Earnings Reviews from this Season:

& my current portfolio/performance.

Demand:

Profits:

Balance Sheet:

Q4 Guidance & Valuation:

Adobe trades for 16x forward EPS. EPS is expected to grow by 12.5% in each of the next two years.

Rubrik beat revenue estimates by 9.8% and beat guidance by 9.9%. Slow growth from Q2-24 to Q4-24 was related to declines in maintenance and other revenue. Subscription revenue maintained at least 39% Y/Y growth for that period. Beat ARR estimates by 2% and beat $45M net new ARR estimates by $25M. It’s good to see subscription revenue carry the bulk of the beat. The nasty earnings reaction is likely related to some buy-side expectations calling for a larger beat than they delivered vs. sell-side analyst consensus.

Profits:

Balance Sheet: 

Guidance & Valuation:

For the full year, RBRK raised subscription ARR guidance by 2% or $28M. This was $3M larger than the Q2 beat. It also raised annual revenue guidance by 4% or $48M. This beat estimates by 3.5% and was $18M larger than the Q2 beat. Next, it raised non-GAAP EPS guidance from -$0.99 to -$0.47, which beat by $0.51. Finally, it more than doubled FCF guidance from $70M to $150M.

RBRK trades for 11x forward sales (no income statement profitability) and 89x forward FCF. Revenue is expected to grow by 39% this year and by 25% next year. FCF is expected to grow by 580% this year (from a base of nearly 0) and by 60% the following year.

I get excited when I see expensive stocks sell off on strong results like this. I’m looking forward to digging into the company.

Oracle provides a slew of software and hardware tools for on-premise and cloud environments. It has 3 main segments that tie very closely together. 

Oracle Cloud Infrastructure (OCI) is its fully managed business for infrastructure services (virtual machines, storage, managed high-performance compute data centers etc.). This segment also includes platform services to build apps in its safe, controlled environment (serverless and container-based).

Strategic Software As A Service (SaaS) includes Oracle NetSuite. This is a set of applications for enterprise resource planning (ERP), customer relationship management (CRM), human capital management (HCM), e-commerce and more. It’s hard at work on launching more industry-specific software apps across areas like healthcare. It has a more customizable, feature-rich product that’s similar to NetSuite called Oracle Fusion. This one is geared towards larger customers.

The last segment is its broad range of database products including both relational and document-oriented offerings across structured, semi-structured and unstructured data. Creating valuable apps from GenAI infrastructure requires great models and rich, organized information access to properly season those models. That’s where its database capabilities come into play. 

Oracle closely integrates with the 3 big hyperscalers, allowing its databases to run anywhere. This also means that customers can migrate their on-premise databases to the cloud via OCI or through any of these hyperscalers, diminishing user friction. Oracle believes that this data cloud interoperability provides innate data transferring cost advantages. Cost is estimated to be “several times cheaper” for model training than any competitive product, according to leadership. Oracle has re-emerged as a digital infrastructure titan. While the company did take longer to roll out its high-performance compute product suite, it has since achieved fantastic traction.

Oracle re-grouped some income statement disclosures. It now reports cloud revenue, software revenue, hardware revenue and services revenue in separate buckets.

Oracle maintained 16% CC Y/Y revenue growth guidance for the year, as the vast majority of the RPO boost will not translate into revenue this year. In terms of RPO guidance, it raised 100%+ Y/Y growth targets offered last quarter to roughly 4x growth for the year. This is related to expectations of more multi-billion dollar contracts, such as a massive $300B contract signed with OpenAI. The heightened RPO growth will mean more CapEx to fund all of these forward-looking demand signals. As a result, they now expect to spend $35B on CapEx rather than $25B. The RPO and CapEx raises coincided with OCI growth guidance moving from 70% Y/Y previously to now 77% Y/Y. As the leadership told us, it doesn’t build or own the buildings… just the equipment that goes in them. This means real estate availability triggers CapEx investments that lead to revenue a lot quicker than for the competition. For operating income, they expect around 15% Y/Y growth this year and “even higher growth” next year. This led to consensus estimates for that metric modestly rising for both years.

The only slight negative I’d poke at is the reiterated overall revenue growth guidance for this year. If OCI expectations are rising and overall expectations are not, that technically means non-OCI revenue guidance was modestly lowered for the year. And while that’s not ideal, “more confidence” in accelerated revenue and profit growth for FY 2027 makes that less irksome.

