trade and a key pillar of the global financial system.

As the BIS (Bank for International Settlements) has long pointed out, movements in the dollar often have a stronger impact on the world economy than interest rate changes alone.

Source.

A weaker dollar usually signals a change in investors' expectations of the US economy. In recent months, several factors have combined, according to IMF and OECD analysis:

• Slowing US growth,

• the gradual easing of monetary conditions by the Fed,

• a narrowing interest rate differential (the difference between interest rates in two countries) vis-à-vis Europe and Asia

• the growing willingness of investors to take risks outside dollar assets.

As a result, capital is flowing out of the dollar and weakening against major world currencies.

From a macroeconomic perspective, a weaker dollar eases global financial conditions. As our team's research confirms, a strong dollar acts as a drag on global growth.

• It makes dollar financing more expensive,

• increases pressure on emerging markets

• worsens the availability of capital

Conversely, its depreciation reduces the cost of servicing dollar-denominated debt, which has a positive impact on non-US economies in particular. This is why a weaker dollar is often associated with a rebound in global growth and better performance of risk assets.

For the United States itself, this development has a twofold effect. On the one hand, a weaker dollar supports the competitiveness of US exports and improves the profitability of firms with a high share of foreign sales. On the other hand, it raises import prices and may contribute to a resurgence of inflationary pressures. According to analyses by the Federal Reserve Bank of New York , the weakening of the dollar has a lagged direct effect on the prices of imported goods, complicating the central bank's efforts to keep inflation under control.

From a global perspective, the key point is that a weaker dollar changes the flow of capital between regions. The IMF has noted in its reports that phases of dollar weakness tend to be associated with higher capital flows to Europe and emerging markets. These regions are thus becoming more attractive not only in terms of returns but also in terms of currency risk. This leads to strengthening local currencies, easing financial conditions and often accelerating economic activity. This is of course linked to the growth of stock markets.

European economies, including the Czech Republic, are benefiting from this perspective on several fronts. Stronger currencies reduce the price of imports, especially energy and raw materials, which are priced globally in dollars. According to ECB studies, the weakening of the dollar and the strengthening of the euro have a direct disinflationary effect that can play a significant role in an environment of slowing inflation. This also creates more room for monetary policy manoeuvre and reduces pressure on households and firms that might otherwise face rising prices.

The euro and the Czech koruna: a strong currency as both an advantage and a drag

In the European context, the weakening of the US dollar is quickly feeding through into the strengthening of the euro, and even more so into the currencies of smaller open economies, including the Czech koruna. In periods of a weakening dollar, the exchange rate becomes one of the main channels for the transmission of global financial conditions to the European economy.

A strengthening euro has a double effect for the euro area. On the one hand, it brings a significant disinflationary impulse. As a large part of imports, especially energy, industrial raw materials and some foodstuffs, are priced in dollars, a stronger euro reduces their price in domestic currency. Studies show that exchange rate movements have an impact on inflation in the euro area comparable to that of interest rate changes, with a lag. In an environment of gradually falling inflation, this is a key factor that allows the central bank to ease monetary conditions without the risk of inflationary pressure building up again.

On the other hand, a stronger euro worsens the price competitiveness of European exporters. Export-oriented economies such as Germany or the Central European countries tend to be sensitive to currency appreciation. A higher exchange rate reduces kroner or euro revenues from dollar contracts and can squeeze the margins of firms that do not have a strong enough bargaining position or currency hedge.

In the case of the Czech Republic, this effect is even more pronounced. The Czech koruna has long been perceived as a pro-cyclical currency (it follows the business cycle - it tends to strengthen in times of economic growth and optimism, and weaken in times of slowdown, recession or market stress). As the Czech National Bank has repeatedly stated, the exchange rate of the koruna is one of the most sensitive variables of the Czech economy. Its current strength against the dollar - the strongest since 2018 - is the result of a combination of the global weakening of the dollar, relatively restrictive domestic monetary policy in recent years and the high openness of the Czech economy.

Source.

Evolution of the USD/CZK (red) and USD/EUR (blue) currency pairs since 2005 (weekly)

The strong koruna has been significantly disinflationary for the Czech Republic. The koruna has thus played a key role in taming inflation in recent years through the exchange rate, not just interest rates. In the context of a weakening dollar, this effect is even stronger.

At the same time, however, the strong koruna poses a challenge for Czech exporters, especially for firms linked to dollar markets. The conversion of dollar sales into koruna leads to lower nominal revenues, which can significantly affect economic results in the absence of currency hedging. In the short term, exchange rate movements may have a greater impact on firms' profitability than a change in demand alone.

Thus, from a macroeconomic perspective, both the euro and the koruna benefit from a weaker dollar mainly through lower inflation and easing financial conditions. At the same time, however, pressure on the export sector and on firms with high dollar exposure is increasing. This double effect is crucial to understanding why currency movements cannot be judged as merely good or bad. Indeed, their impact varies substantially across the economy.

Impact on assets

The US dollar's position as the world's dominant currency means that its depreciation has a real impact on global pricing. Most key commodities such as oil, natural gas, industrial metals and precious metals are priced in dollars. The movement of the dollar thus directly affects the nominal prices of these assets, regardless of whether their real supply or demand has changed.

Price per barrel of oil in USD to 2022 (weekly)

A weaker dollar generally has an inflationary effect on commodity prices in dollar terms. The reason is simple: commodities become relatively cheaper for holders of other currencies, which supports demand. Periods of dollar depreciation have historically been associated with rising oil, copper, aluminium and agricultural prices. This effect is amplified when the global economy is not simultaneously entering a deep recession.

Gold and other precious metals have a special position. Gold has long been seen as an alternative currency asset and a hedge against the weakening of fiat currencies. Our team found that there is a strong negative correlation between the dollar and the price of gold. A weaker dollar increases the attractiveness of gold not only for emerging market investors, but also for central banks, which have been systematically increasing their gold reserves in recent years as part of their diversification away from the dollar. This is one of the main reasons that has led to the current situation in the gold and silver markets. The prices of these metals have strengthened in recent months in a way that investors have not been able to see for many years.

Source: Tradingview

Gold (yellow) and silver (grey) price movements since the beginning of 2025 in USD (daily)

In addition to commodities, the weakening of the dollar is also having a significant impact on the prices of financial assets, particularly stocks and bonds. A weaker dollar improves global liquidity conditions, which supports investors' appetite for risk.

The dollar acts as a financial brake in the global financial system: when it strengthens, it tightens financial conditions and when it weakens, it loosens them. This has a direct impact on equity valuations, especially outside the US.

For the US stock market, a weaker dollar has a mixed effect. On the one hand, it supports the profits of companies with a high share of foreign sales, as dollar results rise when converted from foreign currencies. On the other hand, however, dollar returns on US assets lose some of their value for foreign investors, which may dampen capital inflows to the US at certain stages. This effect is often evident during periods when European or Asian markets outperform US indices. This has been borne out in performance in 2025.

V this article from January this year, we looked at the markets that have outperformed the US the most.

From the perspective of global investors, the key point is that a weaker dollar increases the attractiveness of assets outside the United States. Phases of dollar weakness tend to be associated with asset price gains in Europe and emerging markets, not only due to fundamentals but also due to pure currency effects. Valuations of these assets can thus increase even without a dramatic improvement in economic data. For example, Japan's NIKKEI 225 stock index is still in the green in 2026, while the US technology NASDAQ is weakening.

Chart of the Japanese NIKKEI 225 index from 2024 (daily)

Overall, then, a weaker dollar affects commodity prices, supports the growth of risk assets and changes the attractiveness of individual regions.

Impact on investment returns in different currencies

The weakening of the US dollar is also fundamentally changing the way in which investment performance and corporate performance need to be viewed. In an environment of significant currency movements, the nominal return on an asset is no longer indicative of its actual performance. The exchange rate effect becomes a separate factor that can either significantly boost returns or completely wipe them out.

From the perspective of investors holding US dollar-denominated assets, a weaker dollar is a double-edged weapon. On the one hand, US assets, particularly equities, can show solid growth in dollar terms, thanks in part to the positive impact of a weaker currency on corporate profits. On the other hand, however, investors in the eurozone or the Czech Republic face the fact that their returns are lower when converted into their home currency.

For investors holding euro-denominated assets, the weakening of the dollar represents a relative advantage. A stronger euro increases the purchasing power of the European currency and reduces the cost of imports and foreign acquisitions. In periods of a weaker dollar, European assets tend to outperform their US counterparts, not only due to fundamentals but also due to favourable currency translation. For euro investors, the global investment map is thus shifting in favour of the domestic region and non-US markets.

This effect is even more pronounced for Czech investors. A strong koruna means that dollar returns shrink when converted into koruna, while investments in koruna or euro gain a relative advantage. The exchange rate is one of the main factors explaining the differences in the performance of foreign investment by Czech households. In practice, this means that even a successful dollar investment can underperform in koruna terms if it is accompanied by a significant depreciation of the dollar.

Weaker dollar vs. firms

The impact of a weaker dollar on firms is equally significant. For U.S. companies with a high share of foreign sales, a weaker currency provides a positive boost. Revenues generated in euros, yen or kronor increase when converted into dollars, which boosts profits and often valuations. This effect is well documented in analyses by US investment banks and Fed research, which show that exchange rates can play a key role in corporate earnings dynamics in the short term.

In contrast, European and Czech export-oriented firms facing the dollar face the opposite pressure. A stronger euro or koruna reduces the value of dollar-denominated sales and can squeeze margins if firms lack sufficient currency hedging or pricing power.

At the same time, however, stronger European currencies reduce the cost of importing raw materials, energy and components, which may offset some of the negative effect. Firms focused on the domestic market or with a high share of import inputs may thus in turn benefit from a weaker dollar. This is why the impact of currency movements on the corporate sector is uneven and cannot be assessed across the board.

Conclusion

The recent weakening of the US dollar and the recent appreciation of the euro and the Czech koruna show the crucial role that exchange rates play in the transmission of global economic change. Dollar movements do not only translate into exchange rates, but also affect inflation, trade balances, capital flows and price formation across global markets. A weaker dollar eases global financial conditions, boosts commodity prices and increases the attractiveness of assets outside the United States, while stronger European currencies are disinflationary but also increase pressure on the export sector.

For the European and Czech environments, this development is a typical example of how global macroeconomic trends break down into local effects. The euro-crown exchange rate is becoming one of the main channels through which the real value of investment, corporate profitability and overall economic conditions are changing.

At the same time, however, the results reveal the other side of the story: Alphabet is entering a new investment phase. Extremely high capital expenditures on AI infrastructure and the cloud, as well as one-off costs associated with Waymo, while not yet impairing profitability, make it clear that 2026 will be marked by pressure on cash flow and cost discipline. Thus, the market is not only assessing the strength of the numbers, but also the price the company is paying for this expansion.

How was the last quarter?

The fourth quarter of 2025 brought Alphabet $GOOG revenue of $113.8 billion, representing 18% year-over-year growth (17% at constant currencies). The acceleration in growth was evident across the board, with the main contributors being both Google Services and, in particular, Google Cloud. Compared to 4Q 2024, when revenue was $96.5 billion, this is one of the strongest quarterly improvements in years.

Operating profit in Q4 rose to $35.9 billion, up 16% year-over-year, while operating margin was 31.6%. That's a solid result, especially considering the fact that costs included a one-time $2.1 billion charge for employee stock compensation at Waymo. Without this effect, operating profit growth would have been even stronger and margins would have been higher.

Net income was $34.5 billion, up 30% year-over-year, and earnings per share (EPS) rose to $2.82, up 31% from $2.15 in the same period last year. The strong EPS growth was supported not only by strong operating performance, but also by a long-term declining share count due to extensive share buybacks.

In terms of segments, Google Services remains the key driver, with revenue growing to $95.9 billion (+14%). Search and related ad formats saw 17% growth, YouTube advertising added 9% and subscriptions, platforms and devices also grew 17%, confirming a shift to more stable, recurring revenue. Google Cloud was the star of the quarter, however, with revenues of $17.7 billion marking 48% year-over-year growth, while cloud operating profit jumped to $5.3 billion from $2.1 billion a year earlier. The cloud is clearly moving from the investment phase to a strong profitability phase.

• Full presentation with results.

CEO commentary

Sundar Pichai called the quarter spectacular and highlighted that Alphabet surpassed the $400 billion annual revenue mark for the first time in its history. A key theme of his comments was artificial intelligence, specifically the launch of Gemini 3, which he called a major technology milestone. According to management, Alphabet's own models now process more than 10 billion tokens per minute through direct API usage by customers, illustrating the real commercial adoption of AI.

Pichai also highlighted the rapid growth of the user base - the Gemini app has over 750 million monthly active users, while AI features in search continue to increase engagement. In the area of monetisation, he highlighted YouTube, which has annual revenues in excess of $60 billion, and the total number of paid subscribers across services has exceeded 325 million. The cloud, he said, entered 2026 with an annual run-rate of over $70 billion, driven by demand for AI infrastructure.

Outlook

Alphabet didn't explicitly offer traditional financial guidance at the revenue or profit level, but it did provide a very important signal in terms of investment. CapEx for 2026 is expected to reach $175 billion to $185 billion, an extremely high level and a significant increase from previous years. These investments will be primarily in data centers, AI infrastructure, custom chips and cloud capacity.

Management makes it clear that the goal is not short-term margin optimization, but long-term technology leadership. This means that despite strong revenue growth, the pace of margin expansion may be limited in 2026 and free cash flow burdened by high investment. This is a key point for investors - Alphabet's story is shifting from the "efficient growth" phase to the "strategic dominance at the cost of higher spending" phase.

Long-term results

Looking at the last four years, it is clear that Alphabet has undergone a significant transformation. Revenues have grown from $257.6 billion in 2021 to $402.8 billion in 2025, a combination of structural growth in digital advertising, cloud expansion, and a gradually expanding subscriber model. Meanwhile, the pace of growth has accelerated again after slowing in 2022, largely driven by AI-driven products.

The evolution of profitability is even more pronounced. Operating profit grew from $78.7 billion in 2021 to $129.0 billion in 2025, with a key factor being the slowdown in operating expense growth between 2023 and 2024 and subsequent operating leverage in 2025. This was reflected in net profit, which reached $132.2 billion, up more than 35% from a year earlier.

Earnings per share has been growing over the long term, not only due to net profit growth, but also due to a systematic reduction in the number of shares outstanding. The average number of shares has fallen from more than 13.3 billion in 2021 to about 12.2 billion in 2025, amplifying the effect of growth at the EPS level. Thus, over the long term, Alphabet combines business growth with a disciplined capital policy.

News

Aside from the results themselves, the developments around Waymo are particularly noteworthy, where Alphabet booked $2.1 billion in stock compensation in Q4 in connection with a new investment round. This confirms that autonomous driving remains a strategic but capital-intensive bet. The company also issued $24.8 billion of senior notes, bolstering financial flexibility ahead of massive investments in AI infrastructure.

Shareholder structure

Alphabet's shareholder structure remains highly institutional. Approximately 61% of shares are held by institutional investors, with Vanguard, BlackRock, JPMorgan and State Street being the largest shareholders. The significant insider holdings primarily reflect the voting structure of the share class, rather than normal insider activity.

Analyst expectations

Analysts remain mostly positive on Alphabet, though they caution about near-term risks associated with the size of the investment. Goldman Sachs reiterated a Buy recommendation following the results, highlighting the acceleration of Google Cloud growth and the rapid monetization of AI products. At the same time, however, it cautioned that extremely high CapEx in 2026 may temporarily hamper free cash flow growth and keep valuations under pressure.

The market consensus is thus shifting to the view that Alphabet offers a very strong long-term growth story, but will be evaluated in the short term through the prism of returns on massive AI investments. For long-term investors, the key question remains whether today's spending surge will translate into sustained higher earnings capacity between 2027 and 2028.

Fair Price

Lilly’s performance clearly beat the consensus estimates for both revenue and EPS, with adjusted profit per share exceeding Wall Street’s expectations and prompting strong investor reaction. These results reflect unusually robust demand for flagship products, led by weight-loss and diabetes treatments that remain at the center of the company’s accelerated growth strategy.

Flagship Products Drive Growth

A major catalyst for the quarter was the explosive sales performance of Eli Lilly’s core incretin medicines. Mounjaro generated approximately $7.4 billion in sales, more than doubling compared with the prior year, while Zepbound hauled in roughly $4.3 billion, also representing an increase of well over 100 percent year-over-year. Combined, these two products accounted for a dominant share of the company’s total revenue, showcasing Lilly’s leadership in the high-growth obesity and type 2 diabetes markets.

Other products contributed solidly as well, with Verzenio® breast cancer drug sales rising about 3 percent to roughly $1.6 billion and other newer therapies adding additional momentum. This diversification beyond a single blockbuster reduces concentration risk and broadens the company’s commercial foundation.

Strong 2026 Financial Outlook Reinforces Momentum

What truly grabbed attention was the bullish guidance for 2026. Lilly projected full-year revenue in the range of $80 billion to $83 billion, significantly above consensus expectations of roughly $78.5 billion, with adjusted earnings per share forecast between $33.50 and $35.00 an increase of more than 40 percent year-over-year at the midpoint. Analysts have responded positively; Leerink Partners reiterated an Outperform rating with a target near $1,234 after assessing the strength of Lilly’s guidance relative to market expectations.

The guidance assumes continued growth in Lilly’s high-margin portfolio and reflects confidence in product adoption worldwide, particularly as new treatments are launched and production capacity expands.

Strategic Strength and Pipeline Progress

Beyond the core growth drivers, Lilly is actively building manufacturing capacity and advancing its R&D pipeline. Recent announcements include plans to expand U.S. production facilities and boost capacity for injectable and oral medicines, an investment that supports sustained global demand and reduces production bottlenecks. This manufacturing expansion, supported by billions in planned investment, positions the company to maintain its delivery cadence as product demand scales.

Strategically, the company also submitted its oral obesity drug, orforglipron, for regulatory approval in major markets, potentially broadening its addressable market and extending growth beyond the current flagship products.

Market Implications and Stock Reaction

Investors responded strongly to Lilly’s blockbuster results and aggressive outlook. Following the earnings announcement and guidance update, shares of LLY surged more than 9 percent in extended trading a clear market signal that the mix of robust performance and ambitious forward targets resonated with the Street.

Lilly’s stock performance also stands in contrast to peers in the obesity and diabetes market. Rival Novo Nordisk, which recently issued its own 2026 guidance, is forecasting a potential sales decline of 5 percent to 13 percent next year, highlighting Lilly’s competitive positioning amid pricing and market pressures.

Key Numbers Investors Should Watch

• Q4 2025 revenue: ~$19.29 billion, up ~43 percent year-over-year.

• Adjusted EPS: ~$7.54, beating expectations.

• Mounjaro sales: ~$7.4 billion.

• Zepbound sales: ~$4.3 billion.

• Projected 2026 revenue: $80 billion to $83 billion.

• Projected 2026 adjusted EPS: $33.50 to $35.00.

• Analyst price target: ~$1,234 (Leerink Partners).

These numbers underscore not just one strong quarter, but a broader picture of sustained growth driven by high-demand therapies and a deepening product pipeline.

Do you think $PYPL will ever pull itself out of this and start growing again?

Investors are now looking beyond growth itself. The key questions center on how effectively higher volumes can offset price compression, whether oral Wegovy can unlock a new wave of demand, and how resilient the pipeline is as competition intensifies. The year confirms Novo’s strength, but it also signals that the next phase will be less forgiving on margins.

How was 2025?

For the full year 2025, sales were approximately US$44.8 billion, which corresponds to year-on-year growth of 6% and 10% respectively at constant exchange rates. The difference between these two figures is important - the stronger Danish krone dampened reported growth, while real demand remained robust.

Operating profit was around USD 18.5 billion, down 1% year-on-year in reported currency but up 6% when adjusted for currency effects. The key negative factor was one-off transformation costs of around USD 1.2 billion, without which operating profit would have grown at a double-digit rate even in reported currency. As a result, despite the pressure, the operating margin remained very high at approximately 41%, which continues to make Novo Nordisk one of the most profitable pharmaceutical companies in the world.

