This quarter confirmed that the installed base is a highly reliable growth driver, while the discretionary side of the business continues to face macro headwinds. Here is our analysis of the latest earnings.

1. Revenue

The 2% top-line growth was supported by steady demand for maintenance products and continued improvement in building materials.

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

Breaking down the growth, the quarter benefited from a 3% contribution from pricing and flat volume in the maintenance category. This was partially offset by a 1% decline in discretionary volumes.

Source: Pool Corp Earnings Presentation Q2’26

While there was a deceleration from the 6% growth seen in Q1, it is important to remember that Q1 is generally a small, pre-season quarter. In Q1'26, Pool's growth benefited from a 1% carryover from mid-season price hikes implemented in late April of 2025. Those price increases have now lapsed. Additionally, the prior quarter saw 2% volume growth, which was likely driven by early-buy incentives.

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2. Gross Profit Margin

While gross profit dollars increased by $5.6 million to $540.8 million, the gross margin percentage contracted by 30 basis points year-over-year to 29.7%.

The margin dilution was primarily driven by elevated inbound freight costs (driven by the increase in fuel prices) that the company could not fully recoup in selling prices during the quarter, along with an unfavorable customer mix as a higher portion of sales came from larger customers. Higher amount of roll-ups in the pool maintenance industry is not beneficial for Pool as those larger customers can exercise more purchasing power as they become larger. Despite this, the pro pool maintenance industry is still significantly fragmented. Also, when the pool construction turns around, many of the small players who exited during the downcycle they will probably come back in, ultimately reversing those dynamics. These headwinds were partially offset by ongoing supply chain optimization initiatives and the continued expansion of private label and proprietary products which carry higher margins.

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

3. Operating Margin and Potential Efficiencies

Operating margin on an adjusted basis was 15.1%, as adjusted operating income grew 1% to $275.9 million. Reported operating expenses increased 4% to $273.1 million, but this included $8.3 million in CEO transition costs, which primarily consisted of non-cash share-based compensation.

When excluding those transition costs, adjusted operating expenses were tightly managed, increasing only 1% to $264.8 million. Management expects operating expenses to increase 2% to 3% for the full year, indicating continued cost discipline and a clear focus on capacity absorption.

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4. Performance by Product Category

The Q2 product mix provided clear signals on consumer behavior:

• Building Materials: Sales grew 4%. This outperformance reflects the success of National Pool Trends showrooms and indicates that the company is actively gaining market share in a muted discretionary market.

• Chemicals: Sales declined 2%, significantly lower than the 8% growth seen in Q1’26, driven entirely by lower pricing. This was the most surprising metric of the quarter, as we have expected chemical pricing momentum to remain positive. Management did not provide specific commentary to explain this.

• Equipment: Sales grew 3%. This growth was driven by pricing actions and solid repair-related replacement demand.

5. Regional and End Market Performance

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This was not a flawless quarter; underlying growth has structurally decelerated from the company’s historical highs and management is troubleshooting major regional headwinds.

Here is the analysis into the numbers and what they mean moving forward.

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1. Performance overview

On a reported basis, net revenue reached €517.8 million, representing a 1.2% year-over-year decline, though it was a modest 0.9% quarter-on-quarter increase. On a constant currency basis, revenue growth was estimated at 2.4% YoY, indicating that foreign exchange headwinds are beginning to ease.

Profitability remains solid. EBITDA came in at €341.0 million, maintaining a steady 65.9% margin. This aligns perfectly with management’s full-year target and demonstrates highly effective cost management. Total operating expenses stood at €220.0 million, up 1.0% YoY but down 0.2% sequentially. Personnel expenses actually dropped 1.4% YoY to €121.8 million, confirming the execution on efficiency initiatives.

Source: Evolution AB Investor Presentation Q2’26

"Don't forget that we, during a while, had a very unfavorable cost mix and distribution. We're coming out of that, and we are in good cost control... If the revenue's coming up, the cost will come up, we will then maintain the 66% margin target." — Martin Carlesund, CEO

2. Segment Breakdown

The Live segement generated €437.3 million, down 3.6% YoY but up 0.6% sequentially. A critical metric under the hood is the Game Rounds Index, which rebounded to an all-time high of 391, representing a 6.3% QoQ jump. This divergence—record game rounds translating to flat revenue—shows a structural shift toward faster-paced game shows (like Ice Fishing) with smaller average bet sizes. Volume expansion is outpacing monetization density.

“Game rounds will need to increase more than revenue over the coming 10 years... Short attention span is for the coming generations, so it has to be snappy, fun, really entertaining content.” — Martin Carlesund, CEO

Source: Evolution AB Investor Presentation Q2’26
RNG delivered an outstanding performance, generating €80.5 million, up 14.0% YoY and 2.9% QoQ. This marks a key milestone for a division that has faced multi-year growth bottlenecks. Growth was fueled by persistent demand for slot IP in North America and commercial traction via the One-Stop Shop (OSS) strategy.

Source: Evolution AB Investor Presentation Q2’26

3. Regional performance

Europe: Sequentially Stabilized, Structurally Pressured

Europe officially broke its multi-quarter downward trend with a +3.5% QoQ increase to €173.0 million, recovering from its €167.1m bottom in Q1. However, the region remains down 4.0% YoY. While localized game shows are driving engagement, the long-term structural deceleration from historical growth rates is driven by poor regulatory channelization.

“The regulatory subjectivity remains, and channelization is very weak in a number of jurisdictions... As soon as you raise the tax to a certain limit... you will lose channelization. You have seen that in many jurisdictions now, such as U.K. and the Netherlands, and the channelization reach 50% levels.” — Martin Carlesund, CEO

Source: Evolution AB Investor Presentation Q2’26

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Asia: The Stagnation Trap

Asia took another step back, dropping 3.7% QoQ and 8.9% YoY to €190.5 million. This compares unfavorably to its Q2 2025 peak of €209.1 million. The volatility here is due to a continuous "cat-and-mouse" game with copycat syndicates pirating Evolution's streams. This is a balancing act between automated security countermeasures (which accidentally lock out legitimate players) and product protection which remains unresolved.

Source: Evolution AB Investor Presentation Q2’26

North America: Good but Immaterial to Total Group

North America expanded 9.5% YoY and 2.9% QoQ to €81.0 million, driven by the rollout of Monopoly Live across four states and the opening of a second Michigan studio. However, with large-state legalizations stalling, sequential growth has slowed. Management explicitly warned against viewing this region as a panacea for group-level challenges.

“We shouldn’t overvalue North America... North America in the greater scheme of things, still a small market in comparison to others.” — Martin Carlesund, CEO

Source: Evolution AB Investor Presentation Q2’26

Latin America: The Growth ‘Hits’ a Wall

LatAm revenue looks exceptional on paper at +26.3% YoY, driven by successful scaling in São Paulo and Argentina. However, growth flattened sequentially to just +1.5% QoQ (€47.5m vs. €46.8m in Q1). This abrupt deceleration points to a stabilization phase as operators and players prepare for pending regulatory shifts in Brazil; players are not migrating to licensed formats overnight.

Source: Evolution AB Investor Presentation Q2’26

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4. Other Critical Updates

• The Galaxy Gaming: The outside closing date for the Galaxy Gaming acquisition expired on the day of the call. After spending two years navigating administrative burdens for a small bolt-on deal, management heavily downplayed its importance, stating the transaction is “not significant” and would have no material impact on US operations, effectively preparing the market for a potential deal termination. In fact, one day later they announced that the deal has been terminated.

• UKGC Review Resolved: Evolution cleanly settled its 18-month UK Gambling Commission review with a flat payment of £4.75 million. The probe concluded that the issue was isolated to asset exposure on six unauthorized websites, clearing the company of any systemic compliance failures.

• Headcount vs. Capacity: Headcount was essentially flat quarter-on-quarter (22,880 vs 22,867). Expanding the physical footprint (a new Michigan studio and the Argentina relaunch) without increasing headcount illustrates strict operational cost discipline, though it signals tight capacity utilization across the global network.

• Cash Conversion: Operating cash flow after investments hit €258 million. A concentrated effort on working capital efficiencies reversed negative collection trends in accounts receivable, pushing trailing twelve-month cash conversion to a 86%.

5. Final thoughts

Evolution’s growth engines in Asia and LatAm are currently misfiring or stalling sequentially due to structural and regulatory friction. However, the company proved it is capable of defending its margins even in a zero-growth environment.

The 14% growth inflection in RNG is a strategic victory that helps offset Asian weakness, while the stabilization in Europe proves that localization can fight back against poor gray-market channelization. Supported by a fortress balance sheet with €1.2 billion in net cash, management’s aggressive share buyback program remains a highly effective, high-conviction mechanism to protect per-share value while they navigate these regional transitional phases.