Massive RPO Beat:

The massive RPO beat came from a $300B contract with OpenAI for the OCI segment. Without this, RPO would have beaten expectations by 4%. The result is still incredible, but it does create customer concentration risk with an unprofitable client burning cash at an aggressive clip. If capital markets turn and the appetite to fund all of these losses worsens, that could make executing this contract quite difficult. The team is very confident in the project’s viability, but this is still worth noting.

Furthermore, Microsoft gets right of first refusal for any new compute contract OpenAI signs. That was implemented when the exclusivity piece of their original cloud contract went away. This week, Microsoft and OpenAI signed a Memorandum Of Understanding (MOU) to usher in the next era of their partnership and pave the way for OpenAI restructuring. In my mind, the fact that Microsoft isn’t the cloud vendor for this contract means one of three things:

In terms of how ORCL plans to fund this, they reminded investors that they only own the equipment that goes into physical data centers. This allows them to be more asset light and gives them a “very good line of sight” into delivering this contract. We shall see.

“Oracle has become the go-to place for AI workloads.” – Oracle CEO Safra Katz

OCI Edge:

As we work through this section, note that all hyperscalers would say they offer the best performance and cost of ownership. These can be subjective calculations and all of these CEOs are charismatic. And while that’s true, it’s hard to think OpenAI would be giving them a $300B contract if their products were convincingly inferior.

Demand for the segment continues to “dramatically outstrip supply.” Why? Because of what Oracle views as an ability to run data centers more efficiently than the competition. This edge scales beyond gigawatt data centers. And interestingly, it also includes a unique ability to use its uniform, modular-based layout to offer its full suite of cloud tools on just a few server racks. That singular architecture makes it very easy and affordable to add compute racks as needed, which can scale to massive clusters while maintaining the aforementioned cost and performance edges. Specifically for its “butterfly product,” it can offer a private iteration of OCI with all features for $6M; per leadership, that’s 100x cheaper than the other guys. That’s because its data center designs make  tiny deployments rational, while minuscule incremental additions can be profitably offered to augment flexibility. No minimums! That’s not true for the other guys, so they have to overcharge when companies only need a little bit. 

Cost advantages from its data center design are amplified by what it views as superior levels of automation and lower compute error rates, superior server density and a perceived ability to move data in and out of GPUs faster. As Ellison puts it, when you’re paying by the hour, faster means cheaper.

OCI Runway:

Oracle thinks the runway for OCI is incredibly long. And while that has a lot to do with successful market share gains in the AI training market, its optimism pertaining to the size of the inference market is even larger. Much of the $300B OpenAI deal is for more inference capacity. AI inference is the only way to use all of the publicly trained models to create enterprise-level applications and real value. Inference is where trained and highly capable models plug into 1st-party datasets to create new insights, connect new dots and unlock answers to enterprise-specific questions. For me specifically, it’s nice that I can ask Gemini questions about conference schedules on a public website. It would be far more valuable to upgrade this capability by infusing my own coverage network to get a curated list of events ranked by prioritization to cover. If I were a large clothing vendor, I could use this capability to get a perfect sense of tariff impacts for my specific supply chain with damage mitigation recommendations, rather than a generic regurgitation of current policy.

That’s how a company unlocks the productivity gains and value creation potential packed into its own data. And that will come mainly from inference for most firms. As Ellison says, usage of publicly trained apps and models will need to eventually lead to revenue and profit. The meshing of world-class frontier models and the inference value stemming from private data is how to do this. Jensen Huang of Nvidia says agentic reasoning models (heavily reliant on inference) will consume exponentially more compute than older model versions. That bodes very well for the Oracle runway.

Data:

If you noticed, data was a big piece of the OCI discussion. That’s because Oracle’s dynamic, malleable database offerings are the perfect complement for OCI. It’s one thing to have cheaper infrastructure costs. It’s another to enjoy those lower expenses alongside cheaper data transference. That’s how companies can tap into omnipresent model choice within OCI to ingest data and deliver the aforementioned inference magic. Making sure all of this happens within Oracle creates more lucrative and loyal customers for the firm – all while contributing to the cost advantages we’ve already discussed. Vendor consolidation always has a way of doing that.

It’s this uniquely broad mix of utility that Oracle thinks is unmatched, which is why they think they will win in inference.

“We’re the custodian of much more data than any of the application companies. They measure customers in tens of thousands. We do so in the millions for our databases.” – Founder/Chairman Larry Ellison

Application Business:

Oracle thinks it’s ahead of the pack in the utilization of AI app generators to create most of its new applications. As Ellison puts it, applications are really just a mixture of seasoned agents, guardrails and workflows. Those workflows can be built more quickly and more effectively with algorithms, and so ORCL is doing just that. As an aside, this is contributing to its accelerated profit growth expectations for this year and next year. They’re doing more with less. 

