In case you missed it, this was a busy week for content:

First, some definitions and how these buzzwords relate to each other:

On charge-offs, consumer NCO actually fell slightly Q/Q due to lower credit card losses; credit card loss rate fell from 3.88% to 3.70% Q/Q. NCO rate rose sharply Y/Y from 0.35% to 0.58%, but the sequential improvement is a great step in the right direction. On the commercial side, NCOs rose slightly Q/Q to $490 million due to higher losses.

For provisions, BAC built $8 million in reserves vs. a $303 million build Y/Y. Specifically for consumer banking, reserves rose by $127 million vs. a $486 million rise Y/Y. For global banking provisions, BAC incurred a $229 million loss vs. a $119 million benefit Y/Y. 

“Pace of money movement has been steady since late summer. Consumer payment growth continues into October. Activity is consistent with 2016-2019 when the economy was growing & inflation was under control… this is not meant to say consumers aren't wary about cost of living & rates. But overall, activity is fine. Unemployment is low and wage growth is steady. That bodes well for consumers & asset quality.”

BAC CEO Brian Moynihan

“With respect to our commercial businesses, it is consistent with a lower growth economy. Line of credit usage remains lower than pre-pandemic levels. This does not surprise us with the dramatic increase in the cost of borrowing for small and medium-sized businesses. They aren't being indolent. They want to grow. They are simply being more careful.”

BAC CEO Brian Moynihan

“On asset quality, we told you that consumer credit losses will go down this quarter given delinquency trends. We also told you that office losses would be lower. Both of these proved true again this quarter.”

BAC CEO Brian Moynihan

“We continue to have reserves for an unemployment rate of 5% by the end of 2025.”

CFO Alastair Borthwick

Bank of America now expects $14.3 billion in net interest income (NII) for Q4 vs. $14.5 billion previously. This is due to rate cuts. 2025 guidance is coming next quarter.

BAC trades for 11x forward GAAP EPS. GAAP EPS is expected to grow by 5% this year and by 13% next year.

AmEx technically missed revenue estimates by less than 0.1%. I think we can call this meeting expectations. 35.3% return on common equity (ROcE) comfortably beat 32.4% estimates, while $3.49 in GAAP EPS beat estimates by $0.21 or 6%.

The consumer theme of this call was continued strong spending levels that aren’t quite as robust as post-pandemic levels:

“Spending across our affluent U.S. consumer base continued to be very stable with strong growth from Millennial and Gen-Z customers… Taking a step back, these best-in-class credit metrics are a reflection of our strategy. Our product value propositions create a powerful positive selection effect, which carries through to better credit performance.”

CFO Christophe Le Caillec 

“Within Commercial Services, spend growth was up modestly and consistent with what we've seen over the past few quarters. Our fastest-growing segment again this quarter is international card services with spend growth of 13%. The breadth of this continued performance is especially worth noting.”

CFO Christophe Le Caillec 

Credit trends continue to look great for this affluent customer vendor:

“Delinquency rates remain very low and in line with our prior quarters, especially taking into account the seasonal downtick we saw in Q2. Write-off rates declined to 1.9% this quarter. Looking forward, I still expect modest upward buyers to these rates as we continue to acquire new customers at elevated levels and increase our share of lending from existing customers.”

CFO Christophe Le Caillec 

The only bucket of modest spend weakness for AmEx is happening within its small business segment:

“Our small business segment has been hit by macro… the same-store sales spend is certainly not as robust as it was coming out of the pandemic.”

CEO Stephen Squeri

Guidance & Valuation:

American Express lowered annual revenue estimates from 9%-11% to 9% Y/Y growth. AmEx has a run rate goal of 10% Y/Y growth. At the same time, it raised annual GAAP EPS guidance from $13.55 to $13.90. It has consistently raised its EPS guidance throughout the year, despite the revenue guidance reduction.

“I think that billed business definitely has to accelerate to get to our aspirational goal of 10% revenue growth.”

CEO Stephen Squeri

AXP trades for 20x forward earnings. Earnings are expected to grow by 18% this year and by 13% next year.

Netflix has had a fantastic year in terms of subscriber growth outperformance and overall financial results. A big piece of its subscriber growth has come from password sharing restrictions, which block excess users from accessing a single account. This prompted a lot of signups. Disney is currently rolling out its own password sharing restrictions, which I expect to have a similar positive impact. The one large caveat is that Netflix has the most loyal and engaged viewer base in the sector. Disney will likely deal with slightly higher churn, but it should still be a boon to subscriber results. Between that, several box office hits and the Hulu integration, I expect a great quarter for that segment. The parks segment will remain challenged for now.

Disney is also debuting line skipping passes for $300-$450. These can only be used once per ride.

Under the old team, Starbucks was determined to win back U.S. traffic through deeper discounting. It sacrificed margin and brand preservation to accomplish this. Under Brian Niccol’s new team, a lot of those discounts and promotions are being cut. Starbucks is instead turning its attention to product quality and external marketing. Considering this premium brand has always been able to generate strong, reliable traffic growth at higher prices vs. competition, I think this makes way more sense. Fixate on what will motivate the demographic to spend the extra money on your product… you know… the taste. They’ve shown you for generations that they’re willing to pay up for a good product. That pivoted approach paired with its aim to rapidly fix throughput issues and easier comps should lead to faster growth ahead. That, however, will take time.

ASML dominates the lithography market within the semiconductor manufacturing space. These systems are designed to create the silicon wafer configurations needed to eventually facilitate tasks. Taiwan Semi (and so all major chip producers) is a big ASML customer.

“While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover.”

CEO Christophe Fouquet

2025 misses follow 2025 “strong year” & “cyclical upturn” commentary. The likely sources of the weakness stem from Intel CapEx cuts and industry capacity dynamics from players like Micron.

ASML earnings are expected to fall by 5% this year and rise by 30% next year.

ISRG raised its 2024 procedure growth guidance from 16.25% to 16.5%. It also reiterated expectations for a 68.5%-69.0% GPM in 2024. It lowered its OpEx growth guidance from 11.5% to 11.0%. All of this should lead to modest upward profit revisions. ISRG trades for 63x forward earnings. Earnings are expected to grow by 9% this year and by 19% next year.

There were a series of points that leadership made to separate its next-gen offering vs. other next-gen competition. SentinelOne claims to be the only truly autonomous security platform. It uses AI algorithms that are directly embedded into its single agent for real-time assessment. Data is not streamed to another cloud environment where it’s assessed by people and/or technology before being sent back. It sees none of the other next-gen competitors matching this real-time talent. This is another reason why its native data lake integration is so important: data storage, analytics and security all happen in one place.

SentinelOne describes the alternative streaming process as “data and work intensive haystack data telemetry.” That’s its way of saying people attempting to connect data dots to drive new insights cannot possibly work as quickly as autonomous machines. In a world where data sources are exploding in size, that means larger bottlenecks for companies that cannot modernize. The difference allows SentinelOne to be more proactive in preventing breaches, rather than reacting to them after they’ve happened. The delays brought forth by haystack telemetry pave the way for higher risk and a more reactive approach.

Like SentinelOne, CrowdStrike (direct competition) would say that they are the only vendor to offer the capability. It would say all other companies deploy batch mode data processing techniques while it streams data in real-time. At the same time, CrowdStrike does need 10-12 software updates per day to ensure broad coverage. SentinelOne needs 10-12 updates per quarter for the same level of product implementation. Fewer updates pushed to customers inherently mean lower risk of updates containing bugs. 

At the end of the day, SentinelOne and CrowdStrike offer similar products (especially in endpoint) that are both extremely high quality. There are modest differences between the two, and each will readily talk up those differences as points of strength. In reality, both companies offer wonderful products in a highly compelling secular growth sector.

The backend of SentinelOne’s product ecosystem is its Singularity Data Lake. This is what can ingest data from a near-endless roster of sources and types to aggregate into one place for storage and analytics. This backend features data analytics use cases that extend well beyond security to information technology (IT) and more.

The data lake is the building block for SentinelOne’s AI-native Security Information and Event Management (SIEM) product. SIEM aggregates security logs/data to help organizations uncover and remediate threats faster. It’s the data lake and SIEM foundation that gives SentinelOne the tools needed to unify data and security analytics for the enterprise. The data side ensures the firm can ingest information and context with massive scale. It automates the telemetry process, context switching and more to form patterns from trillions of unstructured data points. It also gives SentinelOne the ability to offer 80% faster and cheaper querying for customers. 

The security products use the near-endless data ingestion and analytics to take the information and uplift threat detection, lower false positive rates, prioritize threats more accurately and expedite remediation. The direct integration means lower data transfer costs for companies and broader interoperability and massive data ingestion scalability. That’s the SentinelOne platform and value proposition in a nutshell (or a kernel). The image below depicts it quite well. 

For some evidence of technological and architectural leadership at SentinelOne, it frequently cites all of the major research firms. Gartner, Frost Sullivan, Mitre, G2, etc. All of them uniformly call this company a leader across endpoint and cloud. In the most recent Gartner Magic Quadrant for endpoint, it was also the vendor that gained the most ground. Maybe that’s why it continues to take more market share than anyone else in the space.

SentinelOne (again, like CrowdStrike would) calls itself the leader in static and behavioral AI. Static AI is used to automate very fixed and finite tasks; behavioral AI focuses on forecasting human behavior; GenAI turbocharges these algorithms and allows them to drive accelerated inference on their own.

So far, SentinelOne’s GenAI assistant (Purple AI) is off to a great start. Version one enjoyed a double-digit new contract attach rate in its first quarter in the market. The product will only improve from here, but it’s already yielding 80% faster threat hunting for early users and an ability to store 3+ years of data vs. up to 90 days for alternatives. During the event, SentinelOne announced Auto-Alert Triage for Purple AI. This ranks alerts to help with prioritizing. It pulls from Global Alert Analysis, which enriches Purple AI with “thousands of anonymized similar alerts” to enhance the likelihood of focusing on the right things. Purple AI also introduced Purple AI Auto Investigations. This unlocks the GenAI assistant’s ability to jumpstart and resolve complex investigations on its own. Customers are welcome to remediate on their own, or just let Purple AI do it for them.

Finally, SentinelOne unveiled the Ultraviolet Family of Security Models. These “solve for specific security use cases and better support the agentic workflows to reduce operational burden.” These models won’t rival the compute of Llama 2 or GPT4, but will be trained on SentinelOne’s large, specific dataset. That will make them complementary to larger foundational models and for more specific use cases with lower compute and data processing needs.

The July 19th outage completely changed the world’s view of SentinelOne. It made everyone more eager to include it in bidding processes, more interested in purchasing its full suite of tools and go-to-market partners more motivated to revisit and deepen previous agreements. In the words of Founder/CEO Tomer Weingarten, it made people “less interested in marketing hype and more interested in technology evaluations.”

SentinelOne sees the next 2-3 years as a “new dawn in security” where it will “drive more change than over the last decade.” It will lean further into value-added reseller and managed service provider partnerships, hyperscale relationships and deals with large hardware vendors like Lenovo to accomplish this. The company sees its total addressable market (TAM) at over $100 billion and feels better positioned today to capture it than it ever has. CrowdStrike’s outage led to rapidly growing interest in its offering; the profit inflection uncapped growth investment and its optimized go-to-market should ensure those dollars are as productive as possible. Good setup. I’ll keep saying it.

Further, the wins continue outside of endpoint. Its cloud security business recently crossed $100 million in ARR. That already makes it among the largest, and pretty much all of the revenue is from agent-based cloud workload protection (CWP). With the purchase of PingSafe, it now has a full suite of agent-less CNAPP capabilities to bolster the momentum. This adds CSPM and CIEM to the mix, with data security posture management (DSPM) coming soon. Cloud is imperative for cross-selling and existing customer growth. It’s how, for example, the firm turned a $500K ARR contract into a $5M contract in 3 years. Like CrowdStrike, SentinelOne sees itself as the only cloud workload protection (CWP) vendor in the market with real-time, runtime threat detection in the cloud. Noticing a pattern?

SentinelOne has picked up a few points of share since going public, with 4% in 2023 compared to 2.8% Y/Y. Leadership pointed out that mid-single digit vendors average about 10 million to 30 million endpoints. The Lenovo deal includes 30 million endpoints adding SentinelOne’s Singularity platform over the coming years. This deal directly bolsters market share, and there are likely more of them coming.

To keep the momentum humming, SentinelOne just deepened its collaboration with AWS. Purple AI will use its Bedrock models; AWS will “boost investments” in the Singularity Platform in the AWS Marketplace to drive “easier access.”

In an interview last month, SoFi CEO Anthony Noto said this:

“There's a whole category of B2B commercial payments that SoFi will participate in both with the technology platform, but also the sponsor bank. It's unlikely it will be a sponsor bank for consumer-driven businesses. But for businesses that are operating at the enterprise level… SoFi can be both the technology provider and the bank of record.”

CEO Anthony Noto

This past week, SoFi announced the “Commercial Payment Services Sponsor Bank Program” to be that bank of record for enterprise clients conducting B2B payments. This includes debit, ACH and wire transfers and represents another perk of SoFi having its charter. Notably, this product will be built on the Galileo Cyberbank Core and will be ready for prime time next month. The bank disruptor is hard at work on integrating Galileo’s (which now includes Technisys) single-core architecture for its SoFi Money product, and this is another example of what SoFi can do with its in-house tech stack. The release made sure to call Galileo a “partner” even though SoFi owns it outright. Why? SoFi has to be careful to put enough distance between it and Galileo to avoid upsetting potential consumer-facing tech platform clients that SoFi directly competes with.

Now is the perfect time for this product release. The FDIC is getting far stricter about sponsor banks playing more of a hands-on role with partners on ledgers and more direct support. SoFi can easily offer this through Galileo’s real-time ledger offering.

