Most of the content from this week has already been sent:

The Cloudflare Earnings Review will come on Tuesday alongside Nu Holdings.

Results:

Guidance & Valuation:

Axon trades for 110x forward EPS. EPS is expected to grow by 2.5% this year and by 22% next year. It also trades for 76x EBITDA, with 28% EBITDA compounding expected over the next two years.

Balance Sheet:

Results:

Guidance & Valuation:

RKLB trades for 17x forward sales (no profit). Revenue is expected to grow by 31% this year and by 55% next year. It is expected to turn EBITDA positive during 2026.

Balance Sheet:

Results:

Guidance & Valuation:

APP sold its mobile gaming business after the quarter and only guided for the advertising portion of its business for Q2. That guidance led to revenue estimates rising by 2% (despite the sale) and EBITDA estimates rising by 11%. So we can call this a comfortable beat.

APP trades for 38x forward EPS. EPS is expected to grow by 44% this year and by 18% next year.

Balance Sheet:

Results:

This business model is violently cyclical. For context, its 4-year revenue CAGR from Q1 2021 to Q1 2025 is 5.2%. Massive peaks and valleys here.

Guidance & Valuation:

Coinbase guidance (doesn’t give overall revenue or profit guidance) led to Q2 revenue estimates falling by 13.8% and Q2 EBITDA estimates falling by 22%.

COIN trades for 16x EBITDA. EBITDA is expected to fall by 7% this year and rise by 14% next year.

Balance Sheet:

Starting in 2025 DKNG will move to disclosing net revenue margin guidance instead of hold rate. They’re similar metrics, but not identical:

Strong customer acquisition trends led to a $50M boost to revenue and a $37M boost to EBITDA for the full year guide. At the same time, historically bad outcome luck (more below) lowered the guide by $170M and $111M for revenue and EBITDA, respectively. Maryland’s tax hike and Jackpocket exiting Texas (more later) lowered revenue and EBITDA by another $30M and $26M, respectively. This led to the lowered overall guidance. With normal outcomes, guidance would have been raised.

“If not for customer-friendly sport outcomes in March, we would be raising our fiscal year 2025 revenue and Adjusted EBITDA guidance.”

Co-Founder/CEO Jason Robbins

DraftKings trades for 23× updated 2025 FCF guidance. Free cash flow is expected to grow by 84% this year based on its guidance and by 77% next year based on that guide and 2026 estimates. Considering the FCF miss was related to bad luck, I don’t think 2026 FCF estimates will move much. 2025 estimates will fall to reflect the new guidance and the 84% growth projection.

Mind the Outcome Luck:

Another quarter of terrible outcome luck, as March Madness was more than enough to offset positive luck at the beginning of the quarter from a positive Super Bowl result. For the first time ever, all 4 top-seeded teams made the final 4 and favorites won at a record-setting 82% clip. This explains the gap between a 9.5% actual hold rate vs. a 10.4% structural (expected) hold rate, which rose 60 bps Y/Y.

I realize this is the 2nd consecutive quarter we’ve talked about this, but I remain adamant that bad luck is not structural and not concerning for the investment case. The team remains adamant too. They have extensively dug into their odds-making practices and are “100% confident” that this is random in nature. There were some theories posed about Name, Image and Likeness (NIL; paying college athletes) creating more top-heavy talent distribution and higher-quality favorites. But? Lines would reflect talent gaps in the odds-making process. They would account for this and it’s not the reason. What is the reason? Sports are unpredictable; as leadership rightfully said, that’s why they’re so much fun. But? Sometimes that unpredictability favors the customer over the book. That’s what’s currently happening, with poor luck directly leading to lower take rates, lower revenues and lower profits in the near-term (as the guidance section depicts). This will revert and that timing is entirely uncertain. But what actually matters for the long-term investment case?

What Actually Matters:

Everything that matters for value creation, independent from the volatility of short-term outcomes, looks great. Structural hold rate is rising because of a successful 370 bps Y/Y mix-shift to parlay betting. Live betting is helping prop up structural hold rate as well, and both of these things are byproducts of product-led innovation such as menu breadth and uniqueness in areas like micro betting, as well as latency reductions to boost up-time. This is why their product is the top-ranked sports betting and iCasino product by Eilers & Krejcik Gaming since last summer.