Two competing narratives I feel are both true here. First, what an incredible RPO and bookings number from this company. Hearing that it will coincide with accelerating profit growth for the next two years made it even better. That means this contract probably comes with reasonably strong margins. I would have seriously questioned that before reading about the profit growth guidance. I have never seen a beat that large for this metric at this scale. It was Nvidia-like and deserves a standing ovation. Oracle has moved from dinosaur to darling.

On the other hand, that means the forward multiple is higher than it has been in over a decade. Faster profit growth is being adequately rewarded in my point of view. That’s especially true given that the source of the beat creates considerable concentration risk. It makes Oracle a tad reliant on an insatiable appetite for hypergrowth and hefty losses for AI-natives like OpenAI. If that goes away and capital markets dry up, I think Oracle’s business will look quite cyclical. Until that happens… the business should look amazing. While I am shocked in the best of ways at this RPO number, this isn’t a parabolic move I want to chase. If anything, I’d likely be taking some profits if I were a shareholder as the P/E chart goes parabolic.

This was shared in the Discord room during the week. That’s where we share some of the weekly content more promptly, field your questions and invite a lot of bright investors to respectfully collaborate amongst each other.

Reiterated Goals & Confidence:

A lot of this interview consisted of reiterating prior disclosures. And when things are going as well as they currently are for SoFi, reiterations are enthusiastically welcomed. It continues to aim for 30%+ member and product growth, enjoy strong, resilient credit health, observe strong debit interchange trends and notch healthy asset under management (AUM) performance in SoFi Invest. Generally speaking, Noto remains highly confident in current business trends and company guidance.

Crypto Product Roadmap Notes:

SoFi Pay will remain a key focus area in the years to come. As previously announced, they’re starting with a blockchain-backed international money transfer product that automatically lets customers field crypto in their native fiat. Eventually, they’ll add a SoFi stablecoin to SoFi Pay (they’ll use 3rd-party products before this) to reduce payment fees and latency for its customer base. 

I think the most exciting piece of stablecoin payments is in the potential created from having a bank charter. It will be easy to sell lower cost per transaction to merchants. Additionally, the charter’s natural ability to grow net interest margin (NIM) vs. non-banks means it has more wiggle-room to offer merchants and members usage incentives to profitably turbo-charge adoption. Between scaled stablecoin offerings and SoFi’s ability to be part of Zelle (thank you, charter), Noto is optimistic about having the broadest payment offering in the industry over time.

There’s a lot more to discuss in the world of crypto. They plan to borrow this international transfer capability for the tech platform business. He thinks there are many consumer-facing enterprises and crypto companies that would benefit from enterprise payment services that can gracefully handle these currency translations. That’s a future growth opportunity.

Noto also is optimistic regarding regulation. For review, as a bank, SoFi is regulated by the OCC. That regulatory body has given guidance on updated crypto rules & regulations. Non-banks are regulated by a web of agencies; many have not yet offered that same clarifying color.

“Today, no company is offering fiat and crypto banking services in one. It will take a while to build out, but there’s a large unmet need.” – CEO Anthony Noto

AI product Roadmap Notes:

In the world of AI, there are a few things to mention. They’re already improving account takeover, fraud and anti-money laundering metrics. It’s also excited about improving the app user interface with more engaging and interactive content beyond solely text.

More on the Product Roadmap:

Lending Platform Business (LPB):

Noto is optimistic about the durability of loan platform funding across cycles. Delivering strong repayment performance across two very different and aggressive cycles has been instrumental in building enough partner trust for them to sign multi-year deals with this creditor. Between that and only seeking out the highest-quality, longest-term partnerships and borrowers, their credit should keep doing well across various backdrops.

The massive growth of this business is enabled by large institutions like Blue Owl that are willing to shell out billions per year to supply capital for these loans. As a reminder, SoFi is not willing to grow its balance sheet above a 10% Y/Y clip in the years to come. That means it’s not able to service all of the demand within its credit buckets. By using balance sheets of well-funded partners, it’s able to service a lot more of these loans and maintain the customer relationship without its balance sheet exploding in size. Their personal loan product routinely allows customers to cut interest rates from 25% to a low-double-digit percentage. That inherently drives a ton of demand and has overwhelmed SoFi in recent years. Now with LPB, it’s no longer overwhelmed and it’s fully taking advantage. Overall funding levels remain strong.

