The company delivered exactly that, surpassing expectations on both the top and bottom lines. Net sales increased 6% to $1.1 billion in the first quarter of 2026. Diluted EPS came in at $1.45, representing an increase of 2% year-over-year. When excluding the impact of ASU 2016-09 tax benefits in both periods, adjusted earnings per diluted share actually increased by 8% to $1.43.

The quarter confirmed that the resilient maintenance base remains strong, while the discretionary side of the business is continuing its gradual recovery. Here is the breakdown of the key drivers.

1. Revenue

The 6% top-line growth was a refreshing beat, driven by solid demand for maintenance products, strong equipment sales, and continued improvement in discretionary categories like building materials. This is the first meaningful acceleration after nearly 12 quarters of declines or flatness.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Breaking down the growth, the quarter benefited from approximately 3% from pricing, 2% from volume in maintenance and discretionary categories, and a 1% combined tailwind from customer early buys and favourable foreign currency translation. The pricing contribution reflects a 1% to 2% lift from current year increases, supplemented by a 1% carryover from mid-season price hikes implemented in late April of 2025.

Source: Pool Corporation Q1’26 Earnings Presentation

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2. Gross Profit Margin

While gross profit dollars increased by $17.5 million, the gross margin percentage decreased by 20 basis points year-over-year to 29.0%. However, context is critical here. This contraction wasn’t due to a loss of pricing power.

The margin dilution was primarily driven by product mix, specifically a higher proportion of lower-margin equipment sales during the quarter. Additionally, Q1 saw an increase in customer early buy activity. While these early buys carry discounts that modestly pressure Q1 margins, they are a highly positive indicator that dealers are confidently stocking up for a strong core season. These headwinds were partially offset by ongoing pricing and supply chain optimization initiatives.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

3. Operating Margin and Potential Efficiencies

Operating margin expanded 10 basis points to 7.3% as operating income grew 7% to $82.6 million. Operating expenses increased 5% to $247.3 million, driven by the addition of six greenfield locations opened after Q1 of last year, technology investments, and general inflation.

Importantly, management expects the year-over-year expense growth rate to moderate in the coming quarters as the company laps prior-year investments and focuses on driving efficiency through its existing, expanded footprint. Therefore, if revenue continues to grow in the mid-single digit rate for the rest of the year, we should expect higher operating leverage going forward.

4. Performance by Product Category

The Q1 product mix provided several encouraging signals:

• Building Materials: Sales grew +5%. This builds directly on the green shoots we identified in Q3’25, supported by the national pool trend offering and signaling further stabilization in remodeling activity. Additionally, given the muted construction market, it appears that Pool is actively gaining market share in this category.

• Chemicals: Sales surged +8%. This strong volume growth was heavily supported by private label lines, which carry structurally higher margins. It is also worth noting that this category faced deflationary headwinds over the past few quarters. Management’s commentary indicates that pricing has stabilized, giving us the impression that the worst of the deflation is finally fading away.

• Equipment: Sales grew +7%. This was driven by both price and solid volume, likely indicating a normalization of the replacement cycle for older installed components.

5. Regional and End Market Performance

• Independent Retail & Pinch A Penny: Sales to independent retail customers grew 3%, setting up a solid foundation for the core season. The Pinch A Penny franchise network saw end-customer sales grow 4%, with franchisees opening seven new locations in the quarter.

• Regional Performance: Favourable weather aided the West, with California growing 10% and Texas growing 7%. Conversely, Florida declined 1%, pressured by weather and some softness in irrigation, while Arizona grew 1%.

• Commercial: Sales were flat for the quarter, largely due to project timing, but the segment exited Q1 showing slight growth.

6. New Construction Vs Maintenance

Management noted that new pool units for 2025 came in at roughly 58,000, marking four consecutive years of decline in new pools built. Management expects 2026 to hover close to that same 58,000 unit mark. Holding near these 2011 levels gives us confidence that we have finally hit the bottom in the new construction segment.

Source: Pool Corp 10-K Filings, Pool Corp Earnings Transcripts, StockOpine Analysis

While expectations are for 2026 to stay flat, the long-term thesis relies on the 5.5 million in-ground pools already installed. As we have consistently tracked, this installed base generates recurring maintenance revenue, meaning Pool Corp’s growth does not strictly require a massive recovery in new pool construction to succeed.

Below paywall, we break down why the outlook is a classic ‘sandbag’ setup and our live portfolio actions….

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Welcome to our brief overview of portfolio news from the past few days.

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Project Prometheus & The Anthropic Funding

Bezos’s new venture, Project Prometheus, is reportedly nearing a $10 billion funding round at a $38 billion valuation. With co-CEO and Google veteran Vik Bajaj, the company is building AI models targeting physical AI (to interact with the real world).

Meanwhile, the capital flowing into Anthropic is impressive. Google confirmed it is planning to invest up to $40 billion in the firm ($10 billion upfront, $30 billion based on milestones). While Anthropic already relies on Google Cloud for chips and infrastructure this partnership brings another 5 gigawatts of capacity over the next five years.

Amazon few days earlier, also increased its investment in Anthropic by contributing another $25 billion ($5 billion initial, $20 billion milestone-based) to a total of $33 billion. In return, Anthropic committed to spending over $100 billion on AWS over the next decade, securing up to 5 gigawatts of computing capacity through Amazon’s Trainium AI chips. Anthropic is hungry for compute power as its efforts already bear fruit with annualized revenues tripled quarter-over-quarter in April to top $30 billion, officially outpacing OpenAI.

On another note, the NSA is already reportedly leveraging Mythos’s defensive power to secure critical infrastructure.

Alphabet partners with Marvell & The 8th-Gen TPU

Google is in talks to co-develop custom AI inference processors with Marvell Technology. This suggests that in the AI era, amid supply chain constraints and rapid innovation, hyperscalers are diversifying their chip ecosystems, reinforcing the idea that there will be more than one winner.

Further cementing its infrastructure dominance, Google just introduced its 8th-generation custom Tensor Processor Units.

• TPU 8t (Training): Built to reduce frontier model development cycles from months to weeks. It delivers nearly 3x the compute performance per pod over the previous generation. A single superpod now scales to 9,600 chips and 2 petabytes of shared memory, delivering an incredible 121 ExaFlops of compute.

• TPU 8i (Inference): Designed for intricate, collaborative workflows where specialized agents “swarm” together. It pairs 288 GB of high-bandwidth memory with 384 MB of on-chip SRAM (3x more than the previous generation) to eliminate idle processors, all powered by Google’s custom Axion Arm-based CPUs.

When CEO Sundar Pichai posted the announcement on X, even Elon Musk stated: “TPUs are underrated”. This further justifies the importance of this development and the place that TPUs have in this AI shift to agentic AI.

The Hardware & Silicon Surge

• AMD: Jefferies noted that Intel’s recent earnings serve as validation of the massive AI tailwinds boosting server CPU demand into 2027. Following this, D.A. Davidson upgraded AMD to “Buy,” viewing Intel’s results as a precursor for a huge step-up in AMD’s CPU franchise. We believe as long as there is a shortage of AI chips, AMD has incredible pricing power. In fact, AMD is rapidly approaching the $389 target price we modeled back in November 2025 when it was trading at just $206.

• AWS & Meta: In a massive win for Amazon, Meta has committed to tens of millions of Graviton CPU cores for its Agentic AI workloads. Complex multi-step orchestration, real-time reasoning, and code generation at scale are highly CPU-intensive. Amazon’s purpose-built Graviton5 instances deliver up to 33% lower latency between cores, cementing the fact that Agentic AI is becoming as much of a CPU story as a GPU story.

Software, Commerce & The Experience Economy

• Adyen: Shifting from its traditional organic growth mindset, Adyen announced its first-ever acquisition: buying loyalty and incentives platform Talon.One for €750 million in cash. Talon.One expects to generate €60 million in ARR this year (a 12.5x multiple - sounds a bit expensive right?). By connecting Adyen’s dynamic payment identification with Talon.One’s SKU-level data, merchants can apply real-time, dynamic pricing and promotions directly in the cart, perfectly positioning Adyen for the emerging Agentic Commerce space.

• Adobe is co-developing an industry-specialized AI agentic operating model with Omnicom to automate marketing workflows. Meanwhile, Adobe has also announced a massive new $25 billion share buyback program through 2030, a signal from the board that they believe the market is undervaluing their pivot to AI.

• Fortinet received the 2026 Google Cloud Partner of the Year Award. Fortinet’s FortiCNAPP platform is gaining traction among enterprises by combining deep network visibility with cloud protection in a unified solution, reflecting a broader shift toward integrated cloud security platforms.

Earnings Watch: EVO & POOL

• Evolution Ab: Q1 ‘26 results are mixed. Sales declined 1.5% overall but grew 6.8% in constant currency. Asia is still struggling but managed a 2.2% QoQ growth, while Europe dropped 5.9% QoQ. On the bright side, LATAM grew 29.3% YoY (aided by a competitor exiting Argentina) and North America grew 10.1% YoY, while it launched a second Michigan studio and there were positive regulatory developments in Maine. Overall, operations are stable, but cutting the dividend and a somewhat shady approach to their new 10% share repurchase authorization raised some governance concerns. After all, what was the purpose of delaying the announcement of their capital allocation policy??

• Pool Corp: After a brutal three-year cycle of post-pandemic normalization, we see clear signs of a return to growth. Q1 ‘26 delivered a 6% bump in net sales and a 7% YoY growth in operating income, the first meaningful acceleration after nearly 12 quarters of flatness. The industry seems to have bottomed out at 58K new pools built in 2025 (similar to 2011 levels), and chemical deflation has officially stopped acting as a headwind.