A lot of that product-led innovation is coming from investments in AI. Like Shopify, Duolingo and so many others, DKNG is becoming “AI-first” and moving from “what we can do with more people” to “what we can do with more AI” as a core mindset. It’s now touching virtually every piece of the business, from customer service to safe betting to documentation, with plans to extend its reach to odds pricing in the near future.

Live betting, specifically via this organic work and integrations of SimpleBet and a few other companies, reached an inflection point this quarter. It eclipsed 50% of total volume for the first time, with plenty of room to run considering it’s over 70% in mature European markets. For the MLB specifically, live betting handle rose 36% Y/Y during April, while DKNG thinks these improvements directly contributed to market share gains throughout the NBA season. We’ve been chatting about this a lot mid-quarter with the New York state-level data indicating gains vs. FanDuel. It was good to hear this confirmed during the call. All in all, live betting is a large incremental handle (bet volume) opportunity, as well as a modest hold rate opportunity. 

“I think this past quarter was the first time I felt like, wow, I'm actually really seeing the impact on the live side start to materialize in the way that we had planned.”

Co-Founder/CEO Jason Robbins

Beyond this, handle growth accelerated Q/Q to 16% Y/Y, without the help of state launches, while competitors showed sequential slowing (hence the market share gains). And even in its most mature states, handle growth is over 10% Y/Y. DKNG expects that handle growth to remain right around 10% Y/Y next quarter despite some negative event timing in the Y/Y comp and weaker regular season NBA viewership vs. 2024. New customer acquisition trends remain very healthy and that’s happening while sales & marketing grow by less than 1% Y/Y. Significant leverage enjoyed on that important line item. R&D rose 16% Y/Y to fortify its recent acquisitions.

To Summarize, they are delivering a great consumer experience, taking handle market share, improving bet mix quality, enjoying durable handle growth across its state footprint (with no legalization help) and surgically controlling non-outcome-related OpEx. Keep doing that and profitable compounding will continue for the foreseeable future… regardless of who wins tonight’s game.

“Our core value drivers are outperforming our expectations as we continue to improve our leading product offering.”

Co-Founder/CEO Jason Robbins

Macro:

DKNG is seeing zero signs of consumer weakening. In Europe, bet demand durability was strong during the Great Financial Crisis, and DKNG expects that to be true today if macro sours. Interestingly, consumer anxiety is actually diminishing overall ad demand, which is giving DKNG more opportunity to invest in high-return areas.

Prediction Markets:

DraftKings continues to take a wait-and-see approach to how regulations shape up for prediction markets. I am strongly rooting for sports betting through this format to be deemed legal. That would give this company immediate access to 50 states at far lower average tax rates. Those tailwinds are astronomically larger than the headwind of Robinhood becoming a new competitor. If DKNG didn’t cede much share to Barstool or MGM or Caesars or Fanatics or ESPN… I’m confident they won’t cede much share here.

iGaming:

14% growth has accelerated to 25% Y/Y growth so far during Q2. They expect the durable growth engine to resemble that 25% instead of the 14% in the quarters ahead. This is despite being forced to exit Texas due to policy changes. DKNG is somewhat hopeful that Lotto.com’s legal battle in that state will eventually help them re-enter in some capacity – but they’re not counting on it.

Subscriptions:

The beta launch of its subscription in New York is “very encouraging” so far. They’ll keep going slowly to make sure the product is ready for scaling before they rev the engine, but so far so very good.

Good quarter. The headline numbers are entirely related to things that do not matter to me. The things that do matter all look great. The items in the “what matters” section are the things that will determine whether or not DKNG is a good investment. Not if Tarik Skubal has +/- 9 strikeouts in his next start (go Tigers). They are killing it in the important places.