Last Month’s Capital Raise:

This was to lower the cost of capital by displacing some high cost debt (which is why it won’t be dilutive to earnings). He did also discuss some small M&A opportunities in AI they’re considering. A potential purchase would likely be aimed at companies able to minimize fraud and chargeback rates to lower SoFi’s expense structure and create more valuable products to sell as part of its tech platform business.

Tech Platform:

No change to guidance or segment expectations.

Overall, this was a uniformly upbeat & positive chat.

This was shared in the Discord room during the week.

Runway:

Uber’s largest 20 mobility markets continue to grow Y/Y bookings in the teens. The most mature piece of their business still has plenty of runway – not to mention dozens of maturing and new bets in its product portfolio. As Dara puts it, they’ve had a good few years and he thinks they’ll have a “good couple of years ahead.” This optimism is based on the growth opportunity and how efficiently Uber has pursued it. Margin accretive expansion, which is fully expected to continue, provides concrete evidence of this. And, for more evidence, the 19%+ mobility gross bookings growth enjoyed over the last few quarters is expected to continue as well, per Dara.

They also repeated a lot of the cross-sell statistics we’ve covered many times in previous earnings reviews. We don’t need to regurgitate all of this, but the general theme continues to be just how early it is for cross-selling and energizing engagement within its existing customer base.

Finally, they’re well on their way to meeting multi-year targets.

Macro:

Uber is seeing zero signs of macro deterioration. As Dara puts it, this is related to the affordable luxury nature of Uber’s platform, the resilience of food delivery and ride-sharing across cycles, its focus on affordable options for consumers and also the “hedged” nature of their business model. By this he means that Uber’s demand levels naturally rise when economies improve. And? The cost of supply naturally falls as the economy worsens, allowing them to reduce surge pricing and profitably offer more affordable overall products. That naturally guards against the demand decay prevalent in many other consumer-facing models. They’re not immune to bad macro, but they’re more insulated than most give them credit for.

"Things continue to be quite encouraging in terms of demand... across every level of consumer, we continue to see encouraging trends. We are not seeing consumers trade down... mobility growth has been 19% over the past couple quarters. We see that being consistent over the next couple quarters. We are not seeing signs of weakness." – CEO Dara Khosrahshawhi 

Uber One:

As leadership has talked about a lot in the past, Uber One contributions for delivery have been far more dramatic than on the mobility side. That’s changing thanks to heightened focus. Several of the products announced at the recent GoGet event (section 7) are helping, but the surge savings tool has been a notable standout thus far. The company knows its best-in-class product breadth paves the way for a best-in-class consumer subscription, and it’s “very early” in terms of the utility Uber can add to spur engagement. If 36M members is very early, that’s pretty exciting.

Delivery:

Dara thinks delivery will achieve the same consumer penetration levels as the e-commerce industry overall. That means 25% penetration vs. around 15% for food delivery today. With Uber being the #1 player in most markets (and #2 in pretty much all others), it’s perfectly positioned to enjoy this structural growth tailwind.

AV Partnerships:

Uber is exceeding even its own optimistic internal expectations on driving utilization rates in these units. That means they’ll be able to pay fleet owners more money for access to their cars, as it can profitably offer higher daily fees, knowing it will make up for the higher expense with higher volume. It’s always great to be the market leader; it’s especially great to be the market leader during this technological revolution.

This was shared in the Discord room during the week.

Observo:

A few weeks ago, CrowdStrike bought Onum to enhance its data pipelines and streaming. The point of the M&A is augmenting its Security Information and Event Management (SIEM) offering. Well… this week… SentinelOne is buying a direct Onum competitor for similar reasons. 

Observo will provide a foundation for ingesting any kind of data a company needs. It does so in an AI-native manner that frees “legacy system to LLM-based” unstructured data migration. This capability also includes routinely cutting data migration times from months to weeks. And like Onum, it’s able to “enrich, summarize and route” data pre-SIEM ingestion. That cuts data storage costs by up to 80%, expedites issue resolution and is “well ahead” of the competition (per leadership). 

These pipelines are also malleable and policy-driven, while enabling natural conversational querying once that data has actually entered a SIEM. Real-time, scalable and efficient data streaming is absolutely paramount for SIEM. That’s the only way the product can field all needed information and deliver that vital context to all other modules for optimal efficacy. SentinelOne was already well-versed in this area, and Observo should add fuel to the bookings fire.

SentinelOne plans to offer this for security and non-security data needs. The contribution to 2026 results will be immaterial on the top-line and will actually lower margins by a half point. Over time, they expect this to be a very material piece of their data business and displace legacy vendors like Cribl.