That’s a wrap. See you soon.

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Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

Our posts may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.

a. Results: Strong Execution Amid High Demand

ASML delivered Q1 2026 total net sales of €8.8 billion, up 13% year over year. Net income grew 17% YoY to €2.8 billion. The Installed Base Management segment, which includes service and field options, performed strongly at €2.5 billion (+25% YoY), driven by the expanding EUV installed base and high-margin performance upgrades requested by customers to increase immediate output.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

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In Q1 FY26, Net System Sales reached €6.3 billion, marking a 9% year-over-year increase. A significant driver of this growth was the EUV segment, which contributed €4.1 billion (approximately 65% of total sales), including revenue from two High-NA systems. This represents a substantial 28% increase in EUV revenue compared to the previous year. Despite a modest 3% rise in unit volume, EUV sales were primarily increased by higher ASP, as previously noted by the management. Sales of non-EUV (DUV) systems accounted for the remaining €2.1 billion. Memory captured the majority of net system sales at 51%, versus logic at 49%. This reflects the accelerating adoption of EUV in DRAM, as customers shift aggressively to gain performance and capacity.

“The reason for that is, of course, performance, but it’s also capacity, because if you are going to use more EUV layers, you are going to need less multi-patterning. Multi-patterning takes a lot of space also in the fabs. I think this is also definitely another argument in favor of EUV. I think this was mentioned, by the way, by this U.S. customer in their call.” - Christophe Fouquet, CEO

Source: Q1’2026 earnings presentation

China’s share of net system sales fell sharply to 19% in Q1 2026 (from 36% in Q4 2025), consistent with management’s expectation of ~20% for the full year, in line with backlog composition. This regional decline was effectively countered by a surge in South Korea, which jumped to 45% of total sales, highlighting ASML’s reduced vulnerability to export controls in China. A global shortage of high-end memory is forcing companies like Samsung to accelerate their equipment orders.

The gross margin reached 53.0%, supported by a very high-margin mix in the service and upgrade business.

Below the paywall, we dive into ASML’s upgraded outlook, critical technology developments, and what this means for the stock’s long-term trajectory…

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Welcome to our brief overview of portfolio news from the past few days.

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Big Tech’s Space Race & AI Alliances

• Amazon’s Satellite Leap: Amazon is making a massive leap into satellite connectivity by acquiring Globalstar for $90.00 per share ($11.57billion). The FCC-approved deal allows Amazon to provide direct-to-device (D2D) services via its Leo satellite network starting in 2028, and includes an established partnership to provide satellite connectivity for Apple’s iPhone and Apple Watch features. This effectively leapfrogs Amazon into the D2D market that SpaceX’s Starlink has been targeting. While legal investigations into the deal’s valuation are ongoing, the operational synergy with Apple provides a massive, immediate subscriber base.

• Anthropic’s Valuation: Separately, Amazon-backed Anthropic is seeing a valuation surge, with offers as high as $800 billion as it explores a potential IPO.

• Alphabet’s Windfalls & Expansion: Alphabet is poised for a potential $122 billion windfall from its 6.11% stake in SpaceX, should the latter reach a $2 trillion valuation in an IPO. This SpaceX windfall represents a staggering return on early investment that significantly bolsters Alphabet’s financials. On the operational front, Google Cloud is deepening its agentic AI ecosystem through strategic partnerships with Thoma Bravo and Cadence, optimizing Gemini models for enterprise-scale AI transformations.

• New Google Integrations: Further expanding its AI applications, Google is negotiating an agreement with the Department of Defense that would allow the Pentagon to deploy its Gemini AI models in classified settings. In the consumer luxury space, Kering aims to launch smart glasses under the Gucci brand in partnership with Google next year, positioning it as the first major luxury brand to enter the AI-powered eyewear sector.

• Regulatory Headwinds: Despite these wins, Alphabet continues to face regulatory headwinds, including a new antitrust lawsuit from Aptoide regarding monopolizing Android app distribution and billing systems.

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Software & Specialized Services

• Adobe: Adobe launched its Firefly AI Assistant, which automates complex multi-step workflows across Creative Cloud apps like Photoshop and Premiere. In a notable move toward an open ecosystem, Adobe is also integrating third-party models, including Anthropic’s Claude, directly into its platform.

• Autodesk: Autodesk expanded its long-term partnership with Globant, which was named an Autodesk Tandem Digital Twin Solution Provider. This collaboration aims to accelerate digital twin implementation in global logistics and smart manufacturing.

Other Key Updates

• ASML: Analysts have significantly increased their price target to $1,846, citing “substantial AI demand”. Supporting this outlook, ASML posted strong first-quarter 2026 earnings of €7.15 per share, up 19.2% year over year. Total net sales were €8.77 billion, increasing 13.2% from the year-ago quarter. As a result, ASML raised and narrowed its full-year outlook, now expecting 2026 total net sales between €36 billion and €40 billion. The company is also planning to double its EUV production capacity by 2027 to meet expected sales growth driven by global memory shortages and advanced EUV adoption. Meanwhile, a surge in sales from South Korea, which hit 45% of the Q1 total, is helping offset headwinds from evolving export controls in China.

• Advanced Micro Devices: The company is expanding its footprint in the autonomous driving sector through a $60 million joint investment in Wayve. Additionally, Supermicro introduced three new edge AI systems powered by AMD’s EPYC 4005 series processors, targeting high-performance workloads in space-constrained environments such as retail stores, manufacturing sites, healthcare environments, where data is processed locally.

That’s a wrap. See you soon.

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Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

Our posts may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.

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Additionally, the company finished the year with a normalized EBITDA of $1.99 billion for FY26. For context, in our valuation two years ago, we estimated FY26 EBITDA of $1.66 billion. While Autodesk significantly outperformed our expectations, the stock price remains at nearly the same levels, as the broader market re-rated Autodesk and other software companies lower due to the narrative surrounding the existential risk of AI.

In the last quarter, management struck a constructive but measured tone, pointing to broad-based momentum, particularly in AECO, construction, and emerging markets. However, they guided FY27 with appropriate caution due to temporary disruption from its sales optimization plan. Even so, the underlying fundamentals remain strong: full-year revenue reached $7.21 billion, free cash flow increased 54% to $2.41 billion, and Autodesk continues to generate substantial cash while maintaining disciplined profitability.

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1. Breaking the SEA Border: Why Taiwan?

For the first time in its history, Grab is stepping outside Southeast Asia into its 9th market. CEO Anthony Tan described this as a natural next step, and the data supports this move as Taiwan it’s a logistics dream given its population density.

Taiwan’s urban density is 3.6x higher than Grab’s Southeast Asian average. High density means shorter delivery routes (so better efficiency) and higher “drops-per-hour,” meaning that margins are generally higher.

Additionally over 4 in 10 households are single-person residences. These households don’t usually cook, making them the highest-frequency users of delivery apps. What a gift for Grab!!

But they are not just solo. They have money to spend, as Taiwan has the second highest household income in Grab’s footprint, trailing only Singapore.

Source: Grab M&A presentation

As Grab’s CEO, Anthony Tan, puts it:

“Taiwan’s population of approximately 23 million also has a high demand for mobile-first services, similar to the Southeast Asian consumers who Grab serves every day.”

2. The Valuation: Did Grab Get a “Steal”?

Grab is paying $600 million for a business that generated $1.8 billion in GMV in 2025. This implies a 0.33x EV/GMV multiple, that stands at a 51% discount to its own trading multiple of approximately 0.68x GMV (including mobility GMV).

To add on this, Uber was willing to pay $950 million for the same asset just 22 months ago before regulators blocked it. However you slice it, Grab has done a good deal.

3. Uber - The Elephant in the Room

The main ‘concern’ relates to the relationship with Uber which remains a major strategic partner and a shareholder in Grab (a remnant of the 2018 SEA exit). Grab will now go head-to-head with Uber Eats in Taiwan creating a potential conflict. When asked about this, Anthony Tan gave the response needed from someone focused on shareholder value:

“Our primary fiduciary duty is to all our shareholders, and driving long-term value creation for our ecosystem in all the countries that we serve.”

Grab is here to win for their investors. Addressing concerns over regulatory hurdles, management clarified that they are entering Taiwan as a new competitor rather than a market consolidator like Uber. This distinction provides a significantly smoother path with the Taiwan Fair Trade Commission.

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4. Financial Impact

Grab is buying a business that is already profitable on an adjusted EBITDA basis (before group cost allocations). As such they expect the following:

• The deal to be accretive to Grab’s 2026 Revenue guidance of $4.04B - $4.10B.

• The transaction to contribute at least $60 million in incremental Adjusted EBITDA by 2028. That stands at 3.3% of current GMV; above Grab’s average of 2% in FY25 and slightly below its long-term target of 4%. Effectively, it’s buying a profitable asset with room for growth.

5. Final Thoughts

This deal is a masterclass in capital allocation. For the past year, the market has been obsessed with rumors of a Grab-GoTo merger, a deal that many expected to be significantly more expensive (at ~$7b) and complex.

Instead of chasing this multi-billion dollar merger in a lower-income market like Indonesia, Grab pivoted to a cleaner, higher quality asset by grabbing the #1 player in a high-density market at just 0.33x EV/GMV multiple.

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Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

Our posts may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.

Welcome to our brief overview of portfolio news from the past few days.

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Anthropic’s Security Push and Amazon’s Supplier Standoff

Amazon-backed Anthropic launched Project Glasswing, a major cybersecurity initiative, after its Claude Mythos Preview model was found to exceed skilled humans at detecting software vulnerabilities. The coalition is impressive, with Apple, Microsoft, Google, AWS, and others joining to use the model for defensive security work. The ability for an AI model to autonomously find critical vulnerabilities at scale has profound implications.

