Hi All,
Welcome to our brief overview of portfolio news from the past few days.
Adobe: Proving the AI Skeptics Wrong
Adobe reported another strong quarter, beating both revenue and earnings estimates.
The Numbers: Revenue reached $6.19 billion (+10% YoY) with non-GAAP EPS up 14%. Operating margin expanded to 36.5%. RPO grew 13%, signaling that demand is not drying up despite the “AI disruption” narrative.
FY26 Guidance: The company guided for 9.4% revenue growth, 10.2% ARR growth and 11.7% EPS growth.
The sentiment remains negative due to perceived existential risks from AI, but the data suggests otherwise as the company continues to deliver double digit growth. Adobe is positioning itself not as a competitor to models, but as the platform layer where AI assets (whether from Firefly or OpenAI) are created, edited and finalized.
In terms of valuation, it trades at a 5.5% FCF yield (net of SBC). If FCF continues to grow in the 10% range, we believe this investment can compound at a 15% IRR without any multiple expansion.
Ashtead: Signs of Acceleration
Ashtead reported Q2’26 results showing continued momentum.
Performance: Revenue grew 1%, but excluding the impact of last year’s hurricane season, growth was 3%—marking the third consecutive quarter of sequential improvement.
Outlook: Management reaffirmed full-year guidance for rental revenue growth (0-4%) and Free Cash Flow ($2.2B–$2.5B).
The non-residential construction environment is stabilizing (new starts are now at equilibrium with completions), with mega-project activity remaining strong. We valued Ashtead at £55.50 per share in September; at current levels (~£47.85), it implies ~16% upside.
Google: Gemini Gaining Ground
Market Share Shift: According to Sensor Tower data, Gemini mobile app MAUs surged 30% (to 346M) between August and November, outpacing ChatGPT’s 5% growth. Gemini taking share from ChatGPT while AI usage proving to be incremental to commercial search queries is a huge win for Google.
Regulatory Headwind: The European Commission has opened a formal probe into whether Google gives itself preferential access to web/YouTube content for AI training. The Commission will assess whether Google uses the content on unfair terms to publishers and creators. Reportedly, the fine can be as high as 10% Google’s total revenue.
DoD Contract: Gemini will power GenAI.mil, a new AI platform for the U.S. Department of Defense. This is a validation of the model’s security and capability for enterprise/government use.
Other Industry & Portfolio Updates
China Exports: Trump said on Truth Social the U.S. may allow Nvidia to ship H200 chips to China, provided Washington receives a 25% cut. While the highly advanced Blackwell/Rubin chips remain banned, this could reopen a significant revenue stream for Nvidia and possibly AMD. However, this also depends whether China will allow those purchases.
Fed Rate Cut: The Federal Reserve cut interest rates by 0.25% (the third cut of the year), signaling a continued easing cycle, though the outlook for 2026 remains more muted with only one projected cut.
That’s a wrap. See you soon.