Why Did They Beat Net New ARR Estimates by $15M but Only Raise Revenue Guidance by $2M?

This was related to the timing of deal closures. A chunk of large deals closed right before the quarter ended. This boosted ARR but did not boost revenue all that much. They think this same pattern will play out through the rest of the year. Furthermore, professional services revenue (their lower-quality segment) was a bit light and they’re assuming that persists throughout the year. They added that for Q3 and the rest of the year “they have a lot of confidence.” But? These prudent assumptions are related to respecting fragile macro and not wanting to get too excited with forward guidance. It sounds like they under-promised.

Go-to-market changes are working well and creating broad-based tailwinds against a macro backdrop that hasn’t improved since their disappointing Q1. What did improve during Q2? Execution. Execution. Execution. 

EDR Market:

While most Fortune 500 companies have now moved from anti-virus and signature-based endpoint protection to EDR, smaller companies haven’t. 50% of non-large cap companies are still using legacy tech. This segment is especially reliant on onboarding simplicity and ease of use to embrace this better technology without requiring a lot of new hires or exploding costs. SentinelOne feels perfectly positioned to help in this regard and thinks that helped its core endpoint business materially accelerate last quarter. The competitive backdrop is improving due to this trend, and that’s expected to continue.

This was shared in the Discord room during the week.

Runway:

Despite META’s massive scale, there remains a sizable runway of operational improvement and financial momentum. From a user base perspective, they still feel under-penetrated in certain markets around the globe. That’s especially true for Threads, but also for WhatsApp in countries like the USA – where user growth has recently been excellent. In terms of further user base monetization, optimizing targeting algorithms to make placements more valuable has plenty of runway. Content personalization to keep people on the apps for longer does as well. Taken together, that should mean more impressions and higher-value impressions over the coming years.

AI:

Meta is “pushing their internal teams to become first adopters of a lot of tools.” Interestingly, in some cases, this will entail additional hiring, as engineers become more valuable and incremental additions provide a more dramatic impact. In other cases, this will mean lower headcount in certain areas, which should be a margin tailwind.

Outside of internal team usage, Meta continues to work hard on delivering industry-leading frontier models. There has been considerable noise surrounding rumors that it will use Gemini to power part of Meta AI, but there’s no change to its model-building approach or conviction in building world-class LLMs.

$600B Invested in the USA by 2028:

The lofty number that Zuck teased at the White House earlier in the month includes 2025 investments that have already happened and all other non-data center investments in USA talent etc. This is not a data center spend guide, although that’s a big piece of it.

Furthermore, they continue to explore 3rd-party partnerships to offload a lot of the CapEx needs and make their data center and compute growth a lot more capital efficient. I’d love to see that happen.

This was shared in the Discord room during the week.

Q2 Comparable Store Sales Miss:

As a reminder, Cava missed comparable store sales estimates for a few reasons. First, it lapped a historically successful steak launch that made modeling Y/Y comp growth more difficult. Second, that happened as its 2024 stores ramped to $3M in average unit volume way more quickly than expected – thus creating another Y/Y comp headwind. And finally, just like for most quick-service food, increasingly fragile macro had a modest impact on demand.

For the 2024 store class note specifically, the team was asked if they’re worried the initial experience for customers was subpar and if that weighed on growth for those stores last quarter. The answer is no. 

Growth Runway:

They continue to take material market share as their affordable and better-for-you niche resonates. Considering the restaurant space as a whole has not enjoyed growth for a few years, those gains are imperative for CAVA’s growth engine.

Another source of growth will come from rising brand awareness. Since the IPO, its brand awareness in emerging markets has moved from 30% to 50% with awareness jumping from around 15% to 40% in markets where it doesn’t yet have a store. They know more stores in more markets will naturally drag that higher, but they’re also open to spending more on marketing to accelerate that process. With that expense under 1% of total revenue, I think that makes sense. Especially as their footprint goes national, marketing to the nation will inherently get more efficient and should unlock a lot more opportunity for productive spending.

The 2026 store growth plan is set and locations are selected. They’re working on 2027 and 2028 locations as we speak.

Food:

The salmon test is now wrapping up and went very well. It will likely be added to the menu next year.

Catering:

As a reminder, Cava is testing a new catering model in Houston, enabling that segment to scale without impacting the core customer experience. In high-volume areas like that, it will use “hubs” with expanded kitchens to augment capacity in surrounding stores. It sounds like this approach is going well, but like always, they will be slow with testing. They don’t debut anything until it is obvious that it will work.