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You can also check our latest valuation update here:

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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a. Results: Outperforming on High-Margin Upgrades

ASML reported Q2 2026 total net sales of €9.3 billion, which landed above the high end of their guidance. Net income reached €2.9 billion, representing 31.3% of total net sales, and resulted in earnings per share of €7.59.

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

A standout for the quarter was the Installed Base Management segment, which surged to €2.8 billion, almost €300 million above management’s expectations. As customers push to maximize output from their existing lines to meet demand, high-margin productivity upgrades are driving significant immediate value.

In Q2 2026, net system sales reached €6.6 billion. This included €3.8 billion from EUV system sales and €2.8 billion from non-EUV system sales. End-use was almost equally split, with logic capturing 51% of net system sales and memory taking 49%. The gross margin came in at a strong 54.0%, beating guidance, driven primarily by the favorable mix of very high-margin components within the Installed Base Management business.

Source: ASML Q2’26 Earnings Presentation

b. Outlook: Raising the Bar (Again) for 2026

Given the sustained order momentum and clear visibility provided by long-term customer commitments, ASML has updated its full-year 2026 guidance.

The company now expects total net sales for 2026 to be between €43 billion and €45 billion, a ~16% increase from the prior target. Full-year gross margin expectations are now set between 54% and 56%. This growth is fueled by advanced logic and memory customers entering long-term agreements and aggressively adding capacity. As a result, ASML anticipates memory-related net system sales to grow by over 75% this year, while advanced logic/foundry is expected to grow over 25%.

For the third quarter of 2026, ASML projects:

• Total net sales: Between €11.0 billion and €12.0 billion.

• Installed Base Management: Around €2.9 billion.

• Gross margin: Between 55% and 57%.

• Operating costs: R&D expenses are projected at around €1.2 billion. SG&A costs are expected to be around €0.4 billion.

Source: ASML Q2’26 Earnings Presentation

c. Technology: Scaling Capacity and High-NA Production Milestone

ASML is scaling its operations aggressively to ensure supply can meet this structural demand, with visibility now extending multiple years.

• EUV Capacity Expansion: ASML expects

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Unless the business possesses an economic moat. A moat is a structural, durable competitive advantage that protects a company’s cash flows and pricing power over a long time horizon. In our bottom-up fundamental analysis, identifying the specific source of a company’s moat is arguably the most critical step before we even open a valuation model.

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The Historical Data: Why Moats Matter

Focusing on structurally advantaged businesses isn’t just a theoretical exercise; it drives tangible long-term outperformance.

A strong indicator of a durable competitive advantage is a Return on Invested Capital (ROIC) consistently remaining above 15%. High ROIC combined with steady organic revenue growth demonstrates that a company is generating significant shareholder value with every dollar it reinvests into its operations.

The Four Pillars of a Competitive Advantage

We typically categorize structural advantages into four pillars. Here is how they look in practice:

1. High Switching Costs

The operational friction, financial cost, or risk of migrating away from a product is simply too high for the customer.

• Autodesk ($ADSK): When an entire engineering or architectural firm standardizes its workflows, BIM models, and technical training on Revit and AutoCAD, ripping out that software to save a few dollars on a competitor’s license introduces unacceptable operational risk.

• Cloud Infrastructure (AWS & Google Cloud): When an enterprise builds its backend architecture and databases natively on a cloud provider, moving to a competitor is a difficult task. It requires massive developer effort, code rewriting, and often incurs heavy data egress fees, making customer retention incredibly sticky.

2. Network Effects

The value of the product or service increases non-linearly with every new participant that joins the ecosystem.

• Grab Holdings ($GRAB): We outlined this in our deep dive earlier this year. As more consumers use the super-app for ride-hailing and deliveries, merchant and driver density increases. Higher density leads to faster wait times and lower costs, which attracts even more consumers. Breaking this flywheel requires an uneconomical amount of customer acquisition spend.

• Booking Holdings ($BKNG): A classic two-sided network. Travelers flock to Booking because it has the largest aggregated supply of hotels, homes and apartments globally. Conversely, accommodation providers are ‘forced’ to list on the platform because that’s where the global aggregate demand sits. Replicating this dynamic from scratch would require billions in marketing spend.

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3. Intangible Assets

Patents, specialized intellectual property, or regulatory barriers that legally or practically prevent competitors from duplicating a product.

• ASML Holding ($ASML): ASML holds an effective monopoly on the Extreme Ultraviolet (EUV) lithography systems required to manufacture the world’s most advanced semiconductors. Decades of hyper-specialized R&D mean a competitor cannot simply replicate their machines, regardless of capital.

• Advanced Micro Devices ($AMD): The structural complexity of their chiplet designs and their deeply protected x86 architectural licenses create an impenetrable barrier to entry. A startup cannot legally or technically spin up tomorrow and begin manufacturing competing server processors.

4. Cost or Scale Advantage

The ability to sustainably produce or distribute goods at a lower cost than peers, often creating a flywheel that widens over time.

• Pool Corp ($POOL): In a highly fragmented industry, their massive distribution network and localized scale allow them to source products at terms independent distributors cannot match. By serving as the single, reliable point of supply for local pool professionals, they possess an operational scale advantage that protects their market share.

• Amazon ($AMZN): The scale of Amazon’s fulfillment and logistics infrastructure allows them to deliver products faster and cheaper per unit than almost any retailer on earth. Replicating this physical footprint today would require hundreds of billions of dollars, giving Amazon a nearly insurmountable structural edge.

Spotting the Cracks: When Moats Erode

A moat is rarely breached overnight. It is a slow bleed that shows up in the financials long before it completely destroys the underlying business.

When reviewing earnings reports line-by-line, we look for three indicators that a structural advantage is beginning to erode:

• Persistent Margin Compression: If margins begin to contract in a stable macroeconomic environment, it is often a sign the company has lost its pricing power.

  PayPal ($PYPL): In recent years, PayPal’s unbranded processing business, Braintree, expanded rapidly, but at the cost of compressed margins. Braintree’s volume grew much faster than PayPal’s premium branded checkout segment. Because unbranded processing is increasingly viewed as a commodity-like service, it lacks the pricing power of branded checkout, which led to overall transaction margin pressure. This margin compression signaled to the market that PayPal’s competitive advantage was under intense pressure from peers. At PayPal, the new CEO Enrique Lores, who took over in March 2026, is currently driving a massive turnaround effort. He is focusing on simplification, cost savings through AI adoption, and reinvesting in higher-margin areas but that doesn’t mean that he can turn the ship around.

• Management Tone Shifts: Listen closely to earnings calls. When executives suddenly shift their strategic narrative or acknowledge aggressive competitor pricing, it is an admission that their product is facing commoditization.

  Adyen ($ADYEN.NV): In the first half of 2023, Adyen reported slowing growth in North America alongside EBITDA margin compression, causing its stock to lose over 40% of its value in a single day. During this period, competitors like Braintree were aggressively trying to capture market share at any cost. Adyen’s management realized that they had underinvested in their sales and account management teams, forcing a strategic shift to aggressively hire new staff to properly sell their platform and defend their market position. The margin compression proved to be temporary; as their hiring initiative concluded, operating leverage returned, and EBITDA margins expanded back to 50% for the full year 2024.

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• Deteriorating Fundamentals and Market Share: The most glaring red flag. If a company’s core product is disrupted by a paradigm shift, the financial collapse is usually swift and permanent.

  BlackBerry ($BB): BlackBerry is the ultimate case study of a technological moat evaporating. In 2008, the company possessed a massive structural advantage driven by its secure enterprise network and hardware, reaching a peak market capitalization of approximately $75 billion. At its height, BlackBerry controlled over 50% of the US smartphone market and its stock hit an all-time closing high of $139 in April 2008. However, as the computing paradigm shifted and competition from Apple’s iPhone intensified, their product became obsolete. The moat was destroyed. By the end of 2008, their market cap had already plunged to $23 billion. Fast forward to July 2026, and the stock is trading around $11, leaving the company with a market cap of roughly $6.4 billion. It is a brutal reminder that a temporary technological lead is not a permanent moat.

The Bottom Line

A great product or a temporary technological lead is not a moat. If you are investing for the long term, you must ask: What structural barrier prevents a well funded competitor from eroding this company’s margins in five years?

If you cannot clearly identify the moat, the future cash flows are not secure. However, it is vital to remember that even the widest moat does not guarantee a successful investment if the price is wrong. Valuation drives returns. Buying an extraordinary business with a durable moat only works if you have the patience to demand a margin of safety.

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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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As a quick recap, Q1 2026 results looked like this: net revenues of EUR 513 million, a slight year-over-year decline of 1.5%, but on a constant currency growth of 6.8%, highlighting the impact of a weak USD. Regional performance was also mixed: while Europe declined 5.9% quarter-over-quarter due to regulatory volatility, Latin America delivered a 29.3% YoY growth and North America saw improved 10.1% YoY growth (21.4% growth in local currency). Despite these dynamics, management has maintained a solid EBITDA margin of 65.4% for the quarter (down 20 bps YoY), remaining disciplined as they prepare for a record-breaking product roadmap in the second half of the year.

Management somehow agrees that the market is wrong given the aggressive highly opportunistic share buybacks (yet we haven’t seen any insider buying). In just one week following June 22, 2026, Evolution bought back nearly 1 million shares, bringing its total repurchases since May to 4.73 million shares (representing over 2% of the company’s entire share capital).

We have updated our DCF model to account for these shifting dynamics. The math suggests that the current pessimism has created a highly attractive margin of safety for long-term investors. It is time to reassess Evolution’s intrinsic value.

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Valuation

Evolution trades at SEK 678 per share, representing a market capitalization of SEK 132 billion (€12.2 billion). At this price level, the stock is valued at a trailing twelve-month (TTM) EV/EBITDA multiple of 8.5x.

Based on our updated Discounted Cash Flow model, we estimate Evolution’s fair value at SEK 778 per share. This target implies a 15% upside from current levels and translates to an expected Internal Rate of Return of 15.3% over our forecast period.

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

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Alphabet

• Waymo's Global Blueprint: Waymo has officially registered "Waymo Germany GmbH" with a business address listed at Google’s Munich office. While an international rollout is not imminent, this move lays the foundational groundwork for a broader European expansion, alongside parallel preparatory initiatives currently underway in London and Tokyo.

• Enterprise AI Expansion: Google Cloud is expanding its strategic partnership with financial technology firm Jack Henry & Associates. The collaboration will focus on building an advanced, AI-driven security platform tailored specifically for banks and credit unions, leveraging Google Cloud's specialized suite of agentic defense products.

• The Talent Headwind: The tech giant is facing pressure in the ongoing AI arms race as it is poised to lose two of its leading AI researchers, Jonas Adler and Alexander Pritzel, to rival firm Anthropic. Brain drain is the silent risk in the AI infrastructure war. Losing key engineers behind the Gemini and AlphaFold models to a direct competitor highlights the fierce structural competition for top-tier talent.

Amazon

• The $13 Billion India Expansion: Amazon has committed an additional $13 billion to scale its artificial intelligence and cloud infrastructure footprint in India. This fresh injection pushes the company’s total planned capital deployment in the country to $48 billion spanning 2026 through 2030, with a heavy emphasis on boosting data center capacities across the Mumbai and Hyderabad regions.

• The DMA Gatekeeper Threat: The European Commission’s preliminary review indicates that Amazon Web Services (AWS) alongside Microsoft Azure should be designated as a digital “gatekeeper” under the Digital Markets Act (DMA). Regulators pointed to high platform switching costs, immense market scale, and rapidly growing AI ecosystems as reasons the cloud giants serve as vital gateways for businesses. If the Commission’s preliminary findings are officially confirmed, Amazon will be handed a strict six-month window to bring its cloud services into full compliance with the DMA. This formal gatekeeper label introduces major structural and regulatory hurdles, as it could severely restrict how AWS bundles its core cloud infrastructure with its newer generative AI products.

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Sunbelt Rentals

• Sunbelt reported record fiscal Q4 2026 revenue of $2.75 billion, marking an 8.9% year-over-year increase. This was fueled by strong rental revenue growth of 8.0%, with the North America Specialty segment leading the charge at a 15.1% growth rate. However, the company faced profitability headwinds. Adjusted EBITDA margins compressed by 400 basis points down to 38.7% from 42.7% a year earlier. Management attributed this margin pressure to a shift toward specialty and ancillary revenues, alongside higher fleet repositioning and internal repair costs. Furthermore, Sunbelt expanded its specialty verticals by acquiring Reliant Asset Management (operating as Aries Building Systems) for $650 million, pushing into modular space solutions.

• Markets aggressively sold the stock down due to the margin compression, but the underlying top-line momentum tells a different story. The strong finish to the year, driven by expanding mega-projects and outsized growth in their specialty segments, shows demand is healthy. While the mix shift and startup costs are weighing on near-term profitability, these are highly strategic investments that build deeper customer relationships and carry strong long-term returns on investment. The sell-off looks like an overreaction to temporary margin noise within a structurally sound growth story.

Other Key Updates

• Adobe announced a definitive agreement to acquire Topaz Labs, an AI software firm specializing in video and image enhancement models, which will close in H2 and continue operating as a standalone offering led by CEO Eric Yang. To deepen its enterprise moat, the company also introduced Adobe Firefly Foundry, a new offering allowing corporate clients greater control over generative AI workflows to ensure brand-aligned and consistent content creation.

• AMD solidified its partnership with Rackspace Technology via a definitive agreement to deploy a 30 MW footprint dedicated to AMD-based compute across Rackspace data centers from late 2026 through 2028, positioning AMD at the silicon layer of Rackspace’s governed AI stack. Furthermore, AMD enhanced its hardware ecosystem by acquiring MEXT, an AI startup focused on memory optimization technology designed to make flash memory mimic DRAM, thereby expanding usable memory capacity for AI workloads.

• ASML: The Dutch government, via Trade Minister Sjoerd Sjoerdsma, is actively lobbying the U.S. government to halt the expansion of export controls on microchip equipment that would further hurt ASML’s sales to China. The gravity of these restrictions is evident in ASML’s financials: China accounted for 19% of ASML’s net system sales in Q1 2026, representing a sharp sequential decline from the 36% recorded in the prior quarter.

• Adyen: BofA Global Research reiterated its Buy rating and €1,750 price target for Adyen ahead of its August 13 interim results, projecting Q2 revenue growth to accelerate to 21.1% (up from 20% in Q1). This growth is backed by market share expansion over legacy banks, merchant wins, and embedded finance. While next-gen rivals like Stripe remain aggressive, BofA notes that Adyen’s new “Agentic capabilities” place it well for AI-driven commerce. Near-term EPS estimates were slightly lowered due to minor margin dilution from the acquisitions of Orb and Talon, which are expected to boost top-line revenue from 2026 through 2028.

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.

With the stock trading at a 68% drawdown from its peak and historically low multiples, the question remains: is Adobe’s AI strategy working?

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

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

In this article, we analyze the ongoing AI transition, and highlight key takeaways from the earnings call. We also assess Adobe’s valuation and let you know if we are making any changes to our portfolio.

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1. Results Overview

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

Revenue: Adobe’s revenues comfortably surpassed both Wall Street consensus and the company’s own guidance from last quarter. Total revenue reached a record-breaking $6.62 billion, marking the highest Q2 top-line performance in Adobe’s history, driven by a 13% growth rate on a reported basis and an 11% increase in constant currency. Revenue growth ex-Semrush stood at 12% year-over-year.

Operating Margins: This top-line strength was accompanied by a contraction in operating margin, as heavy AI-related infrastructure investments and structural costs weighed on the bottom line. GAAP operating margin compressed by 210 basis points to 33.8% in Q2 FY26, down from 35.9% in the prior year’s quarter. Operating margin ex-Semrush declined by 189 basis points to 34%. This profitability pressure was primarily driven by outsized spending in Sales & Marketing ($1.9 billion, +15.9% YoY) and G&A expenses ($546 million, +44.8% YoY), both of which outpaced Adobe’s 13% YoY revenue growth.

Earnings Per Share (EPS): Non-GAAP EPS reached $5.96, an 17.8% increase year-over-year. GAAP EPS was $4.25, impacted by a $70 million ($0.17 per share) non-cash goodwill impairment charge related to the Publishing & Advertising unit.

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

ARR & RPO: Remaining Performance Obligations exiting Q2 stood at $22.27 billion, growing 13% year over year (12% in constant currency) and a modest sequential increase from $22.22 billion at Q1FY26 end. Current RPO (cRPO) also grew 13% year-over-year and remained consistent with the previous quarter at 67%.

Moving to ARR in Q2, it reached $27.10 billion up 12.5% year over year. This re-acceleration from Q1’s 10.9% (+3.7% QoQ) growth was mainly driven by the $480 million ARR contribution from the Semrush acquisition (growth was 10.5% excluding the acquisition impact). AI-first ARR grew ~25% quarter on quarter (from +$400m in Q1) and tripled YoY to more than $500 million.

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

Adobe also generated $2.17 billion in operating cash flows compared to $2.19 billion in the same period last year reflecting a minor increase in working capital requirements.

Meanwhile, the company sustained its aggressive capital return strategy, repurchasing 8.5 million shares over the quarter. Following a new 25 billion authorization in April, the company has approximately 27 billion remaining for future repurchases.

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

2. Customer Group Performance

Both subscription groups showed sustained double-digit growth, even as Adobe rebalanced its funnel toward freemium onboarding.

a. Business Professionals & Consumers

Business Professionals & Consumers subscription revenue surged 16% YoY (11% on constant currency basis) to $1.85 billion, accounting for 29% of Adobe’s total subscriptions. A key driver this quarter was the introduction of the Adobe Productivity Agent, a breakthrough AI experience embedded within Acrobat that leverages document intelligence and Adobe Express to seamlessly transform static files into dynamic assets like presentations, podcasts and social content. This strategic shift toward interactive document workflows, complemented by the ability to share branded PDF Spaces featuring customizable AI assistants, is successfully transitioning users from passive readers to active collaborators.

Rapid adoption of these capabilities fueled an approximate 3x YoY growth in Acrobat AI Assistant ARR, alongside a stellar 150%+ YoY increase in paid MAUs. Simultaneously, Express MAU expanded by more than 20% quarter-over-quarter. Together, combined Acrobat and Express Monthly Active Users (MAU) surpassed the 850 million milestone, climbing roughly 20% YoY.

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

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b. Creative & Marketing Professionals

Revenue grew 13% year-over-year (11% YoY on constant currency) to $4.54 billion.

• Creators & Creative Professionals: With the beta launch of the Adobe Creative Agent and the integration of third-party models like Kling 3.0, Adobe has evolved its “all-in-one creative AI studio” into an agentic production hub. This shift drove record AI usage across flagship applications like Photoshop and Illustrator, while Firefly ARR expanded approximately 50% sequentially via app subscriptions and credit packs. High-value content generation continues to scale at an impressive rate with a greater than 4x YoY surge in assets generated through Firefly Enterprise. Furthermore, solutions like Firefly Services and Firefly Foundry, now supercharged by a strategic NVIDIA partnership for accelerated computing, are empowering global enterprises to industrialize brand-safe content production at unprecedented speed while drastically lowering operational costs. Overall, the top-of-funnel remains efficient, as Creative freemium MAU (spanning Firefly, Express and mobile apps) surpassed 90 million users, reflecting a 70%+ YoY growth rate.

• Marketing Professionals: Adobe’s Customer Experience Orchestration (CXO) strategy has centered on the new Adobe CX Enterprise, an end-to-end agentic architecture that seamlessly bridges design and marketing teams to govern the entire customer lifecycle. Enterprise adoption achieved a new milestone this quarter, with over 80% of AEP and AEM customers deploying integrated agentic capabilities, up from 70% in Q1. Momentum is robust, with subscription revenue for AEP and native apps jumping over 30% YoY, while the Adobe GenStudio portfolio grew its ending ARR by more than 25% YoY as multinational brands standardize their content supply chains on Adobe’s ecosystem. Additionally, the recent acquisition of Semrush extends Adobe’s competitive moat into search and brand visibility across the agentic web.

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

3. Strategic Pivot: Freemium Focus and Deferred Pricing

The standout theme of the Q2 report is Adobe’s deliberate decision to prioritize user acquisition over immediate ARR.

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

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AMD

• UK AI Investment: AMD announced plans to invest up to £2 billion in the United Kingdom over the next five years to accelerate AI research, scientific computing, and sovereign AI development.

• Strategic Academic Partnerships: The company is collaborating with Imperial College London, Oriole Networks, and the University of Cambridge to advance AI infrastructure.

Alphabet

• $80 Billion Equity Capital Raise: Alphabet announced an unprecedented $80 billion equity raise (which has since seen demand push it closer to $85 billion) to fund its artificial intelligence and data center expansion. Notably, this includes a $10 billion private placement to Berkshire Hathaway at a weird discount to what the price was at the time.

• Massive SpaceX Cloud/GPU Deal: Google has entered into a $920 million-per-month agreement with SpaceX to provide access to roughly 110,000 NVIDIA GPUs, plus CPUs and memory, from October 2026 through June 2029. Strict capacity milestones are in place.

• Green Energy Data Center in Texas: Google is partnering with Intersect to build the Meitner Energy Center in Texas, co-located with over a gigawatt of wind, solar, and battery storage.

• Alphabet choosing to raise equity rather than debt highlights the jaw-dropping capital intensity of the AI arms race. To put it in perspective, $80 billion covers less than half a year of Alphabet’s planned $180–$190 billion 2026 capex. However, Berkshire Hathaway anchoring a $10 billion tranche acts as a massive stamp of institutional validation that management is deploying this capital efficiently. That said we find the discount offered at the time somewhat unfair to minority shareholders.

Evolution AB

• Aggressive Share Buybacks: On May 18, Evolution’s board approved a massive EUR 2 billion share buyback program. Over the past three weeks, management has wasted no time executing the plan, consistently buying hundreds of thousands of shares daily on the open market, accumulating over 2 million shares to date.

• This buyback represents roughly 16.5% of Evolution’s market capitalization. The speed and aggression of these daily open-market purchases signal management’s extreme confidence in their cash flow generation and clearly indicate they believe the stock is fundamentally undervalued. We will soon publish our valuation update.

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Amazon

• Anthropic vs. The Pentagon: Amazon-backed Anthropic is facing a massive standoff with the US government ahead of its highly anticipated IPO. The Pentagon is threatening to label the company a “supply chain risk” after Anthropic refused demands to remove contractual restrictions prohibiting the military from using Claude for domestic surveillance or autonomous weapons.

• €10B+ European Automation Push: Amazon is investing over €10 billion to modernize European fulfillment centers. This includes deploying next-gen Proteus robotics by H1 2027 and committing $1 billion to worker upskilling by 2030.

• The European automation push is a brilliant dual-track strategy. Deploying advanced robotics while simultaneously investing heavily in human worker upskilling serves as the perfect “social hedge,” effectively mitigating regulatory and labor friction in a strict European labor market.

Autodesk

• Lowering Barriers for Small Businesses: Following the launch of Autodesk for Small Business, the company slashed the entry cost for its flexible consumption model. Starting June 4, the minimum purchase for Autodesk Flex dropped from 100 tokens ($300) to just 33 tokens ($99).

• Autodesk’s research notes that over 80% of small design business owners struggle with administrative overhead. Cutting the token entry price by 66% removes upfront financial risk. By lowering friction for solo designers today, Autodesk ensures these businesses scale on their software tomorrow.

Other Key Updates

• Index Shuffles: Pool Corporation, alongside Campbell, is being removed from the S&P 500 index effective June 22, to be replaced by Marvell Technology and Flex.

• Being dropped from the S&P 500 forces index-tracking funds to sell Pool Corp. This forced selling pressure often creates temporary mispricing, opening up a compelling entry point for active, long-term buyers.

• Adobe: RBC Capital Markets expects solid fiscal Q2 results, projecting total Annualized Recurring Revenue (ARR) to exceed the $26.6 billion consensus.

• ASML: BofA Global Research raised its price objective for ASML to EUR 1,921 / $2,268 and maintained its “Top Pick” status. With EUV capacity expanding and newer models driving up margins, ASML signals strong growth confidence through 2028.

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.

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

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Alphabet

• Clean Energy for Data Centers: Alphabet signed a 15-year power purchase agreement with Enlight Renewable Energy for 200 MW of solar energy in Oklahoma to power its data centers starting in 2029.

• Waymo Dominates Autonomous Vehicles: Waymo has 577 registered autonomous vehicles in Texas, more than 13x Tesla’s 42 robotaxis. Capitalizing on this momentum, Waymo is also rolling out its next-gen “Ojai” robotaxi (built with Geely’s Zeekr) in major cities. While competitor narratives lean heavily on future promises, Alphabet is quietly building an insurmountable operational lead on the ground.

Autodesk: Stellar Q1 or Optical Illusion?

Autodesk dropped its Q1 FY27 earnings, and at first glance, the top-line performance looked phenomenal. Revenue jumped 18% year-over-year to $1.93B, non-GAAP EPS hit $2.99, and the business remains an absolute cash machine, with free cash flow surging 58% to $876M. Management even raised full-year FY27 guidance.

Yet, the stock slipped in after-hours trading.

Why the disconnect?

The 18% headline growth is heavily distorted by Autodesk’s transition to its new direct-transaction model. When you normalize the metrics and look at constant-currency growth adjusted for this accounting shift, core growth is projected at a much cooler 8–9% for the full year.

Simultaneously, Autodesk announced a $3.6 billion all-cash acquisition of MaintainX, an industrial maintenance and operations software provider. Strategically, this is brilliant long-term positioning, it bridges the gap between design phase software and real-world asset management, capturing a massive operational dataset to feed its industrial AI tools. We view the after-hours weakness as a classic case of the market digesting accounting noise rather than structural deterioration.

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Other Key Updates

• ASML: Japanese rival Nikon is making a targeted push to win back market share in semiconductor photolithography by undercutting ASML on price, leveraging an in-house component cost advantage to near purchase orders with major chipmakers in the US and Asia for its argon fluoride lithography equipment. While this pressures ASML’s lower-tier mature node revenues, ASML’s core investment thesis remains intact due to its absolute, unchallenged monopoly over the cutting-edge EUV and High-NA systems required for advanced AI hardware.

• Intuit: Rolled out “Analytics AI” and a beta “AI Segment Builder” within its Mailchimp marketing platform to help businesses seamlessly analyze audience data. To further enhance its e-commerce AI marketing capabilities, Mailchimp has also expanded its integrations with Anthropic’s Claude, Wix, and WooCommerce.

• Adyen: Chief Financial Officer Ethan Tandowsky is stepping down effective August 31 to pursue an opportunity outside fintech. While sections of the market were critical of Ethan regarding capital allocation strategy, core operational execution during his tenure was exceptionally strong. C-suite departures of structural executives always introduce near-term sentiment volatility, but the underlying payments engine remains fundamentally unchanged.

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.

1. Performance

a. Q3 FY26 Results

Intuit delivered a strong beat-and-raise quarter, topping Wall Street expectations while absorbing elevated costs from its strategic upmarket pivot. Revenue climbed 10.4% year-over-year to $8.56 billion, edging past the $8.54 billion consensus, driven largely by double-digit growth in the Global Business Solutions segment. On the bottom line, non-GAAP EPS reached $12.80 (up 9.9% YoY), comfortably beating the $12.57 consensus estimate and exceeding internal management guidance.

However, non-GAAP operating income grew at a slower rate of 7.8% to $4.7 billion, compressing operating margins by ~136 basis points to 54.7%. This compression and the 12.5% jump in overall key costs (specifically service costs, R&D, and marketing), were primarily driven by aggressive reinvestments into AI and sales capacity, alongside pricing headwinds in the low-end consumer tax market.

Despite this near-term margin squeeze, management signaled deep conviction in their cash flow trajectory by repurchasing $1.6 billion in stock, hiking the dividend by 15% to $1.20, and announcing a massive new $8 billion share repurchase authorization.

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

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b. Segmental Analysis

Consumer Group

The Consumer segment reported sales of $5.3 billion, an 8.1% increase year-over-year. This growth was anchored by a 7.9% increase in TurboTax revenue to $4.4 billion alongside a 14.9% year-over-year acceleration in Credit Karma revenue to $631 million, which was heavily driven by broad product strength across personal loans, auto insurance, and home loans. In contrast, the mature ProTax division experienced flat year-over-year growth at $278 million for the quarter.

Source: StockOpine Analysis

However, the headline story is the divergence within the tax business. In an environment where total IRS filers are projected to decline by ~2 million units, the largest contraction since the pandemic, Intuit expanded its presence in the $37 billion assisted tax category. TurboTax Live revenue is projected to increase by 36% to $2.8 billion, accounting for roughly 53% of total TurboTax revenue and driving a 38% growth in TurboTax Live customers. This shift toward assisted offerings and faster refund options led to a projected 11% increase in ARPU. This growth in higher-value filers helped offset a reduction in overall market share, as free, pay-nothing customers decreased from 8 million to approximately 7 million.

Conversely, the DIY segment faced headwinds among price-sensitive filers earning less than $50,000. CEO Sasan Goodarzi noted the company lost on price in this niche but plans to evolve the business model to monetize these users through the broader consumer platform.

“Build on our momentum with TurboTax Live, where we have the largest TAM and a significant ARPU opportunity. Second, evolve our DIY business model to deliver the right value at the right price point for the most price-sensitive filers, and monetize beyond tax with our consumer platform. We’re confident in our platform assets and proof points to deliver on our long-term growth goals.”

To mitigate headwinds in the low-end consumer segment, Intuit utilized its platform network, reporting that ARPU is approximately 30% higher for customers using both TurboTax and Credit Karma compared to those using TurboTax alone. This cross-platform integration allowed Credit Karma members with simple tax situations to have up to 80% of their data pre-filled. Consequently, the number of tax filers beginning their filing process within the Credit Karma interface increased by 54%.

Global Business Solutions (GBS)

GBS revenue grew 15% to $3.3 billion, with the Online Ecosystem revenue increasing 19% year-over-year. Excluding Mailchimp, Online Ecosystem growth was even more robust at 22%. Total international online revenue grew 10% on a constant currency basis.

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

QuickBooks

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

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AMD: Winning the Next-Gen Fabric Game

AMD has begun ramping production of its next-generation EPYC data center processor, codenamed “Venice,” utilizing TSMC’s advanced 2nm process technology. This marks the industry’s first HPC product to enter 2nm production. AMD is ramping up production in Taiwan with future expansion planned for TSMC’s Arizona facility.

AMD also announced over $10 billion in investments across the Taiwan ecosystem to co-develop next-gen 2.5D bridge interconnect technology (EFB architecture) with ASE, SPIL, and PTI, leading up to the high-volume deployment of its “Helios” rack-scale platform in H2 2026. The roadmap also introduces “Verano,” a 6th Gen EPYC processor utilizing LPDDR memory designed for power-constrained applications. CEO Lisa Su revealed that soaring demand for agentic artificial intelligence and inferencing has dramatically accelerated these server compute requirements.

INTUIT: The Software Transition Tax

Intuit delivered a modest Q3 top-line beat, with revenue reaching $8.56 billion (+10% YoY). Global Business Solutions remained the primary driver (+15% to $3.3B), powered by strong momentum in QuickBooks Online Accounting (+22% YoY). However, the Consumer segment experienced a visible deceleration, with TurboTax growing just 7% versus 11% in prior periods.

While management raised full-year FY26 revenue guidance to $21.34B–$21.37B, operating margins compressed from 56.0% to 54.7%. To offset this and streamline operations, Intuit announced a major 17% workforce reduction, which will incur $300M to $340M in restructuring charges. We will shortly publish a full earnings review and inform you if we are taking any action in our portfolio.

Alphabet: Monetization vs. CapEx Reality

Alphabet’s recent Google I/O updates highlighted multi-faceted revenue opportunities, including its new $100 AI Ultra plan tailored for developers and power users, app integrations across Gmail/YouTube, and Gemini Spark. On the corporate infrastructure side, Google Cloud partnered with Thales to establish a sovereign cloud solution in Germany.

Simultaneously, alternative ecosystem scaling is picking up speed through a massive joint venture with Blackstone, where Blackstone will invest an initial $5 billion in equity to build data center capacity powered directly by Google’s custom Tensor Processing Units (TPUs). By putting their custom TPU chips inside these Blackstone data centers, Google is establishing its own hardware footprint to challenge Nvidia’s monopoly on AI chips.

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ASML: The Ultimate Bottleneck in the Chip Super-Cycle

Global semiconductor supply remains incredibly tight as demand from AI, satellites, and robotics outpaces industry production—a trend ASML CEO Christophe Fouquet expects will drive a prolonged investment cycle lasting into 2028. ASML is poised to release its first batch of advanced logic and memory chips produced using its cutting-edge High Numerical Aperture (High-NA) machines within the next few months, which is expected to drastically reduce patterning costs, product defects, and cycle times.

Analysis suggests ASML’s 2027 capacity can support a >50% YoY expansion in leading-edge wafer output. Additionally, the company signed an agreement with Tata Electronics to deploy its lithography tools in an $11 billion chip fabrication plant in Gujarat, India.

Other Key Updates

• Amazon’s multi-year effort to build custom in-house hardware is gaining significant ground: both Anthropic and OpenAI have signed agreements to rent large-scale capacity on Amazon’s custom Trainium chips.

  On the industrial software side, AWS finalized a multi-year cloud expansion deal with AVEVA to host its CONNECT platform and leverage AI analytics via Amazon Bedrock.

• Allegion announced the launch of its “Campus-to-Community Student Living” solutions, a mobile-first hardware and software integration ecosystem aimed at the off-campus student housing market. Built around Schlage’s Resident Key technology integrated into Apple Wallet and Google Wallet, the platform allows end-users to seamlessly use standard smartphones and smartwatches to manage security across residences, common amenities, and campus facilities. The rollout follows successful real-world testing with property managers at the University of Oklahoma, demonstrating optimized property operations and a visible reduction in after-hours lockouts.

• Evolution AB has commenced a massive share repurchase program of up to €2 billion on the Nasdaq Stockholm exchange to significantly reduce its outstanding share capital.

• Grab Holdings: Grab is consolidating the Indonesian digital lender Superbank after Singtel transfers its stake. Superbank recently posted its first full-year profit and has grown to over six million customers. It will be fully folded into Grab’s Financial Services segment, significantly expanding their digital banking footprint and cross-selling potential in Indonesia.