Away from the AI headlines, Amazon is refusing wholesale supplier requests to raise inventory prices. While this protects short-term margins, suppliers are forced to absorb higher tariff and oil-related costs. This dynamic is a double-edged sword that could squeeze selection if suppliers start redirecting inventory elsewhere.

Google: Gemini Rising & Waymo Expanding

Alphabet had a busy week across AI, autonomous vehicles, and cloud.

Alphabet signed a long-term agreement with Broadcom for custom Tensor Processing Units and AI rack components through 2031, a meaningful step toward hardware self-sufficiency. Waymo also launched fully driverless ride-hailing in Nashville with Lyft as its fleet management partner.

On the software front, Google updated its Gemini chatbot to surface a one-touch ‘Help is available’ interface for crisis support when conversations signal potential mental health distress. Additionally, Google Cloud shifted toward outcome-based, ROI-driven deployment models through a deepened enterprise AI partnership with Onix.

Massive Semiconductor Outlook Upgrade

In a new note to clients, Bank of America analyst Vivek Arya issued a massive upgrade to the firm’s global semiconductor outlook. He hiked its 2026 revenue target to $1.3 trillion, a $300 billion leap from the estimate the bank provided just four months ago. The bank expects the total semiconductor market to hit the $2 trillion milestone by 2030. This implies a 20% compound annual growth rate through the end of the decade. This is a very important development for our semi holdings like ASML and AMD.

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PayPal & Meta Integration

PayPal announced a partnership with Meta. The goal: one-tap shopping on Facebook. Users will be able to purchase products without leaving their feed, with Instagram integration coming soon. Users scroll through Facebook, see a product, and buy it with one tap. Given that both platforms have billions of users, the potential is massive. It is a good move, but if this isn’t shown in the underlying numbers, the price won’t move much.

Other Key Updates

• Evolution: Pareto Securities upgraded Evolution to Buy from Hold, raising its price target 17% to 700 SEK. This signals growing conviction in the live casino operator’s near-term earnings trajectory.

• Grab: Grab expects its new AI-powered “group ride” feature to tackle rising fuel costs and drive growth. The feature utilizes automated calculations to split fares more accurately, offering passenger savings of up to 40% per trip.

• Crocs: Shares are rising as traders rotate into unusually cheap, high-quality names. At just 7x forward earnings and 1.19x trailing revenue, the market is pricing in almost no growth.

• The stock market experienced a robust recovery today following a ceasefire agreement between Iran and the U.S.. Investors piled back into tech names, lifting Nasdaq 2.8% as geopolitical tensions eased and fear-driven trades reversed.

That’s a wrap. See you soon.

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Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

Our posts may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.

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Yet, LVMH’s world-class management is proving resilient in navigating these challenges. The Q4 2025 results beat expectations on the bottom line, with early signs of stabilization in China and strong US demand providing tailwinds. Fashion & Leather remains the powerhouse, while Watches & Jewelry and Selective Retailing (led by Sephora) show resilience. With “cautious confidence,” management emphasizes long-term brand investments and expects a modest rebound in 2026, aligning with consensus organic growth of 1–4%.

This blend of sector headwinds and enduring strengths creates a compelling opportunity for investors. The recent sell-off has compressed multiples to 14.6x EV/EBITDA—below historic averages—prompting the question: is the market overly pessimistic about LVMH’s ability to reclaim its growth trajectory? That brings us to the core of this update. Let’s reassess LVMH’s true worth today.

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But if we look past the headline figures, the picture gets a bit more complex. Adjusted EBITDA margins contracted 259 basis points, EPS missed consensus by 7.1% and top line revenue was essentially flat at $2.64 billion which was a negligible $5.5 million miss against expectations.

With the stock hovering about 21% below its peak, it’s worth asking: is the market missing the long-term story, or is this miss on expectations and margin pressure a sign to stay on the sidelines?

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

1. The Top-Line Trend: Persistent Small Misses

That $5.5 million revenue doesn’t mean much in isolation. However, it fits into a broader pattern we have been tracking. Sunbelt has missed revenue consensus in the majority of quarters over the past two years. While these negative surprises are small in magnitude, their frequency indicates a recurring struggle to capture the top-line growth anticipated by the market.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

2. Q3 FY26 - the Numbers

Overall, the results were solid on the top line but missed analyst consensus across every profitability metric:

• Total Revenue: $2.64B (+2.7% YoY)

• Rental Revenue: $2.44B (+2.6% YoY, or ~4% excluding hurricane impacts)

• Adj. EBITDA: $1.08B (-3.1% YoY), with margin 41.0% (-259bps YoY)

• Adj. EPS: $0.78 (-3.7% YoY, missing the $0.84 consensus)

• YTD Free Cash Flow: $1.43B (+83% YoY)

The Story of the Quarter: Margin Compression

The top line was resilient with rental revenue growth accelerating quarter-over-quarter (4% Vs 3% in Q2’26 excluding the prior year hurricane impact), but margin compression is the story of the quarter. Two distinct drivers are weighting on profitability right now:

1. Revenue mix: The Specialty segment is growing faster than General Tool. Specialty naturally carries a lower EBITDA margin, though it boasts higher return on investment because it is less capital-intensive. We’re also seeing a boom in ancillary revenues (like cable installation for major events such as the Super Bowl or step-up and step-down transformers re-rented to support data centre projects), which carry lower margins than pure rental revenue. These services are currently growing at twice the pace of pure rental revenue. These dilute the margin percentage due to higher labor and logistics costs, but as CEO Brendan Horgan emphasized, this is still “highly profitable revenue” that increases the total dollar pool of earnings.

2. Internal Costs: Elevated internal repair and fleet repositioning costs which have been a significant headwind throughout the year. The good news? CEO Brendan Horgan signaled a pivotal turning point in Q3, indicating that these pressures are finally starting to tail off.

Source: StockOpine Analysis, Company filings

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Segment Performance

• North America General Tool - Sunbelt’s largest segment reported total revenue of $1,526 million, growing 1.3% year-over-year, with rental revenue up 1.6% or approximately 2% excluding hurricane impacts. Growth was led by volume improvement, with strength in mega projects and large strategic accounts offsetting moderating conditions in the local non-residential construction market. However, adjusted EBITDA margin contracted sharply by 282 basis points to 50.3%, primarily reflecting the mix effects of higher ancillary revenues and fleet repositioning costs discussed above.

Source: StockOpine Analysis, Company filings

• North America Specialty – The star of the quarter. Total revenue hit $897 million, up 5.2% year-over-year. Rental revenue grew 4.4% or approximately 7% excluding hurricane impacts. Demand was driven by broad-based momentum across flooring, temporary fencing, structures and walls, trench safety and power and HVAC. Adjusted EBITDA margin contracted 246 basis points to 45.4%, consistent with the group-wide cost pressures.

Source: StockOpine Analysis, Company filings

• UK- The United Kingdom segment continues to be the weakest in the group. Total revenue of $214 million grew 3.4% as reported, but declined 2% at constant exchange rates. This means that growth is entirely a function of currency movement rather than operational progress. Rental revenue grew 2.2% as reported and adjusted EBITDA margin fell 271 basis points to 22.9%. Management is undertaking restructuring actions to improve profitability and return on investment over the medium term.

Source: StockOpine analysis, Company filings

Dollar Utilisation

• North America General Tool: Dollar utilisation has declined slightly from 48% in Q3 FY25 to 47% in Q3 FY26. While rental revenue grew by 1.6%, this was offset by a larger 3.1% increase in average OEC (original equipment cost), as well as the impact of the internal repair costs and company repositioning of its fleet to maximize utilization in a mixed construction market.

• North America Specialty: Specialty achieved an increase in dollar utilization to 74%, driven by a 4.4% increase in rental revenue that outpaced a 2.8% increase in average OEC.

• UK: The slight decline in dollar utilization from 53% in Q3FY25 to 52% in Q3FY26 coincides with a period of operational restructuring in the UK.

Source: StockOpine analysis, Company filings

Capital Allocation & Free Cash Flow

Year-to-date free cash flow reached $1.43 billion (up 83%) from $782 million in the same period last year. This dramatic improvement reflects management’s disciplined capital allocation approach, with year-to-date capex falling 29% to $1.72 billion.

“When markets are experiencing the transitory headwinds, we have experienced over the last few quarters, we remain extremely disciplined in our deployment of capital to support strong utilization and rate discipline. When markets are growing more rapidly, we accelerate capital spending to capture opportunities in market share. In all cases, we generate significant free cash flow in excess of our investments, which we return to shareholders in the form of dividends, debt repayment, and share buybacks.” Alex Pease, CFO

And, they are using free cash flow aggressively to reduce leverage and return cash to shareholders:

• $1.35 billion returned to shareholders year-to-date through $1.05 billion of share buybacks and $307 million in dividend payments. Shares outstanding have declined from ~443M in early 2022 to 415M currently.

• A new share buyback program of up to $1.5 billion just launched alongside the NYSE listing, signaling management’s confidence at current price levels.

• Lowered net borrowings by over $200 million in last year to $7.6 billion. As of January 2026, net debt to adjusted EBITDA leverage is 1.6x, down from 1.7x a year earlier and within the 1.0x–2.0x target.

Now let's turn to the forward-looking metrics. Read on for a breakdown of Sunbelt's updated guidance, our thoughts on valuation, and exactly how we are handling our position.

Read more

Meanwhile, the stock is selling at historically low valuation multiples and is about 64% below its peak.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

Adobe has also extended its run of earnings & sales beats over the past 5 years (it only missed sales consensus twice) by continuing to grow revenue and profitability at a consistent rate. The earnings beat magnitude has widened over the past three quarters driven both by performance and by the aggressive buyback program, reducing shares outstanding from 435 million in Q1’25 to 410 million in Q1’26 .