Net profit was approximately USD 14.8 billion, up approximately 1% year-on-year, while earnings per share (EPS) rose 2% to approximately USD 3.34. Profitability thus remained stable, but it is clear that the rate of earnings growth has lagged significantly behind the rate of revenue growth - exactly the signal that the market is sensitive to.

In terms of segments, growth was driven primarily by obesity care, where sales grew 26%, driven by Wegova's continued global expansion. GLP-1 diabetes treatment grew at a low single-digit rate, confirming the gradual saturation of traditional markets. Rare diseases added a solid 5%, acting as a portfolio stabilizer.

• Full presentation with results.

CEO commentary

Commenting on the results, Mike Doustdar openly admitted that 2025 was a challenging year for the company in terms of the pricing environment, particularly in the US where price adjustments, Most Favoured Nations agreements and impending patent expiries in some international regions are all impacting results.

However, he also stressed that the company was very encouraged by the rapid take-up of oral Wegova in the US, where the number of weekly prescriptions reached around 50,000 within weeks of launch. Management, he said, remains confident that the combination of new dosage forms, higher doses and a new generation of molecules will allow it to grow patient numbers and overall volumes over the long term, even if the pricing environment remains under pressure.

Outlook for 2026

The outlook is a major reason why investors are cautious. Adjusted revenue growth (excluding the impact of the one-time reserve reversal in the 340B program) is projected to be -5% to -13% in 2026 at constant currencies. In reported currency, growth is expected to be roughly 3 percentage points lower, implying very weak to negative headline growth.

Similarly, adjusted operating profit is expected to fall in the range of -5% to -13% at CER. On the positive side, the planned reserve release of around USD 4.2 billion under the US 340B programme will improve both revenue and profit in the short term, but this is a one-off accounting effect, not a structural improvement.

At the same time, management expects the global GLP-1 market to continue to grow rapidly, and Novo Nordisk intends to capture this growth with oral Wegova, higher doses of the injectable form and the phased ramp-up of CagriSem.

Long-term results

Between 2021 and 2024, Novo Nordisk's revenues grew from approximately US$20.4 billion to US$42.1 billion, more than doubling in four years. This growth has been driven almost entirely by an explosion in demand for GLP-1 drugs, particularly in obesity, where the company has established a virtually dominant position.

Operating profit grew from roughly US$8.5 billion to US$18.6 billion over the same period, with margins hovering above 40% over the long term. This shows the company's extraordinary pricing power in previous years. This is why the current slowdown is being viewed so sensitively - investors are used to a combination of high growth and extreme margins that is increasingly difficult to sustain.

Earnings per share between 2021 and 2024 grew from around $1.50 to $3.30, with growth supported not only by operating performance but also by systematic share count reductions. This trend continues now, although the rate of EPS growth is clearly slowing.

News

The most significant event is the approval and launch of oral Wegova in the US, which may change the structure of the obesity treatment market in the long term. In addition, the company successfully completed a Phase 3 study of CagriSema in diabetes and submitted a higher dose of semaglutide 7.2mg to the FDA, expanding future offerings.

The Phase 2 results with zenagamtide were also of interest in the research area, showing significant weight and HbA1c reductions, confirming the potential of the next generation of molecules.

Shareholding structure

The shareholding structure remains stable and strongly institutional, with long-term investors such as Capital International Investors, FMR and Franklin Resources dominating. This suggests long-term confidence in the investment story, despite short-term fluctuations.

Analyst expectations

Analysts at the major banks agree that Novo Nordisk remains a structural winner in the obesity market, but caution on valuation pressure due to a weaker outlook for 2026. For example, Goldman Sachs analysts said after the results that the firm still has a unique pipeline and volume potential, but expect higher volatility and slower earnings growth in the short term. Target prices are mostly above current levels, but with an emphasis on the long term.

Fair Price

This business sits outside traditional banking and away from highly cyclical industries. Its role is to provide capital to innovative companies at a stage where banks step back and funding becomes scarce. That positioning enables higher returns, but also introduces a different risk profile. Understanding how cash flows, underwriting discipline, and credit cycles interact is essential to judging whether the yield represents opportunity or compensation for uncertainty.

Top points of analysis

• Dividend yield of around 11% at a price well below book value

• Specialisation in senior secured lending to growth companies

• Strong profitability and high margins in a high rate environment

• Discount to NAV(net asset value) of over 30%, which the market has so far refused to close

• Key issue: sustainability of dividend in a deteriorating macro

Company performance

Runway Growth Finance $RWAY is a publicly traded BDC(Business Development Company) that focuses on lending to high-growth companies, primarily in the technology, healthcare and innovative industrial sectors. These are typically venture capital-backed companies that have strong products but are not yet generating stable free cash flow.

The cornerstone of the business is direct credit financing - most often in the form of first-lien loans, often accompanied by a warrant component or performance bonus. This allows the company to collect high interest rates without having to take the full equity risk.

Runway is not a bank. It has no deposits, is not subject to full banking regulation and operates with greater flexibility. This allows it to occupy niche funding markets that traditional institutions are leaving behind - and this is where the superior return potential arises.

How the firm makes money: portfolio structure and margins

A key characteristic of the portfolio is the high proportion of secured floating-rate loans. This means that in a high interest rate environment, yields automatically increase while the cost base remains relatively stable.

Gross and operating margins in excess of 50 % are above average in this segment, reflecting both high interest yields and relatively low operating costs. The company is not capital intensive, does not require high investments and most of the profits can be distributed to shareholders.

The income structure is also a major advantage, with most of the revenue coming from regular interest payments rather than one-off transactions. This increases the predictability of cash flow, which is key to the dividend story.

Management

The company is led by David R. Spreng, an experienced manager with a long history in alternative finance and private credit. His career has been closely aligned with credit strategies focused on growth companies, which translates into a more conservative portfolio structure than an investor would expect in "venture debt."

David is also the founder of Runway Growth Capital, which he built in 2015, and chairs its investment committee. He is one of Silicon Valley's most respected investment figures with over 30 years of experience in both venture capital and growth finance. During his career, he has been involved in the creation and development of nearly fifty technology companies, eighteen of which have gone public and fourteen of which have been successfully sold to strategic investors. He has appeared four times on the prestigious Forbes Midas List among the top fifty venture capitalists in the world and was even ranked as the eighth best VC in 2006.

In 2010, David shifted from traditional venture capital to growth debt financing when he co-founded Decathlon Capital Partners, a company focused on lending to high-growth companies. It was here that he realised the full potential of debt as an alternative to equity dilution and subsequently developed this idea when he founded Runway Growth Capital.

Financial results

The long-term financial development of Runway Growth Finance shows a clear transition from the portfolio building phase to a stable monetization phase. In 2021, revenues were slightly above USD 50 million, while management was still highly volatile and cash flow was even negative. At that time, the company was actively expanding its loan portfolio, investing in growth and structuring its business model. This is a typical phase for younger BDC funds that have not yet reached critical size.

The turning point came in 2022 and especially in 2023, when interest income from the portfolio began to grow rapidly. Revenues more than doubled in two years, reaching about $124 million in 2024. This growth was not driven by acquisitions or accounting adjustments, but purely by loan portfolio expansion and higher floating-rate loan yields. Significantly, revenue growth was accompanied by even faster growth in operating profit.

Operating profit in 2024 exceeded $73 million, implying an operating margin of over 50%. This is exceptionally high in the context of the financial sector and reflects the nature of the business: low operating costs, limited capital expenditure and high interest income from a relatively concentrated portfolio. Earnings per share rose from $0.79 in 2022 to $1.89 in 2024, with the number of shares outstanding declining slightly, indicating that EPS growth was not "diluted" by the issuance of new capital.

Dividend: yield as a direct product of the business model

The dividend is not a marketing tool for this company, but a direct result of its business. Runway Growth Finance generates interest income that is collected regularly, predictably and at a high margin. These returns, net of operating expenses and reserves, are available for distribution to shareholders almost immediately. Therefore, the dividend is in the double digits without the company having to resort to unsustainable practices.

In 2024, the firm generated approximately $70 million of free cash flow, while the total dividend payout was significantly lower. Thus, the dividend payout remains within a reasonable range and does not represent a "wringing out" of the balance sheet. Importantly, the dividend is not funded by debt or asset sales, but by actual cash generated by the loan portfolio. This fundamentally differentiates this title from riskier yield traps.

The risk of the dividend lies not in its cover, but in the cyclicality of the credit market. If there is a significant increase in defaults in the portfolio or a sharp slowdown in venture funding, the dividend could be cut. Even in such a scenario, however, the investor would enter with a yield of around 11%, which creates a significant safety cushion.

Valuation

The stock's valuation reflects the market's deep distrust of the entire BDC and venture debt segment. The stock is trading at roughly 0.67 times book value, implying that the market implicitly assumes either a decline in the value of the loan portfolio or long-term earnings pressure. This discount is not an abstract concept - it is a de facto valuation of the firm below the value of its net assets.

Looking at a price-to-earnings ratio of around 4.4 and a price-to-cash flow ratio below 8, it is clear that the market is not valuing the firm as a stable income vehicle, but as a high-risk credit title.

If the company traded at least close to book value over the longer term, the revaluation alone would imply a potential upside of tens of percent in the share price. This potential is further complemented by the very high dividend yield that the investor collects over the waiting period.

Risks: where the investment thesis may break down

The biggest structural risk of Runway Growth Finance is its concentration on venture debt and growth technology companies, which are sensitive to macroeconomic conditions, capital availability and investor willingness to fund loss-making or low-margin projects. Should the venture ecosystem enter a prolonged downturn, the rate of restructurings, deferrals or even defaults may increase. This would have an impact not only on profits but also on the book value of the portfolio.

Another risk is the evolution of interest rates. The portfolio's current yield is largely based on floating-rate loans that have benefited from high rates. In an environment of a rapid and significant decline in rates, interest income would decline while part of the costs would react with a delay. This could depress net interest income in the short term and thus the ability to maintain the dividend at current levels.

The stock's relatively low liquidity and small market capitalization are also specific risks. In periods of stress, the price may overreact, regardless of fundamentals. Investors must therefore allow for higher volatility and the fact that the market may price the title below its intrinsic value over the long term without a quick catalyst for a change in sentiment.

Where a company can grow

Runway Growth Finance' s growth is not based on exponential asset growth, but on a combination of three very specific factors: the evolution of interest income, the expansion of the loan portfolio within the existing mandate, and improvements in capital efficiency. The first and most important source of growth is the structure of the portfolio, which is largely made up of senior loans at variable rates. In 2024, the firm generated revenues of approximately $124 million, representing year-over-year growth of over 31%. This growth was not driven by acquisitions, but by higher returns on the existing portfolio and a gradual increase in the amount of capital invested.

The second specific growth factor is the size and composition of the portfolio. The firm has expanded its asset base significantly in recent years, with operating costs growing much more slowly than revenues. This can be seen in operating margins in excess of 50%, which is extremely high by BDC sector standards. If Runway were able to grow its portfolio by a further 10-15% per annum, for example, while maintaining its current cost structure, most of this growth would translate directly into net profit and cash flow. In other words, even relatively moderate asset growth can lead to above-proportional earnings per share growth.

A third, often overlooked source of growth is the return of capital to shareholders through buybacks. In 2024, the firm repurchased about $36 million of its own shares, which, with a market capitalization of about $300 million, represents a non-negligible hit to the number of shares outstanding. If the title trades below book value over the long term, management can continue to repurchase shares with an immediate positive impact on NAV per share and future dividend capacity.

Investment scenarios

The optimistic scenario is based on the assumption of stabilization of venture and growth financing in the US. In this environment, defaults remain low, credit margins remain attractive and Runway is able to reinvest redeemed capital on similar or only slightly worse terms than today. Revenues in such a scenario could be in the range of USD 130-145 million per year, with net income growing faster than revenues due to high margins. The dividend would remain close to the current level of around USD 1.30 per annum and the market would gradually start to reduce the discount to book value. If the share price were to approach NAV, this would mean capital growth of tens of percent in addition to the dividend yield.

A realistic scenario assumes a slightly cooling interest rate environment and slower portfolio growth. Yields would stabilise, earnings would oscillate around current levels and part of the dividend could be adjusted downwards over time. Even in this scenario, however, the company would generate sufficient cash flow to offer a double-digit dividend yield. The share price would likely remain below book value, but the investor would still take home an attractive total return consisting primarily of dividends.

The downside scenario involves a more significant deterioration in conditions in the technology and venture segments. Higher levels of restructuring and write-downs would lead to a decline in the book value of the portfolio and pressure on profitability. In such a scenario, management would be highly likely to cut the dividend to protect the balance sheet. The share price could fall significantly in the short term, potentially well below current levels. Again, however, the company would continue to generate cash and the scenario would not mean a collapse of the business, but rather a temporary devaluation of capital for shareholders.

What to take away from the article

• Runway Growth Finance is an income stock built on real cash, not a growth story

• The current dividend of over 11% per annum is a result of the high operating margin and portfolio structure

• Company growth can come without rapid asset expansion due to operating leverage and share buybacks

• Valuation below book value reflects sector risk, not fundamental collapse

• This is a title suitable for investors willing to accept volatility and risk in exchange for high ongoing returns

I have to say the market is riding a great wave right now, bringing us big opportunities every day. I'm excited about it, but unfortunately the truth remains that you don't know where to deploy cash first and funds aren't unlimited. Let's hope the market stays in this trend for a while longer so we can all be happy with our prepared positions.

The gaming industry has built a reputation in recent years as one of the most attractive growth segments of the digital economy. It has been characterised by low barriers to entry for new players, global distribution, a huge range of monetisation models, increasing time spent online and the ability to create long-term franchises. However, it is this era that has begun to fracture in recent quarters and has already broken for some studios. After a pandemic boom, the sector finds itself in an environment where growth can no longer be automatically bought with higher marketing budgets or more aggressive monetisation. Analytical views in recent months increasingly agree that gaming is moving into a phase of compressed margins. Development and operating costs are rising faster than the revenue potential of individual titles, gamer attention is more fragmented than ever, and returns on large AAA projects are not what they used to be.

At the same time, the structure of demand is changing. Post-Covid has seen a normalisation of time spent playing and the industry has had to absorb the reality that the pace of expansion from 2020-2021 was not sustainable. While part of the market is counting on the industry gradually stabilising and returning to growth in the coming years, this will be very different to what the segment experienced 5 years ago. However, this is where the first big problem arises: the more mature the market, the more sensitive players are to rising prices, and in-game purchases. And because the attention economy is brutally competitive in 2026, game companies are no longer just fighting amongst themselves, but with streaming platforms, social networks that simply have the upper hand today.

The second problem is purely manufacturing and financial. Game development is getting longer, teams are getting bigger, and for big titles, not only the production budget itself is growing, but also the marketing budget. This research from September 2025 points out that publishers often push releases to when more games are coming out, which increases the cost of marketing to get the game seen and makes the efficiency of bringing the game to market worse. This is exactly the type of pressure that is not immediately visible in a company's numbers, but in the longer term will translate into a decrease in return on capital, and ultimately pressure on margins.

Source.

The third problem comes from the labor market. The gaming industry has been one of the most visible tech segments in recent years in terms of layoffs, project cancellations and sudden changes in strategy. In its surveys, the GDC has repeatedly described ongoing waves of uncertainty, layoffs and more cautious funding, an indicator that the sector is reassessing growth ambitions and trying to return to more controlled costs. And into this comes regulatory risk in the form of pressure on consumer protection (particularly for younger players) and debates over problematic monetisation mechanics, which in the long term increase the likelihood that some revenue models will be progressively curtailed.

In this setting, how the market values gaming companies is also beginning to change. In the growth era, companies were content to report increasing engagement and outlook. Today, the market is demanding much harder proof that monetization is keeping pace with costs, that the pipeline of projects is realistic, and that the company can grow without buying revenue by cutting prices or rehashing marketing. Many stocks have fallen to near historic lows for this reason. However, if the mood were to change and prices were to reach peaks they have long since left, appreciation would be much higher than in the hundreds of percent.

Roblox $RBLX

Roblox is both a global gaming platform and a technology ecosystem that allows users to not only play but also create their own games and virtual worlds. Founded in 2004, the company now serves tens of millions of daily active users worldwide, with a target audience that is predominantly younger in age. Roblox generates revenue primarily through the sale of the virtual currency Robux, which funds both the operation of the platform and rewards the community of developers who build content on it. In recent years, the company has reported billions of dollars in annual revenue and very high user engagement, but has also remained under pressure from high operating costs, infrastructure investment and security, making it one of the most talked-about growth companies in the gaming sector.

Roblox has long been seen as the embodiment of the next generation of the games business. It was a platform, not a game publisher. The growth in daily active users, high engagement and a strong developer community created a story that was long enough for the market, even without profitability, to buy the stock in bulk. But that's over.

In terms of operational metrics, Roblox still doesn't look bad. Both the number of users and time spent on the platform are growing, especially outside the U.S., where the company is aggressively expanding. The problem is that the growth in engagement is translating more and more poorly into revenue per user. Our team's analyses show that the younger demographic that Roblox relies on is significantly more price-sensitive and less willing to spend on virtual items compared to older players. This limits the platform's ability to increase revenue without negatively impacting user activity and satisfaction.

Another pressure is cost. Roblox invests huge resources in security, content moderation and infrastructure, which is a tax on an open model with a large proportion of underage users. These expenses are not a one-off. Rather, they grow structurally as the platform grows. In terms of margins, this puts Roblox in an awkward position: each additional expansion of the user base increases operational complexity faster than revenue. This is exactly the opposite dynamic to what investors expect from scalable digital platforms. It's also one of the main reasons why Roblox, even after a big increase in revenue and margins in recent years, is still losing money.

The change in current gaming sentiment is also evident in how the market has stopped tolerating profitability deferrals. Just a few years ago, Roblox was valued primarily as a long-term bet on the metaverse (the ability to play games created on the Roblox platform in virtual reality) and future monetization opportunities. Today, that narrative is fading, replaced by a much more pragmatic question:

Can the platform translate its enormous reach into an economically sustainable model without hitting the limits of its user base?

This uncertainty is one of the main reasons why Roblox stock has come under significant pressure.

But the pressure has been so pronounced that the stock has fallen below its fair value by 5%, according to the Fair Price Index on Bulios. So, they are currently fairly priced under the DCF and relative value calculations.

Roblox thus illustrates well the broader problem of the gaming sector: user and engagement growth alone is no longer enough. The market today demands proof that platforms can grow and generate profit, or at least with a clear path to profitability that is not built on increasingly aggressive monetisation.

Ubisoft $UBI.PA

Ubisoft is one of the oldest and largest players in the global games industry. With a portfolio of iconic brands such as Assassin's Creed, Far Cry, Watch Dogs and Rainbow Six, it generates annual revenues in the high single digits of billions of euros and employs thousands of developers across more than a dozen studios worldwide. For fiscal year 2025, Ubisoft reported revenues of over €2.2 billion and operating profit in the hundreds of millions. These are numbers that would represent a good performance for most tech titles. But in the context of the current gaming market, these numbers appear to be a symptom of a broader problem: stagnating growth, declining monetization efficiency, and the rising cost of developing new AAA titles are dragging down the company's attractiveness.

Ubisoft has long invested in ambitious games with high budgets and extensive content, which previously corresponded to a situation in which blockbuster titles could generate huge sales and microtransaction revenues several times a week while holding players' attention for a long time. Today, however, that is changing. The market is saturated, gamers are more selective in price and time, and monetization models that once worked as the gold standard are losing their effect. Unlike some smaller studios that have moved to cheaper and faster development of new titles or mobile games, Ubisoft has mainly stuck to the most demanding AAA model, where a single game often takes five years or more to develop and can cost hundreds of millions of dollars.

This strategic choice is at the heart of the company's current problems. Longer development cycles are proving to be a weakness in the context of a rapidly changing market. A game that was designed for one audience and competitive environment may arrive on the market already without relevance. In addition, Ubisoft seems to repeatedly run into execution problems: delays, repeated content rewrites, concept changes and exorbitant budgets, which together lead to pressure on internal cash flow and margins. According to the company's annual reports, which can be found in the stock detail on Bulios, year-over-year revenue growth from digital products and services has begun to slow, while post-release marketing and support costs continue to rise.