Coupang is an e-commerce and logistics giant in Korea. It’s quickly expanding into food delivery, entertainment, financial services and also more countries. The company “exists to deliver new moments of wow for customers,” which is why its membership program is called “Wow.” The company’s product commerce offerings include its budding marketplace and fulfillment business, while developing offerings include everything else.

Coupang paid a 47% effective tax rate and expects full-year tax to be 52.5% of pre-tax income. This is related to Taiwan expansion and non-deductible ordinary business expenses. Tax rate should normalize in 2026, providing another source of net income margin leverage.

Coupang reiterated 20% Y/Y foreign exchange neutral (FXN) growth for the full year. It has not seen consumer weakness stemming from macro volatility. It also reiterated $700M in EBITDA losses for its developing offerings segment and reiterated a path to 10%+ long-term EBITDA margin.

Coupang trades for 74x forward EPS. EPS is expected to grow by 47% this year and by 117% next year. The firm is currently inflecting to profitability, so the sales multiple chart is the best option.

As always – this was a very short call. It lasted 30 minutes.

Product Commerce:

The tight focus on expanding selection continues to work. This quarter it added Kiehl’s, Dolce & Gabbana and several other luxury brands for its RLX customers. It also added Converse, Nespresso and many others that more so cater to the masses. And customers are responding very positively. Revenue per active customer rose 6% Y/Y FXN, while customers buying from 9+ categories rose 25% Y/Y. CPNG thinks the runway, through recent additions of things like tires and additional grocery inventory, is massive. It plans to keep adding new categories to juice the cross-sell engine. This matters a lot. Korea’s population is not growing and e-commerce penetration is already at 30%. They cannot grow customers rapidly in their core market forever, but the runway lengthens greatly as they bolster the categories and use cases on which customers rely.

Rocket Delivery:

Like Mercado Libre in Latin America and Amazon here, Rocket Delivery is a critical competitive element. It’s how Coupang places more inventory closer to customers, which cuts cost to serve. In turn, that fosters unique operating efficiencies that unlock more investment in differentiated customer service. Furthermore, Rocket Delivery’s footprint was expensive to build, and that moat now means Coupang is best-in-class for delivery speeds.  This translates to best-in-class conversion rates and more operational efficiency gains. As all of these competitive advantages compound, it finds itself able to offer low-cost everyday essentials, which are perhaps its greatest lever to raise consumer purchasing frequency.

Its logistics business attracts more customers… these customers spend more as service improves… this added traffic unleashes Coupang’s ability to more deeply delight customers and also attracts more 3rd-party merchants to keep boosting assortment and keep spinning this flywheel. And speaking of 3rd-party merchants, that’s a perfect segue into Fulfillment & Logistics by Coupang (FLC) updates.

Fulfillment & Logistics By Coupang:

FLC is very similar to Amazon’s 3rd-party seller business and Supply Chain by Amazon (SCA). It’s where Coupang lets merchants tap into the world-class storage, packing, shipping and returns that its Rocket Delivery business fosters day in and day out. They can enjoy the same conversion-optimizing assets that Coupang has painstakingly built without enduring the hefty, risky CapEx to get there. FLC continues to grow “multiples faster” than the overall business.

Developing Offerings:

In Taiwan, things are going ok. They’d like growth there to be faster, but they’re still in product-market discovery mode and determining what works. Sounds like the results there were a bit disappointing. Success expansion to that country will be a process, but they’re adamant that Taiwan resembles a very early Coupang Korea business and they’re eager to keep investing. This quarter, they grew selection by 500% Y/Y, with frequency and spend per visit rising in tandem. The company just released the WOW membership program in March, which is contributing to engagement gains, just like it does in Korea.

“As with any new offering we launch, there will always be a learning curve as we test and learn and make changes. And in Taiwan, we're going through that process and expect to continue to learn and adapt and grow… there's a lot of exciting initiatives and experiments we have in motion there.”

Founder/CEO Bom Suk Kim

For Farfetch (online luxury fashion marketplace that it bought), Coupang is now ready to “position it for its next phase of expansion.” They’ve morphed this from a cash incinerator losing customers to a positive EBITDA contributor in Q4 with customer stability. Now it’s time to build on the highly successful integration of this luxury fashion marketplace.