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

In this article, we’ll break down Adobe’s Q1’26 earnings, analyse the ongoing AI transition, highlight key takeaways from the earnings call, assess Adobe’s valuation and let you know if we are doing any changes in our portfolio.

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1. Results Overview

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

Adobe’s Q1 FY26 results exceeded expectations across the board, surpassing both analyst consensus and the guidance provided last quarter. Revenue hit $6.40 billion, growing 12% as reported and 11% in constant currency, the highest Q1 revenue in company history.

However, the top-line strength came alongside a modest operating margin contraction, as increasing AI-related investments weighed on profitability. GAAP operating margin came in at 37.8% in Q1 FY26, down from 37.9% in Q1 FY25 (a 10-basis point contraction). The underlying driver is sales & marketing ($1.71B, +14% YoY) and G&A ($463M, +26% YoY) which are growing faster than revenue.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Remaining Performance Obligations (RPO) exiting Q1 stood at $22.22 billion, growing 13% year over year (12% in constant currency) while posting a sequential decline from $22.52B at Q4 FY25 end. Current RPO (cRPO) grew 12% year on year (+1.7% QoQ) and 11% in constant currency in this quarter. From FY24 to FY25, the ending cRPO coverage ratio (ending cRPO/Next 12M revenue) increased, reaching 56.32% in FY25 and edging up further to 57.26% in Q1 FY26, suggesting improving near-term revenue visibility.

Moving to ARR in Q1 it reached $26.06 billion, up 10.9% year over year.

While the YoY growth rate held steady, the sequential deceleration from 11.5% was possibly due to increasing usage of AI but slower materialization to RPO. Management reaffirmed the full-year FY26 ARR growth target of 10.2%, implying double-digit ARR growth for each of the remaining three quarters.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Adobe generated a Q1 record $2.96 billion in operating cash flows, up from $2.48 billion a year ago. The company repurchased 8.1 million shares (~2% of shares outstanding), with $3.89B remaining of the $25B authorization. With the stock trading at historically low multiples, management’s continued buyback pace signals strong confidence in Adobe’s long-term value.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

2. Customer Group Performance

Adobe reports two customer subscription groups. Both delivered strong double-digit growth in Q1 FY26:

a. Business Professionals and Consumers – Revenue increased 16% YoY to $1.78 billion, contributing 29% to the total subscription revenue. With a single PDF or across documents in a PDF Space, Acrobat AI Assistant offers users conversational experiences that help them understand information more quickly and accurately. The connection between Acrobat and Express allows users to turn content they are consuming into audio summaries, infographics, presentations and more. Resonance with these features led the growth in AI Assistant MAU and ARR by 2x YoY and 3x YoY, respectively, in Q1FY26. Simultaneously, Express MAU was up 3x YoY and was integrated into 99% of U.S Fortune 500 companies.

b. Creative & Marketing Professionals – Revenue rose 12% YoY to $4.39 billion, exceeding management’s guidance of $4.33 billion and accounting for 71.2% of total subscription revenue.

• Creators & Creative Professionals: With over 30 AI models, including those from Google and OpenAI, sharing ideas using “Firefly Boards” and prompt-based editing capabilities with integrated photoshop and express web journeys, Firefly has changed from a basic AI tool into a professional creative hub. As a result, the total generative consumption has increased 45% QoQ in Q1FY26. The company reported rise in high value AI usage with video generative actions growing more than 8x YoY and audio generative actions expanding 2x YoY. Therefore, Adobe’s revenue from Firefly subscriptions and credit packed ending ARR jumped by 75% sequentially in Q1FY26. On the other hand, Firefly enterprise is experiencing new customer acquisition growth of 50% YoY. Tools such as Firefly services (provides API that allows creating of mass assets using automation) and Firefly foundry (allows the enterprise to train AI on their own IP without compromising on brand safety) have enabled large scale content creation at a faster pace and reduced costs.

• Marketing Professionals: Adobe’s Customer Experience Orchestration (CXO) is a strategy which connects the design and marketing team through AEP and GenStudio. Adobe Experience Platform (AEP) uses AI agents to analyse customer behaviour through interactions and automate marketing campaigns. In Q1FY26, Adobe enabled the usage of these tools to AEP users through their Try and Buy program. The AEP AI Assistant is already being used by 70% of AEP customers. Subscription revenue for this platform and its apps grew 30% YoY, indicating sustained momentum. GenStudio is a one stop destination which combines separate Adobe’s tools required for digital content and manages activities right from idea to final ad. Ending ARR for the Adobe GenStudio products grew > 30% YoY as global leading brands and agencies are investing in Adobe ecosystem to power their content supply chain. If those growth rates and adoption trends suggest that AI is eating Adobe’s lunch, then we just disagree.

  “In Q1, we introduced new AEP Agents along with expanded Agent Orchestrator capabilities, now available to all AEP customers, via a Try and Buy program. The scale of our platform has grown to over 35 trillion segment evaluations and more than 70 billion profile activations per day. Subscription revenue for AEP and native apps grew over 30% year over year, demonstrating continued momentum and value realization.” Anil Chakravarthy

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

In the sections below paywall we will dicuss AI developments, valuation and other highlights from the call.

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Source: Koyfin

But it wasn’t all bad. The quarter was fundamentally a story of tough comparisons. Pool faced a massive headwind in Q4'25 as it cycled against the hurricane-driven surge in Florida from late 2024. Despite this, the company delivered a 70-basis-point expansion in gross margins and introduced a 2026 outlook projecting a return to low single-digit top-line growth.

We’ll dive into the specific drivers behind these numbers below.

Support for this research is provided by our sponsor, 9fin.

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1. Revenue

Net sales for the quarter were $982.2 million, a modest 1% decrease year-over-year. This slight decline was largely expected, as Q4’24 included a 2% benefit from hurricane recovery efforts. Excluding the impact of that tough repair comparison in Florida, the positive growth trends we saw over the last two quarters would have continued.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

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This quarter’s revenue dynamics were driven by a +2% benefit from net pricing, which helped offset a -2% drag from lower discretionary spending.

Source: Pool Corporation Q4’25 Earnings Presentation

For the full year, Pool achieved $5.3 billion in net sales, finishing flat compared to FY24 and reflecting a true year of stabilization. The industry has been in a broader decline for three consecutive years, fighting the hangover from the pandemic demand surge as well as a restrictive interest rate environment.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

2. Gross Profit Margin

Gross margin for the quarter was a major bright spot, coming in at 30.1%. This represents a robust 70-basis-point expansion compared to Q4’24.

This margin expansion was fueled by disciplined pricing, supply chain benefits, and an increase in private label sales. The company also benefited from a favorable product mix compared to last year, as Q4’24 saw an unusual spike in lower-margin equipment sales related to post-storm replacements. For the full year, gross margin landed at 29.7%.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

3. Operating Margin

Operating margin for the quarter contracted by 80 basis points to 5.3%. Operating income came in at $52.0 million.

Operating expenses increased by 6% to $243.7 million. This expense growth was primarily driven by incremental investments in the POOL360 Unlocked technology rollout, costs associated with new greenfield sales centers, and rising self-insured medical costs.

For the year, operating income reached $580.2 million (11.0% operating margin) compared to $617.2 million in the previous year (11.6% operating margin)

4. Performance by Product Category

The Q4 product mix highlights the impact of the 2024 hurricane comps:

• Building Materials: Sales grew +4%. This marks another solid quarter of growth, driven by demand for National Pool Trends products. The trend continues from Q3'25 where we saw another +4% YoY gain.

• Equipment: Sales declined -3%. This drop was directly related to cycling against the significant equipment replacement activity following the major hurricanes in Q4’24.

• Chemicals: Sales fell -3%. This reflects both a tough comp with post-hurricane cleanup and continued pressure on chemical pricing.

5. Other End Markets

• Independent Retail: Sales to independent retailers declined by 4% in the quarter. This reflects softer retail demand compared to the hurricane-driven surge late last year.

• Pinch A Penny: The franchise network saw a 9% sales decline. This was heavily impacted by geographic concentration; most stores are in Florida, and Q4’24 saw a 15% jump in sales from hurricane activity. The network itself continues to expand, crossing the 300-location mark.

• Commercial: Sales fell -4% for the quarter, but finished the full year up +3%.

• Regional Performance: Florida declined 9%, heavily skewed by the tough comp, though it remains up 2% on a two-year stack. Texas provided early signs of recovery, growing +1% in Q4. California and Arizona declined 4% and 3% respectively.

6. New Construction Vs Maintenance

The industry saw just under 60,000 new pools built in the U.S. in 2025, representing a mid-single-digit decline from 2024. This is 25% lower than the pre-pandemic period and closer to the post-financial crisis years.

Source: Pool Corp 10-K Filings, StockOpine Analysis

Looking into 2026, management noted an encouraging level of optimism from dealers following the January show season. Many builders expect to construct at least as many pools as they did in 2025, indicating that the new construction market has likely found its floor.

For FY25, maintenance revenue was 64% of total revenue, while renovation and remodel made up 22% and new pool construction contributed 14%. This compares to maintenance revenue of 62% in FY23 and 58% during the construction peak in 2021. As mentioned in previous posts, this trend shares similarities with the financial crisis when the maintenance mix grew from an estimated 55% of sales at the housing bubble peak to 70% after the collapse.

7. 2026 Outlook

Management is expecting return to growth in 2026.

• Sales: Expected to grow in the low-single-digit range.

• Pricing: Anticipated to provide a +1% to +2% benefit.