In addition, the strategy of focusing on titles that should generate recurring revenue is not as successful as Ubisoft imagined. The so-called "live-service" market is now extremely competitive and saturated, so new projects must necessarily succeed on both user engagement and monetization levels to cover development and operational costs. Yet data shows that a very small percentage of these games achieve sufficient market attention and monetization efficiency to become profitable even after high upfront investment.

All of this translates directly into investor perceptions. Whereas Ubisoft used to be valued as a stable publisher with a broad portfolio and strong franchises, today the stock reaction is increasingly focused on the risk that the return on investment for individual titles will not match their prices and market expectations. Cost restructuring, layoffs and release delays are signals that the market often interprets as symptoms of deeper problems, not just short-term fluctuations.

The stock has already fallen more than 96% since its 2019 peak and today trades for just a few euros. But according to the Fair Price Index on Bulios, the current price for such a renowned giant in its sector is low. According to the calculation, Ubisoft's intrinsic value is 118% higher than it is trading today. If the company really manages to turn its setbacks and problems into solid profits and the stock recovers to its former glory from the pre-pandemic days, investors buying at current prices could see appreciation of over 2000%.

Take-Two $TTWO

Take-Two Interactive is one of the highest quality and most watched publishers in the gaming industry. Its portfolio includes some of the most valuable brands on the market, most notably the Grand Theft Auto series, Red Dead Redemption, and sports titles under the 2K banner. In terms of financial performance, it is a company that has long been in the multi-billion dollar a year revenue range and is able to generate very strong cash flow in years when it launches a key title. But it is this ability to generate revenue that is now not only a major strength, but also a major weakness in the entire investment story. But the stock has fared significantly better than previous competitors.

Take-Two is an extreme example of how the games business has moved towards a model with a high concentration of value. A significant portion of the market's expectations are now tied to the success of a handful of franchises, with any delay or weaker adoption of a major title having the potential to significantly rock the company's financial outlook. Analyst studies of the gaming market have long pointed out that for publishers with a limited number of mega-hits, the stock's sensitivity to release timing increases more than to the quality of the portfolio itself. In other words, even a top brand loses its investment allure if it is quiet for too long.

Another problem is cost dynamics. Developing games like GTA or Red Dead are now among the most expensive projects in the entire entertainment industry, often with budgets comparable to Hollywood blockbusters. While long development cycles make it possible to create an extremely high quality product, they also increase the risk that the return on capital will be spread over a very narrow window of time after release. In an environment where player behaviour is changing and competition for attention is increasing, this means more pressure on marketing, long-term support and monetisation, additional costs that reduce margin potential.

While Take-Two tries to mitigate this dependency by expanding features and monetizing existing titles over the long term, the situation is not without risks. The market today is significantly more selective and players are only willing to invest time and money in a limited number of game ecosystems over the long term. This means that even for very strong brands, there is a threshold beyond which further monetisation is met with community resistance and a slowdown in engagement. It is this balance between maximizing brand value and maintaining player loyalty that is the key factor for Take-Two in the years to come.

From an investment perspective, Take-Two thus represents a paradox of the current gaming sector. On the one hand a company with some of the most valuable games in the world, on the other a business model extremely sensitive to timing, expectations and execution. Today, the stock is dragged down not only by the results as such, but especially by the expected release of the new GTA 6. This has already been postponed several times and investors are running out of patience. However, it is expected to be the smash hit the entire industry has been waiting for. Indeed, if it is at least as successful as its predecessor, it will bring unimaginable amounts of capital to the company.

Since the company's stock is in an uptrend, a big change from its predecessor, and is up nearly 50% in the last 3 years, it is currently overvalued. According to the Fair Price Index, they are now almost 39% more expensive than their intrinsic value.

Conclusion

The direction of the gaming industry has fundamentally changed in recent years. What was seen not long ago as a nearly flawless growth segment of the digital economy is now facing a combination of structural constraints: slowing monetisation, rising development costs, extreme competition for players' attention, and lower market tolerance for inefficiency. The common denominator across the sector is no longer expansion, but the struggle to sustain a business model in an environment where growth is not a given.

From a broader perspective, the gaming sector is thus entering a phase where the way it is valued is changing. The market is no longer just looking for stories of future growth, but is increasingly looking hard at return on capital, cost discipline and the ability to monetise the existing player base without depleting it. This doesn't mean that games as an industry are losing relevance; on the contrary, they remain one of the biggest forms of digital entertainment. But it does mean that the investment realities of the sector today are significantly more complex, more selective and less tolerant of mistakes than in years past.

To me, it’s a good reminder that investors in Nvidia today are buying not only AI growth but also the political stability of U.S.–China relations. In the short term this can mean a loss of revenue or a delay in realization; in the long term it mainly means greater uncertainty about how much of Chinese demand will actually translate into results. The fact that Chinese alternatives don’t yet match the H200’s performance helps Nvidia, but the regulatory brake is stronger than the technological lead.

So my question isn’t whether Nvidia has a top-tier product — it does. It’s whether the market at the current price sufficiently reflects that part of the AI story may remain constrained by politics and licensing. Do you see this as a temporary complication, or a structural risk that would warrant a larger discount in valuation?

But on the other hand, 2025 has also revealed some structural limits, especially in the area of gross margins and dependence on the Chinese market for GPUs, where regulatory constraints still represent a variable with a significant impact on the composition of results. Still, the CEO's comments suggest that the company enters 2026 with "strong momentum" and expects further expansion of its high-performance and AI platforms.

Quarterly results

For Q4 2025, AMD $AMD achieved revenue of $10.27 billion, up 34% year-over-year and a higher quarterly number than the $9.25 billion in Q3 2025. Gross margin increased to 54%, up from 51% in Q4 2024 and a relatively strong Q3 2025, which saw a 3 percentage point improvement. This shows that the company is succeeding in scaling up production and improving product mix, despite increasing competition.

Profitability grew even more strongly. GAAP operating income reached $1.75 billion, up 101% YoY, and operating margin moved from 11% to 17%. Net income more than tripled to $1.51 billion, delivering EPS of $0.92, +217% YoY. On a non-GAAP basis, which removes some one-time items and volatile components, results were even stronger: operating profit of $2.85 billion(+41% YoY) and record EPS of $1.53, up 40%.

Segmentally, the Data Center division was the most dynamic, generating $5.4 billion in Q4 revenue (+39% YoY) driven by growing deployments of EPYC server CPUs and Instinct GPUs for AI workloads. The Client & Gaming segment grew 37% to USD 3.9bn, with the Client business alone leading the way with +34% revenue growth driven by strong demand for Ryzen CPUs and partial market share gains. The Embedded division grew only modestly (+3%), still a solid result given the long-term order cycle and seasonal effects.

In addition, AMD benefited from a one-time effect of the Instinct MI308 inventory rebooking of approximately $360 million in the quarter, which positively impacted gross margin - without it, non-GAAP gross margin would have been around 55%.

• Full presentation with results.

Outlook and positioning for 2026

Management, led by Dr. Lisa Su, remains optimistic about future developments. For Q1 2026, AMD expects revenue of approximately $9.8 billion ± $300 million, which would imply year-on-year growth of around 32%, although there would be a weaker seasonal decline across quarters. Non-GAAP gross margin is expected to be around 55%, confirming the stability of the margin structure even without Q4 one-off effects.

CEO commentary on the results

Management's commentary was significantly upbeat in tone, but at the same time did not deliver a new near-term catalyst, which the market was expecting after a strong run-up. Lisa Su called 2025 "defining" due to record revenue and profitability, and highlighted the accelerating adoption of EPYC processors and the rapid scaling of the AI datacenter business. She repeatedly highlighted the long-term potential of AI platforms and strong demand across segments, particularly in data centers.

However, from a market perspective, it is key that management has not scaled the near-term outlook. Instead, it confirmed sequential revenue decline in Q1 2026 (~-5% q/q) and highlighted seasonality and regulatory constraints around exports to China. Despite management talking about "strong momentum into 2026", for investors focused on the coming quarters, this was more about confirming a familiar story, not accelerating it.

Long-term results

AMD's long-term results show a clear trend of transformation from a traditional semiconductor manufacturer into a high-performance and AI-accelerated business. Between 2021 and 2025, revenues will undergo a dramatic transformation: from $16.4 billion in 2021 to a record $34.6 billion in 2025, corresponding to an average annual growth of over 20%. The fastest growth has been seen in the last two years, when demand for datacenter and AI solutions has become a key driver.

Gross profit increased from $7.9 billion to over $18 billion on a non-GAAP basis during the same period, although there was a one percentage point decline in non-GAAP gross margin in 2025 due to changes in product mix and one-time factors (e.g., export restrictions on certain GPU products to China). Operating expenses grew less steeply than sales, allowing operating profit to increase significantly from several hundred million in 2023 to over $7.7 billion in 2025 on a non-GAAP basis.

Profits and cash flow grew even more dynamically. GAAP net income rose from $854 million in 2023 to over $4.3 billion in 2025, and EPS increased from ~$0.53 to ~$2.65 over the same horizon. Thus, over the long term, AMD is weathering cyclical downturns and demonstrating its ability to translate market share and technology demand directly into results.

Shareholder Structure

The majority of the stock is held by institutions (~70%), with traditional asset managers such as Vanguard (~9.7%), BlackRock (~8.4%), and State Street (~4.5%) among the largest holders. The low insider ownership (only ~0.44%) is consistent with the broad institutional distribution base, and the risk profile of the stock then primarily reflects market dynamics and technology expectations, rather than significant short-term management behavior.

Analyst expectations and Wall Street reaction

Following the earnings release, analyst consensus did not deteriorate fundamentally, but sentiment shifted in a more cautious direction due to the outlook. Analysts appreciated the record Q4 and exceptional margins in the AI segment, but also cautioned that Q1 guidance implies a slowdown in growth rates, which increases the risk of a near-term correction after strong growth in the stock.

For example, Morgan Stanley analysts said after the results that AMD remains a long-term AI infrastructure winner, but the stock may "suffer from the absence of a positive surprise in guidance" in the coming quarters.

Fair Price

Who are your top picks right now? At current prices I have three — $MSFT, $FICO (it’s brutal, but it could still go a bit lower 🤣) and $SPGI

Investor caution has been heightened amid macro headwinds, cost pressures, and persistent concerns about demand for traditional PCs and printing supplies. Even initiatives like a generous dividend and long history of payouts have not been enough to fully stabilize sentiment, despite continued dividend declarations that yield over 6 percent at current price levels.

Disappointing Earnings Guidance Clouds Outlook

HP’s most recent earnings report showed revenue growth and six consecutive quarters of expanding sales, but the forward guidance disappointed markets, particularly in earnings per share expectations for fiscal 2026. The company projected non-GAAP EPS of $2.90 to $3.20 for the full 2026 fiscal year, below the average analyst estimate, and provided Q1 2026 EPS guidance of $0.73 to $0.81, slightly under consensus. This has reinforced concerns that margin pressure from rising component costs, tariffs and elevated memory prices will weigh on profitability throughout the year.

$HPQ reported for fiscal 2025 a net revenue of about $55.3 billion, up roughly 3.2 percent year-over-year, while full-year non-GAAP diluted net EPS declined from the prior year, underscoring a period of muted profit growth. Notably, HP’s fourth quarter net revenue of $14.64 billion beat expectations, and adjusted earnings per share of $0.93 outpaced forecasts but the market’s focus stayed on the softer guidance and expected headwinds.

Leadership Changes and Strategic Redirect

Adding to market unease, longtime CEO Enrique Lores is leaving HP to become CEO of PayPal, effective March 1, 2026, and Bruce Broussard has been named interim CEO. Such a rare executive shift coupled with an earnings guide that fell short of analyst expectations has amplified the sense of uncertainty around HP’s near-term strategic direction.

Despite the change at the top, HP reaffirmed its outlook for fiscal 2026, including its revenue and EPS guidance and a free cash flow target of $2.8 billion to $3 billion, suggesting leadership continuity even amid transitional turbulence.

Cost Pressures and Structural Challenges

HP continues to grapple with a complex operating environment. Beyond external pressures like tariffs and rising memory costs, the company is undertaking cost reduction efforts tied to AI adoption and restructuring plans, which include job cuts estimated between 4,000 and 6,000 employees by fiscal 2028 to capture gross savings of around $1 billion annually (Reddit reporting on restructuring plans) (turn0reddit62). Though part of a longer-term profitability strategy, such structural changes can add short-term cost volatility and weigh on investor sentiment.

Analyst perspectives on HP remain mixed. In the past year, price targets for HP have been trimmed on concerns about slower PC demand and cost headwinds. For example, Morgan Stanley reduced its target to $26 from $29, highlighting tariff-related cost impacts and moderating expectations around EPS growth.

What Investors Should Watch Next

As HP works through a pivotal transitional phase, several key indicators will guide investor sentiment:

Demand trends in PCs and printers: Sustained unit growth and AI-enabled PC uptake can offset weakness in legacy segments.

Profitability metrics: Stabilization or improvement in adjusted EPS and operating margins will be crucial to restoring confidence.

Leadership clarity: The appointment of a new permanent CEO and strategic priorities around innovation and cost structure will influence perceptions of execution risk.

Dividend sustainability: With a continuing high dividend yield, investors will monitor whether the payout remains attractive relative to growth prospects.

While HP’s stock remains below pivotal levels and market sentiment is cautious, the company’s efforts to balance cost management, leadership transition and strategic reinvestment will determine whether this period of underperformance signals a temporary pullback or a deeper valuation reset.

The pressure point lies elsewhere. Management acknowledged that execution in key areas, particularly branded checkout, fell short of expectations, triggering leadership changes aimed at improving performance. For investors, the issue is no longer stability, but direction. With competition intense across checkout solutions, the market is looking for clearer evidence that growth can reaccelerate rather than merely hold its ground.

Quarterly results

In the fourth quarter of 2025, PayPal $PYPL reported net sales of $8.7 billion, up 4% and 3% year-over-year, respectively, when adjusted for currency effects. While this growth is more modest than the pace of some fintech competitors, it is indicative of solid resilience in the underlying business.

Transaction margin - a key metric for payments companies - rose 3% to $4.0 billion, and 4% after adjusting for interest on customer balances, confirming that the core payments business is generating a solid profit base. GAAP operating profit was $1.5 billion (+5%), and non-GAAP operating profit was $1.6 billion (+3%), resulting in stable GAAP operating margin of 17.4% and non-GAAP operating margin of 17.9%. In terms of net income, Q4'25 was one of the best quarters in recent memory with net income of $1.44 billion and GAAP earnings per share of $1.53 (+38%).

Payment activity was also robust, with total payments volume (TPV) reaching $475.1 billion (+9%), with the number of payment transactions growing 2% to 6.8 billion. When PSP transactions (i.e. transactions facilitated by third-party service providers) are removed, the number of payments grew by 6%, showing that transaction growth is still organic in the primary business. Active accounts increased by 4.7 million to 439 million, further confirming PayPal's ability to attract and retain users despite a highly competitive environment.

Focusing purely on profitability, GAAP EPS of $1.53 represents a significant improvement over prior years and reflects efficient cost management, higher transaction margins and improved platform monetization. Non-GAAP EPS of $1.23 also grew (+3%), with performance driven primarily by the core payments segment.

• Full presentation with results.

At the same time, the company announced that its board of directors has appointed Enrique Lores as its new president and CEO with the clear goal of stepping up execution of looming growth initiatives, particularly in the area of custom checkout solutions, which has been identified as a weak link in recent results.

🔴 Reasons for share price decline: CEO change, missed EPS, cash flow and revenue estimates, weaker 2026 outlook.

Outlook

For fiscal year 2026, PayPal provided an outlook that was slightly below expectations, predicting earnings per share of $5.75 versus the consensus estimate of $5.73. The company also warned of a single-digit decline in Q1 2026 earnings.

CEO commentary

Interim CEO Jamie Miller took an unusually candid tone in her comments. She acknowledged that although PayPal was able to grow across sales, margins and earnings per share in 2025, the company's execution lagged particularly in branded checkout, a key consumer payments product. It was this weakness, according to management, that led to the decision to replace the CEO and bring in Enrique Lores to lead the company.

The management thus de facto confirmed what the market has feared for a long time - PayPal is losing relevance with merchants and consumers in an environment where competitors offer simpler, faster and better integrated payment solutions. At the same time, the words about "investing in future growth" suggest that short-term profitability will be sacrificed in favor of restructuring the product and user experience.

Long-term results

The long-term performance of PayPal $PYPL over the last four fiscal years shows that the company has been able to maintain steady revenue growth despite significant macro pressures and transformations in the payments industry. Revenues have grown continuously: $25.4 billion in 2021, $27.5 billion in 2022, $29.8 billion in 2023 to $31.8 billion in 2024. The growth rate has been in the range of 6-8% per annum, confirming the increasing monetization of existing clientele and diversification of the business across both payment and non-payment segments despite the relatively low growth rate.

In terms of profitability, the company has gradually increased its operational efficiency in recent years. Operating profit grew from $3.8 billion in 2022 to $5.0 billion in 2023 and $5.3 billion in 2024, indicating that the firm was able to improve margins despite slower revenue growth. Net profit showed very strong year-on-year fluctuations - from $2.4 billion in 2022 to $4.2 billion in 2023 and $4.1 billion in 2024. The main reasons were changes in cost structures, tax effects and one-off items related to investment activity.

Long-term earnings per share (EPS) grew steadily, from approximately $2.09 in 2022 to nearly $4.03 in 2024, with the number of shares outstanding declining in recent years, supporting EPS growth despite relatively moderate net income growth.

Cash flow remains a strong aspect of the business, as evidenced by steady operating cash flow in excess of $6 billion per year and free cash flow of over $5.5 billion in 2024, although the absolute value of this has declined slightly in 2025 due to investment and timing effects in our business.

Shareholding structure

Over 81% of PayPal's shares are held by institutional investors. The largest shareholders include Vanguard Group with ~9.7% stake, BlackRock with ~8.0% and State Street with ~4.6%. The low share of insiders (only ~0.15%) signals that management and the board do not predominantly maintain large equity positions, but this is consistent with the typical structure of publicly traded fintech firms with an emphasis on institutional ownership.

Analysts' expectations

Analysts generally appreciate the stable revenue growth, significant free cash flow and solid margins, but caution that the pace of growth has been moderate in recent years and that PayPal faces significant competitive pressure, particularly in the checkout and digital payment solutions space. Consensus target prices are typically in a range that reflects a moderately positive outlook, while not assuming a dramatic acceleration in growth. Some banks, such as Citi and Barclays, rate the stock a Hold with target prices around $70-75, while others, such as Wells Fargo, see upside potential from improved margins and cash flow with target prices around $80-85.

Fair Price

Early signals from the US launch of oral Wegovy suggest the story may not be finished. The appeal goes beyond convenience. A pill format lowers barriers for new patient groups and has the potential to expand the addressable market rather than merely reshuffle existing demand. The key question now is speed: how quickly this next wave materializes and whether it is large enough to change both competitive positioning and valuation assumptions.

Top points of analysis

• Weg's pill crossed 26,000 prescriptions in the US in its second full week of launch, which the market sees as a surprisingly strong start.

• The oral form may expand the market to needle-averse patients, the self-pay segment and new demographics - and thus lift overall addressable demand.

• Novo gets first-mover advantage in oral GLP-1 for obesity; Lilly is awaiting approval of its Orforglipron pill.

• Obesity is shaping up to be a market of around $100 billion a year by 2030 (estimates vary), with oral potentially accounting for a third or more of the entire GLP-1 market.

• Investment is not just about "prescriptions" but retention, reimbursement, persistency and production capacity limits - i.e. what will (or won't) make early signal into revenue and margin.

Main topic: why 26,000 prescriptions may be more than just a nice number

The 26,109 prescriptions number for the week ending January 23 is important mainly because it comes extremely early. According to data cited in the media, this was the second full week after launch, with the first week being around 18,410 and the very first four days after launch (since January 5) bringing in around 3,071 prescriptions. This is the typical curve that an investor likes to see: rapid acceleration without the product needing months of "warm-up" in the system.

The second thing is the demand structure. For injectable GLP-1, the market has collapsed into two worlds: patients with good insurance versus self-pay, plus a chronic problem with availability and outages. The oral form pushes the barriers elsewhere - into price elasticity, persistence, and how "easy" it is to get the pill into the hands of people who would never inject. Back in January, Reuters cited Novo's view that the oral segment in particular may be bigger than expected, and by 2030 oral GLP-1s could account for a third or more of the entire GLP-1 market.