SoFi added $2 billion in fresh funding for its loan business. The money is specifically for two buckets: the loan referral business and its new program to let 3rd parties originate loans through its own app for borrowers in its credit demographic. This funding essentially expands SoFi’s overall origination capacity by $2 billion, as it doesn’t take any balance sheet risk for these loans and so there’s no impact on capital ratios.

What it does get? Data on all of these borrowers and the ability to cross-sell more tools. Depending on the gain-on sale margin to Fortress, this should also net somewhere between $60 million to $100 million in incremental revenue. Good piece of news.

Bank of America still sees Nvidia as a “generational opportunity.” It sees calendar 2025 and 2026 profits coming in well ahead of consensus and thinks the company will maintain its dominant category position in the GenAI hardware race. The AMD event bolstered the analyst’s confidence in Nvidia’s leads being durable.

UBS updated Datadog to a buy. ITs channel checks give the firm confidence in second half results accelerating beyond current consensus. It sees a real opportunity for the company to accelerate beyond 25% Y/Y growth and strong likelihood of upside to current consensus 2025-2026 results too.

Bank of America channel checks point to an outperforming quarter for Servicenow. It views the firm’s exposure to the current Carahsoft investigation (federal contract price fixing and a close NOW partner) as immaterial for quarterly results.

Guggenheim reiterated a buy rating for SentinelOne based on optimism surrounding its growth opportunities. Barclays also reiterated a neutral rating on the firm, but expressed “rising optimism” in its non-endpoint traction and channel partnerships. Piper Sandler also upgraded SentinelOne based on the expectation of market share gains from the CrowdStrike outage, upside to ARR estimates and the focus on partnerships.

Truist reiterated its Alphabet buy rating with a price target boost. It sees search and Youtube engagement coming in strong and healthy advertising and cloud growth. Its channel checks point to the strong Q2 for its advertising business carrying to this quarter as well. It isn’t overly concerned about search market share or regulatory battles.  

JP Morgan hosted Zscaler leadership this week. The analyst came away thinking Zscaler was confident in the competitive landscape and its changes in go to market.

Deutsche Bank sees Shopify results coming in ahead of expectations based on its channel checks and app data. The bank sees strong market share gains and margin expansion via expense discipline. It specifically sees 22% Y/Y GMV growth vs. average estimates of 20.5%.

Goldman remains positive on Amazon. It sees ecommerce, advertising and cloud growth all accelerating and turnout out strong. It noted that about $3 billion in total potential Kuiper costs could weigh on margins, but expects operating leverage to continue throughout 2025 regardless.

JMP downgraded Duolingo to hold based on the stock’s massive run. Fair.

Canaccord interviewed the founder of a large digital advertising consulting agency. Channel checks were ahead of expectations, with travel and B2B spend both standouts. Google and Meta advertising channel checks were also better than expected. Meta’s outperformance was a full 3% ahead. 

Morgan Stanley reiterated its neutral rating for Celsius ($50 price target). It noted a continued decline in market share from 9.7% to 9.5% with total distribution points maintaining ~35% Y/Y growth. It sees “room for market share expansion” over time, but also notes that it just needs to get through Pepsi inventory reductions and promotional headwinds first. It also noted tough competition that could prevent these gains from being realized. 

Bank of America sees in line results for Google.

Apple announced a PayPal integration for its latest Apple Pay software. Yet another positive piece of partnership and ecosystem camaraderie news for this recovering company.

Shopify added post-shopper conversion targeting for its marketing campaign tool.

Meta is facing a lawsuit for making its product too addicting (or engaging) for teens. It also laid some people off this week across most teams.

Uber reportedly explored an Expedia purchase. I’m hoping this doesn’t happen and it sounds like it won’t. Focus on the core. If you feel the need to expand to travel, do it yourself or through smaller M&A like you have in the past. 

Amazon is joining the data center nuclear energy party with a new Energy Northwest partnership to create small nuclear reactors. It’s also investing $500 million in X-Energy Reactor and partnering with Dominion on this too. And for those of you who were worried about mass-quitting following its 5-day in-person work mandate, this week Amazon’s cloud boss said “if you don’t like it, you can leave.” Finally, Amazon and Databricks (large, private Snowflake competitor) inked a 5-year deal for the company to use Amazon’s AI chips and to buy more Nvidia chips through AWS’s re-seller business.

The FDA is reconsidering excluding tirzepatide (weight loss compound) from the shortage list for now. That’s potentially good news for HIMS, although this sounds like it will be temporary.

Robinhood launched a desktop version of its product with new tools aimed at winning over high-frequency traders (and the 50% of retail volume not conducted via mobile devices). The product is called “Robinhood Legend.” Through this, investors will also gain access to crypto futures and index-level options. 

Israel Englander (founder of Millennium Management) announced a $430 million stake in Nu.

Alphabet received approval for a request to delay a ruling for its Google Play antitrust case.