This was shared in the Discord room during the week.

Mexico:

MELI thinks its payment processes and flexibility in Mexico are both best-in-class. With low credit card penetration and acceptance rates in that nation, there really wasn’t a foundation to support credit-based GMV growth. It has now laid that foundation and thinks its combination of credit cards and BNPL are differentiated and resonating. 30% of Mexican transactions are now made with MELI payment methods. Not only does that mean more revenue per order, but stickier, more engaged customers. We often praise its marketplace selection and logistics platform as strong competitive moats, but I think this fortifies the Mexican moat in an underrated fashion.

Macro in Mexico isn’t amazing right now, but MELI is overcoming it, as it knows its own success is far more tied to internal execution than modest swings in the backdrop.

Brazil Slow Shipping:

The slower shipping option is currently not optimized for margin. MELI is using the exact same network they’re using for their rapid shipping. Eventually, they plan to get much better at batching slow delivery orders to lower deadweight loss within their trucks and other pieces of the supply chain. They see that lowering costs down the road and serving as a material margin tailwind.

Marketing:

There was a lot of attention paid to higher marketing expenses for MELI last quarter. As it reminded us, that change meant marketing was 12% of revenue instead of 11%. This modest rise was based on a few large campaigns to support its lower shipping fee introduction and MercadoPago. Furthermore, Mercado Libre is also spending more because they’re getting so much better at targeting. Return on investment (ROI) is rising and so the amount of productive spend available to them is higher. They are unwilling to optimize quarterly short-term margin to appease the street. They are fixated on building the most valuable company they can over the long haul, and that requires spending when efficiency is this good and the opportunity is this large.

Investment Cycle?

Some of the commentary from MELI this year has made investors worry about the firm entering a large investment cycle like during 2017. That’s when they started building the logistics network. The margin impact from this cycle’s investments will not be nearly as large as it was then. MELI is in a much better place – in terms of scale, diversification, product breadth and margin profile – to absorb these temporarily elevated logistics and credit card costs while still delivering highly profitable growth. Again… it will accept modestly lower near-term margins for more long-term profit. Doing so today just will not mean net income tanks like it did then.

Credit Health:

Everything continues to look good in Brazil. No changes there. That was great to hear, following a note from JP Morgan calling out mild credit health weakness. They don’t seem to be concerned in the slightest.

Ads:

Through targeting enhancements as well as Disney and Google partnerships, MELI thinks it has the 3rd-party inventory needed to effectively complement its own properties and better appeal to advertisers. Now, it’s a matter of communicating the heightened value-prop to brands in MELI’s quest to be the largest digital advertiser in Latin America.

B2B:

MELI finally added a dedicated B2B buying channel in Brazil like it has in Argentina and Mexico. It provides needed tools such as invoices, custom buyer permissions, bulk discounts and more. These are pre-requisites for B2B becoming a big piece of this firm’s business, and now they’re in place. B2B in Brazil is even further behind B2C in terms of transition to e-commerce; this company now has an offering to accelerate adoption and take more market share.

This was shared in the Discord room during the week.

Branded Checkout Modernization Process:

Branded checkout keeps steadily growing at a mid-single-digit Y/Y clip and that’s expected to endure. No changes there. Leadership continues to enjoy “tremendous conversion rate improvements” for all merchants on its latest and greatest branded checkout flow. This is giving them more confidence in two things. First, this fix is going to deliver the uplift to branded checkout growth that they expect as it finishes rolling out. It’s only live for around 15% of global transactions, but is ramping up nicely. Secondly and relatedly, they think that the conversion uplift will serve as a domino for winning more merchant adoption as these new companies see the benefits and feel the pressure to match them.

BNPL:

Chriss talked about younger generations having very little interest in credit cards. They prefer debit and/or BNPL. That’s why its renewed debit card focus (added 5 million cards since launching its omnichannel campaign with higher rewards) and pushing BNPL presentment upstream in the shopping process are so important. And for an added bonus, credit card transaction margin is lower than debit and BNPL. So? Not only should better products in these two categories mean more volume… but more volume at higher margin.

New Color on the Venmo Roadmap:

PayPal is looking to make payments more convenient on Venmo. Right now, traditional peer-to-peer entails someone paying and then being reimbursed afterwards. Just like Venmo Groups is helping people more conveniently organize, this should too. For example, it will make people feel more comfortable with sharing an expensive meal or trip, knowing they don’t have to foot the bill upfront and hope people pay them back. There are so many examples like this one that Venmo can help with. Anything they can do to remove friction from the payment process is good news. Furthermore, it probably will serve as peer pressure-based motivation for everyone in a group to have a Venmo account – rather than paying through other means like cash, cash app, Zelle, etc. Like Apple’s blue text bubble makes people not having it feel left out, this product could mimic that valuable reality.