The third level is competitive timing. While $LLY awaits the regulatory verdict on its oral candidate orforglipron (and according to some accounts, there has been talk of the possibility of approval during 2026), $NVO is already in the market and picking up what is hard to catch up: physician experience, patient habits, first payer contracts, and distribution channels.

And a fourth detail that is underappreciated by investors: marketing and "mindshare." Reuters pointed out that Novo has significantly increased advertising spending on Wegova and Ozempic in the US in 2025. As availability improves and the company can push demand more aggressively, adding the pill also makes sense as an "acquisition tool" - a product that brings new patients into the ecosystem and can then migrate some of them to other forms of therapy.

Market size: Where obesity may move by 2030

It's worth separating two things here: the anti-obesity market and the broader GLP-1 economy. For the investment framework, the most commonly cited thesis is that the global market for anti-obesity medication may grow to levels of around US$100 billion in annual sales by 2030. At the same time, more players are entering the obesity race (e.g., other large pharma and candidates in development), confirming that the market is seen as structurally giant and long-term.

The key takeaway for Novo is that the oral form can change the composition of the market. If we take a conservative framework:

• Anti-obesity market ~$100 billion in 2030.

• Oral GLP-1 accounts for ≥ 1/3 of the GLP-1/obesity segment (Novo outlook)

This brings us to simple "investor math": the oral segment could theoretically be around $30-40 billion per year by the end of the decade (depending on whether the market ends up closer to $80, $100 or $150 billion). This is not a prediction of one company's revenue, but a framework for the size of the opportunity.

What share can Novo have?

Here it's fair to admit that the share is uncertain and will depend on three variables:

1. Timing and quality of competition (Lilly and others)

2. reimbursement and payer access

3. persistence (how many patients stay on therapy)

Therefore, it makes sense to work with scenarios.

Illustrative projections of the oral segment in 2030:

• If the oral segment is $35 billion

• and Novo gains 40% → $14 billion per year

• at 50% → USD 17.5 billion

• at 60% → USD 21 billion

This is exactly what makes a pill an investment catalyst: even "just" a few tens of percent share in the oral segment can mean double-digit billions in revenue per year over a decade - and that's the size that can realistically shift a company's valuation.

Novo vs. Lilly: why the battle for the pill is decided before the competition arrives

On paper, this may look like a temporary advantage. Novo Nordisk has a pill on the market, Eli Lilly is waiting for approval. But the difference in investment is deeper - and, more importantly, time-sensitive.

Novo doesn't just collect prescriptions today. It's collecting real-world data that Lilly doesn't yet have. Doctors are getting used to how to prescribe the pill, for which patients it works best, and how to combine it with other treatment options. Patients are forming a habit to a particular brand and form of therapy. And payers-often underestimated-begin to work with the first real numbers on utilization, persistence, and cost. These are all things that can't be caught up with marketing in one quarter.

While Lilly is known for extremely strong execution and the ability to scale production quickly, in the case of the oral form, it only enters the market when a reference product already exists. This changes the dynamic. Lilly won't be setting the rules of the game - it will have to either catch up or beat them. And that usually means either a better clinical profile or a more aggressive pricing strategy. Both have an impact on margins.

The key point for Novo is that first-mover advantage in this case is not just about market share, but about "mindshare." If the pill becomes the gateway to obesity treatment - i.e., the first step for patients who would never start the injection - Novo gains a structural advantage in new user acquisition. Even if some of them later move on to a competitor, the first contact with the brand has long-term value.

From an investment perspective, one more comparison is important: Lilly today benefits from extreme growth and high expectations. Novo, on the other hand, is entering a phase where a positive surprise may carry more weight than another "beat" at a competitor. If the oral form proves to be spreading faster than the market expected, the relative repricing may come more for Novo than for Lilly.

Products in the fight against obesity: what Novo and Lilly really offer today

The battle between Novo Nordisk and Eli Lilly is not just about marketing and manufacturing capabilities. It's all about the product offering - that is, what doctors and patients actually have (or will soon have) available, in what form and with what efficacy and convenience profile.

Novo Nordisk: breadth of portfolio and first pill on the market

Novo today stands on a strong combination of proven injectable products and, more recently, an oral form.

• Wegovy (injections) - The flagship product for the treatment of obesity. High efficacy, strong brand, but at the same time limited availability and a barrier in the form of the injectable form that puts some patients off.

• Ozempic (injection) - Primarily a diabetic drug that is also used massively off-label for weight loss. It is important to Novo mainly as an entry-level product and source of huge cash flow.

• Wegovy in tablet (oral form) - The key new element of the whole equation. Not necessarily a "better" drug than injections, but a different entry point for patients. The tablet dramatically lowers the psychological barrier, expands the market to "needle-averse" (needle fearing) patients, and opens up the self-pay segment. Early data (26,000 prescriptions in the second full week) suggests that demand is real and fast.

Product-wise, it's important to Novo that oral Wegovy doesn't push injections, but widens the patient funnel. Some of them may eventually switch to injectable forms, which increases lifetime customer value.

Eli Lilly: extreme efficacy, but waiting for the pill

Lilly enters the fray from a different position - with fewer products but a very strong "top performer."

• Zepbound (injection) - The most frequently mentioned drug with the highest efficacy in weight loss on the market. It is the reason why Lilly quickly gained up to around 60% of the obesity segment according to various estimates. But the problem is the same barrier as with injectable Wegova - form and availability.

• Mounjaro (injection) - Originally a diabetes drug, heavily used off-label. A key source of growth for Lilly, but again only in injectable form.

• Orforglipron (tablet - in development) - Strategically the most important missing piece. If approved, Lilly will enter the oral segment with tremendous strength - strong brand, rapid execution and manufacturing capabilities. But from an investment perspective, it is crucial that it comes later and into a market that Novo has already begun to shape.

The investment gap: efficiency vs. affordability

From a purely clinical perspective, Lilly today has the upper hand in maximizing the efficacy of injectable therapies. But from an investment perspective, another issue is still more important:

How many people actually start treatment - and how many stay on it?

And this is where the advantage of the oral form starts to break down.

• The tablet expands the addressable market, even though it may not have the same effect as injections.

• Injections maximize results but limit the number of patients.

• In a mass market (tens of millions of people), adoption is often more important than absolute efficacy.

That's why oral Wegovy is so strategically valuable to Novo: it's not about beating Lilly on the clinical chart, but opening up another layer of demand that Lilly can't yet serve.

What has to fit to turn prescriptions into sales

It's easy to fall into euphoria with early prescriptions, but an equity investor needs to know what the bridge is between scripts and revenue:

• Payer mix: how much is self-pay vs. insurance. Self-pay can grow quickly, but is sensitive to price and household economics.

• Persistence: for chronic therapy, the key is whether patients last months and years or just a short "trial".

• Supply & manufacturing: early months may be limited by capacity - this can slow growth even when demand is strong.

• Clinical position: if competitors offer better efficacy/comfort or better adverse event profile, share can spill over quickly.

Risks: why the "first mover" advantage may be less than it looks

The biggest risk is regulatory-competitive: if Lilly wins approval for an oral candidate in 2026 while being able to scale it up quickly, Novo's first-mover advantage may narrow to a few quarters. The second risk is pricing and political: pricing and reimbursement pressure in the US may gradually steal margins and limit availability. The third is technological: pipeline competition is intensifying and other big players are entering the fray, which will reduce the "duopoly rent" over time.

And the fourth, which the market often underestimates: marketing and reputation. As obesity becomes a mass consumer market, sensitivity to perceived value, side-effects, media narrative and availability will grow. This can drive demand in the short term, as can clinical data.

Investment scenarios: what this could mean for Novo's growth

Optimistic scenario: oral segment explodes and Novo maintains dominance

Weg's pills confirm high persistency, reimbursement mix improves and oral form really grows to ≥ 1/3 of the market by 2030. Novo will maintain a 50-60% share of the oral segment thanks to its first-mover advantage and ecosystem. In this case, Wegovy's oral may gradually become one of the company' s biggest growth drivers and offset the competitive pressure in injectable forms.

Realistic scenario: strong product, but market will quickly become competitive

Lilly comes out with an oral alternative in 2026, part of the market splits, but the oral segment still grows strongly. Novo holds ~40-50% of the oral market through brand and distribution, growth continues but valuation will be sensitive to whether the company can sustain margins and adoption rates.

Pessimistic scenario: rapid competitive response and pricing pressure

Competition will accelerate, payers will limit reimbursement or enforce aggressive pricing terms, and the oral form will not have the expected persistence. The oral segment grows more slowly and Novo ends up with more of a ~30-40% share. In this case, the pill will be a positive but not a "game changer" and the investment story will revert primarily to the injectable portfolio and pipeline.

What to take away from the article

• The 26k prescriptions per week is an early signal that oral Wegovy may be more than just an adjunct to injections.

• Obesity is heading for a market on the order of ~$100 billion per year by 2030, so even a minor shift in share has a huge impact on revenues.

• Oral GLP-1 could account for a third or more of the market by 2030 - that's the main reason why the pill has strategic value.

• The real test is not the number of prescriptions, but persistence, reimbursement and scaling

• The biggest risk is the speed of competition, especially the timing of Lilly's oral pill

Today, Tesla is at one of the most pivotal points in its history. While just a few years ago it was seen almost exclusively as a symbol of the electric car revolution, the current reality is significantly more complex and also significantly more problematic. Car sales in key markets are slowing, the price war is pushing margins down, and competition from China is turning from a regional threat into a global structural pressure. But this is precisely the point at which Tesla's entire strategy begins to break down. The company is gradually scaling back production of some models, rethinking expansion in the automotive segment, and communicating more openly that its long-term future does not lie primarily in selling cars.

This shift is neither accidental nor short-term. According to our team's analysis, the automotive industry is also entering a phase where electric mobility is becoming a highly competitive industry with declining margins, much like consumer electronics in past decades. This evolution is one of the main reasons why Tesla has been accepting lower margins in recent quarters in exchange for maintaining production and sales volumes while investing massively in areas that have little to do with traditional automotive. Meanwhile, research into industrial automation and humanoid robotics shows that this is where a new market worth hundreds of billions of dollars could take shape over the next ten years.

Software, artificial intelligence, and Tesla's ability to develop its own hardware and algorithms will play a crucial role in this transformation. That's an advantage that traditional car companies have virtually none of and that Chinese manufacturers are only just catching up to. But it's also why Tesla (as a stock) is so difficult for investors to grasp today. The short-term numbers from the automotive segment send warning signs, while the long-term vision (autonomous systems, robotics, AI) is still difficult to quantify and requires faith in the company's technological edge. It is this contradiction between the present and the future that is creating the extreme exchange of views on Tesla stock today.

Car manufacturing

The automotive part of Tesla today faces a combination of pressures that are fundamentally altering its near- and medium-term profile. Over the past two years, the electric car market has moved from a phase of structural scarcity to one of fierce price competition, where technological superiority is no longer the issue, but the ability to produce cars cheaply, quickly and in large numbers. Tesla, which has long been the segment's price maker, has itself become the initiator of a price war in this environment, only it is this move that is now most significantly affecting its profitability.

Source: Bulios - Tesla detail

The series of discounts across the main models had a clear objective: to maintain sales volumes and avoid losing share in key markets. In the short term, Tesla succeeded, but at the cost of a sharp decline in margins, which hit their lowest levels in several years. Analyst analysis points out that Tesla is now much closer to traditional car companies than its valuation would suggest. This disconnect between market valuation and automotive segment fundamentals is one of the main sources of the stock's current volatility. The Fair Price Index on Bulios also highlights this.

Competition

Increasing competition from China is also a major factor. Manufacturers such as BYD are now able to offer electric vehicles of comparable technological level at significantly lower prices, not only in their home market but increasingly in Europe and other regions. Studies tracking the global EV market repeatedly point out that Chinese manufacturers benefit from vertical integration, cheaper supply chains and strong government support. This creates a long-term pressure that cannot be addressed simply by further price cuts without negative impacts on profitability.

Added to this is the issue of product portfolio. Tesla today stands primarily on a relatively narrow range of models that have been on the market for several years. While this has not mattered in the past, the current environment requires faster innovation and more frequent model changes that consumers are used to from, for example, the Chinese market. The curtailment of production of some versions and a more cautious approach to expanding production capacity suggest that Tesla itself is aware of the limits to further growth purely through car sales.

2 main segments

Tesla's car business is thus reaching a stage where it is no longer the main driver of the company's business. It still generates sales and cash flow, but its ability to justify a long-term technology premium in the company's valuation is increasingly being questioned. Yet the stock is still near all-time highs. That's why it's increasingly important to watch where Tesla is shifting capital and strategic focus to see what role the automotive segment has to play in the broader transformation of the company.

Source.

Tesla is now openly profiling itself as an AI and robotics company whose goal is not to maximise car sales, but to develop systems that can be scaled across industry, logistics and services. In this context, cars are gradually changing from a final product to a platform for collecting data, training algorithms and testing autonomy.

Software and artificial intelligence play a crucial role here. Tesla has one of the largest proprietary real-world traffic datasets in the world, generated by millions of cars in daily operation. This data is a key input for the development of autonomous systems and machine learning algorithms. Studies on autonomy development repeatedly highlight that the critical competitive advantage is not the hardware itself, but the volume and quality of the data on which the models are trained. This is where Tesla has a head start that is difficult to replicate by traditional car companies and new players.

The company's increasingly ambitious robotics program builds on this foundation. The humanoid robot Optimus already serves as a product for industrial deployment. According to analyses of the industrial automation market, it is the shortage of labour and rising labour costs that could dramatically increase the demand for autonomous robots in the coming years. Here, Tesla is betting that its ability will allow it to make faster progress than its competitors and thereby capture the largest share of this market.

Changing the company's profile

But investors need to be wary of such a hard change in business model. Software and robotics carry the potential for significantly higher margins and global scalability, exactly the type of business that could justify the technology premium at which Tesla's shares trade. The problem, however, is the time horizon. While the investments the company is making in this segment today are not small, the commercial outcomes from these projects are still largely in the future and difficult to measure by traditional financial metrics. Thus, the automotive segment continues to serve as a major generator of cash, which the company is massively pouring into future developments, betting on its success.

Tesla is thus currently in a transition phase. It is focusing on 2 completely different business segments:

• The short-term cyclical automotive business.

• a long-term exponential technology vision.

This creates tension not only in the management of the company itself, but also in the expectations of the market. It is the ability to bridge these two worlds, which means financing technological transformation through car production while gradually reducing dependence on this segment, that will be crucial to the next chapter of Tesla's story.

Analysis

In the case of Tesla today, we run into one of the biggest analytical problems of the entire stock market...

How to value a company whose current fundamentals and long-term ambitions are each heading in a different direction.

Traditional financial metrics based on the auto business are sending signals of slowdown, margin pressure and increasing competition. But at the same time, Tesla's market valuation continues to imply that the company is transforming into something much bigger than a carmaker in the future.

From a purely analytical view of Tesla's results, the picture is fairly clear. The automotive segment, which still accounts for the vast majority of revenues, has reached a stage where volume growth is no longer offsetting price declines. Gross margins have shifted in recent quarters to levels that are historically close to the traditional automotive industry, not technology firms. This is crucial because high margins have been one of the key arguments for why Tesla has long been priced at a significant premium to other carmakers.

Our team's analyses, which cover the entire automotive segment and compare the performance of individual manufacturers, highlight that electromobility itself is entering a normalization phase. The technology is becoming standardised, batteries are gradually becoming a commodity for other players and the differences between manufacturers are narrowing.

In such an environment, it is extremely difficult to maintain above-average margins over the long term without a clear technological or software edge or customer loyalty.

This discrepancy is also evident in investor expectations. Short-term results are judged more harshly than in the past, and each additional downgrade or weaker outlook triggers a sharp stock market reaction. At the same time, the long-term investment story remains largely intact. Tesla continues to be valued as a company that has the potential to monetize autonomous driving, software and robotics on a scale that no other automaker has achieved. But everything is still based on promise. But to get it, the company must not go into debt at its current pace.

The automotive business generates cash flow, but its ability to finance ambitious technology projects without further pressure on margins is limited. At the same time, the longer the possibility of monetizing autonomous driving and robotics is delayed, the more sensitive Tesla's valuation is to any deterioration in near-term results. This is one of the main reasons why Tesla stock is in an extremely volatile range and why such a strong polarization of opinion has formed around it. Since the beginning of 2026, Tesla shares have been relatively stable by their standards so far, down 6.5%, but they still face high volatility, which is rather exceptional for companies of similar capitalization.

From an analytical perspective, Tesla is thus at a stage where the market has stopped blindly believing the story alone, but at the same time is not yet willing to abandon it. Investors and analysts alike are beginning to examine much more carefully whether individual technological advances and investments are actually moving towards profitability, or remain more of a vision without a clear timeframe.

For Tesla stock today, the market is not pricing in what the company is, but what it could become. This is key to understanding the entire debate surrounding this company. Current financial results, particularly from car sales, do not in themselves justify a technology premium in valuation. It is built almost entirely on future expectations.

The market today is therefore operating with a very asymmetric risk profile. If Tesla manages to translate its technology lead into a real, scalable, high-margin business, the automotive part of the company may in retrospect appear to be just a transitional phase. But if this transformation continues to be delayed, or hits regulatory, technological or competitive limits, Tesla will remain trapped between two worlds for the long term.

While the market is factoring all the good things into the share price today, it is not forgetting the side of the fact that everything might not go according to plan and that currently Tesla is just an expensive car company. This can be seen in the valuation of the stock itself. According to the Fair Price Index on Bulios, which is based on DCF and relative valuation, the price per share of Tesla today is high. It is as much as 27% above its fair value according to this calculation.

Conclusion

From a broader perspective, however, one thing is important: Tesla today stands at a strategic crossroads unprecedented in the auto industry. Few companies attempt to simultaneously serve a highly competitive, low-margin market while building an entirely new technology ecosystem. It is this ambition that makes Tesla one of the most watched and controversial stocks in the world.

The market response, however, is more complex than pure enthusiasm. With valuation and expectations now elevated, the margin for error has narrowed significantly. The results serve not only as confirmation of Palantir’s operating strength, but as an early test of whether its growth rate, margins, and operating leverage can be sustained beyond the initial surge of AI-driven demand.

How was the last quarter?

The fourth quarter of 2025 was exceptional from a Palantir $PLTR perspective on virtually every key metric. Revenue was $1.41 billion, representing 70% year-over-year growth and 19% quarter-over-quarter acceleration. This growth was driven not by a one-off order, but by broad-based demand, particularly in the US market, where Palantir is becoming the de facto standard for deploying AI in real-world operational processes.

US revenues grew 93% year-on-year to $1.08 billion, with the commercial side of the US business exploding at a 137% rate to reach $507 million. US government contracts grew more slowly but still very robustly, specifically up 66% to $570 million. Importantly, the growth is not just volumetric, but structural - Palantir awarded 180 contracts worth more than $1 million in the quarter, with 61 of those contracts exceeding $10 million. The total value of contracts closed reached a record $4.26 billion, an increase of 138% year-on-year.

The company's profitability literally shot up this quarter. GAAP operating profit was $575 million, equivalent to an operating margin of 41%. On an adjusted basis, operating profit was $798 million and operating margin was 57%, levels Palantir has never historically achieved. GAAP net income was $609 million, a 43% net margin, and adjusted earnings per share were $0.25.

The cash flow confirms that this is not an accounting illusion. Operating cash flow in the quarter was $777 million, a 55% margin, and adjusted free cash flow was $791 million. The company ended the year with $7.2 billion in cash and short-term U.S. Treasury bonds, no funding pressure, and significant room for further expansion.

• Full presentation with results.

CEO outlook and commentary

CEO Alex Karp did not hide his confidence in his comments and interpreted the results as a confirmation of the company's unique strategy. He emphasized that Palantir is consciously focused solely on monetizing the operational leverage enabled by rapid advances in AI models, and referred to this trend as "commodity cognition" - a state where AI capabilities are becoming widely available, but real value is only created by integrating them into real-world processes.