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.

Let’s break down the results to see if this is a visionary leap or a desperate scramble.

1. Financial Results

• PayPal’s revenue increased to $8.4 billion in the first quarter, representing a 7% year-over-year increase (or 5% when adjusted for currency fluctuations). While this is an acceleration from the 4% seen in Q4’25, it is still low relative to the broader payments industry as the company continues to lose market share on its branded checkout business.

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

• PayPal’s non-GAAP operating income fell 5% to $1.5 billion, resulting in a 229-basis-point contraction of the operating margin to 18.4%. This squeeze was primarily driven by an 8% surge in non-transaction related operating expenses, which exceeded the company’s initial guidance of a mid-single digit growth. Management attributed this spending spike to a strategic pivot to pull forward critical investments in AI technology, marketing and product development into the first half of the year. However, this margin erosion remains highly concerning, as it indicates that the core business is becoming structurally more expensive to operate.

• Non-GAAP EPS was $1.34, up 1% YoY, as opposed to the company’s internal guidance of mid-single digit decline. This was largely boosted by the aggressive share repurchases reducing the number of shares.

Source: PayPal filings, StockOpine analysis

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2. Payment Volume and Operating Metrics

a. Total Payment Volume

In Q1 FY26, TPV reached $464 billion, reflecting an 11% increase year-over-year (8% FXN), with growth driven mainly by PSP (Unbranded) and Venmo. Branded Checkout TPV grew at just 2% on a currency-neutral basis, a slight sequential improvement of 1%. When compared to Visa and Mastercard, whose payment volumes grew at 9% and 7% respectively, it is clear that PayPal's Branded Checkout continues to lose market share.

On the other hand, volume growth for PSP (Unbranded) accelerated to 11% (up from 8% in Q4’25). Within this segment, Enterprise Payments showed notable strength in the mid-teens, supported by high retention and growth within the existing merchant base.

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

Source: PayPal filings, StockOpine analysis

Growth was particularly strong in the US market, where TPV increased 11% year-over-year due to the combined momentum of unbranded processing (PSP), Venmo and core branded experiences. PayPal’s International TPV reached $163.8 billion, accounting for ~35% of the company’s total TPV. This figure represents an 11% increase on a spot basis year-over-year, though growth was a more modest 2% on a currency-neutral (FXN) basis. Management attributed the slowdown to the travel sector, broader macroeconomic softness, intense local competition and market saturation across Europe, particularly with persistent pressure in the U.K. and moderating growth in Germany.

To counter these challenges, management conducted deep-dive reviews and is rebalancing its focus toward the consumer side of the network. Key initiatives to revitalize international growth include the launch of the PayPal+ loyalty program in the U.K. and the aggressive scaling of localized checkout innovations, such as NFC-based solutions in Germany, to capture higher-value transaction verticals.

“There are also specific verticals, high-value verticals where we can have a more differentiated value proposition, especially we combine with financial services. This combined with an improvement in execution that by really understanding what our priorities are and simplifying how we make decisions, we think the combination of all that will have a significant impact in the business going forward” - Enrique Lores, CEO

b. Venmo

Venmo continues to serve as a critical high-growth engine for the portfolio, delivering $86.2 billion in TPV for Q1, representing 14% FXN growth. This marks the platform’s sixth consecutive quarter of double-digit expansion that helped overall transaction margin dollar growth despite broader organizational headwinds.

Pay with Venmo surged 34% in the quarter. Though Venmo debit card and tap-to-pay adoption contribute a small share to branded experiences volume, they grew an impressive 60% year-over-year. Paypal’s Monthly Active Accounts (MAA) grew 1% to 225 million, but this growth was largely driven by Venmo, suggesting the core PayPal wallet may be seeing engagement fatigue.

Source: PayPal filings, StockOpine analysis

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Fortinet

Fortinet delivered an exceptional first-quarter performance for 2026, exceeding the high end of its guidance on both revenue and profitability. Revenue grew 20% year-over-year to $1.85 billion, driven by a powerful 41% surge in product revenue to $645 million. Additionally, billings expanded 31% to $2.09 billion. While product sales grabbed the headlines, Fortinet’s recurring service revenue grew 11% to $1.21 billion.

Fortinet also posted a non-GAAP operating margin of 36%, operating cash flow of $1.08 billion (+25% YoY) and free cash flow of $1.01 billion (+26% YoY). Non-GAAP earnings per share grew 41% year-over-year to $0.82. This strong execution prompted management to raise its full-year 2026 revenue guidance to 15% year-over-year growth, within a range of $7.71 billion to $7.87 billion. Fortinet’s expansion is fueled by two major trends: the structural merging of networking with security, and a rapidly evolving threat landscape supercharged by AI. Far from being a headwind as many assumed, AI is driving demand. Furthermore, management signaled strong confidence by executing $827 million in share repurchases during the quarter.

PayPal

During the first quarter of 2026, PayPal posted net revenue of $8.35 billion, a growth of 7% year-over-year. Non-GAAP EPS remained flat at $1.34, exceeding Wall Street’s $1.27 forecast. However, the earnings beat was quickly overshadowed by weak guidance for the upcoming quarter. The company expects Q2 non-GAAP EPS to slide approximately 9% year-over-year to $1.27, falling short of the $1.34 analyst expectation.

In response to persistent operational hurdles, PayPal announced a major structural restructuring, including plans to downsize the workforce by roughly 20% over the next two to three years and reorganize operations into three distinct business units: Checkout Solutions & PayPal, Consumer Financial Services & Venmo, and Payment Services & Crypto. Even the restructuring is slow at PayPal!

At least this reorganization is projected to unlock $1.5 billion in gross savings. PayPal reiterated its full-year 2026 non-GAAP EPS outlook to range from a low-single-digit decline to slightly positive growth.

That said, with TPV growing 11% but transaction margin only increasing by 3% it is obvious that PayPal has a questionable earnings quality at the moment.

Grab

Grab reported a revenue growth of 24% year-over-year to $955 million in Q1 FY26. The regional giant recorded a GAAP net profit of $120 million, compared to the $10 million net profit reported in Q1 2025, marking Grab’s second consecutive quarter of GAAP profitability. Adjusted EBITDA surged 46% year-over-year to $154 million, with margins expanding by 250 basis points to 16.2%, despite the ongoing fuel price crisis. This profitable expansion reflects strong operating leverage across its core segments, and was supported by a 23% and 25% increase in Mobility and Deliveries GMV, respectively. Management also noted on the earnings call that new AI-powered initiatives, such as a ‘Turbo’ driving mode, has already boosted driver earnings by 23%, highlighting how technology is actively improving their business model and driving higher GMV growth.

Underpinning this momentum was a 43% surge in Financial Services revenue to $107 million, alongside a loan portfolio that more than doubled to $1.4 billion. The company also marked its first major international expansion beyond Southeast Asia by announcing the acquisition of Taiwan’s foodpanda.

AMD

AMD’s Q1 revenue grew 38% year-over-year to $10.3 billion, outperforming the $9.3 billion expected by analysts. Non-GAAP EPS rose 43% year-over-year to $1.37, beating the $1.29 consensus. The massive expansion was driven by the Data Center segment, which surged 57% year-over-year to $5.8 billion, now representing 56% of AMD’s total sales. Looking ahead, AMD issued a confident Q2 revenue guidance of $11.2 billion (up 46% year-over-year), ahead of the $10.5 billion consensus. CEO Lisa Su revealed that soaring demand for agentic artificial intelligence and inferencing has dramatically accelerated server compute requirements. This prompted AMD to double its server CPU TAM forecast to more than $120 billion by 2030, projecting an annual growth rate of over 35% vs its prior 18% estimate. Wall Street responded with enthusiasm and BofA Securities noted that AMD is well-positioned to capture roughly 50% of this expanded market, leaving rivals Intel and Arm to split the remainder. Maintaining a 55% gross margin while generating $2.6 billion in quarterly free cash flow (+ 253% YoY) shows that AMD has the financial muscle to heavily fund continuous R&D and secure leading-edge foundry capacity.

Adyen

During Q1, Adyen delivered a net revenue of 621 million euros, a rise of 16% year-over-year (+20 % YoY at constant currency basis), slightly exceeding consensus expectations of 19.5%. All segments depicted a double-digit constant-currency net revenue growth.

Processed volume reached €382 billion (up 21% year-over-year), driven by a growth of 26% in Unified Commerce and 38% in Platforms.

Management showed confidence by affirming that operational trends have remained highly stable heading into the second quarter, contrasting sharply with the deteriorating performance reported by its payment peers like PayPal.

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.