Generally speaking, they view Venmo as perfectly positioned for the 70% of commerce that is service-based. PayPal dominates with the smaller goods-based bucket. Venmo can dominate on the other side. It has been capable for years, but now, through checkout, debit cards, rewards and more, it’s finally taking advantage. I will keep saying it… regardless of the stock price not yet believing it… Chriss is executing significantly better than the previous team.

PayPal World:

Chriss expects more digital wallets to join the PayPal World network. As a reminder, this creates interoperable payments between PayPal, Mercado Pago and other global wallets representing 2 billion active users (5x PayPal alone). It allows merchants to field any wallet in this network as long as they accept one. This removes the need to tediously onboard new checkout flows every time a company needs to add an option. And for consumers like me, it means I can use my PayPal wallet around the globe at merchants that don’t accept the method directly. Interoperability on steroids is how I’d describe PayPal World. It has been tried in the past by other vendors and has not worked. We’ll see if it does this time.

Stablecoins:

PayPal thinks about stablecoins in (what I view as) the correct way. They see stablecoins creating more access, lower fees and faster payment processes. They think it needs to be seamlessly integrated into traditional payment experiences to drive ubiquitous adoption, and that’s the plan. If done well, checkout with stablecoins will look largely the same… the outcomes will just be better.

Security Information & Event Manager (SIEM) Disruption:

Kurtz talked up the significant latency, efficacy and cost advantages that Falcon’s SIEM offering provides vs. the competition. He also got into a bit more detail on how Onum M&A will help expedite data migration onto this product. It makes the process of moving over to the modern SIEM a lot more convenient and lower-risk. Its upgraded process entails a gradual transition instead of an abrupt sunsetting of the old offering. Furthermore, as this process plays out, Onum greatly lowers disruption-related costs via “parallel data processing while preserving security posture.” By this, the company means enabling both platforms (new and old) to simultaneously ingest pre-sorted and enriched data – rather than one at a time.

CrowdStrike also sees Onum as a total addressable market (TAM) expander in the world of IT. The acquired company’s real-time data streaming and pipeline isn’t just for security. It can be used for IT Service and Asset Management (where ServiceNow presides) and Observability (where Datadog presides) as well. Kurtz envisions these areas as eventual pieces of the company’s overall value proposition, and thinks they have a right to win. The firm already handles a customer’s most sensitive data, endpoints, workloads and more. It’s natural to think proof of concept should earn a lot of trust and credibility for offering lower-stakes modules. For observability specifically, it’s interestingly already seeing companies building custom apps for these use cases through its Falcon Foundry (custom app building) module. Clearly customers are interested in doing this work on its platform.

Identity Competition:

Kurtz used to talk about Okta, Ping and other identity access managers (IAMs) as purely complementary. The company did debut identity threat detection and response (ITDR), which is not a competitor to IAMs. But with CRWD’s release of privileged access management (PAM) and how Kurtz sounded at this conference, the tone has significantly changed. They’re going after this entire market as customers ask them to do more.

This interview was more of a scripted introduction to Google Cloud from Kurian. It reviewed the things we discuss in quarterly earnings reviews and product event coverage with not much newness. We did learn a few things:

State-level data out of New York for this week was poor. Bet volume looked good, but bad outcome luck led to a 1% take rate for the week (now 7.5% for the last three weeks). Anything below 10% means pressure to results vs. expectations and New York is probably a good indicator for other states that don't publish this data. This is an inevitable part of the investment. There will be weeks of very good luck and some weeks of very bad luck. As long as structural hold (expected hold) is rising and cost efficiencies continue, that won't really matter over the long run. But it can impact the stock in the very short term. While this will be a small headwind for Q3 results, hold rate data before this stretch did look good and the $1B jackpot is leading to stronger-than-expected Jackpocket traction. So this week's data doesn't necessarily mean Q3 will be a miss, but does make that beat harder to deliver. Again, not important for the fundamental, multi-year bull case but worth noting.