The outlook for 2026 is extremely aggressive. The company expects full-year revenues in the range of $7.18 billion to $7.20 billion, implying year-over-year growth of approximately 61%. U.S. commercial sales are expected to exceed $3.14 billion, implying growth of at least 115%. Adjusted operating profit is expected to be between $4.13 billion and $4.14 billion and free cash flow is expected to reach $3.9 billion to $4.1 billion. In addition, management expects GAAP operating profit and net income in every single quarter of 2026.

Long-term results and business development

A look at the long-term numbers shows that the current explosion is no accident. Palantir's revenue grew from $1.54 billion in 2021 to $1.91 billion in 2022, $2.23 billion in 2023, and $2.87 billion in 2024. While the rate of growth varied from year to year, the key turning point was in profitability.

While in 2021 and 2022 the company was generating significant operating losses and net profit was deep in the red, 2023 marked the first stabilization and 2024 has already brought a net profit of $462 million. Operating profit more than tripled between 2023 and 2024 and EBITDA moved into positive territory with strong growth momentum. This shift is the result of a combination of higher average contracts, recurring revenue and dramatic improvements in operating efficiency.

At the same time, it is important to mention the negative side of the long-term development - shareholder dilution. The average number of shares outstanding has grown at a rate of 4-7% per annum in recent years, partially dampening earnings per share growth. However, the current level of profitability is beginning to override this effect, with EPS increasing significantly faster than the number of shares in 2024 and 2025.

Shareholder structure

The shareholder structure remains strongly institutional, with institutions holding around 60% of the shares. The largest shareholders are Vanguard, BlackRock and State Street, followed by JPMorgan and several other large asset managers. Insider holdings exceed 3.5%, which for a technology firm of this size still represents a relatively significant alignment of management interests with shareholders.

Expectations of anayltics

• Analyst Consensus (overall sentiment): The average 12-month target price for Palantir stock is around $189-$192, implying roughly ~28-30% potential upside.

• Bank-specific recommendation: Bank of America raised PLTR's target price from $215 to $255 and maintained a Buy rating on the stock given strong segment growth and revenue outlook for 2026.

Fair price

Is $DIS still interesting to you, or is $NFLX simply a much better and more attractive company?

What Wall Street Expects in the Numbers

Heading into the report, analysts have penciled in strong growth metrics for Palantir. Consensus forecasts suggest revenue of approximately $1.34 billion for Q4 2025, representing about 62 percent year-over-year growth, while adjusted earnings per share are expected to land near $0.23, up about 64 percent from the same quarter last year. These expectations reflect continued expansion of Palantir’s business across both government and commercial segments, as well as rising demand for its AI-driven software platforms. The company has topped revenue estimates in several recent quarters, contributing to optimism that tonight’s results could again beat expectations.

Positive Momentum Meets Skepticism

Despite the strong expected growth, sentiment around Palantir’s stock has been mixed. The shares have pulled back roughly 30 percent from recent highs, and broader skepticism in the tech sector toward richly valued AI and software names has kept some investors cautious . At the same time, analysts remain divided: some firms have maintained sell ratings or cautious outlooks, while others, including William Blair, recently upgraded the stock to Outperform, citing improved valuation and sustained commercial momentum.

This split view is further illustrated by the variety of price targets on the stock, with some analysts pricing PLTR as high as the $230 range on the back of AI platform growth and expanding commercial adoption, while more conservative shops highlight valuation and demand durability concerns that could temper upside. The average analyst price target implies significant potential upside from current levels if the company delivers results that reinforce confidence.

What Investors Will Be Watching

When the earnings data hits the tape tonight after markets close, there will be a number of key items investors will scrutinize closely:

Revenue growth and segment performance: Does Palantir continue to expand its commercial footprint while maintaining strong government sales?
Earnings per share and margin trends: Are profits expanding alongside revenue, and is the company showing disciplined cost management?
Guidance and forward outlook: How will management frame expectations for the first quarter of 2026 and beyond?
Stock reaction and options volatility: How far will shares move based on post-earnings volatility pricing and whether results fall below, meet, or exceed forecasts?

Tonight’s report could serve as a litmus test for investor confidence in Palantir’s long-term narrative around artificial intelligence and enterprise analytics. Strong results and an upbeat outlook could quickly shift sentiment and draw renewed interest from growth investors, while a weaker than expected performance or cautious guidance could reinforce the caution that has built up in recent months.

Recent years have confirmed what seemed inevitable at the beginning of the decade. The demand for AI infrastructure has morphed into a trend with far-reaching implications for the technology sector and the global economy. While media attention has traditionally been directed towards companies like Nvidia $NVDA or Microsoft $MSFT, the data our team has studied in depth shows that the real driver of AI growth is not just computing power and better software alone. The components that enable the deployment of best-of-breed models and performance scaling play a key role, especially the memory modules and storage that power data centers and compute clusters around the world.

This shift is beautifully illustrated by the story of more than just SanDisk $SNDK, whose stock has experienced one of the most remarkable market moves since its spin-off (from an initial price of a few tens of dollars to a rise in the thousands of percent).

And why exactly? AI applications don't just require the raw computing power of a GPU. They need huge amounts of data that must be read, written and kept available quickly as the model is being trained. By some estimates, the global demand for AI computing power could consume tens of gigawatts of electricity and require infrastructure investments on the order of hundreds of billions of dollars, already flowing in this direction, over the next few years. These demands are fundamentally changing the consumption of memory and storage technologies and moving companies on the fringes of the traditional technology ladder into the middle of the mainstream market.

In addition, the overall cycle is behaving differently than in the past due to AI demand. While traditional consumer electronics is stabilizing production along relatively predictable trends, the AI-intensive data center means rapidly growing demand that far exceeds the traditional capabilities of memory manufacturers, both for DRAM (memory that devices use right now) and NAND (memory that is used for long-term data storage). This imbalance between demand and supply is one of the main reasons why the storage and memory segments of the market are showing such strong fundamentals today, and why investors are looking beyond GPU and processor manufacturing further into the infrastructure itself.

In the following sections, we look at three key players in the S&P 500 index and explain how they relate to this trend and why they may be relevant in the context of the AI boom. Remember, these are companies that have multiplied their stock value by tens and often hundreds of percent by 2025.

SanDisk $SNDK

The story of SanDisk is a prime example of how a fairly inconspicuous part of the technology chain can turn into a key structural trend winner in a new market environment. A brand that investors have long associated primarily with consumer storage is now re-emerging to the fore. This time, however, as an important supplier of NAND memory for the enterprise segment and data centers, where a major part of the AI revolution is taking place.

The key moment was the spin-off of SanDisk itself and its return to the stock market as a separate entity (hence the chart in the stock detail only starts at the beginning of 2025). The market here quickly revalued a business model that in the past was often seen through the cyclicality of consumer electronics. But the current reality is markedly different. AI models, cloud services and data centers are generating exponential growth in the volume of data that must not only be stored but also accessed extremely quickly. This is where NAND memory becomes an indispensable part of the infrastructure, and SanDisk is one of the most technologically well-positioned players in this segment.

The demand structure is also crucial. While the traditional PC and smartphone markets remain relatively subdued, enterprise and hyperscale customers are significantly increasing investment in AI-optimized storage. Memory market analyses have long pointed out that AI servers consume many times more NAND capacity than conventional server solutions, fundamentally changing the economics of the entire segment. This is starting to impact both the pricing discipline of manufacturers and their margin outlook.

The result is a sharp change in investor perception of the company. SanDisk's stock has seen extreme growth in a short period of time, which at first glance may appear speculative. However, a deeper look reveals that the market is not just reacting to short-term sentiment, but to the firm's redirection towards a long-term, structurally growing market. The combination of a limited supply of NAND memory, growing demand from AI infrastructure, and increased bargaining power with customers is creating an environment that SanDisk simply did not have in the past. The numbers themselves speak to this, which you can analyze by their models right in the stock detail.

At the same time, it should be added that SanDisk is part of a broader memory ecosystem where developments in pricing, capacity and technology transitions (to more advanced NAND types, for example) are reflected across the entire sector. This is why its development is also an important indicator for other players who are benefiting from the AI boom, either directly or indirectly.

Micron $MU

While SanDisk benefits primarily from the growth in data storage volumes, Micron Technology stands even closer to the very core of AI infrastructure. Without DRAM, and especially High Bandwidth Memory (HBM), today's AI models simply could not operate at the scale at which they are deployed. And this is where Micron has moved into the position of a strategic player in recent years, with its products becoming one of the major limiting factors in the continued growth of computing power.

AI servers are in a completely different league from traditional data centres in terms of memory. According to our analysis, a single AI server consumes several times more memory capacity than a conventional server designed for cloud applications. Training large language models and their subsequent inference requires extremely fast data access, low latency, and high throughput. These are all features that classic storage architectures have not offered for a long time. This is why HBM memories have become one of the most valuable components of the entire AI boom.

Micron is in a unique position in this regard. As one of the few global DRAM and NAND manufacturers, it has direct exposure to both key memory segments that are driving the AI boom. Moreover, it has managed to significantly improve its technology level and manufacturing efficiency in recent years, which is starting to translate into margins just as the memory cycle is breaking from a supply glut into a structural capacity shortage. A number of studies from the semiconductor industry have warned that the supply of HBM memory is limited for at least the next few years, while demand is growing faster than manufacturers can meet it.

This fundamentally changes the dynamics of the entire memory cycle. While in the past memory companies were extremely sensitive to price wars and overcapacity, the current environment gives manufacturers significantly more bargaining power. Micron today is selling memory not as a commodity, but as critical infrastructure without which AI services cannot scale. This shift is also key from an investment perspective, as it suggests that the traditional cyclicality of the memory sector may be less pronounced in the AI era than in the past. And this also translates strongly into margins, which are now at record highs.

At the same time, Micron is becoming something of a barometer of the overall AI market. Any slowdown in data center investment would be felt very quickly, as would any further acceleration. That is why its development is being closely watched not only by investors, but also by competitors and customers across the technology sector.

However, there are currently no indications that demand will change in any way. Shares of $MU are already up 45% since the start of this year, but this meteoric rise has also put them in territory where many investors are starting to worry about valuations. Even according to the Fair Price Index on Bulios, which is based on DCF and relative valuations, Micron stock is currently above its fair value by more than 22%.

Western Digital $WDC

Western Digital has long been one of the companies that the market has viewed primarily through the prism of consumer electronics cyclicality and traditional hard drives. But its role has begun to change significantly in the AI boom. Today, Western Digital stands at the intersection of two worlds. On the one hand, consumer storage, and on the other, enterprise solutions for data centres, which are increasingly optimised to handle the huge volumes of data generated by AI.

While GPUs and HBM-type memories address compute speed and working with active data, AI infrastructure also requires massive capacities for long-term data storage, training and model results. This is where hard drives still have an indispensable role to play. Studies focused on AI data center architecture repeatedly point out that as AI computing grows, not only does the need for computing power increase, but so does the volume of data that must be archived, backed up, and analyzed retroactively. This trend favors companies that can offer high-capacity, energy-efficient storage, an area where Western Digital has long-standing expertise.

The restructuring of the business itself is also a key factor. The separation and greater focus on individual segments - particularly enterprise storage and data centers - is allowing the market to better appreciate parts of the business that have been "hidden" behind underperforming consumer electronics in the past. Combined with growing demand from hyperscalers for capacity solutions, this is changing the company's investment story: from a cyclical hardware manufacturer to a strategic AI infrastructure supplier.

In addition, Western Digital is benefiting from the same supply and demand dynamics seen in previous memory manufacturers. Limited investment in new capacity in previous years means a more disciplined market today, where manufacturers are better able to control pricing and margins. In addition, stability is increasing due to very strong demand for AI and long-term contracts to build new data centers that need both storage and memory.

Thus, Westren Digital is a company that is benefiting from the current trend and making a lot of money, but the stock's recent growth (126% since 2023) puts it in a zone where the Fair Price Index on Bulios is glowing red. And it has been for some time. In fact, at current levels, $WDC stock is 48% above its intrinsic value.

Conclusion

The market is now no longer just pricing in the mere existence of AI, but is increasingly discerning where in the value chain long-term demand and pricing power actually originates. While computing power remains important, the focus is shifting to the less visible but essential building blocks of the entire infrastructure, i.e. memory and storage.

The common denominator of the companies we looked at in this article is that their products are not optional add-ons to AI, but essential to its further development. Whether it's high-speed memory, high-capacity storage or solutions for dealing with massive amounts of data, without these technologies, AI systems cannot be scaled, streamlined or commercially deployed. And that in itself speaks volumes about the nature of these companies.

The market reaction reflects timing rather than direction. Elevated content and sports-rights costs, combined with residual pressure in linear media, weigh on near-term earnings momentum. This quarter looks less like a payoff and more like a consolidation step, as management openly points to a stronger second half. The tension lies in patience: whether investors are willing to wait for the operating leverage that is still ahead.

How was the last quarter?

Disney $DIS revenue in Q1 FY2026 grew 5% year-over-year to $26.0 billion. Growth was driven primarily by the Experiences segment and a solid Entertainment performance, while the Sports segment delivered only a modest increase in revenue. Pre-tax profit was $3.7 billion, remaining roughly in line with last year, but total segment operating profit fell 9% to $4.6 billion.

Earnings per share saw a slight deterioration. Diluted EPS came in at $1.34 compared to $1.40 in the prior year, while adjusted EPS fell to $1.63 from $1.76. This decline is an important signal that despite revenue growth, Disney is facing margin pressure in the short term.

A detailed look at the segments explains the structure of the results. Entertainment grew revenue by 7%, but segment operating profit fell 35% to $1.1 billion. The main reason was higher production and marketing costs, which outweighed the positive effect of higher subscription fees and strong theatrical performance of titles such as Zootopia 2 and Avatar: Fire and Ash.

Conversely, the streaming portion of SVOD is becoming one of the most positive elements of the results. SVOD revenue grew 11% and operating profit increased $189 million to $450 million, for an 8.4% margin. This clearly confirms that the transformation of Disney+ and Hulu towards a sustainable business is starting to bear fruit.

The Sports segment reported an operating profit of $191 million, down 23% year-on-year. The negative impact of the temporary suspension of distribution on YouTube TV, which reduced operating profit by approximately $110 million, as well as the increase in sports rights costs, was significant here.

Experiences remains the strongest pillar. The segment achieved record quarterly revenues of $10.0 billion and operating profit of $3.3 billion. Home Parks saw attendance growth of 1% and per capita spending increased 4%, confirming the pricing strength of the brand even in a more challenging macroeconomic environment.

• Full presentation with results.

CEO commentary

Robert A. Iger assessed the start of the fiscal year positively, highlighting in particular Disney's ability to generate value across its entire brand ecosystem. He pointed to an exceptionally strong box office in calendar year 2025, with several titles ranking among the billion-dollar hits, and the fact that these franchises are generating secondary revenue in parks, merchandising and streaming.

Iger also hinted that the last three years of restructuring and more disciplined cost management are starting to be seen, particularly in streaming. He said Disney is now better prepared to manage the business with a long-term horizon, although short-term fluctuations in some segments remain a reality.

Outlook

Management's outlook is considerably more optimistic than the first quarter results themselves. For Q2 FY2026, Disney expects segment operating profit in Entertainment to be comparable to last year, with SVOD expected to achieve an operating profit of approximately $500 million, an improvement of approximately $200 million year-over-year.

Sports is expected to face an operating profit decline of roughly $100 million in the second quarter due to higher rights costs, while Experiences should see modest profitability growth despite headwinds from lower international attendance and new project costs.

Full-year guidance for fiscal 2026 is built for acceleration in the second half. Disney expects double-digit segment operating profit growth in Entertainment, SVOD margin around 10%, low single-digit profitability growth in Sports and high single-digit growth in Experiences. Adjusted EPS is expected to grow at a double-digit rate year-over-year, and operating cash flow is expected to reach about $19 billion. Management is also confirming a $7 billion share buyback plan.

Long-term results

A look at the last four fiscal years shows a significant turnaround in the company's profitability. Revenues have grown from $82.7 billion in fiscal 2022 to $94.4 billion in 2025, with growth rates stabilizing around 3-7% annually.

Even more striking is the evolution of operating profit, which has increased from $6.8 billion in 2022 to $13.8 billion in 2025. Net income has seen a jump in growth, going from $3.1 billion in 2022 to $12.4 billion in 2025. EPS has increased from $1.73 to $6.88 over the same period, clearly showing the return of operating leverage after a pandemic period and restructuring.

The company has undergone significant volatility over the past few years, reflecting a combination of structural changes in the media business and cyclical factors associated with the return of physical entertainment. While revenue and profitability growth in 2022 and 2023 was dampened by high content cost pressures, restructuring of media activities and weaker monetization of streaming, key segments gradually began to show signs of stabilization. In particular, the gradual return of attendance and pricing power in theme parks was a significant positive factor, as they moved back from cyclical lows to above-average profitability and began to regain their role as a major cash generator. This shift allowed the company to partially offset the weaker performance of its traditional media businesses and set the stage for renewed operating profit growth.

On the other hand, however, the evolution of profitability remained uneven, as higher sales were not always accompanied by a corresponding improvement in margins. Increasing investment in content, marketing and technology, together with pressure on sports rights and a volatile advertising market, led to limited operating leverage in some years. As a result, net income and earnings per share fluctuated not only in response to operating performance, but also due to one-off items, tax effects and changes in capital structure. Overall, the long-term development can be characterised as a transition from a phase of restructuring and investment to a phase of gradual stabilisation, with the key question for the coming years being whether the growing sales and strong demand can be translated into sustainable growth in margins and free cash flow.

News

Key structural changes include the consolidation of Hulu Live TV with Fubo, where Disney holds a 70% stake, and the formation of an Indian joint venture with Reliance Group, where Disney has a 37% stake. These moves reduce capital intensity and volatility in lower-return regions and segments.

At the same time, the company continues to expand its theme parks, including investments in Disneyland Paris and the development of the cruise segment, which should strengthen Experiences as a key stabilizing element of the overall portfolio.

Shareholding structure

Disney shares are more than 75% held by institutional investors. The largest holdings are held by Vanguard, JPMorgan Chase, BlackRock and State Street, underscoring the company's character as a long-term institutional title with an emphasis on stability and return on capital.

Analyst expectations

Analysts view Q1 results as a temporary wobble rather than a change in the long-term story. Large investment houses in particular highlight the rapidly improving streaming economics and resilience of the Experiences segment. Consensus expects the key catalyst for the stock to be the second half of fiscal 2026, when double-digit earnings growth and strong cash generation should be evident.

Fair Price

Yet some of these firms continue to execute exactly as they always have. They operate essential infrastructure, generate cash across economic cycles, and increase dividends year after year without interruption. The tension lies in the disconnect between what the business delivers and how the market prices it. The question is not whether the model still works, but why its reliability commands so little attention in a market obsessed with growth narratives.

Top points of analysis

• More than 50 years of uninterrupted dividend growth regardless of the cycle

• Stable, contract-linked earnings across sectors of the economy

• Strong operating cash flow backing the dividend by a significant margin

• Conservative balance sheet and disciplined capital allocation

• Valuations that do not reflect the quality or stability of the business

Company performance: the unassuming backbone of the U.S. economy

ABM Industries $ABM is one of the largest providers of facility services in the United States. In other words, the company handles the day-to-day operations of buildings, airports, hospitals, universities, industrial campuses and commercial properties. Its services include housekeeping, facilities management, energy management, security, parking systems and critical infrastructure support.

The key is that these services are not optional luxuries. Whether the economy is growing or declining, buildings must be kept up and running, airports safe and hospitals functional. This gives ABM a business with low cyclicality and high levels of recurring revenue, often secured by long-term contracts.

A significant portion of revenue comes from the public sector and large corporations, which reduces credit risk. In addition, the company operates across regions and sectors, so it is not dependent on a single type of customer or segment of the economy.

Competition: Why ABM survives where others struggle

The competitive landscape in facility services is fragmented and brutally competitive. There are global players, regional firms and local providers who compete primarily on price. At first glance, it might seem that ABM has no "moat", but the reality is different.

ABM's greatest competitive advantage is its ability to service complex, multi-year contracts on a national and international scale. This is a barrier that smaller firms cannot overcome - not just because of capital, but because of processes, compliance, IT systems and human resource management. It is this capability that makes ABM the preferred partner for airports, hospitals and large corporations where service failure is not tolerable.