1. Performance

a. Results

Revenues grew 17% year-over-year (15% excluding foreign exchange) to $182 billion in Q1 FY26. This performance was driven by a resurgence in unit growth in the Stores business and accelerating cloud demand. This performance allowed the company to beat the higher end of its management guidance and consensus estimate by a narrow 1.7% ($179 billion) and 0.9% ($177 billion), respectively.

Q1’26 operating income stood at $24 billion, surpassing the high end of guidance ($22 billion) and consensus estimate ($21 billion). Margin increased to a record 13.1% (+ 130 basis-point year over year) compared to 11.8% in Q1 FY25. Efficiency gains in the fulfilment network and high-margin AWS growth contributed to this improvement.

Amazon reported EPS of $2.78, a jump of 75% from $1.59 in Q1’25. The reported EPS exceeded the consensus estimate of $1.64 billion. It is important to note that net income included pre-tax gains of $16.8 billion from non-operating income related to Amazon’s investments in Anthropic.

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Despite Operating Cash flow increasing 30% year-over-year to $149 billion (TTM), free cash flow (TTM) plummeted 95% to $1.2 billion in Q1 FY26. This decline was driven by the massive surge in capital expenditures, with TTM purchases of property and equipment reaching $147 billion (net CAPEX in Q1 stood at $43.2b an increase of 78%). Management remains confident in these investments, noting that AWS must lay out cash for data centers and chips 6 to 24 months before monetization. Growth acceleration does support their confidence in investing for the future so we are fine with that.

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

b. Segmental analysis

North America

The North America segment reported sales of $104 billion, a 12% year-over-year increase in Q1 FY26. Operating income surged 43% YoY to $8.3 billion, resulting in an 8% margin (an expansion of 173 bps).

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

This momentum was driven by a 15% year-over-year surge in unit growth, the highest since the pandemic era. The addition of over 600 new brands such as Ted Baker, PAPATUI by Dwayne Johnson, ONDO, and rapidly scaling grocery business now places Amazon as the second largest grocer in the US. With over $150 billion in 2025 gross sales, the company has seen perishable sales skyrocket over 40x year-over-year, with fresh items now accounting for nine of the top 10 products ordered for same-day delivery. The shift into perishables has significantly improved consumer engagement, as same-day grocery shoppers build baskets nearly three times larger and spend over 80% more than non-grocery customers.

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Whole Foods Market is maintaining its upward trajectory, operating over 550 locations today with a pipeline of 100 additional stores set to open over the next few years. By becoming a primary destination for perishables, Amazon has successfully moved from being a discretionary store to a daily utility.

CEO Andy Jassy highlighted that this growth is underpinned by aggressive delivery speeds, including new one and three hour options on 90,000 items on Prime. The company has delivered over 1 billion items same day overnight so far in 2026. To improve the efficiency of their fulfillment team, new, advanced robotics and automation systems are currently being installed in their large U.S. shipping centers opening in 2026.

Furthermore, the average prices of products on the website decreased compared to previous year as a pricing strategy. Its ability to decrease average prices while expanding margins suggests superior supply chain efficiency and strong bargaining power with vendors.

In Q1 2026, third-party seller services generated $41.6 billion in revenue, representing a 14% year-over-year increase (12% excluding foreign exchange). These sellers remain a cornerstone of Amazon’s marketplace, accounting for 60% of total paid units sold during the quarter. Amazon views third-party sellers as essential contributors to its broad selection and competitive pricing. In Q1 2026, seller performance was particularly strong in the U.S., as well as in Europe and Brazil, where Amazon recently lowered seller fees to incentivize growth.

“We’re seeing our investments in the seller experience resonate and, in turn, grow our business. Prime continues to fuel our growth and reflects the value members receive from the program. Prime Video is a key pillar of the Prime value proposition, an important driver of new member acquisition”- Brian Olsavsky, CFO

International

Net Sales grew 19% year-over-year to $39.8 billion in Q1 FY26. The segment reported an operating income of $1.4 billion (+40% YoY), with a margin of 3.5% (+41.6 bps YoY).

The growth was led by their super-fast delivery service, Amazon Now, which brings thousands of items to your door in 30 minutes or less.

“We continue to expand our ultra-fast delivery service, Amazon Now, which offers delivery in 30 minutes or less on thousands of items. It started last year in India, where orders are increasing 25% month-over-month, with Prime members tripling their shopping frequency once they start using it.” Andy Jazzy, CEO

The service is already available to tens of millions of people in nine different countries. They have recently expanded the service to parts of Tokyo and eight major cities in Brazil, with plans to bring it to even more locations soon.

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

Advertising

The advertising segment generated $17.2 billion (up 24% or 22% YoY in constant currency) in Q1 FY26. On a TTM basis this is $72m and to put this in perspective it is 1.7x TTM YouTube Ads revenue.

Amazon Ads is aggressively expanding its footprint through high-impact CTV partnerships. The deepening of its Netflix partnership via Amazon Audiences now allows advertisers to layer Amazon’s vast first-party shopping data directly onto Netflix’s premium content for highly precise targeting. Furthermore, a new deal with Comcast Advertising unlocks Prime Video’s massive viewership to local and small-to-medium businesses. Finally, a new integration with Samsung TV Plus introduces Interactive Video Ads, allowing viewers to seamlessly add products to their Amazon carts directly from their television screens using their remotes.

The advertising segment continues to benefit from a two-pronged AI approach. On the one hand, tools like Creative Agent are automating ad campaign generation for brands across seven major international markets, including Canada, France, and the U.K.. On the consumer-facing front, Amazon is successfully monetizing its AI shopping assistant, Rufus. Rufus has evolved into a highly capable agentic tool, able to research products, track prices, and even auto-buy items in the store when they reach a set price. Adoption is surging, with Rufus monthly active users growing by 115% and engagement up nearly 400% year-over-year. This massive engagement is translating to advertising success: nearly 20% of shoppers who interact with sponsored brand prompts inside the Rufus interface continue their conversation to learn more about the brand.

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

Source: Fiscal.ai (affiliate link with a 15% discount for StockOpine readers) / Note: We share this chart for completeness in comparing Amazon to peers.

AWS

AWS net sales surged 28% year-over-year to $37.6 billion in Q1 FY26, reaching an annualized revenue run rate of $150 billion. Operating income jumped 23% to $14.2 billion, maintaining an operating margin of 37.7%.

Key highlights for AWS include:

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1. Financial results

Despite the geopolitical headwinds, the company continued to execute, showing momentum in unaffected regions and expanding its margins.

Revenue

Revenue came in at $5.5 billion, representing year-over-year (YoY) growth of 16% (10% YoY on a constant currency basis). The weakness of the USD against other currencies benefited revenue, as Booking generates a large chunk of its revenue outside the US. However, this is a temporary benefit as currencies naturally fluctuate over time. This result exceeded the high end of management’s guidance (14%-16% reported or 7%-9% on constant currency basis). The outperformance benefited from higher merchant revenues, which carry a higher take rate.

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

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For Q2 2026, management expects 4%-6% YoY (2%-4% on constant currency) revenue growth. While the growth deceleration of approximately 7 percentage points on a constant currency basis appears steep, it is largely driven by the escalation of the Middle East conflict, which caused a sharp drop in new bookings and elevated cancellations throughout March (with global room night growth plummeting to just 1%). Since those lost March bookings were largely intended for Q2 travel, Q2 is effectively absorbing the revenue hole created by that initial demand shock. This is compounded by management’s conservative guidance assuming the conflict’s impacts will persist for the entire second quarter, compared to just a partial-quarter impact in Q1.

Adjusted EBITDA

Adjusted EBITDA for Q1 2026 was $1.3 billion, up 19% from the prior-year quarter. The Adjusted EBITDA margin was 23.3%, an expansion from 22.9% in Q1 2025, driven by leverage in fixed operating expenses.

Despite the steep revenue deceleration expected in Q2, management guided for Adjusted EBITDA to grow 4% to 6%, perfectly in line with revenue growth. This highlights the beauty of Booking's asset-light business model: their largest expense, marketing, is highly variable and naturally scales down alongside softening demand.

Adjusted EPS

Adjusted EPS for Q1 2026 was $1.14, up 14% from the prior-year quarter. The growth in EPS was lower than EBITDA growth due to a higher tax rate, though this headwind was partially offset by the heavy repurchase program, which lowered the share count by 4%.

Capital Returns

A massive $4.0 billion was returned to shareholders in the quarter, consisting of a record $3.6 billion in share buybacks and $343 million in dividends.

Booking Holdings has consistently bought back shares over the last decade. CEO Glenn Fogel commented on this aggressive strategy:

“Since 2014, we have reduced our share count by over 40%, even after accounting for the dilutive impact of stock-based compensation by opportunistically investing in this long-term vision through our share buyback program.