Morgan Stanley downgraded TTD to neutral on execution & Amazon concerns. This changes nothing about my point of view towards the investment. This is still the leader in connected TV & still has great ancillary growth runways in audio and retail. I think the guide was sandbagged to make the CFO’s first quarter a lot easier (which subsequent comments from leadership pointed to). That’s my opinion and I am sticking to it – at least through the next earnings report. This team has been too good for too long and they are telling us to expect better execution and an acceleration into 2026. They coexisted and successfully grew vs. an aggressive Alphabet for years and now people think they can’t do the same as Google pulls back and Amazon replaces them. I don’t see it that way. I’m staying patient. Time will tell.

In other news, Netflix opened their inventory up to Amazon. I would expect every single publisher in advertising to make their impressions available to as many buy-side platforms as they can. That’s rational. That’s how you maximize price per impression and fund hefty content spend. This is the farthest thing from surprising or alarming to me. TTD will need to outcompete others by demonstrating superior targeting and more granular impression matching. That has always been the case and will not change if they now need to beat a stronger Amazon rather than a stronger Alphabet. Better algorithms are how TTD can match impressions with buyers willing to pay more while those buyers still get great return on ad spend (ROAS). That is how it has won for a decade. If we think TTD is as fragile as an investment case relying on Netflix irrationally working only with them, then this is not a good investment case. That’s not at all my opinion. This is just an easy excuse to punish a headline amid overwhelmingly negative sentiment. 

Finally, KeyBanc reiterated their outperform rating for Trade Desk. Usually, this wouldn’t rise to the level of importance of an alert. Considering how bad the sentiment is today, I think it’s appropriate. Resilient optimism is based on the same things I believe. All of these negative headlines are overblown and the company is fine. Like me, they think publishers partnering with every demand-side platform is inevitable. They’re similarly not surprised by the Amazon/Netflix partnership and they think TTD’s targeting and data products are differentiated enough to command considerable market share in these partnerships.

I truly can’t wait for the Q3 print to confirm whether I am right or not about sticking with this name. When you manage a portfolio of 20 stocks like I do (that skews towards growth), there will always be laggards. While I trimmed considerably this year before the decline (go see time-stamped evidence), I’m still not enjoying this price decline. But? Holding when a healthy company’s stock is testing the patience of investors has routinely turned out to be the right decision for me. I just don’t think sentiment is attached to its fundamental future, and that’s why I added this week. I think it’s largely noise and risks blown far out of proportion. And I am not willing to give up on a company that has been so consistently excellent because analysts no longer trust the words coming from a trustworthy CEO.

It’s Trade Desk and Duolingo right now in terms of most hated holdings. Apple joined several others in debuting language translation for its AirPods. I will keep saying it… these products do not displace the fun, competitive and productive product Duolingo offers. I expect the company to keep selling off on these headlines given how bearish investors currently are. I do not expect these offerings to structurally eat into its business.

On the other hand, Duolingo still hasn’t gotten back to social media content normalization. That will happen, but it hasn’t yet. Until that happens, I expect continued pressure on user growth. If it rebounds as I expect, I don’t care if it’s weak for a few more weeks. Normalization will likely soon, but with most of Q3 now over, a miss on that metric is somewhat likely.

Finally, Citizens JMP maintained an outperform rating. They are excited about App Store regulatory changes. They envision 2027 EBITDA potentially being boosted by 10% due to Duolingo’s ability to direct subscribers to their own payment pages. Thank you, Epic Games. This change allows DUOL to sidestep hefty app store fees, and materially boost gross margin. The gross margin boost would translate into higher EBITDA. On the last earnings call the team talked about testing directing subscribers to their own payment flows. This analyst seems to think that testing is going well.

Nu added job listings for software engineers in Argentina. While it does have talent hubs throughout the world in nations where it doesn’t yet operate, this is another piece of evidence pointing to that being country #4. This, new hires to accelerate international expansion and two rounds of M&A rumors in that country.

Shopify COO Kaz Nejatian left the firm to become OpenDoor’s new CEO. Best of luck to him. I think he should’ve stayed, but what do I know?

Chipotle is expanding into Singapore and Korea.

Starbucks opened its first Spanish flagship store.

Amazon’s Zoox (autonomous cars) entered Las Vegas.

Between a cool producer price index (PPI), an in-line core consumer price index (CPI) and modestly weaker employment data, there’s a nearly 100% chance of a rate cut next week. Initial jobless claims of 263,000 vs. 235,000 Y/Y expected were concerning, but this week is usually especially seasonally bad for this metric. As long as unemployment rates remain around where they are and the consumer is getting paid, that should be very positive for risk assets. If cuts coincide with a sharply worsening labor market (not my expectation), that will obviously be far less positive for markets. 70% of the economy relies on consumer spending; massive CapEx budgets are helped by easy capital markets.