Unlike some of its competitors, ABM does not seek to expand aggressively at any cost. Instead, it is focusing on optimizing its contract portfolio, exiting low-margin contracts and gradually shifting to more technically demanding services (energy management, technical building management). While this hinders revenue growth in the short term, it improves the quality of revenue in the long term.

Financial stability is also an important difference compared to smaller competitors. ABM has access to capital, can survive periods of price pressure and can absorb short-term losses in individual segments. In a recession, this often leads to market consolidation, where weaker players drop out and strong players win their contracts - albeit at lower margins.

Management

Scott Salmirs is President and CEO of ABM, one of the world's largest providers of facility services and integrated building management solutions. He has led the company since 2015 and is seen as a leader who builds decision-making on clear values and a long-term vision. During his tenure, the company has undergone several major transformations aimed at streamlining operations, growing key segments and strengthening relationships with customers and employees. As a result, financial performance has improved significantly, with revenues increasing from approximately $4.9 billion to more than $8.1 billion, adjusted EBITDA more than doubling and operating margins increasing by more than 60%.

Prior to his appointment to the role of CEO, he served for more than a decade in various senior management roles within ABM where he was responsible for, among other things, the strategic management of the rapidly growing International and Aviation divisions. As the regional leader for the Northeast U.S., he was able to triple revenues and increase client retention rates to 96%. He also gained experience in finance and real estate at Goldman Sachs, Lehman Brothers and CBRE, where he managed large portfolios of owned, managed and leased properties. Today, he translates this experience into ABM's leadership with an emphasis on capital discipline, operational efficiency and sustainable growth.

Financial Performance

At first glance, ABM Industries appears to be a typical low-margin service provider - and the numbers bear this out. Gross margins of around 11.8% and operating margins of around 3.7% are among the lower figures across the market. That in itself would not be attractive unless the company compensated for low margins with volume, stability and operational discipline.

Revenues for fiscal 2025 were $8.75 billion, representing 4.6% year-over-year growth. This is not rapid growth, but it is consistent across years - the company has grown at a rate of 3-5% per year for several years in a row, without dramatic swings. This is exactly the type of growth that pairs well with a dividend strategy. Significantly, revenue growth is occurring even in an environment of higher labor costs and inflation, indicating an ability to pass costs on to customers.

However, the profitability trend is a turning point. Operating profit in 2025 has risen to €325 million. Profit in 2025 has nearly doubled to USD 162 million, a jump of more than 53% year-on-year. USD 162 BILLION. Earnings per share rose more than 100% to $2.61, with this growth driven not just by accounting items but by a combination of lower operating costs, contract portfolio optimization and share buybacks.

EBITDA has been steady at around 420-460 million. USD 420-420 million for several years. This confirms that the company is not cyclically volatile, but operates as a cash-flow machine with high predictability, albeit without a dramatic growth story.

Dividend

• Dividend growth over the years.

With ABM Industries, it's crucial to understand one thing right from the start: this is not a dividend stock built on high yield, but a title built on extreme continuity and sustainability. This is qualitatively in a completely different league than chasing a 6-8% yield.

The current dividend is $0.29 per share per quarter, which equates to an annual yield of approximately 2%. At first glance, this doesn't look attractive, but the key is dividend earnings and cash flow coverage. At earnings per share of $2.61 for fiscal 2025, the payout ratio is roughly 44%, which is a conservative level - especially for a company with low capital intensity.

Even more important is a look at free cash flow. The firm generates operating cash flow well in excess of dividend obligations, while capital expenditures are relatively low (typical for a service business). This means that the dividend is not financed by debt or one-time items, but by ongoing operations. In practice: even if earnings fell by tens of percent in the short term, the dividend would still be covered.

Historically, ABM is one of the so-called Dividend Kings - it has paid a dividend continuously for more than 50 years and increased it every year. That said, the company has maintained and increased the dividend through oil crises, stagflation, the dot-com bubble, global financial crises and pandemics. This fact isn't marketing - it's the toughest possible dividend stress-test there is.

The rate of dividend growth is also important. ABM doesn't raise it aggressively, but smoothly and predictably, typically by low units of percent per year. This is consistent with the nature of the business: stability > yield maximisation. For the long-term investor, this means that the dividend realistically protects the purchasing power of capital without increasing the risk of future reductions.

So the summary of the dividend part is clear: this is not a stock for high yield hunters, but a title for investors who want a dividend they can rely on in 10-20 years' time, without fear of recessionary cuts.

Valuation: why the market values the company as "boring", and why that can be an advantage

ABM's valuation is a textbook example of a situation where the market ignores the quality of a business because of the low attractiveness of the story. Let's look at the numbers without emotion.

The stock trades at roughly 16.5 times earnings (P/E). That's a valuation that is more common for cyclical industrial companies, not businesses with contracted earnings, low earnings volatility, and a 50+ year dividend history. In other words, the market pays no premium for stability.

Even more interesting is a look at Price to Sales around 0.3. That means an investor is buying one dollar of sales for thirty cents today. Such a low multiple implies that the market expects no long-term growth and views the company almost as a "utility service." Yet the reality shows steady revenue growth of around 3-5% per year and significant swings in profitability due to costs rather than demand.

Price to Free Cash Flow at around 17x is already a more realistic benchmark. This is not an extremely cheap stock, but it is a valuation appropriate for a company that generates predictable cash flow without the need for massive reinvestment.

A P/B of 1.5× is not as telling here because service companies don't generate value through assets, but through contracts, people and processes. More important is the return on capital, which is around 6% ROIC - not a stellar number, but a stable number for a low-risk business.

Risks: where the investment thesis can fail

ABM's biggest structural risk is not demand, but the low margins of the business as a whole. Operating margins of around 3-4% mean that even a relatively small increase in costs - wages, benefits, insurance or energy - can be disproportionately reflected in profits. While the company may be working with long-term contracts, it is not always able to pass on cost pressures immediately to customers, especially in the public sector and large corporations with fixed budgets.

The second key risk relates to labour. ABM employs around 100,000 people, mostly in low- to medium-skilled occupations. This makes the company vulnerable to minimum wage increases, union pressure and changes in labour legislation. In an environment of structural labour shortages, wage cost growth may exceed the rate of revenue growth in the long term, which would lead to margin compression even without an economic recession.

Another less discussed risk is the contractual concentration by sector. A significant portion of revenue comes from airports, medical facilities, schools, and government. These segments are stable but also extremely sensitive to political decisions, budget cuts and changes in government procurement. This is not a cyclical risk in the classical sense, but a regulatory and budgetary risk that can lead to price pressure when contracts are renewed.

Investment scenarios

Optimistic scenario: overestimation of stability

In a positive scenario, the market starts to appreciate more the defensive nature of the business in an environment of higher macroeconomic uncertainty. If ABM can sustain revenue growth of around 4-5% p.a. while stabilizing operating margin above 4%, EPS could grow at a rate of 8-10% p.a. due to operating leverage and buybacks.

In that case, it would not be unrealistic for valuations to move from today's ~16× earnings towards the 18-20× that is common for quality dividend companies. This would imply a double-digit annual total return, combining share price growth and dividend. This scenario requires no revolution - just consistent execution.

Base case: a slow compounder

The most likely scenario assumes the company remains what it is today: a stable service provider with low margins but high predictability. Revenues will grow around the rate of inflation, profitability will remain relatively flat, and the main source of income will be the dividend, supplemented by modest EPS growth.

In this scenario, it is realistic to expect a total return of around 6-8% per annum, which is consistent with the stock's defensive profile. This is not a title that will outperform the market in euphoria, but it can steadily beat it in periods of volatility.

Negative scenario: pressure on margins with no breakout

The negative scenario occurs when there is a combination of rising labour costs, political pressure on public sector prices and a lack of pricing power. If operating margins fall below 3% and earnings stagnate, the market could reprice the stock towards 13-14x earnings.

This would mean a fall in the share price, although the dividend would likely be maintained. In this scenario, ABM becomes a pure "income" title with no growth story and the investment would only make sense for very conservative investors.

What to take away from the article

• ABM Industries is a defensive dividend title with an exceptionally long history of payout growth

• The business is based on essential services with a high level of recurring revenue

• The dividend is backed by operating cash flow with a significant reserve

• The market values the company conservatively, which increases the margin of safety

• It is a title suitable for long-term, income-oriented investors

That dynamic becomes even more visible in cross-border activity. International spending, typically the most profitable part of the business, accelerated meaningfully and amplified operating leverage. Combined with disciplined cost control, this translated into margin expansion and faster EPS growth. For investors, the appeal lies in consistency: revenue growth, margin improvement, and earnings acceleration reinforcing each other rather than competing for attention.

How was the last quarter?

In Q4 2025, Mastercard $MA reported net sales of $8.8 billion, up 18% year-over-year, or 15% on a currency-neutral basis. Operating profit rose to $4.9 billion, up 25%, clear evidence that growth was not "bought" by costs, but that the company was able to leverage its operating leverage. Operating margin rose to 55.8% from 52.6% a year ago, up 3.2 percentage points. Net income came in at $4.1 billion, up +22% year-over-year, and diluted earnings per share increased to $4.52, up +24% year-over-year. On an adjusted basis (after adjusting for selected effects), the company reported adjusted net income of $4.3 billion and adjusted EPS of $4.76, up +25% year-over-year.

The key is that growth was driven by real transaction activity, not a one-time effect. Gross dollar transaction volume grew 7% in local currency terms to $2.8 trillion. Purchase volumes grew even faster, +9%, and the number of "switched transactions" increased by 10%. But the cross-border segment is the most important for monetisation: cross-border volumes grew by 14% in local currency. This is an area that typically generates above-average revenue per unit volume and therefore has a disproportionate impact on both revenue and margins. In other words, even relatively 'normal' growth rates in domestic payments can be offset by a higher proportion of cross-border activity.

The revenue structure has again shown why Mastercard is not just a pure "payment network". Payment network revenues grew 12% (currency neutral 9%), while value-added services and solutions grew 26% (currency neutral 22%). Here is the strategic point: these services typically carry higher margins, better repeatability and greater cycle resilience as banks and merchants address security, identity, fraud management, authentication or data analytics without regard to short-term fluctuations in consumption. But at the same time, the firm acknowledges competitive pressure in the form of partner incentives: rebates and incentives in the payments network grew 20% (17% currency neutral), which is consistent with an environment where programs are negotiated harder and renewals have a higher price. On the positive side, Mastercard has so far offset this pressure with revenue and margin growth.

On the expense side, operating expenses grew 10%, slower than revenue, which explains the expansion in operating margin. On an adjusted basis, expenses grew 14% (12% currency neutral), partly due to acquisitions, and the rest went mainly to higher general and administrative expenses. The tax rate in the quarter rose to 16.7% from 14.1%, and the adjusted rate also moved to 17.0% from 14.9%, which the company attributed primarily to the effect of the global minimum tax and geographic mix of earnings. In practice, this means that net income and EPS may be partially "dragged" by taxes going forward, even as operating performance remains strong.

• Full presentation with results.

CEO commentary

CEO Michael Miebach described 2025 as another strong year, with net sales up 16% year-on-year (15% currency neutral) and the company, he said, "winning" through a combination of technology confidence, innovation and partnerships. He specifically mentions programs like Apple Card, which illustrate Mastercard's ability to win large and strategically important contracts. At the same time, he builds an investment thesis on the growth of value-added services and solutions, which grew 23% in 2025 (21% currency neutral), confirming the firm's strategic shift away from a pure transaction network and toward a platform over payments.

The key takeaway from his comments is that management sees the results not just as a product of "good macro" but as a result of diversification and the ability to monetise new layers of value - security, digital and authentication solutions, data, engagement and services for merchants and businesses. He also says the company is "agile and diversified" and therefore well positioned to take advantage of opportunities in 2026, which is usually a signal that management expects continued healthy consumption and that it sees investments in products and partnerships as well-timed.

Outlook

Management enters 2026 with expectations of continued double-digit growth, despite less favourable currency effects and a higher tax burden. For the full year 2026, Mastercard is targeting net sales growth at the high end of the "low double digits," approximately around 10-12%, and this outlook is consistent across GAAP and non-GAAP metrics. Adjusted for currency effects and acquisitions, organic, currency-neutral revenue growth should also remain at the high end of low double digits, confirming that the core of the expansion remains the payments business itself and higher value-added services, not one-off effects.

On the cost side, Mastercard expects operating expenses to grow faster than revenue, specifically at the upper end of high single digits, around 7-9%, reflecting continued investment in technology, security, data solutions and value-added services. The outlook also includes a restructuring charge of approximately $200 million in the first quarter of 2026, which is not intended to reduce costs in the short term, but to free up space for reinvestment in long-term growth initiatives. Management also emphasizes that these costs should not disrupt the long-term trajectory of margins.

Profitability should remain robust despite the higher cost base. Mastercard also expects non-GAAP operating profit to grow in the low double-digit range, with operating margin expected to remain above 57%, although the pace of expansion will be more moderate than in 2025. N

Long-term results

The long-term numbers for 2022 to 2025 show a consistent "compounding" pattern: revenue growth, earnings growth and even faster EPS growth through a combination of margins and share buybacks. Revenues have grown four years in a row: reaching $22.237 billion in 2022, rising to $25.098 billion in 2023, $28.167 billion in 2024, and $32.791 billion in 2025. The growth rate was double-digit in all years, accelerating to +16.4% in 2025, reflecting a strong mix of cross-border and value-added segment growth, which the company itself describes as a key driver.

Operating profit rose from $12.264 billion in 2022 to $14.008 billion in 2023, then to $15.582 billion in 2024 and $19.401 billion in 2025. Here we see the typical operating leverage: in 2025, operating profit grew faster than sales (+24.5%), which also explains why the market often pays a premium for quality and margin stability at Mastercard. Net profit grew at a similarly consistent rate: $9.93 billion (2022), $11.195 billion (2023), $12.874 billion (2024) and $14.968 billion (2025). Net profit growth in 2025 was +16.3%, broadly similar to sales growth but achieved despite a higher tax burden.

However, the trend in EPS is the most convincing, as it combines profitability growth and the buyback effect. Diluted EPS rose from $10.23 in 2022 to $11.83 in 2023, $13.89 in 2024 and $16.52 in 2025. That's a cumulatively very strong shift that's not just about business growth, but also about the share count declining over the long term. The diluted average share count has declined from 971 million in 2022 to 946 million in 2023, 927 million in 2024 and 906 million in 2025. It is this combination - volume growth, service growth, high margins and a systematic reduction in share count - that has long been at the heart of the investment thesis.

News

The results and commentary show that Mastercard continues to accelerate in areas beyond net transaction fees. Most notable is the growth in value-added services and solutions, where the company is benefiting from demand for digital security, authentication, fraud prevention and data services. At the same time, management signals that it is closing and renewing key programs even at the cost of higher incentives, which is typical in the current competitive environment. In practical terms, it's a battle for distribution and long-term relationships with banks, fintechs and large partners - and if Mastercard can grow faster than payment network volumes, it means it's succeeding in expanding monetization "beyond" transactions.

Shareholding structure

Mastercard's shares are typically very heavily owned by institutions: institutions hold around 91% of the shares and the free float is around 92% institutionally owned. The largest shareholders include Vanguard, BlackRock, Mastercard Foundation Asset Management and JPMorgan. This typically implies a stable ownership base, but also sensitivity to institutional rebalancing during periods of changing macro expectations, particularly around consumption, travel and global growth.

Analyst expectations

From an analyst perspective, the outlook for Mastercard remains positive, even after very strong results. For example, Reuters pointed out after the numbers were released that Mastercard is benefiting from resilient consumer and corporate demand, strong cross-border payments growth and high operating leverage, with analysts expecting the company to be able to maintain double-digit revenue growth in the "low-teens" range and continued earnings per share growth in 2026, despite modest pressure from higher costs and restructuring expenses. At the same time, Reuters points out that it is the combination of a payments network and fast-growing value-added services that makes Mastercard one of the best-performing titles in global fintech.

Fair Price

No one can say with certainty today which direction the cryptocurrency market will take after the recent very turbulent days. Volatility is extreme, sentiment shifts day to day, and emotions again play a huge role.

In my USD portfolio I have long-term holdings of $BTCUSD, $ETHUSD and $ADAUSD. Bitcoin holds the dominant position, making up roughly 8% of the portfolio, while ETH and ADA each account for about 1%.

In mid-November 2025 I decided that for one year I would regularly buy additional BTC—always on Wednesdays, always for the same amount. At the time I didn’t know this approach had an official name: DCA (Dollar Cost Averaging). It simply made sense to me for an asset I believe in and for which I want to systematically build a long-term position, without trying to time the market.

After the recent significant drops in ETH and ADA I decided to apply the same strategy to these two cryptocurrencies. So from now on I will buy BTC, ETH and ADA every Wednesday, with the following conditions:

- I will top up ETH and ADA each time for approximately 0.15% of the portfolio value,

- these purchases are not time-limited, as is the case with BTC,

- I will continue them only under the condition that:

ADA is below the level of 0.55 USD,

ETH is below the level of 2,800 USD.

The goal is not to catch the bottom, but to, in a disciplined way, use weaker prices to build positions in assets I trust for the long term, while keeping the crypto allocation in the portfolio under control.

God save the king, my investments, and cryptocurrencies.

What is your opinion on cryptocurrencies and the DCA strategy? Do you use it, or do you approach buying differently?

Market Reaction and Price Action

Bitcoin’s drop under $80,000 triggered not only short-term liquidations but also renewed questions about whether the previous uptrend will regain momentum. According to recent market data, total crypto market capitalization shed significant value as traders exited positions and speculative long bets were unwound. Liquidations in futures markets reportedly totaled billions in recent sessions, further reinforcing downward pressure on prices.

The price action reflects a broader risk-off attitude in markets, where tightening liquidity conditions and shifting expectations around monetary policy have dampened appetite for risk assets, including cryptocurrencies.

Macro and Policy Drivers

Investors have pointed to a combination of macroeconomic uncertainty and hawkish central bank expectations as key factors in Bitcoin’s recent decline. In particular, speculation around future Federal Reserve policy following the nomination of Kevin Warsh as Fed chair has reinforced views that liquidity may tighten, reducing support for speculative assets like Bitcoin.

Additionally, broader trade tensions and tariff concerns, along with geopolitical risks, have encouraged traders to shift toward traditional safe havens such as gold, which has recently rallied to record levels. This dynamic contrasts with earlier narratives that bitcoin could function as “digital gold” in times of stress, highlighting the evolving nature of how investors view the asset.

Volatility and Liquidity Challenges

The current decline has also exposed lingering structural market vulnerabilities, including thin liquidity and limited buying support around key levels. Analysts note that Bitcoin’s inability to hold above key support zones has prompted technical traders to reduce exposure, contributing to price accelerations on the downside. On several major exchanges, BTC prices dropped as much as 10 percent in peak sell-off conditions, reflecting the scale of recent volatility.

Liquidity challenges in crypto markets can amplify price moves, especially when ETF outflows and capital shifts push institutional participants to the sidelines. With speculative flows exiting digital asset funds and spot trading volumes softening, Bitcoin’s price has become increasingly sensitive to short-term sentiment shifts.

New Participation Despite Weakness

Despite the drop below $80,000, some data points suggest that new investor interest and accumulation may be emerging at lower levels. Wallet metrics show an increase in active addresses and new Bitcoin wallets created as prices declined, suggesting that some buyers view the weakness as an entry opportunity. This contrast rising adoption activity amid price slumps could point to a divergence between short-term trading flows and longer-term network engagement.

What Investors Should Watch Next

As Bitcoin navigates this critical support zone, investors will be focused on several key indicators that could shape near-term direction:

Support and Resistance Behavior: How BTC trades around the $80,000 mark and whether it can reclaim this level will be crucial for bullish conviction.

Liquidity and Volatility Metrics: Changes in trading volume and funding rates in futures markets may signal whether selling pressure is abating or intensifying.

Macro Signals: Central bank guidance and liquidity conditions remain dominant drivers for risk assets. Investors will look for clearer cues on monetary policy trajectory and inflation dynamics.

Market Participation Trends: Inflows into spot Bitcoin funds, wallet growth metrics, and on-chain activity can offer insight into whether the current dip is short-lived or part of a deeper market cycle adjustment.