• Gross Margin: Forecasted to be consistent with 2025 levels at 29.7%.

• Diluted EPS: Guided to a range of $10.85 to $11.15. This excludes any potential ASU tax benefits, implying growth in the low-single-digit range.

8. Quick Take: The POOL360 Digital Advantage

Pool’s continued investment in its B2B digital ecosystem is paying off.

• Record Adoption: For the full year, POOL360 sales reached an all-time high of 15% of total revenue.

• Q4 Momentum: Digital sales remained strong at 13.5% of total revenue in the fourth quarter, up from 12.5% in the prior year.

• Strategic Benefit: The company successfully launched POOL360 Unlocked in Q4, introducing new artificial intelligence features and expanded customer access.

9. Concluding Remarks

We believe Pool’s Q4 results validate that the company has successfully navigated the bottom of this cycle. With the discretionary business showing signs of firming up, a resilient maintenance segment, and the stock price trading at decade-low valuations, the long-term thesis remains firmly intact.

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Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

Our posts may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.

At StockOpine, our primary objective is to own high-quality winners for the long term within a focused portfolio of roughly 20 companies. This number isn’t arbitrary. It’s based in academic research by Elton and Gruber (1977), who showed that a randomly selected portfolio of about 20 to 30 stocks eliminates most unsystematic (company-specific) risk.

According to their findings, a 20 stock portfolio carries total risk only about 28% above the minimum achievable level (a stock portfolio with 3,290 securities). That gap narrows to roughly 20% with 28 securities and about 10% with 60 securities. The takeaway is that the marginal benefits of diversification decline rapidly, while the effort and cost required to monitor additional holdings increase significantly.

However, position sizing is not an exact science. It is a continuous balance between conviction and humility. The recent market swings have prompted us to re-examine our rationale, acknowledge its limitations, and consider where increased flexibility might offer an edge.

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1. Why Sizing Matters

Before diving into our rules, it is important to understand why we don’t just buy an index or stick rigidly to one factor. Investment styles tend to move in cycles, alternating between extended phases of outperformance and underperformance.

As illustrated by the Koyfin charts below showing various factor ETFs against the S&P 500 (SPY) over 10-year, 5-year, and 1-year horizons, no single strategy wins all the time. Growth dominates over the decade, but value and momentum have their distinct periods to shine. Because the market tide shifts, picking the right winners and managing their weight in the portfolio is important.

10-Year Horizon

Over the last decade, Growth (IWF) has significantly outperformed, while small-caps and value have lagged.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

5-Year Horizon

The 5-year view shows more variance, with recent dips in growth bringing it closer to the average.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

1-Year Horizon

In the short term, the picture is messy. Different factors fight for outperformance, highlighting the difficulty of relying solely on broad factor exposure.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

Given this variability, here is how we currently approach sizing, and how we are thinking about evolving it.

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2. The Initial Entry: Conviction Vs Bias

When we complete our analysis on a new company, we typically aim for a starting position of 3% to 5%. This depends on our conviction level derived from financial metrics (growth, earnings quality, ROIC), Total Addressable Market (TAM), management quality, and valuation.

• If a company is a clear quality compounder, we start with at least 3%.

• For turnover stories or mean reversion expectations, where the range of outcomes is wider, we start lower. (e.g., we started Leslie’s at 2%, and unfortunately, even adding 1% later proved to be a poor decision).

Additionally, we apply a ‘cooling-off period’ after deep research to counteract recency bias (the tendency to be overly optimistic just because you just spent hours studying the bull case). Starting at 3% allows us to have ‘skin in the game’ while reserving the right to watch an earnings call or two to confirm our thesis before scaling up.

3. Managing the Position: Adding on Weakness and Strength

Once a stock is in the portfolio, fundamentals and price action impact our next moves, but only within strict limits.

Adding on Weakness (but aiming to avoid the “Falling Knife”): If a high-conviction company’s stock price falls due to short-term issues, we are attracted to buying more. However, we have a theoretical limit that a single position should not exceed 8-10%* of invested capital at cost. At some point, you have to step back. This prevents catastrophic losses if the thesis is fundamentally broken and we were wrong.

*Exceptions: Mega-cap compounders like Google and Amazon have historically held very high weights in our portfolio because they earned this right through sustained, proven execution.

Adding on Strength: We are also willing to average up (as we did with Booking, Alphabet, and Amazon). If a company’s execution and economic moat prove stronger than our initial expectations, we will add to the position even if the share price has increased. That said, once a holding exceeds 10% of the portfolio, we typically stop adding and allow it to run, provided the fundamentals remain intact.

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4. The Art of Selling: Why We Might Trim Instead of Exit

Selling is harder than buying. We focus on clear red flags: a thesis that deteriorates over a two-year period, weak communication (withdrawing guidance, repeated overpromising), or chronic operational underperformance. These were the reasons we exited positions such as Diageo, Lululemon, Reckitt, and Rentokil.

That said, not every setback warrants a sale. We try to distinguish between structural and temporary factors. For example, we held Evolution through EU regulatory fencing issues and Asia cyberattacks, and Greggs during its heavy investment phase. Short-term noise is different from long-term erosion.

We have also learned that selling purely on valuation can be costly. We bought KLA around $300 in 2022 and sold near $900 in 2025 because it appeared expensive. Today, it trades close to $1,500.

The data supports this lesson. A 2018 study by Professor Hendrik Bessembinder found that just 4.3% of U.S. listed companies (top 1,092 firms) from 1926 to 2016 generated 100% of net wealth creation above Treasury bills. The remaining ~96% collectively matched the return of risk-free bonds (9,579 firms (37.81%) generated positive lifetime wealth, but their gains were fully offset by the wealth destruction of the remaining 14,661 firms (57.88%)).

Source: Do Stocks Outperform Treasury bills? - Hendrik Bessembinder - May 2018

Therefore, fully exiting a high-quality compounder because the valuation feels stretched risks eliminating one of the rare companies that drives long-term portfolio returns. That’s why we now prefer trimming over full exits.

When AMD quickly grew from a 5% to 8% position, we reduced exposure to manage risk but retained a core 5% holding to participate in the AI upside. Trimming protects capital; maintaining a core position preserves asymmetry.

5. Future Evolution: The Case for Flexibility (The Peter Lynch Approach)

Sticking rigidly to 20 stocks means that to add a new idea, an existing one must be sold. This can lead to passing on a great new idea just to avoid cutting a solid existing holding.

We are considering an approach similar to that used by Peter Lynch. While managing the Fidelity Magellan Fund from 1977 to 1990, Lynch delivered a 29.2% annualized return. At times, he held hundreds, even over 1,000 stocks. Many of these were very small positions, often initiated to monitor a company more closely, with capital scaled up only as conviction strengthened and the thesis proved correct.

We see value in being flexible enough to expand our holdings to 25 or even 30 companies by introducing smaller “starter” positions (e.g., 1.5%). Why? Because we missed meaningful opportunities in stocks like Micron (pitched at $117, now $418) and Teradyne (pitched at $69, now $329) simply because the portfolio felt “full.”

A 1.5% starter position creates optionality. If the thesis proves wrong, the impact on the portfolio is limited and easily absorbed. If it develops into the next Micron, that small initial allocation can meaningfully enhance overall returns.

This framework acknowledges that we won’t get everything right, but it also ensures we don’t exclude the next great compounder due to artificial capacity constraints.

Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

Our posts may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.

Here is a breakdown of the numbers and the headwinds spooking the market.

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1. Financial results

Revenue: Reached $6.3 billion, up 16% year-over-year, or approximately 11% on a constant currency basis. This exceeded the high end of management’s guidance by about 4 percentage points, driven by higher than expected payments revenue.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

• Profitability: Adjusted EBITDA grew 19% year-over-year to $2.2 billion, with the Adjusted EBITDA margin expanding to 34.6% from 33.8% in the prior year. Adjusted EPS came in at $48.80, up 17% year-over-year.

• Capital Returns: Free cash flow surged 120% year-over-year in Q4 to $1.4 billion. The company rewarded shareholders by returning $2.4 billion in Q4 alone, the highest quarterly amount since 2023, through a mix of share repurchases and dividends. Furthermore, the Board approved a 25-to-1 stock split effective April 2, 2026, and raised the quarterly dividend by 9.4% to $10.50 per share.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

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2. KPIs

Room Nights & Gross Bookings

Room nights grew 9% year-over-year to 285 million, beating the top end of guidance by 3 percentage points driven by strong Asia and US as well as an expanded booking window. Total gross bookings increased 16% to $43.0 billion.

Growth was broad-based. Asia and the US each delivered low double-digit room night growth, while Europe and the rest of the world grew in the high single digits.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Alternative Accommodation

Alternative accommodation room nights (representing 36% of total room nights) at Booking.com grew approximately 9% in Q4, and total listings reached 8.6 million, an 8% increase year-over-year. However, analysts on the earnings call pointed out that growth in this segment is “continuing to slow a little bit”,

raising questions about its long-term trajectory. Glenn Fogel, CEO, acknowledged the slowdown and noted that despite performing well, he believes there is room for further improvement in that area.

“We're growing it. It's nice, but we got more to be done, and we got more to be done there and improving the product and certainly there are areas where we are still nowhere near where I'd like to be in terms of inventory, but we are building it. So I hope nobody takes something from this call and thinks, oh, it's not as important. No, it is important and it's something that we are going to continue to be working hard on.”

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Below is our analysis explaining why the “PayPal fear” is misplaced and the actions taken in our portfolio.

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1. H2 2025 Scorecard

• Net Revenue: €1.27 Billion (+17% Reported / +21% Constant Currency). Missed Consensus of €1.29B.

