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

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

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

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

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

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

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

1. The Top-Line Trend: Persistent Small Misses

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

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

2. Q3 FY26 - the Numbers

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

• Total Revenue: $2.64B (+2.7% YoY)

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

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

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

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

The Story of the Quarter: Margin Compression

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

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

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

Source: StockOpine Analysis, Company filings

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Segment Performance

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

Source: StockOpine Analysis, Company filings

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

Source: StockOpine Analysis, Company filings

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

Source: StockOpine analysis, Company filings

Dollar Utilisation

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

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

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

Source: StockOpine analysis, Company filings

Capital Allocation & Free Cash Flow

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

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

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

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

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

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

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

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

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

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

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

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

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1. Results Overview

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

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

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

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

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

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

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

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

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

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

2. Customer Group Performance

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

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

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

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

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

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

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

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

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Source: Koyfin

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

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

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1. Revenue

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

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

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

Source: Pool Corporation Q4’25 Earnings Presentation

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

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

2. Gross Profit Margin

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

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

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

3. Operating Margin

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

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

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

4. Performance by Product Category

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

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

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

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

5. Other End Markets

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

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

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

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

6. New Construction Vs Maintenance

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

Source: Pool Corp 10-K Filings, StockOpine Analysis

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

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

7. 2026 Outlook

Management is expecting return to growth in 2026.

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

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

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

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

8. Quick Take: The POOL360 Digital Advantage

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

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

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

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

9. Concluding Remarks

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

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

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1. Financial results

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

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

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

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

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

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2. KPIs

Room Nights & Gross Bookings

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

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

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

Alternative Accommodation

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

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

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

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

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1. H2 2025 Scorecard

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

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

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

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

• EPS: €18.46 per share (+11.5% YoY).

• Free Cash Flow Conversion: 86%.

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

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

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

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

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

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

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

3. Dissecting the Pillars

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

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

a. Digital: The “Optical” Weakness

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

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

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

However, as the CFO Ethan Tandowsky noted,

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

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b. Unified Commerce (UC): The Crown Jewel

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

• Volume: +30%.

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

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

c. Platforms

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

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

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

4. Profitability: “Trust the Process” Pays Off

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

• EBITDA Margin: Hit 55%.

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

Source: Company filings

As Ingo Uytdehaage said on the call:

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

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

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

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

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

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

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

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

1. The Numbers: A Quarter of Misses

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

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

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

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

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

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

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

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

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

a. The Core Problem: Branded Checkout is Stalling

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

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

Here is Jamie Miller, Interim CEO admitting the failure:

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

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

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

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

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

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

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

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

b. Give Credit Where Due

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

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

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

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

As Jamie Miller noted on the call:

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

Source: PayPal Earnings Presentation Q4’25

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

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

Source: PayPal Earnings Presentation Q4’25

c. The Innovation Distraction: Agentic & Visibility

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

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

1. Results

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

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

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

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

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2. Segments

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

a. Data Center

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

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

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

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

EPYC Processors

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

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

Instinct accelerators

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

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

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

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

b. Client & Gaming

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

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

Client

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

Gaming

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

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c. Embedded

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

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

3. Outlook

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

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

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

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

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

Source: AMD Earnings Presentation Q4’25

4. Conclusion

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

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

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

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

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

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

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

a. Results: A Record-Breaking Quarter

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

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

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

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

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

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

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

b. Backlog & Services

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

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

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

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

c. Outlook: 2026 is a Growth Year

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Source: StockOpine Analysis

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

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

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

1. A Closer Look on FY25 Numbers

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

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

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

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

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

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

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

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

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

Source: StockOpine Analysis

2. Regional Trends

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

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

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

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

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

Source: StockOpine Analysis

3. Segment Breakdown: Divergent Fortunes

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

Source: StockOpine Analysis

Wines & Spirits

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

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

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

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

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

Fashion & Leather

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

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

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

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

Perfumes & Cosmetics

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

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

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

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

Watches & Jewelry

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

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

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

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

Selective Retailing

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

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

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

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4. Conclusion

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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1. Separating Signal from Noise

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

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

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

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

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

Source: PayPal Q3’25 Earnings Presentation

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

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

Source: PayPal Q3’25 Earnings Presentation

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

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

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

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

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

Source: PayPal Q3’25 Earnings Presentation

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

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

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

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

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

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

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

2. Valuation

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

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

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Despite this, the market has punished the stock for its longer-than-anticipated recovery cycle. The share price has seen a continuous decline, resulting in a -35% return over the last year.

As investors hunting for mispriced opportunities, we are forced to ask a critical question:

Is there now enough margin of safety to justify shifting capital from our high-growth AI holdings into this ‘boring compounder’?

Source: Koyfin → 20% discount for StockOpine readers

Without further ado, let’s jump into the updated valuation to find out.

1. Valuation

As promised, here’s the full model. Feel free to adjust it or reach out with any questions or clarifications.

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We reviewed the new information, revisited our valuation, and assessed whether our position needs adjustment.

If you want more context before we dive in, check out last year’s deep dive: Adyen: Simplifying Payments with Top-Notch Quality

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1. The Durable Moat: Single Platform and Banking Licenses

The investment thesis for Adyen has always rested on its “single platform” architecture. Combined with their proprietary banking licenses, it creates a compounding advantage that is becoming increasingly difficult for competitors to replicate.

CTO Tom Adams articulated the cost of fragmentation. Most legacy competitors and even modern fintech peers rely on a patchwork of systems, different stacks for different regions, or acquired gateways. This creates an “integration tax” where data is lost in handoffs, and innovation slows down.