Overall, Bitcoin’s fall below $80,000 has underscored the growing influence of macroeconomic and liquidity forces on the crypto market. While the traditional narrative of Bitcoin as a hedge remains debated, the current price action highlights the importance of market sentiment and broader financial conditions in driving digital asset valuation. Recent weak price support at key levels has amplified volatility and prompted renewed focus on the interplay between speculative flows and longer-term adoption trends.

Despite exceeding expectations, KLA’s stock fell significantly following the announcement a response that highlights how nuanced investor sentiment has become for capital-intensive tech and semiconductor equipment firms.

Market Focus Shifts to Outlook and Guidance

Investors appear less concerned with the headline strength in earnings and more focused on what comes next. After the earnings release, KLA’s share price dropped nearly double digits on broad market trading, with midday declines ranging from about 9 percent to 13 percent in some sessions. Even when the company’s earnings were initially announced, the stock pulled back shortly after rising in after-hours trading.

This reaction stems from guidance concerns around future capital spending by semiconductor manufacturers and wafer-fab equipment (“WFE”) demand, which is considered a key driver of KLA’s growth. Analysts and traders have highlighted that while KLA’s recent quarter was solid, its forward guidance on WFE spending was more modest than competitor outlooks and may reflect uneven demand timing in the AI-related chip cycle.

Technical and Demand Dynamics

Part of the pressure on KLA’s stock also reflects broader semiconductor equipment sector dynamics. Buyer sentiment around tools used for advanced logic, memory and AI chip production has oscillated as industry participants weigh inventory cycles, lead times, and regional demand shifts. Some investors expected stronger cues on the near-term outlook, especially given recent all-time highs in KLA’s share price earlier this year.

Further complicating sentiment, reports show that although revenue and earnings were healthy year-over-year, free cash flow metrics fell slightly short of some expectations a factor that can influence valuation, particularly for a capital-heavy business. Even with strong profit generation, deviation from forecast free cash flow figures adds a layer of caution for risk-aware investors.

Analyst Views and Diverging Opinions

Market watchers have been quick to adjust their views in light of the mixed reaction. On one hand, some research firms have raised price targets on KLA, citing long-term growth driven by AI and advanced semiconductor investments. Cantor Fitzgerald, for example, increased its target while underscoring strong demand and extended equipment lead times a signal that orders remain robust even if timing shifts occur.

On the other hand, concerns about near-term outlook and supply chain constraints have led some analysts to temper expectations or highlight volatility risk, particularly in the cyclical wafer fabrication equipment market.

What Investors Should Watch Next

Looking ahead, several key areas will influence how KLA’s stock performs:

Guidance and Forecasts: Investors will scrutinize whether management can offer clearer signals about wafer fab equipment demand and spending across major regions, especially as AI computing investment evolves.

Capital Allocation and Operating Efficiency: With strong free cash flow generation in recent quarters, how KLA balances research and development, dividends and share repurchases may affect confidence in execution.

Macro and Supply Dynamics: Broader semiconductor industry trends, including trade policies, lead times and customer ordering patterns, will be key to interpreting future performance.

Technical Indicators: After a period of strong gains early in 2026, the stock’s recent volatility highlights the importance of support and resistance levels on pricing charts for traders.

In summary, KLA’s recent sell-off underscores how investor priorities have shifted from simply celebrating earnings beats to demanding clarity on forward demand trends. For long-term holders who view the semiconductor equipment cycle as secularly favorable due to AI and advanced computing, the fundamentals of KLA remain compelling. However, the near-term stock pricing now appears to hinge heavily on guidance, supply chain context, and shifting demand signals.

SanDisk’s recent quarterly results showed massive earnings and revenue beats, driven by extraordinary demand for its flash memory and SSD products in AI and data center applications. According to reporting on the company’s fiscal performance, the memory chip maker’s adjusted earnings and top-line results blew past analyst expectations, reinforcing confidence that SanDisk’s products are central to the rapid growth of artificial intelligence infrastructure.

AI and Data Center Demand Fuel Pricing Power

The core catalyst behind SanDisk’s rally is the explosive growth in demand for high-performance storage driven by AI and enterprise data center buildouts. Analysts have highlighted that storage and memory are becoming critical bottlenecks in modern AI systems, where massive datasets must be stored, accessed, and processed with high speed and reliability needs that SanDisk’s NAND flash and SSD solutions are uniquely positioned to meet .

This narrative gained significant traction after comments from industry leaders at major technology events underscored the strategic importance of storage in the AI ecosystem. As a result, demand for NAND flash memory has tightened, allowing SanDisk which was spun off from Western Digital in early 2025 to benefit from price increases and improved margins that accompany constrained supply and robust enterprise interest.

Short Squeeze and Momentum Dynamics

Adding to the bullish technical setup, SanDisk’s price action reflects signs of an intense short squeeze in recent trading. Market commentators have noted that elevated short interest and rising option open interest have amplified volatility and helped drive extreme short covering, further propelling the stock higher. This dynamic, combined with strong fundamental results, creates a compelling narrative for traders looking to capitalize on momentum.

Analyst Confidence and Price Target Upside

Wall Street’s bullishness on $SNDK has also been reflected in analyst commentary and revised price targets. Several brokerage firms have maintained Buy ratings and significantly raised price targets, citing both the structural transformation of the memory market and SanDisk’s leadership position within it. In some cases, price targets have climbed to levels suggesting considerable upside relative to current prices, emphasizing SanDisk’s potential to extend gains as fundamental trends play out.

These firm upgrades are rooted in optimism about SanDisk’s product mix strength, data center traction, and pricing power amid a constrained NAND memory supply environment that supports stronger revenue and margin growth.

What Investors Should Watch Going Forward

Despite its stunning run, SanDisk’s rally raises important questions that investors will be watching closely in the months ahead:

Sustainability of AI-Driven Growth: Continued strength in enterprise and AI-related storage demand is central to SanDisk’s valuation case. Future earnings reports and guidance will hinge on whether this demand trend sustains or accelerates.
Memory Pricing and Supply Dynamics: A tight NAND flash market can support pricing power, but changes in supply conditions or consumer hardware demand could alter the landscape.
Valuation and Risk Appetite: With a steep rally underway, valuation multiples have expanded rapidly. Investors should weigh whether current prices factor in all potential risks or if additional growth drivers remain.
Sector Interplay: SanDisk’s performance is part of a broader memory and storage sector trend that includes companies like Micron, Western Digital and Seagate, all seeing notable moves as AI infrastructure spending rises.

The convergence of fundamental strength, structural demand for storage, and a dynamic technical picture has made SanDisk one of the most intriguing stories in the semiconductor and AI hardware space. Investors who can evaluate both the opportunities and risks tied to valuation will be well positioned to assess SanDisk’s next steps as the rally progresses.

The strategic focus now lies beyond quarterly earnings. Integration progress, project ramp-ups, and reserve replacement are reshaping the long-term profile of the business. Investors are watching whether this combination of volume growth and capital discipline can persist through different price regimes. The underlying question is not how Chevron performs in a strong oil market, but how durable its cash engine remains when conditions are less forgiving.

How was the last quarter?

Chevron reported net income of $2.8 billion in the fourth quarter of 2025, which equates to earnings of $1.39 per share. Adjusted earnings were $3.0 billion, or $1.52 per share, down year-over-year primarily due to lower realized oil prices, negative currency effects and one-time costs associated with pension settlements. However, operating numbers remained very strong.

Operating cash flow was $10.8 billion, while adjusted free cash flow was $4.2 billion. Even with weaker commodity prices, Chevron is generating cash that allows it to fund investments, reduce debt and return capital to shareholders. ROCE was 5.4% in the quarter, reflecting cyclical price pressure rather than a structural efficiency issue.

In terms of segments, upstream remains the key driver. Total production reached 4.0 million barrels of oil equivalent per day, up more than 20% year-on-year, with the Hess acquisition and projects in the Permian Basin and Gulf of Mexico contributing a significant portion of the growth. Downstream was stable, with improved refining margins partially offsetting upstream pressure.

• Full presentation with results.

CEO commentary

CEO Mike Wirth called 2025 one of the most significant years in the company's history. He emphasized that Chevron was able to successfully integrate Hess, launch key projects and reorganize the company to be more resilient to commodity price fluctuations. He said the combination of record production, structural savings and discipline in capital spending led to the highest operating cash flow ever at comparable oil prices.

Outlook

For 2026, Chevron expects continued strong production and further efficiency gains. The company is targeting further structural cost reductions, with a savings program to reach $3-4 billion annually by the end of 2026. Capital expenditures remain under control, although they will be increased due to investments in new projects and energy infrastructure.

From a shareholder perspective, the confirmation of the dividend policy is key. Chevron raised its quarterly dividend by 4% to $1.78 per share and is heading for its 39th consecutive year of dividend growth. At the same time, the company is continuing its extensive share repurchases, which supports long-term earnings per share growth even with fluctuating oil prices.

Long-term results

A look at 2021-2024 clearly shows the cyclical nature of Chevron's business, but also its ability to adapt quickly. The company's revenues peaked at more than $235 billion in 2022 due to extremely high energy prices, while 2023 and 2024 saw a normalisation towards around $195 billion. However, this decline has not been accompanied by a collapse in profitability.

Net income in 2024 was $17.7 billion, down from a record year in 2022 but still well above the long-term average before the energy crisis. EPS was around $9.7 in 2024, showing that even with lower oil prices, Chevron remains a highly profitable company. Another important factor is the declining share count due to buybacks, which has supported EPS over the long term.

Operationally, Chevron has significantly improved reserve replacement. It has achieved a 158% reserve replacement ratio in 2025, which means the company can not only produce but also successfully recover its reserves, thanks largely to the Hess acquisition and new discoveries in the Permian Basin, Guyana, and Australia. EBITDA has remained at very high levels over the long term, although it is sensitive to the price cycle.

News

The year 2025 was an exceptionally busy one for Chevron with strategic milestones. The company completed the acquisition of Hess and achieved projected synergies of $1 billion. The Future Growth Project was launched in Kazakhstan, while several deepwater fields reached first production in the Gulf of Mexico. There was also a major breakthrough in Guyana, where Chevron started production from the Yellowtail field and approved further investments.

In addition to traditional energy, Chevron has entered the US lithium sector, investing in renewable fuels and announcing projects to support the energy needs of US data centres. These moves demonstrate an effort to diversify future sources of cash flow without abandoning the core oil and gas business.

Shareholding structure

Chevron has a very stable institutional base. Approximately 68% of the shares are held by institutions, with Vanguard, State Street, BlackRock and Berkshire Hathaway among the largest shareholders. The presence of Berkshire Hathaway has long reinforced the perception of Chevron as a quality dividend title with disciplined capital management.

Analyst expectations

Analysts view Chevron as one of the highest quality "large-cap" energy companies. In the short term, they note the sensitivity of earnings to oil prices, but in the long term they appreciate the combination of a strong balance sheet, record production, high reserve replacement and consistent dividend growth. The investment thesis thus rests less on oil price speculation and more on a steady ability to generate cash across the cycle.

Fair Price

But it's with SoFi that the narrative often breaks down after such a significant sprint: investors want to see clearly how record growth translates into steadily higher margins, what the pace of monetization of the one-stop shop will be outside of credit, and what the latest move toward crypto and blockchain realistically means in the context of regulation, costs, and risk management. Therefore, even with strong numbers, the market's reaction may be "mixed" - not because of what has happened, but because of what should be sustainable from it.

What was the last quarter like?

The quarter ended with record revenue and operating performance for SoFi $SOFI. Total GAAP net revenue came in at $1.025 billion, up 40% year-over-year from $734 million. USD. On an "adjusted" basis, the firm reported adjusted net revenue of $1.013 billion, up +37% year-over-year. This is important not only symbolically because of the billion-dollar mark, but mainly because growth is not built on one leg alone: the firm explicitly mentions strengthening the fee-based component and scaling the product ecosystem.

Profitability, meanwhile, has moved into a different league. Adjusted EBITDA (Adjusted EBITDA) jumped to a record $318 million. GAAP net income was $174 million, up +60% year-over-year, corresponding to an Adjusted EBITDA margin of 31%. The company also points out that this is the ninth consecutive quarter of GAAP profitability, a key signal of stabilizing unit economics and cost discipline in a business that until recently "bought growth."

The "engine" of net interest income and financing is also strong. Net interest income was $617 million. The net interest income was USD 617 million (+31% year-on-year). Net interest margin was 5.72% (-19 bps y/y from 5.91%), which SoFi explains mainly by mix - relatively more volume is shifting from high-yield personal loans towards mortgages and student loans. At the same time, the firm describes a significant improvement on the funding cost side: the average rate paid on deposits was 181 bps lower than on warehouse funding, which management translates into c. $680mn of funding. The company has seen USD 680 million in annualized interest cost savings. In practice, this means that the bank balance sheet and deposit base are starting to act as a real competitive advantage, not just a "regulatory costume".

Operationally, SoFi added a record 1.027 million new members in a single quarter to get to 13.7 million members (+35% YoY). More importantly, product depth: 1.6 million products were added in the quarter, bringing the total to 20.2 million (+37% YoY). In addition, management emphasizes the quality of cross-sell: 40% of new product openings came from existing members, with a year-over-year improvement of nearly 7 percentage points. This is exactly the mechanism to turn a one-stop shop into a long-term efficient growth machine - cheaper acquisitions, higher LTV and better margins.

• Full presentation with results.

CEO commentary

Anthony Noto builds the results story on three pillars: scaling the platform, accelerating the product ecosystem, and moving to the "next phase" of financial services. In his interpretation, the quarter is groundbreaking mainly because SoFi exceeded $1 billion in quarterly revenue for the first time, while adding 1 million members for the quarter and growing its product base by a record 1.6 million. These are the metrics that are supposed to prove that the one-stop shop model really works - people don't just come for one thing, but gradually pick up other products within the ecosystem.

The second level of his comment is more strategic: Noto explicitly emphasizes "crypto and blockchain innovation," noting that SoFi wants to be a "bank-grade" player in crypto and tokenized flows - that is, combining innovation with the security and stability of a national banking license. The CEO frames this as an effort to "lead the next phase of financial services," which is an ambitious narrative, but it also automatically opens up questions for investors: what will be the regulatory and compliance costs, what is the return on investment, and how quickly will these initiatives translate into fee-based returns.

Outlook

What is fairly clear from the quarter and management commentary are the key variables that the market will be pricing in 2026. First, the growth rate of fee-based revenue: in 4Q it reached 443 million. The company presents it as a structural driver of diversification beyond the pure credit cycle. Second, NIM stability and order quality: SoFi says credit performance is within expectations and charge-offs on personal loans improved 57bp y-o-y. Third, capitalization and return on capital: the firm said equity rose $1.7bn in the quarter to $10.5bn and that this includes $1.5bn of new capital - and this is often viewed sensitively by the market as higher capital improves safety but also raises the bar on ROE and can mean dilution.

Long-term results

Looking at recent years, SoFi has followed the classic trajectory of "growth at a loss → operational stabilization → first profitability". Revenues have grown very rapidly between 2021 and 2024: from $1.088bn in 2021 to $1.763bn in 2022, then to $2.898bn in 2023 and $3.704bn in 2024. This is an expansion that would mean nothing in itself if it went purely through marketing and acquisition subsidies, only that at the same time the cost profile and especially the ability to monetise has gradually changed.

The gross profit grew from 977 million euro to 977 million euro. USD 1.519 billion (2021) to USD 1.519 billion (2022), USD 2.053 billion (2023) and USD 2.581 billion (2024). Interestingly, OPEX has virtually stabilized in 2024: operating expense was $2.347 billion, -0.3% year-over-year versus $2.354 billion in 2023. This stabilization of OPEX is often the point at which growth companies begin to "tip" into profitability - because the next dollar of revenue no longer needs the same portion of fixed costs.

And that tipping point is visible on the bottom line. Operating income was negative in 2021 (-$481 million), also negative in 2022 (-319 million), remained negative in 2023 (-$301 million), but turned positive in 2024 to $233 million. Net profit in 2024 was USD 499 million. USD 499 million compared to a loss of USD -301 million in 2024. USD -320 million in 2023 and USD -320 million in 2023. EPS therefore went from negative (e.g. -0.36 in 2023) to positive (0.46 in 2024), which is a major change for valuation and the investor "universe" as it opens up completely different types of models and investors.

The 2025 picture fits in as well: for the full year, the company reported GAAP total net revenue of $3.613 billion (+35% YoY) and adjusted net revenue of $3.591 billion (+38% YoY), with adjusted EBITDA for the year of $1.054 billion (+58% YoY). In other words, SoFi is no longer just a growth story, but a growth story that is starting to "pay" for itself while growing faster in operating profit than in revenue - and that is exactly the return of operating leverage that the market is looking for in digital finance.

News

The most important "news" of the quarter is not a one-off event, but a strategic shift: in 4Q, SoFi announced that it became the first national bank (within its charter structure) to launch crypto trading for consumers, while simultaneously launching its own stablecoin, SoFiUSD, on a public permissionless blockchain. It added blockchain-powered international remittances to more than 30 countries. Management frames this as an effort to combine modern crypto products with banking security and stability.

From an investment perspective, however, this is not just an extra "feature". It's a bet that further growth in fee-based revenue and engagement will come not just from lending, but from the infrastructure around payments, remittances, investing and new types of financial flows. If successful, this could improve diversification and margins. If it fails, it can increase the cost base and regulatory friction without adequate monetization. So the market will want to see concrete metrics on adoption, profitability and compliance costs, ideally during 2026.

Shareholder structure

SoFi has a relatively "classic" structure for a growth financial technology: insider holdings are at 3.0%, institutional holdings at 52.64% (float 54.27%). This means the title is largely in institutional hands, but still has a significant retail market share, which may increase sensitivity to quarterly surprises and narrative changes around guidance.

The largest institutional holders include Vanguard with about 111 million shares (as of December 31, 2025), followed by JPMorgan (93.6 million), BlackRock (62.4 million) and Shaw (35.0 million). For investors, it's practical to watch mainly to see if the trend changes for the largest holders in subsequent quarters - SoFi is the type of stock where "positioning" often follows confidence in the long-term profitability model.

Fair Price

This is where perspective matters. A temporary revenue shortfall does little to change the durability of cash flows or the discipline behind capital returns. The real question is not whether the company can absorb a weaker quarter, but whether the recent price action has altered the long-term risk–reward profile. For patient investors, that distinction is often where opportunity begins.

Top points of the analysis

• The market overreacted to the slight disappointment in sales, while profitability remained strong

• Abbott expects organic growth to accelerate in 2026

• Short-term pressure is coming primarily from the nutrition segment, not the core business

• Company has extremely stable cash flow, low debt and high return on capital

• The pending acquisition of Exact Sciences may open up a new long-term growth pillar

• Dividend remains safe and growing over the long term, even after the stock selloff

Why Abbott shares fell sharply after earnings

The drop in Abbott Laboratories shares following the release of its fourth quarter 2025 results (more than 10%) was significant at first glance, but on closer analysis looks more like a reaction to a combination of several short-term factors than a signal of a structural problem in the business. In particular, the market reacted to a slight disappointment at the revenue level, with the company reporting $11.5 billion versus expectations of roughly $11.8 billion. In absolute terms, this is a relatively small difference, but in the context of high valuations for healthcare titles, even a minor miss often triggers an overreaction.

A key source of weaker sales was the nutrition segment, which has faced a combination of higher production costs, pricing pressure and changing consumer behavior in recent quarters. Management has openly admitted that higher prices have led to subdued demand, particularly from more price-sensitive customers. But this problem is not unique to Abbott - similar pressures can be seen across the consumer side of the healthcare industry. However, the market has reacted as if this were a permanent disruption to the growth profile of the entire company.

Another factor has been a change in investor expectations, who in previous years were used to strong growth impulses from diagnostics and pandemic products. As this effect gradually faded, investors began to place more emphasis on consistent organic growth and immediately penalize any faltering. Although fourth-quarter adjusted earnings per share rose 12% year-over-year and met expectations, the market focused almost exclusively on earnings.

How the nutrition issue fits into the big picture

It's important to emphasize that the nutrition segment is not the main driver of Abbott's long-term investment thesis $ABT. While it is a significant part of the portfolio, it is also the area most exposed to pricing pressures and consumer behavior. Management has already clearly communicated during the earnings call that changes are underway in this division to optimize costs, adjust pricing strategy and return to growth in the second half of 2026.