• EBITDA: €702.1 Million (+23% YoY). Beat Consensus of €692M.

• EBITDA Margin: 55%. Massive expansion of ~200 bps YoY.

• Processed Volume: €745.3 Billion, up 12% (+19% YoY - excluding a single large volume customer).

• EPS: €18.46 per share (+11.5% YoY).

• Free Cash Flow Conversion: 86%.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

2. The “PayPal Fear” & The Take Rate Defense

The bear case today is that Adyen is becoming just another payments company like PayPal, fighting a price war it can’t win. Investors look at the Digital pillar volume (-1% reported, or +11% excluding the large customer) and compare it to Braintree’s recent +12% growth, assuming Adyen is losing share.

But if Adyen were losing a price war, their Take Rate (the cut they keep) would be collapsing. It isn’t. It’s expanding.

• Digital Take Rate: Increased to 0.183% in H2 2025 (up from ~0.169% in H2 2024).

• Total Take Rate: Landed at 17.1 bps, up from 16.2 bps a year ago.

This is the “anti-PayPal” signal. Adyen is effectively churning low-margin volume (likely Block’s Cash App) while winning complex, high-margin enterprise volume. The fact that Digital revenue grew 10% (Constant Currency) while volume was essentially flat proves they are extracting more value, not less.

3. Dissecting the Pillars

To understand the true health of the business, we must look at the three pillars individually. The headline slowdown hides a shift towards stickier revenue.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

a. Digital: The “Optical” Weakness

• Revenue: €696.1M (+10% Constant Currency, +7% reported).

• Volume: -1% reported (impacted by Cash App, +11% excluding the large volume customer).

Management noted a record number of customers moving into Unified Commerce. When a Digital client opens a store, their volume often shifts pillars. This creates a “double headwind” for the Digital segment: Cash App drags the volume down, and successful upsells “steal” the growth to the Unified pillar.

However, as the CFO Ethan Tandowsky noted,

“Being able to support our customers in more sales channels means that they put more trust. We’re able to win more of their share of wallet.”

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b. Unified Commerce (UC): The Crown Jewel

• Revenue: €431.3M (+33% Constant Currency).

• Volume: +30%.

• Terminals: Adyen added 54,000 terminals in H2 alone, reaching 456k total active terminals (+92k YoY).

The ability to roll out Starbucks to 943 stores in seven weeks or expand Uber to kiosks is a moat that pure-play digital competitors cannot cross. The data supports the "omnichannel" thesis: during Black Friday (BFCM), in-store baskets were 28% higher than online ones. Adyen is capturing this market.

c. Platforms

• Revenue: €143.3M (+49% Constant Currency).

• Volume: +28% (or +54% excluding eBay).

While the growth looks massive, we note that the number of platforms processing >€1B dropped slightly from 32 to 31. However, the number of active business customers grew to 220k (vs 193k in H1). This suggests the drop is likely a single client falling just below the threshold due to macro factors, not a structural churn issue. Additionally, with 31% of Platforms volume now on POS (up from 25%), the stickiness of this segment is increasing.

4. Profitability: “Trust the Process” Pays Off

In 2023, Adyen crashed when they refused to stop hiring. They asked for our trust. H2 2025 is the payoff.

• EBITDA Margin: Hit 55%.

• The Lesson: Management shifts resources to where clients are going (Unified Commerce, Platforms) rather than chasing short-term quarterly targets.

Source: Company filings

As Ingo Uytdehaage said on the call:

“But we think that too much focus on the short term is not helping us in that long-term execution... in all the decision that we make as a management board, we only take the 3-5 years perspective and not this year’s perspective.”

We trusted them on the hiring in 22-23. We should trust them on the client strategy in 2026.

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The shocker of the Q4 print wasn’t just the earnings miss, it was the abrupt, “effective immediately” appointment of Enrique Lores (former HP CEO) as the new President and CEO. This feels wrong. It feels reactive. While Alex Chriss may have missed on the core checkout button, he improved Braintree profitability, finally started monetizing Venmo, and stabilized the ship.

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To replace him so suddenly raises questions. The official statement from Jamie Miller (Interim CEO) was standard corporate speak:

“The Board’s appointment of Enrique reflects a clear commitment to strengthening performance... At the same time, we recognize as a company that our execution has not been what it needs to be.”

But let’s look at the incentives. A simple comparison of the compensation packages is telling. Alex Chriss signed for equity awards around $43.75 million, while Enrique Lores is landing a package closer to $72.5 million. This raises further questions about the Board’s decision-making process.

Were the poor results merely a pretext to surface a conflict of interest? How does paying nearly double for a new CEO serve shareholders when the business is guiding for margin compression?

Let’s get into the numbers, because the guidance and the “execution issues” are where the real pain lies.

1. The Numbers: A Quarter of Misses

The Q4 print was weak, and no amount of adjusted metrics can hide the stalling growth engine.

• Revenue: Came in at $8.68B, missing estimates of $8.79B. Growth of 4% is negligible for a “growth” fintech.

• Non-GAAP Operating Income: $1.55B, missing estimates of $1.58B.

• Operating Margin: Contracted 9 basis points to 17.9%. This is the lowest Non-GAAP operating margin we have seen in the past six quarters.

• EPS: $1.23, missing the guidance of roughly $1.29. Management blamed a higher than expected tax rate, but relying on tax nuances to explain a miss is usually a sign of weak operational leverage.

• Transaction Margin ($TM): The lifeblood of the company grew just 3% (or 4% ex-interest). This is well below previous implied estimates of 5-6%.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

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The volume picture is also discouraging. TPV grew 9%, while payment transactions increased just 2%. Excluding PSP (Braintree) volume, transactions rose 6%. That implies PSP transactions declined by roughly 13% during the quarter. It’s a clear hit to the volume narrative, though it does mark an improvement from the ~20% YoY decline seen in the prior quarter.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

a. The Core Problem: Branded Checkout is Stalling

The narrative has been turnaround for a long time, but the core cash engine Branded Checkout is slowing down. Branded Checkout TPV grew just 1% on a currency-neutral basis down from 5% in Q3’25.

Management blamed a list of external factors: US retail weakness, international headwinds in Germany, and normalization in travel/gaming. They always seem to blame external factors. To us, when you blame the “macro” while competitors are growing, it just implies market share loss.

Here is Jamie Miller, Interim CEO admitting the failure:

“The 4-point deceleration was more than we expected... First, U.S. retail weakness. We saw pressure across our retail merchant portfolio, particularly among lower and middle income consumers. While part of this can be attributed to macro factors... it’s also clear that we need to do more to win with key merchants.”

To reverse the trend, management announced a “change in approach” to focus on strategic merchants, who represent nearly 25% of branded checkout volume. They formed dedicated teams in January to serve them.

“To date, we’ve been optimizing for every merchant, and that approach has slowed our ability to move quickly on what matters most…We're changing our approach to focus on strategic merchants, representing nearly 25% of our branded checkout volume today but could be much larger.” Jamie Miller - Interim CEO

Focusing on large merchants sounds good on paper, but these players have immense bargaining power. If you are desperate to ‘win’ larger share of their wallet with dedicated teams and custom integrations, you are likely going to concede on pricing. This pivot further justifies the expectation of a drop in Transaction Margin dollars in 2026.

Moving to the redesigned checkout, we heard the biometric excuse. Management blamed operational deployment issues, noting that new checkout experiences were rolled out without biometric enablement.

“In too many cases, we were deploying our redesigned checkout without biometric enablement... That’s changing.” Jamie Miller - Interim CEO

Apple Pay has had biometric authentication figured out for years. It’s hard to understand why this wasn’t enabled by default in the redesigned checkout from Day 1.

As for progress, it remains slow. Management says only 36% of consumers are currently checkout-ready (biometrics/passkeys enabled), with a target of 50% by the end of 2026. Adding just 15% over a full year is underwhelming. By the time this rollout is complete, the technology risks being outdated.

b. Give Credit Where Due

It wasn’t all a disaster though. Ironically, the parts of the business that Alex Chriss focused on are the only ones working.

1. Venmo is finally making money: Venmo revenue grew ~20% to $1.7B (excluding interest income). Active accounts surpassed 100 million.

2. BNPL is scaling: TPV exceeded $40B (up >20%).

3. Enterprise Payments (Braintree): Returned to double-digit volume growth (+12%) and significantly improved profitability by doubling their net processing yield.

As Jamie Miller noted on the call:

“These 2 businesses [Venmo and Enterprise] were once small contributors to profitability. In 2025, they drove nearly half of our 6% transaction margin dollar growth.”

Source: PayPal Earnings Presentation Q4’25

Additionally, the PayPal Debit Card is showing clear signs of traction. In the US, TPV growth accelerated to over 50%, with MAAs (monthly active accounts) up 35%. Interestingly, US debit ARPA is roughly 3x that of a checkout-only user, reinforcing the importance of the omni-channel strategy.

Venmo’s debit card momentum is similarly strong, with TPV up more than 50% and MAAs growing 50%. While debit cards and Tap to Pay still represent a relatively small share of branded experiences volume today, their combined spend continues to scale rapidly, rising 60% YoY.

Source: PayPal Earnings Presentation Q4’25

c. The Innovation Distraction: Agentic & Visibility

Management spent time discussing “Agentic Commerce” and partnerships with AI platforms like Perplexity and Microsoft Copilot. While they admit this won’t materially impact 2026 growth, it feels like a buzzword distraction from the core fire in Branded Checkout.

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Despite the strong headline results, the stock price fell 17% the next day as the market looked for an even greater surprise. It seems investors still question AMD’s ambitious long-term target of growing revenue at a >35% CAGR over the next five years.

