Hi All,
Welcome to our brief overview of portfolio news from the past few days.
Meta’s Pivot: Zuckerberg Gives Investors What They Want
According to Bloomberg, Meta’s CEO Mark Zuckerberg has discussed budget cuts as high as 30% for the company’s metaverse division next year. The stock responded positively, rising 3% on the news.
Once again, Mark Zuckerberg demonstrates that he knows exactly what investors want to hear. Reality labs had operating losses of $18 billion over the last twelve months. By reigning in spending on the currently loss-making metaverse project, Meta is signaling a continued focus on efficiency, aligning its capital allocation with market expectations.
Amazon Unveils Trainium3: Another Threat to Nvidia?
Amazon announced the general availability of Trainium3 UltraServers, powered by its new custom AI chip. The new system delivers up to 4.4x more compute performance and 4x greater energy efficiency than its predecessor. Customers like Anthropic are reportedly reducing training costs by up to 50% using Trainium.
Hyperscalers like Amazon and Google are releasing viable alternatives to Nvidia GPUs at a rapid pace. These ASIC solutions provide more cost-efficient alternatives for specific workloads. If compute consumption increasingly shifts toward these custom chips, hyperscalers could begin to claim meaningful market share from Nvidia over time, potentially threatening its hefty margins.
AMD: Major Partnerships
AMD had a number of positive developments this week:
Vultr Supercluster: Vultr will launch an AI supercluster powered by 24,000 AMD Instinct MI355X GPUs. While this deal could bring over $500M in revenue, we note that AMD co-led Vultr’s funding round last year, highlighting the increasingly circular nature of AI financing.
HPE Partnership: HPE will be one of the first to adopt AMD’s “Helios” rack-scale AI architecture.
No Bubble: At the UBS conference, Su dismissed “AI bubble” fears, stating we are early in a 10-year super cycle. On the ASICs Vs GPUs debate, she estimates ASICs (like Google’s TPUs) can capture 20-25% market share, with GPUs remaining the majority due to flexibility.
Leslie’s Q4’25 results : Anatomy of an Investment Mistake
Leslie’s reported Q4 and FY25 results that beat revenue and EBITDA guidance, but the bigger picture remains challenging.
Results: Q4 sales fell 2.2% to $389.2M, while Adjusted EBITDA rose slightly to $45.2M. Management announced the closure of 80-90 non-profitable stores (resulting in a $180M impairment) and is targeting a 10% inventory reduction in FY26 alongside cost cuts.
FY26 Guidance: The company guides for $1.175 billion in sales at the mid-point (implying -5% growth) with a slight uptick in Adjusted EBITDA to $65M.
Liquidity & Viability: While store closures were necessary, they may not be enough. With annual interest expenses of ~$63M and a cash position falling to $23M (plus ~$150M available in the revolving facility), Leslie’s must increase Free Cash Flow (FCF) to cover interest payments. This appears achievable in FY26 given the EBITDA guidance and targeted $100M inventory reduction, but profitability must improve meaningfully thereafter for the business to be sustainable.
Leslie’s has been one of our investment mistakes. We assumed the company could return to pre-COVID profitability after over-earning during the pandemic. Instead, the opposite occurred, and management’s execution has fallen short of our expectations.
Other Industry & Portfolio Updates
Anthropic IPO? Reports suggest Anthropic (backed by Amazon and Google) has hired law firm Wilson Sonsini to explore a potential IPO, possibly as early as next year.
Greggs Upgrade: J.P. Morgan initiated coverage on Greggs with an “Overweight” rating and ~35% upside, citing sector-leading margins, strong unit economics and major catalysts from 2026 as new distribution centres come online. It appears the Street is finally beginning to recognize that Greggs is undervalued.
Evolution vs Black Cube: In a new court filing, Black Cube presented an affidavit claiming Evolution’s games remain accessible in sanctioned jurisdictions like Iran and Russia, seeking dismissal of Evolution’s lawsuit. The New Jersey court must now decide whether to dismiss the case or allow litigation to proceed.
That’s a wrap. See you soon.