From an investment perspective, it is significant that the weakness in nutrition is not undermining the financial stability of the company. Abbott continues to generate strong cash flow, maintains high margins in other segments and has the flexibility to absorb temporary fluctuations. It is this ability to separate the short-term problems of one segment from the long-term performance of the whole that is the hallmark of quality healthcare companies.

Growth prospects: why 2026 should bring acceleration

Despite the short-term jitters, Abbott management expects 2026 to bring an acceleration in organic revenue growth to 6.5%-7.5%, which would mark a return to a more robust pace. This outlook is not based on a single product or segment, but a combination of several long-term trends that play into the company's hands.

Medical technology and diagnostics remains a fundamental pillar. The aging population, the rising prevalence of chronic diseases and the pressure for early diagnosis are creating structural demand that is relatively independent of the economic cycle. Abbott has a strong position, broad portfolio and global reach in these areas, enabling it to grow even in a less favourable macro environment.

The second important factor is the return of operating leverage. Data over the past few years shows that revenue growth is again translating into faster operating profit growth. Gross profit grew by more than 15% in 2025, while sales grew by around 6%. This suggests an improving margin structure and more efficient use of the cost base, which is key to long-term earnings and dividend growth.

The pending acquisition of Exact Sciences should also play a significant role. This would allow Abbott to enter the early cancer detection and preventive diagnostics business, a segment with high long-term growth potential. This is not a short-term catalyst for results, but a strategic portfolio expansion that can gradually raise the growth profile of the entire company.

Why the current sell-off may not be a turning point in the story

Looking at the situation in a broader time frame, the current share price decline reflects re-pricing expectations rather than a deterioration in fundamentals. Abbott remains a highly profitable company with low debt, a strong balance sheet and a long history of dividend growth. Valuation post-downturn is more moderate, reducing risk for long-term investors.

Growth prospects for 2026 and beyond are built on structural trends in healthcare, not one-off effects. If management is able to stabilize the nutrition segment and successfully integrate Exact Sciences, Abbott could return to being perceived as a combination of defensive stability and moderate growth, a profile the market has valued over the long term.

Valuation: defensive quality at a moderate price

After a sharp selloff, Abbott Laboratories is trading at levels that look considerably more reasonable than in previous years, especially if the title is viewed through the lens of a long-term, dividend-oriented investor. With a market capitalization of roughly $216 billion and an enterprise value of around $222 billion, the price-to-earnings ratio comes out to about 15.6 times, which is rather at the lower end of the historical range for a quality healthcare blue chip.

What is important from a relative valuation perspective is that Abbott is not a classic high-growth title, but a combination of defensive stability and moderate growth. The price to earnings ratio of around 4.9 times and price to book value of 4.2 times reflect the company's high asset quality, strong brands and above-average return on capital over the long term. ROE of over 28% and ROIC of nearly 19% confirm that the company can operate efficiently with capital without becoming over-leveraged.

Financial stability is also an important element of valuation. The debt-to-equity ratio of 0.25, net debt to EBITDA well below 1 and Altman Z-score of 5.2 clearly show that the balance sheet is very conservative. This is key not only for dividend protection, but also for the ability to execute strategic acquisitions without jeopardizing financial health. With a beta of around 0.7, Abbott then acts as a lower volatility title, an important portfolio stabilizer for long-term investors.

From a cash flow perspective, the valuation is more challenging - a price to operating cash flow ratio of over 30 times is not low. However, it should be read in the context of high quality and repeatability of cash flow, long-term dividend growth and very low equity risk. In other words: Abbott is not a cheap stock, but after the selloff it no longer looks expensive relative to its quality.

Dividend: 54 years of growth, high sustainability and room for the future

The dividend is one of the strongest arguments for why Abbott Laboratories has long been a sought-after stock among conservative and income investors. The company is a member of the elite Dividend Kings group and raised its dividend for the 54th consecutive year in 2026, placing it among the narrowest group of companies with exceptionally consistent capital discipline. Such a long track record is not the result of one strong product, but a testament to the resilience of the entire business model across cycles, crises and regulatory change.

The current annual dividend is approximately $2.52 per share, which at the current price equates to a dividend yield of around 2%. On the face of it, this is not a high yield, but that has never been the essence of Abbott's dividend thesis. It's about a combination of stability, annual growth and very low downside risk, not maximizing immediate cash yield. That's why Abbott is often seen as a "core dividend title," not a high-yield bet.

From a sustainability perspective, it is key to monitor the payout ratio. On an adjusted earnings per share basis, the payout ratio is roughly in the mid-40% range, which is a very conservative level. Thus, the company pays out less than half of its earnings and leaves the rest for reinvestment, research, acquisitions, and strengthening the balance sheet. This creates a sizable cushion even for periods of weaker growth or short-term fluctuations, such as the recent problems in the nutrition segment.

A look at cash flow offers an even stronger picture. Abbott generates stable operating cash flow and the dividend is fully covered by free cash flow, and by a significant margin. Even in years when earnings have been impacted by one-time tax or accounting items, the ability to pay and grow the dividend has remained intact. This is a crucial difference from companies that, while posting accounting profits, have weaker cash flow dynamics.

Debt poses no structural risk to the dividend. A debt-to-equity ratio of around 0.25, net debt to EBITDA well below 1, and high interest coverage mean that Abbott is not forced to choose between paying down debt and paying shareholders. On the contrary, the strong balance sheet allows the company to combine dividend growth with its acquisition strategy, which is particularly important in the context of the planned acquisition of Exact Sciences.

Growth catalysts in a market context: how big are the opportunities

Medical devices and medtech: structural growth in the low double digits

The medical devices segment, where Abbott is one of the global leaders, has long benefited from an aging population, a higher prevalence of cardiovascular and metabolic diseases and rising healthcare spending. The global medtech device market is growing at a rate of around 6-8% per year by most estimates, with some specialist areas such as cardiology and continuous monitoring growing even faster.

Abbott has a significant but not dominant share in these segments, which is an investment-positive combination. The company is not large enough to be constrained by regulators, but it also has enough scale to benefit from global market growth. Its market share is more in the single digits to low teens of percentages in key regions, meaning that market growth translates relatively directly into revenue growth.

Diagnostics and screening: a return to the long-term trend

The diagnostics market, which was extremely volatile during the pandemic, is gradually returning to a normal growth profile. Long-term estimates speak of 5-7% annual growth, driven by a greater emphasis on preventive care, early diagnosis and personalised medicine. Abbott is one of the biggest global players here, particularly in laboratory and point-of-care diagnostics.

Crucially, diagnostics generates recurring revenue from consumables and tests, which increases cash flow predictability. Abbott does not have extreme dominance here, but its broad portfolio and global distribution allows it to grow steadily with the market without the need for aggressive price wars.

Nutrition: a cyclical pressure but a long-term growing market

The clinical and consumer nutrition market is growing at a long-term rate of 4-6% per annum and is more sensitive to price and consumer behaviour. This is where Abbott has run into a short-term problem in recent quarters. However, what is important for investment purposes is that this is a temporary cyclical pressure, not a structural market decline.

Abbott has strong brands and significant global share in clinical nutrition, particularly in hospital care. If pricing strategy and costs can be stabilised, this segment can return to growth and once again contribute to the stability of the overall portfolio, although it is unlikely to be a major growth driver.

Exact Sciences and cancer screening: a new long-term growth vertical

The acquisition of Exact Sciences opens up Abbott's access to the early cancer detection market, which is one of the fastest growing areas of healthcare. This segment has the potential to grow at a double-digit rate (10-15% per year) over the next decade, according to available estimates, thanks to a combination of technological advances, an aging population and pressure to reduce costs through prevention.

Abbott has virtually no significant stake here today, which is exactly what makes this acquisition a strategic opportunity. If the integration is successful, cancer screening could become a new growth pillar that improves the long-term growth profile of the entire company without compromising its defensive nature.

Investment scenarios: how the Abbott story may evolve

Optimistic scenario: return of confidence and new growth pillar

In the optimistic scenario, it turns out that the post-earnings sell-off was indeed an overreaction by the market to a short-term problem in the nutrition segment. Management measures will start to work sooner than currently expected, prices will stabilise and demand will gradually return. At the same time, strong performance will continue in the key medical devices and diagnostics segments, which are benefiting from structural trends such as an aging population and pressure on preventive care.

Key to this scenario is the successful closing and integration of the Exact Sciences acquisition, which will open up new long-term growth potential in early cancer detection. If this area begins to gradually translate into revenue and investors can grasp the story as a strategic portfolio expansion, the overall perception of the company may change - from a purely defensive dividend title towards a "quality growth" healthcare company. In that case, the stock would benefit not only from earnings growth, but also from a valuation return closer to historical averages.

Realistic scenario: stable growth and dividend as the main pillar

The realistic scenario assumes that the weakness in the nutrition segment will persist for a few more quarters, but without further escalation. Other parts of the business - notably medical devices and diagnostics - will continue to grow and compensate for the weaker performance of this division. Organic revenue growth will be around 6-7%, in line with management's current outlook for 2026.

In this scenario, Abbott Laboratories will remain primarily a very stable dividend play with high cash flow visibility. Earnings growth of around 8-10% annually, along with continued dividend increases, will provide investors with a solid but less dynamic yield. Valuations are unlikely to change significantly, meaning total return will be driven primarily by fundamental growth and the dividend, not multiple expansion.

Pessimistic scenario: prolonged weakness and acquisition disappointment

The pessimistic scenario is based on the assumption that the problems in the nutrition segment will prove more structural than management now suggests. Demand will remain subdued for longer, pressure on prices and margins will persist, and overall revenue growth will slow below 5%. At the same time, the integration of Exact Sciences could be more difficult, expensive and slower than expected, undermining market confidence in the company's long-term growth potential.

In such an environment, Abbott would likely remain profitable and financially stable, but investors would come to view it purely as a defensive title with no significant growth ambitions. Valuations could be depressed further, which would imply weaker stock performance despite the continued dividend payout. This scenario is not an existential risk, but rather a risk of lower than expected returns for shareholders.

What to take away from the article

• The sharp drop in the stock was a reaction to a short-term disappointment in earnings, not a collapse in the business

• Weaker spot is the nutrition segment, which does not form the core of the long-term investment thesis

• Other parts of the business remain strong and support stable cash flow

• 2026 should bring an acceleration in organic growth

• Acquisition of Exact Sciences may create a new long-term growth pillar, but carries integration risks

• Abbott is one of the most stable dividend titles in the market and the dividend remains safe

• The current sell-off has reduced entry risk rather than changing the long-term investment story

The performance of the S&P 500 is often presented in the media as a single number. But 2025 was a textbook example of just how misleading it can be to focus only on aggregate returns. According to the official statistics, the S&P 500 ended 2025 with a return of 16.39%. You can read in the media that the return was as high as around 18%, which is a distortion created by the performance measurement methodology.

The market went through a significant drop in April and then an even more significant rise. The S&P 500 Index was able to bounce back from the spring decline and grow roughly 45% from the April lows of 2025, which is important to understand the psychology of the market: much of the year's performance was generated in relatively short periods of time when the market was appreciating strongly.

But capital concentration was also crucial for 2025. According to this study, at the end of the year the 10 largest companies accounted for almost 41% of the weight of the entire index, an extremely high number even historically, and it means one simple thing: the index has long been an average of the US economy, but largely a bet on a relatively narrow basket of the largest companies. That's why the S&P 500 can look strong even when the bulk of companies may be moving sideways or even weakening slightly (if technology is gaining ground).

Source: Novelinvestor

But capital rotation has also started to play heavily into performance. In terms of sectors, it turned out that despite the index as a whole rising, only three sectors outperformed the index, while the rest either rose more slowly or only averaged.

Moreover, our team's analysis shows that the largest contributions to the index's overall performance came from a narrow group of stocks, again underscoring that the index's performance was largely driven unevenly. So who were the winners and losers?

The top 3 sectors of the S&P 500 in 2025

The year 2025 once again brought strong market results for US equity markets. Still, the growth rate was not uniform across sectors. Analyses consistently show that only three sectors have managed to outperform the overall index, with clear structural and thematic trends behind their success in the form of technology adoption, communications innovation and industrialization coupled with new infrastructure investments.

Communication Services

Performance: 33.6% in 2025
Communication Services was the best growing sector in 2025, driven by the return of investors in companies generating strong growth in advertising revenues, subscriptions and higher user engagement in the digital environment.

Key growth drivers:

• Alphabet (Google $GOOG) - growth driven by a shift into AI-oriented products and a strengthening advertising economy

• Meta Platforms $METAstabilizing user metrics and video monetization

• Netflix $NFLX - subscriber base expansion and pricing adjustments.

The communications sector benefited from the continued shift of advertising budgets to the online space, strong consumer engagement with video content and the growing monetization potential of platforms. This, combined with relatively lower weightings in strategic portfolios, gave the sector growth momentum above the index average.

Information Technology (Technology)

Performance: 24% in 2025
Technology as a whole remained a core bull market in 2025. AI-driven demand for hardware and software solutions pulled the sector forward, despite volatility between sub-sectors (e.g. software vs. hardware).

Strongest growth for individual titles:

• Western Digital$WDC +283%) - excellent year with extreme gains thanks to the data center and AI storage boom

• Micron Technology$MU +239%) - shifting manufacturing strategy towards memory and AI-oriented products

• Seagate Technology$STX +219%) - data center components benefited from growing infrastructure investments

Western Digital was one of the top 3 fastest growing stocks in the S&P 500 in 2025

According to reports, titles like Western Digital and Micron were among the top gainers in the entire index, significantly outperforming even the traditional "Magnificent Seven." The sector's growth has been driven not only by big names, but also by smaller, fast-adopting companies that have been able to capitalise on the strong preponderance of demand for AI-oriented technologies.

Industry (Industrials)

Performance: 19.4% in 2025
The third sector to outperform the index was Industrials. While industrials do not receive as much media attention as technology or communications services, their performance in 2025 was notable, often supported by significant new investments in manufacturing, transportation, and infrastructure.

Examples of major players:

• GE Aerospace $GE and other aerospace component manufacturers - growing demand for aircraft components and fleet upgrades

• Logistics firms$FDX) - benefited from the resurgence of global supply chains

The 2025 Industrials sector has shown that diversification of growth sources away from clean technology can be important to index performance. In an environment where infrastructure spending and capital investment have risen to higher levels, industrials have gained investor attention.

The 2 weakest S&P 500 sectors in 2025

While a portion of the S&P 500 benefited from thematic growth trends and the concentration of capital in a few winning segments, another portion of the market lagged significantly. In 2025, it became apparent that defensive or interest rate sensitive sectors may not automatically act as a portfolio stabilizer if macroeconomic conditions and investor expectations change.

Our team analyzed all sectors and the following sectors earned investors the lowest appreciation last year.

Consumer Staples

Performance: 3.9% in 2025

The Essential Consumer Staples sector, which includes food, beverage, and household goods manufacturers, was a significant laggard in 2025. Although demand for these products has remained steady even in worse economic times, it is the lack of a growth catalyst that has proven to be a key issue.

Margin pressures have been another negative factor. Inflation, rising input and logistics costs have been passed on to consumers only to a limited extent, leading to stagnant profit margins for many large players.

Specific examples of weaker performance:

• Procter & Gamble $PG (-14% in 2025) - margin growth, revenue stagnation

• Coca-Cola $KO (+12%) - stable cash flow but low profit growth

• PepsiCo $PEP (-6%) - margin pressure due to cost and consumer price elasticity

Consumer Staples thus served as a stable haven for capital in 2025 rather than a driver of index performance.

Real Estate

Performance: +3.2% in 2025

Real estate was the weakest sector in the index, remaining under pressure for the third consecutive year. The Real Estate sector is extremely sensitive to interest rates - and it is the combination of higher government bond yields, more expensive financing and weaker demand for commercial real estate that has created a very unfavorable environment.(nareit.com)

Struggling companies:

• Vornado Realty Trust $VNO (-22%) - Weak demand for urban office space.

• Simon Property Group $SPG (+7%) - still under rate pressure.

The real estate sector has become a structural loser in 2025, not just a cyclically weak segment. Investors here have made it clear that they see no reason to return capital without a change in the interest rate environment or new demand dynamics.

Vornado Realty Trust's shares are trading at the same levels as they did in August 2024, but the company pays a dividend of 2.44%, which is paid in the form of one dividend per year. Its value has more than doubled from 2024 and is now 74 cents per share.

What the weakest sectors have in common

The common denominator for Consumer Staples and Real Estate was not weak demand, but the lack of a growth story in an environment of high rates and strong competition from growth segments. While these sectors offered stability, they failed to keep pace with a market that was heavily focused on growth, innovation, technology and capital efficiency in 2025.

Which sectors may pick up the baton in 2026 if macroeconomic conditions begin to change?

Outlook for 2026: Where the S&P 500 sector dynamics may shift

We enter 2026 in a different starting position than a year ago. While 2025 was all about concentration of performance, dominance of a few sectors and a very narrow group of leaders, this year is marked by the question of whether this pattern can continue unchanged. Indeed, history shows that periods of extreme concentration often herald a gradual sectoral rotation, but not necessarily an across-the-board correction.

The macroeconomic environment remains a key factor for this year, particularly the evolution of interest rates, inflation and the pace of economic growth in the US. If the scenario of gradual monetary easing is confirmed (rates were not cut at the Fed's first meeting of the year this week), segments that were disadvantaged in 2025 precisely by high rates and expensive capital may come to the fore.

Top sectors for 2026:

• Technology - The technology sector and its share of the S&P 500 remains one of the strongest market movers, with AI at its core. This week, the index even reached an all-time high above 7,000 points, with the fundamental impetus being the optimistic expectations around the development of artificial intelligence and earnings growth for technology companies.

• Financials - The financial sector, with the increasing likelihood of interest rate cuts and a resurgence in lending activity, is often one of the sectors that benefits from monetary policy easing or rate stabilisation. According to professional outlooks for 2026, financial stocks may be relatively cheap relative to other sectors, which could create room for upside as the market shifts away from megacap technology titles and toward cyclical values. This includes banks, insurance companies and other financial service providers.

• Energy - The energy sector is coming to the fore in the current 2026 due to technical breakouts, geopolitical tensions and increasing demand for energy and raw materials. Trading strategies and technical indicators suggest that the sector may be subject to a new upward momentum, especially if commodity prices and earnings expectations for energy stocks remain high.

Other candidates for a change in momentum are the more cyclical parts of the market, particularly selected industrial subsectors and segments tied to corporate investment activity. If earnings begin to grow outside of a narrow range of technology leaders, market breadth may gradually improve, which would imply a healthier growth pattern for the index as a whole. A similar environment has historically favored sectors that have benefited from renewed capital spending, infrastructure upgrades, and more stable global trade.

The second important theme is the normalisation of growth expectations. Sectors that significantly outperformed the index in 2025 enter 2026 with high expectations for future performance. The market is no longer pricing in not just growth, but near-perfect execution of scenarios. This in itself does not mean the end of their dominance, but it does increase their sensitivity to any slowdown or disappointment. We saw this this week in Microsoft's $MSFT stock, which weakened 10% after the results were released, losing tens of billions of dollars of market capitalization.

The third level is the change in investor behavior. This creates room for selective return of capital to segments that were seen as more passive or defensive in 2025, but which may regain relevance in a different macro environment. These sectors have been overlooked by investors in recent years and may currently appear to be uninteresting. But this is where the S&P 500 Index as a whole may see faster growth.

Conclusion

The year 2025 has reaffirmed that the S&P 500 Index cannot be read through just one aggregate number. Behind the solid overall return was a significant internal imbalance, with only a limited number of sectors and companies carrying the bulk of the growth while the bulk of the index was left out. The gap between the strongest and weakest segments, exceeding 30 percentage points, was one of the widest in recent years and clearly showed how selective the flow of capital was.

This pattern of growth has created an environment that is on the one hand resilient but at the same time fragile. Resilient because it is underpinned by the strong fundamentals of the market leaders. Fragile because it depends on the continuation of very specific stories and expectations. That's why 2026 will be less about whether the market grows as a whole and more about how growth will regroup within the index.