1. Results

Revenue for the quarter increased 34% year-over-year (and 11% sequentially) to a record $10.3 billion. The upside was fueled by record EPYC and Ryzen sales, alongside a $390 million revenue contribution from Instinct MI308 shipments to China which were not included in the guidance provided in Q3’25.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Non-GAAP gross margin hit 57%, up 300 basis points year-over-year. It is important to note this includes a benefit from the release of $360 million in previously reserved inventory (related to the MI308 China product). Excluding this one-time benefit and the China revenue, the "adjusted" non-GAAP gross margin was approximately 55%, still a healthy expansion driven by favorable product mix.

Non-GAAP operating income was a record $2.9 billion, up 41% year-over-year. The operating margin expanded to 28%, up from 26% a year ago. Non-GAAP EPS was a record $1.53, up 40% YoY.

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2. Segments

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

a. Data Center

The Data Center segment remains the growth engine, with revenue hitting a record $5.4 billion, up 39% year-over-year. This acceleration (compared to 22% growth in Q3) highlights the massive demand for both general-purpose compute and AI infrastructure.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

The segment reported an operating income of $1.8 billion, representing a 33% operating margin. This is a significant jump from the 25% margin seen in Q3, aided by the inventory reserve release mentioned earlier.

In terms of the outlook, management reiterated the target to grow Data Center revenue by >60% annually over the next 3-5 years and scale AI revenue to “tens of billions” by 2027.

EPYC Processors

Server CPUs continue to be a dominant force. Sales of 5th Gen EPYC "Turin" processors accelerated, accounting for more than half of total server revenue in the quarter. Management highlighted that the need for Agentic AI workflows is actually driving higher demand for powerful CPUs to act as head nodes. As CEO Lisa Su noted:

“We exited the year with record server share... EPYC has become the processor of choice for the modern data center, delivering leadership performance, efficiency and TCO."

Instinct accelerators

The AI business continues to scale rapidly. Key highlights from the quarter include:

• MI308 China Revenue: AMD recognized ~$390 million from MI308 sales to China. Management guided for another ~$100 million in Q1 2026 but is not forecasting further China revenue beyond that due to the dynamic regulatory environment.

• MI350 Ramp: The MI350 series is ramping well, with 8 of the top 10 AI companies now using Instinct for production workloads.

• Next-Gen Roadmap: The focus is shifting to the MI450 and the Helios rack-scale platform, scheduled for launch in H2 2026. This is viewed as a major inflection point.

b. Client & Gaming

The combined Client & Gaming segment delivered revenue of $3.9 billion, up 37% year-over-year. Operating income was $725 million (18% margin).

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Client

The Client (PC) business was a standout performer, growing 34% year-over-year to a record $3.1 billion. This growth was driven by the Ryzen desktop and mobile CPUs as well as strong commercial adoption. Commercial PC sell-through grew by more than 40% year-over-year, marking a successful expansion into the enterprise notebook and desktop market.

Gaming

Gaming revenue saw a holiday boost, up 50% year-over-year to $843 million, driven by higher semi-custom revenue and Radeon GPU sales. However, management cautioned that as we enter the seventh year of the current console cycle, semi-custom revenue is expected to decline by a significant double-digit percentage in 2026.

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c. Embedded

After several quarters of correction, the Embedded segment has returned to growth. Revenue was $950 million, up 3% year-over-year and 11% sequentially. While the recovery is modest, the long-term indicators are strong. AMD closed $17 billion in design wins in 2025, up nearly 20% YoY, positioning the segment for sustained growth as inventory levels normalize across the industry.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

3. Outlook

For the first quarter of 2026, AMD expects revenue to be approximately $9.8 billion (+/- $300 million).

• This represents 32% year-over-year growth.

• Sequentially, this is a slight decline of ~5%, driven by seasonal decline. Management noted that Data Center is expected to grow sequentially, offsetting seasonal declines in Client, Gaming, and Embedded.

• The guidance includes approximately $100 million of MI308 sales to China.

Non-GAAP gross margin is guided to be approximately 55%, and operating expenses are expected to be around $3.05 billion, reflecting continued aggressive investment in the AI roadmap. This implies a non-GAAP operating margin of approximately 24%, which is in line with Q1’25.

Source: AMD Earnings Presentation Q4’25

4. Conclusion

AMD closed 2025 with a strong performance, proving that its Data Center strategy is firing on all cylinders. EPYC CPUs have proven to be a “must-have” for new AI infrastructure, driven by the rise of agentic workloads, allowing AMD to exit the year with record server market share. Additionally, record revenue in both the Client and Data Center segments confirms that AMD is winning share in traditional markets while successfully ramping its AI business.

The market, however, remains skeptical that AMD can hit its ambitious long-term growth targets. Time will tell, but the upcoming launch of MI450 and Helios in the second half of 2026 will be the true test.

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Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

Our posts may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.

a. Results: A Record-Breaking Quarter

ASML reported Q4 2025 net sales of €9.7 billion, which sits at the higher end of their guidance and reflects a substantial jump from €7.5 billion in Q3. This was largely driven by the EUV systems.

• Net System Sales: Reached €7.6 billion, with EUV accounting for 48% of the mix (vs. 38% in Q3). EUV includes the recognition of revenue for two High-NA systems.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

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• Bookings: The headline number was the record net bookings of €13.2 billion (vs. €5.4 billion in Q3). This included €7.4 billion in EUV orders alone, a clear signal that customers (Logic and Memory) are aggressively preparing for 2nm and advanced DRAM nodes.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

• For the first time in recent memory, Memory bookings (56%) surpassed Logic (44%), driven by frantic demand for HBM (High Bandwidth Memory) and DDR5 to support AI workloads.

The gross margin came in at 52.2%, up from 51.6% in Q3, landing comfortably within guidance despite the dilutive impact of early High-NA system recognition. Net income was €2.8 billion, representing 29.2% of sales.

b. Backlog & Services

While the headline revenue figures grab the attention, two underlying metrics confirm the durability of this cycle:

• Record Backlog: The order book ended the year at a massive €38.8 billion. The quality of this backlog is pristine. EUV systems now account for €25.5 billion (or 66%) of the total, providing visibility for 2026. Furthermore, the risk of cancellations from China has largely dissipated, as the region now represents only ~20% of the backlog, aligning future revenue with a more sustainable geographic mix. For context, China sales accounted for 33% in 2025 and 36% in Q4’25.

“As part of the outlook for non-EUV, we expect the China region's share in our total net sales in 2026 to be in line with our current system backlog, which is around 20 percent.” - Christophe Fouquet, CEO

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• Installed Base Management grew 26% YoY to €8.2 billion in FY25. CFO Roger Dassen highlights upgrades as “the easiest and fastest way for customers to get additional output capacity” in a supply-constrained market. The momentum continues into Q1’26 with expected sales of ~€2.4 billion (implied +20% YoY), driven by “increasing service revenue from our growing installed base of EUV systems” and strong “appetite for upgrade business” to solve short-term capacity needs.

c. Outlook: 2026 is a Growth Year

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Source: StockOpine Analysis

During periods of stagnant growth, operating deleverage kicks in, and this is exactly what we are seeing right now at LVMH. Operating margin has declined from 26.5% in FY23 to 22% in FY25. However, despite the cycle, management has managed to keep operating margins above pre-COVID levels.

What does this tell us? We believe LVMH is currently under-earning. As the cycle turns and the Group returns to organic growth of at least mid-single digits, operating leverage should kick back in, allowing profit margins to expand from here.

Nevertheless, we remain in a stagnant period and have not yet seen definitive signs of the cycle turning, with various external factors still in play (geopolitics, FX, tariffs). Without overwhelming you with macro thoughts, let’s dive into LVMH’s FY25 results.

1. A Closer Look on FY25 Numbers

LVMH reported €80.8B in revenue for FY25 (-5% reported, -1% organic). The year was characterized by what Bernard Arnault described as a “winter” for the industry, driven by three major headwinds:

• Currency headwinds: A negative FX impact of -3% on revenue and -€1 billion on operating profit, as the Dollar, Yen, and Renminbi weakened against the Euro.

• Geopolitical and Economic uncertainty: Including trade tensions (tariffs on Cognac in China and the US) and tax increases in France.

• Cyclical normalization: Following the post-COVID boom, demand has softened, particularly in Wines & Spirits.

Operating profit declined 9% YoY to €17.8B, with operating margins compressing to 22.0% (from 23.1% in FY24). The decline was primarily driven by:

• Gross Margin pressure: Down 6% YoY, falling to 66.2% of revenue.

• Currency impact: A substantial €1.06 billion negative hit to recurring operations. Almost 60% of the operating profit decline was FX-related.

• Strategic Spend: Despite the downturn, management maintained marketing and selling expenses at 37% of revenue to preserve brand desirability rather than slashing costs to boost short-term earnings.

“I believe we can say more seriously that the results of the group are solid in a rather challenging, disrupted climate economically... 2026 won’t be simple either, but one thing at a time.” Bernard Arnault, CEO.

Source: StockOpine Analysis

2. Regional Trends

Despite a negative full-year organic print (-1%), momentum shifted positively in the second half of the year. H2 organic growth rebounded to +1%, signaling a potential stabilization.

• United States: Growth was flat during the year but accelerated in H2 as the dollar weakened, encouraging domestic spending over tourist spending abroad.

• Europe: Saw a reverse trend; growth was stronger in H1 due to tourism but softened in H2. Overall, Europe organic revenue declined by 1% in FY25.

• Japan: Revenue declined by 12% as a result of tougher comps.

• Asia (ex-Japan): Remained under pressure, declining 4% over the year but returned to growth in the second half of the year after 6 consecutive quarters of decline.