No one is better positioned than we are to understand what our long-term value can and should be relative to market fluctuations on any given day or quarter. As I just mentioned, we have reduced our share count by over 40% in 12 years. Importantly, we have done so at the average price per share of $93, thereby generating significant incremental investment returns for our shareholders by betting on ourselves at the right times, and while always preserving and exercising the flexibility to invest in both the organic and inorganic growth of our business. It is a strategy that we are very committed to.”

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

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2. KPIs

a. Nights Booked

Nights booked for the quarter reached 338 million, up 6% YoY. Management estimated that the Middle East conflict negatively impacted room night and GBV growth by about 2 percentage points. Excluding this impact, room nights would have been up by approximately 8% (exceeding management's prior guidance of 5% to 7%).

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

• The U.S. accelerated for the fourth consecutive quarter, growing in the low teens (Vs low double digit in Q4 2025), driven mainly by domestic travel.

• Europe was up mid-single digits (Vs high single-digit in Q4 2025). While the region was negatively impacted by bookers traveling to the Middle East, intra-regional demand from European bookers remained strong, up high-single digits.

• Asia was up high-single digits. Within Asia, intra-regional demand from Asian bookers was up low-double digits.

• Rest of World (which includes the Middle East) was down low-single digits.

Looking ahead, 2%-4% room night growth is projected for Q2 2026, assuming the conflict’s impacts continue through the end of June.

To quantify the regional exposure: bookers in the Middle East (including Turkey and Egypt) represented approximately 4% of global room nights in 2025. If we include inbound travel to the Middle East, the region represents approximately 7% of global room nights.

Following the onset of the conflict, Booking saw elevated cancellations and lower travel demand, resulting in overall March room night growth dropping to 1%. The impact in March was about 6 percentage points (half from reduced bookings, half from increased cancellations). Therefore, if it was not for the conflict, room nights would have grown at a healthy rate of 7% in March.

b. Gross Bookings

Gross Bookings in Q1 2026 reached $53.8 billion, a 15% increase (8% on a constant currency basis). Growth was driven by the 6% room night growth, a 1% increase in constant currency ADRs, and a 28.5% growth in airline tickets. Looking ahead, Booking projects 4%-6% gross bookings growth for Q2 2026 (2%-4% on a constant currency basis, which is in line with room nights).

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

3. Alternative Accommodation

Alternative accommodation room nights on Booking.com grew 5.5% YoY. At first glance, this appears to be the first quarter that alternative accommodations grew at a slower pace than the company's total room nights (6%). However, that 6% figure applies to the entire Booking Holdings parent company, which was lifted by strong regional growth from sister brands like Agoda and Priceline in the U.S. and Asia.

On the core Booking.com platform, alternative accommodations actually outpaced traditional hotels, allowing the segment's mix to successfully expand to 38% of Booking.com’s room nights, up from 37% in Q1 2025. Furthermore, the underlying supply engine remains highly positive, with active listings reaching 8.8 million, a 9% increase YoY.

Source: Booking Holdings Q1’26 presentation

4. Direct and App Bookings

The shift to direct, high-loyalty bookings remains strong, validating the company’s brand power.

• The TTM mobile app mix was in the high-50% range, up from the mid-50% range last year.

• The TTM B2C direct mix, which excludes performance marketing channels, held steady in the mid-60% range. This remained resilient despite the conflict, as the Middle East traditionally has an above-average direct mix, offset by continued declines in SEO traffic (which is only a small contributor to the overall direct channel).

• Genius level 2 and 3 customers accounted for a high-50% share of TTM room nights, up from the mid-50% range last year.

As the mix of direct bookings increases, the company can gain further operating leverage on marketing expenses.

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5. Merchant Bookings

Merchant gross bookings reached 72% of the total this quarter, highlighting a massive multi-year evolution from just 23% in Q1 2019, 51% in Q1 2023, and 67% last year. This expanding mix is a strategic win: it enables the Connected Trip by allowing Booking to seamlessly bundle multiple travel verticals into a single customer transaction. Financially, it boosts revenue yield by capturing payment processing economics alongside standard commissions, while generating a massive float of upfront cash that earns substantial interest income.

6. Connected Trip

The Connected Trip strategy continues to expand customer wallets and lock in loyalty.

• Flight tickets booked grew 28.5% YoY, while attractions tickets jumped 25%.

• Connected Trip transactions (trips booked across more than one vertical) grew in the high-teens range YoY. These transactions now represent a low double-digit percentage of Booking.com’s total transactions.

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

7. Outlook

Due to the conflict in the Middle East, management adjusted their revenue guidance expectations for the full year. Assuming the conflict is sustained until the end of June and is followed by a recovery in bookings in the second half of the year, they expect high single-digit revenue growth compared to low double digit expected in prior guidance. Despite lowering the bottom end of the ranges, management kept the high end of guidance for Gross Bookings and Adjusted EPS in line with their prior expectations.

Source: Booking Holdings Q1’26 presentation

8. Thoughts on valuation

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

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The Hyperscaler Flywheel: Cloud, Chips, and Capital

• Alphabet smashed Wall Street expectations in Q1, reporting a 22% revenue surge to $110 billion and an EPS of $5.11, nearly doubling the prior year’s $2.81. The standout performer was Google Cloud, which skyrocketed 63% to $20 billion as enterprise AI demand intensified. With a massive cloud backlog of over $460 billion and its Gemini AI models processing 16 billion tokens per minute, the company is effectively leveraging its vertically integrated AI flywheel. Highlighting its strong financial health, Alphabet also raised its quarterly dividend and maintained robust operating margins of 36.1%.

• Amazon’s revenue grew 17% to $182 billion and net income jumped to $30 billion, driven significantly by a $17 billion gain from its Anthropic investment. AWS was the star of the show, accelerating to 28% growth (its fastest in 15 quarters) while the company’s custom silicon business surpassed a $20 billion annual run rate. Despite negative free cash flow due to a massive $43 billion net CapEx push into AI, Amazon’s strategic partnerships with OpenAI and Meta for its Trainium and Graviton chips underscore its growing dominance in the AI infrastructure layer.

• Microsoft delivered a robust performance in the March quarter, with revenue reaching $83 billion (up 18%) and earnings per share of $4.27, both comfortably exceeding analyst expectations. This growth was primarily fueled by cloud and AI momentum, as evidenced by a 123% year-over-year surge in AI-related revenue, which hit a $37 billion annual run rate. The Microsoft Cloud segment generated $55 billion, while Azure specifically grew 40%, outperforming forecasts. In addition, commercial remaining performance obligations (RPO) skyrocketed 99% to $627 billion, signaling long-term revenue visibility through massive multi-year enterprise contracts. Despite heavy investments, Microsoft demonstrated strong operational leverage, expanding its operating margins to 46.3% and reinforcing its dominant competitive stance in the enterprise AI market.

• Meta delivered a strong Q1 with revenue surging 33% to $56 billion, driven by robust advertising fundamentals as ad impressions grew 19% alongside a 12% increase in average ad pricing. Despite 35% cost increases, the company maintained a 41% operating margin and generated over $32 billion in operating cash flow. While Meta’s revenue growth outpaced its hyperscaler peers, investors remain cautious due to a significant hike in full-year capital expenditure guidance, now reaching up to $145 billion, reflecting the high costs of data centers and AI infrastructure. This $10 billion CapEx upward revision triggered an 8%+ stock sell-off, wiping out roughly $175 billion as investors punish the company for the unclear AI ROI. Additionally, Meta is proceeding with an aggressive workforce reductions (10% cut) to offset AI investments.

Other Key Updates

• PayPal Reorganizes: CEO Enrique Lores (who took over very recently) is simplifying the giant into three units: Checkout, Consumer/Venmo, and Payment Services/Crypto. A key highlight of this move is the elevation of Venmo into its own standalone segment, a decision accompanied by the departure of executives Diego Scotti and Michelle Gill. By making Venmo a standalone segment, PayPal is making it easier for the street to value the asset independently or potentially prepare it for a future sale.

• Booking’s Middle East Headwinds: Q1 was mixed as regional disruptions weighed on guidance. While gross bookings expanded 15% to $54B, management lowered full-year guidance to high-single to low-double-digit growth due to increased cancellations and regional headwinds that peaked in March. Despite these pressures, the company maintained strong market share gains and returned $3.6B to shareholders through repurchases and dividends.

• Adobe is collaborating with Alluvium and has completed the acquisition of Semrush Holdings. The partnership with Alluvium integrates Adobe Experience Platform’s demand-generation tools with supply orchestration to help healthcare providers align clinical capacity with patient demand. Simultaneously, the Semrush acquisition bolsters Adobe’s ability to drive brand discoverability and conversion, specifically targeting the shift toward AI-driven interfaces and autonomous agents as the primary way customers now engage with brands.

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.

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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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