Earnings Unpacked: What Q1 Tells Us About AI Demand, Payments, and the Consumer
Portfolio News #28
Hi All,
Welcome to our brief overview of portfolio news from the past few days.
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Fortinet
Fortinet delivered an exceptional first-quarter performance for 2026, exceeding the high end of its guidance on both revenue and profitability. Revenue grew 20% year-over-year to $1.85 billion, driven by a powerful 41% surge in product revenue to $645 million. Additionally, billings expanded 31% to $2.09 billion. While product sales grabbed the headlines, Fortinet’s recurring service revenue grew 11% to $1.21 billion.
Fortinet also posted a non-GAAP operating margin of 36%, operating cash flow of $1.08 billion (+25% YoY) and free cash flow of $1.01 billion (+26% YoY). Non-GAAP earnings per share grew 41% year-over-year to $0.82. This strong execution prompted management to raise its full-year 2026 revenue guidance to 15% year-over-year growth, within a range of $7.71 billion to $7.87 billion. Fortinet’s expansion is fueled by two major trends: the structural merging of networking with security, and a rapidly evolving threat landscape supercharged by AI. Far from being a headwind as many assumed, AI is driving demand. Furthermore, management signaled strong confidence by executing $827 million in share repurchases during the quarter.
PayPal
During the first quarter of 2026, PayPal posted net revenue of $8.35 billion, a growth of 7% year-over-year. Non-GAAP EPS remained flat at $1.34, exceeding Wall Street’s $1.27 forecast. However, the earnings beat was quickly overshadowed by weak guidance for the upcoming quarter. The company expects Q2 non-GAAP EPS to slide approximately 9% year-over-year to $1.27, falling short of the $1.34 analyst expectation.
In response to persistent operational hurdles, PayPal announced a major structural restructuring, including plans to downsize the workforce by roughly 20% over the next two to three years and reorganize operations into three distinct business units: Checkout Solutions & PayPal, Consumer Financial Services & Venmo, and Payment Services & Crypto. Even the restructuring is slow at PayPal!
At least this reorganization is projected to unlock $1.5 billion in gross savings. PayPal reiterated its full-year 2026 non-GAAP EPS outlook to range from a low-single-digit decline to slightly positive growth.
That said, with TPV growing 11% but transaction margin only increasing by 3% it is obvious that PayPal has a questionable earnings quality at the moment.
Grab
Grab reported a revenue growth of 24% year-over-year to $955 million in Q1 FY26. The regional giant recorded a GAAP net profit of $120 million, compared to the $10 million net profit reported in Q1 2025, marking Grab’s second consecutive quarter of GAAP profitability. Adjusted EBITDA surged 46% year-over-year to $154 million, with margins expanding by 250 basis points to 16.2%, despite the ongoing fuel price crisis. This profitable expansion reflects strong operating leverage across its core segments, and was supported by a 23% and 25% increase in Mobility and Deliveries GMV, respectively. Management also noted on the earnings call that new AI-powered initiatives, such as a ‘Turbo’ driving mode, has already boosted driver earnings by 23%, highlighting how technology is actively improving their business model and driving higher GMV growth.
Underpinning this momentum was a 43% surge in Financial Services revenue to $107 million, alongside a loan portfolio that more than doubled to $1.4 billion. The company also marked its first major international expansion beyond Southeast Asia by announcing the acquisition of Taiwan’s foodpanda.
AMD
AMD’s Q1 revenue grew 38% year-over-year to $10.3 billion, outperforming the $9.3 billion expected by analysts. Non-GAAP EPS rose 43% year-over-year to $1.37, beating the $1.29 consensus. The massive expansion was driven by the Data Center segment, which surged 57% year-over-year to $5.8 billion, now representing 56% of AMD’s total sales. Looking ahead, AMD issued a confident Q2 revenue guidance of $11.2 billion (up 46% year-over-year), ahead of the $10.5 billion consensus. CEO Lisa Su revealed that soaring demand for agentic artificial intelligence and inferencing has dramatically accelerated server compute requirements. This prompted AMD to double its server CPU TAM forecast to more than $120 billion by 2030, projecting an annual growth rate of over 35% vs its prior 18% estimate. Wall Street responded with enthusiasm and BofA Securities noted that AMD is well-positioned to capture roughly 50% of this expanded market, leaving rivals Intel and Arm to split the remainder. Maintaining a 55% gross margin while generating $2.6 billion in quarterly free cash flow (+ 253% YoY) shows that AMD has the financial muscle to heavily fund continuous R&D and secure leading-edge foundry capacity.
Adyen
During Q1, Adyen delivered a net revenue of 621 million euros, a rise of 16% year-over-year (+20 % YoY at constant currency basis), slightly exceeding consensus expectations of 19.5%. All segments depicted a double-digit constant-currency net revenue growth.
Processed volume reached €382 billion (up 21% year-over-year), driven by a growth of 26% in Unified Commerce and 38% in Platforms.
Management showed confidence by affirming that operational trends have remained highly stable heading into the second quarter, contrasting sharply with the deteriorating performance reported by its payment peers like PayPal.
That’s a wrap. See you soon.
Nice cross-section of earnings. Clearly showing AI demand lifting infra names like AMD while payments stay more mixed in execution