Source: StockOpine Analysis

3. Segment Breakdown: Divergent Fortunes

With the exception of Wines & Spirits, all remaining segments showed improvement in the second half of the year. However, only Watches & Jewelry and Selective Retail delivered positive consecutive growth in both Q3 and Q4.

Source: StockOpine Analysis

Wines & Spirits

This segment remains the hardest hit, posting a -5% organic revenue decline. This marks the third consecutive year of organic revenue decline. For years, this segment enjoyed a stable 30% operating profit margin with top-line growth in the mid-single digits. Now, a decline in spirits which could potentially prove structural is being supercharged by tariffs.

• Cognac: Significantly impacted by trade tariffs and weak demand in China and the US. Organic revenue decline was -12% YoY for the category.

• Champagne: Held up better with resilient sales, aided by Moët & Chandon’s renewed Formula 1 partnership. Organic growth for Champagne and Wines was flat YoY.

• Profitability: Margins collapsed to 19.0% (vs 23.1% in FY24).

Source: StockOpine Analysis, Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Fashion & Leather

The core engine of LVMH saw -5% organic growth. Profitability remained best-in-class with a 35.0% operating margin, which is above pre-covid levels but below last year’s 37.1% (and the ~40% peak levels seen in FY21/FY22). Despite the negative full-year organic figure for the segment, Bernard Arnault noted that Louis Vuitton and Christian Dior both grew “quarter after quarter from Q1 to Q4”

• Louis Vuitton: Continued to innovate with unique initiatives like the “Vuitton Ship” in Shanghai and a new high-end makeup line.

• Dior: Benefited from a “creative renewal” following successful shows in early 2026.

Source: StockOpine Analysis, Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Perfumes & Cosmetics

Organic growth was flat (0%), but the segment outperformed on profitability, with operating profit up 8%.

• Dior: Sauvage remains the world’s best-selling men’s fragrance, and Dior lipsticks are sold “every 2 seconds”.

• Strategy: The focus on selective distribution helped margins rise to 8.9%.

Source: StockOpine Analysis, Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Watches & Jewelry

This segment was a bright spot, flipping to +3% organic growth (vs. declines previously). Notably, organic revenue growth for the segment acceleraed to 8%YoY in Q4’25.

• Tiffany & Co.: The elevation strategy is “bearing fruit” with a massive transformation plan involving store renovations and a push into high jewelry (shifting focus from silver to gold).

• Bvlgari: A standout performer achieving "another record-breaking year" in 2025.

Source: StockOpine Analysis, Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Selective Retailing

The Star Performer Sephora continues to be the “unchallenged world leader” in beauty retail.

• Performance: The division delivered +4% organic growth and 28% jump in operating profit.

• DFS: LVMH is actively exiting this business, having sold a majority stake to focus on more profitable ventures. DFS accounted for 1.8% of LVMH’s total revenue in FY25.

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4. Conclusion

LVMH is navigating a “winter” cycle, but the business remains significantly profitable and cash-generative. Despite lower profitability, they generated €14.3B in free cash flow (+6.8% vs. FY24) by better controlling CAPEX and working capital.

Management offered a “reserved” outlook for the short term in 2026 due to geopolitical headwinds but remains optimistic for the medium term. A key highlight for investors is the Arnault family’s conviction: The family is set to cross the 50% ownership threshold in 2026, reinforcing their long-term commitment.

“A family group isn’t riveted to the quarterly results... We create product for the long term and we’re not mesmerized by what’s going to happen in the coming quarter.” Bernard Arnault.

With H2 organic growth turning positive (+1%), LVMH appears to be forming a bottom. However, this recovery may take longer than expected given the persistent challenges in the external environment.

At current levels, the stock trades at 16.2x NTM EV/EBIT and an FCF/EV yield of 4.9%. These are multi-year low valuations in a downcycle where LVMH is likely under-earning. In that respect, we remain long at these levels and may even consider increasing our position if the stock falls further.

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Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

Neither the team nor any of its affiliates accept any liability whatsoever for any direct or indirect loss however arising, from any use of the information contained herein. Any unauthorized copy of this newsletter or its contents is illegal.

Our posts may contain affiliate links, which means that we might get a commission if you decide to sign-up using any of these links. No extra cost is charged to you.

By subscribing / reading our newsletter or any affiliated social media accounts, you indicate your unconditional acceptance to the above and your unconditional acceptance to our terms and conditions.

• The Dislocation: PYPL trades at ~10x Forward P/E (near 52-week lows) despite accelerating Transaction Margin growth (+7%) and Venmo monetization (+20%).

• The Pivot: The “Checkout is dying” narrative ignores the 10% acceleration in U.S. Branded Experiences driven by debit/offline usage.

• The Catalyst: 2026 is a transition year of investment (1-2% margin reinvestment), setting the stage for high-margin Ads and Agentic revenue in 2027.

• The Verdict: We view this as a ‘Profitable Utility’ mispriced as a ‘Terminal Value Trap.’

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1. Separating Signal from Noise

As we enter 2026, PayPal ( ) presents one of the most interesting setups in large-cap tech. The stock is trading near 52-week lows (~$57), pressured by a fresh wave of analyst downgrades in mid-January. Goldman Sachs slashed their target to $64 (from $72), citing market share erosion to Apple Pay. TD Cowen was even more severe, cutting their target to $65 (from $80), while Compass Point reiterated a sell rating with a target of just $55. The consensus is clear: PayPal is priced as a terminal utility with zero growth, facing regulatory overhangs and competitive moats it cannot cross.

Source: Koyfin (affiliate link with a 20% discount for StockOpine readers)

However, looking under the hood of the Q3 ‘25 results and recent strategic announcements, a different reality is emerging. The “growth at all costs” era is dead; the “profitable utility” era has arrived.

• Transaction Margin Recovery: We are seeing a confirmed 6-7% growth in Transaction Margin dollars (ex-interest), proving the “price-to-value” strategy in Braintree is working.

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers)

Source: PayPal Q3’25 Earnings Presentation

• Venmo’s Monetization Inflection: Venmo is no longer just a free P2P app. The platform is pacing toward ~$1.7bn in revenue this year (ex-interest income, +20% YoY), driven by the expanding Pay with Venmo and Venmo Debit Card flywheel. Revenue growth of ~20% versus TPV growth of 14% points to improving monetization efficiency, with Venmo extracting more value per dollar of volume as scale increases.

  As Alex Chriss has highlighted, this inflection is structural. At Investor Day, management guided to more than $2bn in Venmo revenue by 2027, noting that current execution positions the business to deliver well beyond that over time. Crucially, Venmo’s growth is margin-positive, with Chriss stating that it is accretive to transaction margin. TPV growth itself is also accelerating, reaching 14% in Q3, up from 12% in Q2 and 9% in 2024, reinforcing the durability of the monetization trajectory.

Source: PayPal Q3’25 Earnings Presentation

• The primary bear case remains the slow rollout of the modern “Fastlane-style” checkout experience. CEO Alex Chriss was candid at the Citi conference, admitting that upgrading 15 years of legacy integrations is “slower than I expected”. Currently, the redesigned paysheet is live on roughly 25% of global traffic, with only about half of that fully optimized.

  However, focusing solely on the legacy “Online Button” misses the structural shift to Branded Experiences (Omnichannel):

  • While global Online Branded Checkout is growing at a stable 5%, the broader Branded Experiences metric (which includes debit & tap-to-pay) is growing faster at 8% globally. In the U.S. Branded Experiences accelerated to 10% growth in Q3 (double the rate of the prior year).

  • Debit card and tap-to-pay volumes skyrocketed 65% YoY. We are seeing early wins like contactless payments in Germany (5M enrollments) and massive debit card adoption moving PayPal from a ‘guest checkout’ option to a daily spending tool.

  The narrative that ‘Checkout is dying’ is incomplete and misleading. The legacy button has stabilized in the mid-single digits, while the new Omnichannel form factors are accelerating growth.

Source: PayPal Q3’25 Earnings Presentation

• The ‘Agentic’ Call Option: Through new partnerships with Google, Microsoft, and OpenAI, PayPal is positioning itself as the trusted “vault” for AI Agents, a future revenue stream the market is assigning zero value to today. This also ensures that PayPal isn't disintermediated by AI agents.

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This report updates our valuation model to reflect a “Transition Year.” 2026 will see suppressed margin expansion as management reinvests to lock in users. Jamie Miller, CFO, was explicit about this tradeoff at the UBS conference:

“So first, fourth quarter, we said we would invest 1 to 2 points of transaction margin dollars back into the space around product attachment and habituation. And that is really what we’re focused on when we get into ‘26. ‘26 for us around investment in branded checkout is product attach and habituation and it’s about Agentic Commerce and making sure that we can really lean in there and be a first mover to capture that shift.”

We are weighing the near-term pain of these investments (rewards, ads, and offers) against the long-term potential of two potential flywheels:

1. PayPal Ads: A high-margin ad network built on first-party transaction data.

2. PayPal World: The cross-border wallet initiative. While adoption is in early stages, Bank of America recently highlighted its potential, estimating that hitting adoption targets could generate approximately $365 million in annual incremental revenue.

Is the market right to panic over Apple Pay, or is it missing the quiet compounding of the most diversified payments platform in the world? Let’s dive into the numbers.

2. Valuation

The stock price as of 22nd of January 2026 stands at $57 with 1 year return of 36.4%. The Company’s market capitalization is $54B and it trades at an EV/EBITDA TTM multiple of 7.7x. Based on our DCF valuation, the estimated price of PayPal is $87, 51.5% higher than its current price, with an expected IRR over the projected period of 23.3%.

Source: StockOpine analysis / This table can be found in tab ‘Key Assumptions’

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