Adyen’s single codebase and single tech stack allows for accountability at the core and pragmatism at the edge. This means:

• Compounding Performance: An optimization built for a merchant in Singapore is immediately available to a merchant in Brazil. Every transaction trains the same global model.

• Agility: New capabilities do not require building new stacks; they are modular extensions of the existing foundation.

Banking Licenses

While the tech stack is the engine, the banking licenses are the rails. Mariëtte Swart (CRCO) argued that we are entering the “age of infrastructure,” where owning the license is critical for resilience. It is no longer a nice to have feature.

Adyen now holds full banking licenses in Europe, the UK, and the US. This is distinct from the “partner bank” model used by many fintechs (e.g., Stripe, various BaaS providers), where the fintech inherits the risk appetite and operational fragility of a third-party bank.

Strategic Advantages of Owned Licenses

• Predictability: Adyen sets its own risk appetite and owns the relationship with the regulator. That means, merchants are not subject to sudden shutdowns or delays because a partner bank changes its policy.

• Speed: By connecting directly to central banks (like the Federal Reserve in the US), Adyen eliminates middlemen. This allows for true Instant Payouts 24/7/365, moving money when the customer wants, not when the banking window opens.

• Uniform Product Growth: Adyen can lend from its own balance sheet and issue cards without seeking third-party permission, enabling faster scaling of financial products. This is key to the embedded financial products (issuing, capital, accounts) which we will cover shortly.

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2. Dynamic Identification: The New Foundational Layer

The most significant strategic announcement was the introduction of Dynamic Identification as the third foundational layer of the company, sitting alongside the Single Platform and Banking Infrastructure.

The Co-CEO Ingo Uytdehaage described the current industry approach to identity and risk as broken. The industry relies on static checks such as uploading passports, utility bills, and manual reviews. This results in an 11-day average onboarding time, a 95% false positive rate on AML alerts and up to 10% blocked transactions for legitimate shoppers. Furthermore, GenAI has made it easy to fabricate static documents, which pushes the need for a dynamic solution that can adapt to real signals rather than fixed proofs.

Dynamic Identification replaces static checks with continuous, behavioral monitoring. Because Adyen sees €1.3 trillion in volume across online and physical channels, they have a unique view of legitimate behavior.

• How it works: Instead of asking “Is this document real?”, Adyen asks “Does this entity behave like a legitimate business?” It uses a graph-based model that connects shoppers, cards, devices, and businesses. This gives Adyen visibility into real activity, when someone buys a coffee, takes a taxi, purchases a pair of shoes, and so on. According to Ingo, this pattern of behavior is hard for AI to fake.

• Network Effects: If a sub-merchant on a platform has shoppers who are known to be good customers elsewhere in the Adyen network, that merchant is deemed lower risk.

“So let me give you an example. If a new merchant starts with us and the first shoppers that come in and we have seen those shoppers before that they are well-established shoppers on our platform, we don’t have to take additional steps. It’s probably a legitimate business, you don’t need to take additional steps. Or if a new merchant has a bank account or a card that has been used on our platform before, we need less manual work to verify these accounts. And these are examples how we can do it better.” Co-CEO Ingo Uytdehaage

Commercial Applications

• Uplift (Revenue Optimization): By understanding the shopper’s context (e.g., a high-value transaction in a foreign country is normal for this specific user), Adyen can approve transactions others would block. This has helped in reducing false positive to 42% (Vs 95%) and has delivered a 1.07% - 2.76% conversion uplift for major merchants like Just Eat Takeaway and American Eagle.

Source: Adyen Investor Day 2025

• Frictionless Onboarding: Adyen can auto-verify sub-merchants. If a business owner is already a known shopper or entity in the ecosystem, they can skip manual ID checks. This has already reduced manual reviews by 6%.

• Compliance at Scale: Adyen is deploying AI agents powered by LLMs to process alerts, especially for PEP (Politically Exposed Persons). These agents use Dynamic ID data to clear alerts in minutes instead of hours, with a target of 90% automation for investigations. This shift already delivers about 50% time savings internally, as reviewers can focus on the complex and high-risk cases that actually matter rather than spending time on the 95% of alerts that turn out to be false positives.

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3. Agentic Commerce

Adyen is placing a strategic bet on Agentic Commerce, that is, the automation of purchasing by AI agents on behalf of consumers. While management admits this is nascent today, they view 2026 as the “year of experimentation” and estimate a $2 trillion GMV opportunity by 2030.

What is Agentic Commerce? Think of it this way: instead of a human searching, selecting, and buying, a consumer simply gives a prompt to an AI (e.g., “Find me a gray cashmere sweater under $100 and deliver it by Friday”). The AI then handles discovery, selection, and payment.

Despite the promising future of agentic commerce, Adyen noted that many merchants are terrified of disintermediation and of losing their direct relationship with customers to an AI interface. That fear puts brand and loyalty at risk, so merchant adoption won’t happen quickly.

Adyen aims to position itself as a universal translator that lets merchants accept agentic transactions while keeping control of the customer relationship. These were the four principles outlined for agentic commerce:

• Verifiable intent: The shopper must clearly approve the transaction, reducing fraud and disputes.

• Merchant control: A universal token carries the context so merchants keep control over cards, wallets, local methods, and their own checkout flows.

• Universal recognition: As chat and voice replace log-ins, the universal token helps identify the same user across channels and payment methods.

• Ownership: Merchants keep the customer data they need for refunds, exchanges, and ongoing service — all without extra integration work.

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4. Financial Products: The Embedded Finance Engine

Beyond payments processing Adyen highlighted its Embedded Financial Products (EFP) suite: Issuing, Capital, and Accounts.

Management sizes the revenue opportunity for these embedded products at €127 billion, growing at 20% annually.

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