Finally, Coupang Eats is taking market share from its largest Korean competitor (Baemin), as the free delivery promotion for WOW members is working as intended.

“As always, we continue to execute across these initiatives in line with our core operating principles: customer obsession, operational excellence and disciplined investment.”

Founder/CEO Bom Suk Kim

Operational Excellence:

A fixation on OpEx discipline augments the efficiency advantages already laid out and bolsters its ability to elevate its offering even further beyond everyone else’s. Investments across robotics and general automation. This is materially lowering cost to serve and strengthening its entire ecosystem.

“We still see tremendous opportunity from these drivers and expect them to contribute to even further annual margin expansions in the quarters and years to come in the quarters and years to come.”

Founder/CEO Bom Suk Kim

Despite this fixation on efficiency, other general & administrative expenses de-levered by 80 bps Y/Y as a percentage of revenue. They explicitly told us to expect this last quarter, as they accelerated developing offerings (DO) investments to capture large growth opportunities. They’re encouraged by the impacts of these investments early on, and expect leverage to resume in the coming quarters.

Macro:

They’ve seen zero impact on their consumer from global trade wars. They are not reliant on U.S.-sourced goods for inventory. Like Mercado Libre, they are wonderfully insulated from the global drama.

h. Take

Wonderfully boring quarter in the absolute best of ways. This company simply continues to grab share, expand margins, broaden the product suite, and execute. Their leadership team is as elite as their financial prospects and this quarter just offers more evidence. I’m very pleased.

Apple is reportedly exploring adding more AI search options to its browser. It also came out this week and said search volume during the month of April through Safari (for which Google is the default search option) fell Y/Y for the first time. I wanted to address both of these items. First on AI search options – and I think they’re connected. It makes sense to see browser search specifically falling, as Google moves customers to the Gemini app and its 350M monthly active users. I can speak from personal experience about how all of my querying has moved from the browser to the Gemini app over the last few months. I think it’s safe to say that Gemini is more cannibalistic for Google search than other competitors, so this evolution will weigh on browser search. But? Alphabet immediately (thank you to them) came out and said overall query volume on iPhone devices and platforms continues to nicely grow. That tells me I’m right.

And now, time for some speculation. Apple pockets $20B per year from Alphabet to be the default search option. Many think comments from executives this week were made to strengthen Google’s antitrust search case. Folks think Apple said all of this to make the landscape seem more competitive than it is and will keep working with Alphabet to keep making that massive sum of money. But if that’s wrong, I think there’s a great chance Alphabet will cut this contract (either voluntarily or be forced by regulators) and immediately find $20B in incremental free cash to play with (less the associated search-based FCF). That can pay for its Wiz security deal… it can pay for more AI research and CapEx… and/or it can lead to a profit explosion. Yes, that would greatly hurt search market share on Safari specifically, but will be irrelevant for every other browser including Chrome.

And as I’ve said many times, I expect Alphabet to lose market share in search while continuing to nicely grow that business for a long time. GenAI expands query possibilities and a smaller yet large piece of a much bigger pie works for me. I am confident Alphabet will continue to win its fair share of this market with its ubiquitous brand, unmatched datasets, top-ranked large language model and elite research teams. When you pair that with Search resilience with their leadership in streaming, full-stack AI, cloud infrastructure, autonomous driving and quantum computing… at a 16x forward multiple… and I am not panicking. I am staying the course here. My mind is always wide open to changing; it has not changed.

Chipotle named Jason Kidd as their new COO. He was an SVP of Operations of Sam’s Club’s South Division and most recently the COO of Taco Bell (house of Brian Niccol).

CrowdStrike cut 5% of its workforce as AI automation reduces some need for certain roles.

Amazon’s Zoox experienced a safety setback in Las Vegas and has recalled vehicles. It also secured an $85M equity stake in AMD. AWS also won a new contract with Pepsi.

Output Data:

Inflation Data:

Consumer & Employment Data: