During the week, I also published:

EPS is compounding at a steady 11% multi-year pace.

"Inflation was once again essentially flat in the quarter across all core merchandise."

Costco CFO Gary Millerchip

“Our members are willing to spend as inflation comes down as long as those sort of 3 key ingredients that I mentioned are there for the member as well: items, quality and value… I think we're seeing a lot of similar consumer trends as in the last few quarters… We're seeing members being very choiceful about how they're spending the dollars.”

Costco CFO Gary Millerchip

Adobe is a software giant that invented the .pdf file (co-founder John Warnock specifically). It provides programs to create and imagine, handle customer interactions and process documents. Revenue is split into two main buckets: Digital Media and Digital Experiences. Digital Media is made up of its “Creative Cloud” and “Document Cloud.” The Creative Cloud includes Photoshop and Illustrator. It’s what empowers creation, iteration and perfection of digital design. The Document Cloud, including the ubiquitous Adobe Acrobat, allows for secure PDF (Personal Document Format) management and collaboration – among other things.

Finally, its Experience Cloud includes Adobe Analytics and other products like “Campaign.” Campaign is its (intuitively-named) marketing campaign tool. Experience Cloud covers end-to-end customer interactions with a real-time customer data platform (CDP), ensuring that those interactions are optimized. It also publishes some greatly appreciated macro data on overall commerce spend.

“Black Friday/Cyber Monday played out about as expected.”

CFO Dan Durn

Note that ARR throughout the year is measured on a foreign exchange neutral (FXN) basis. FX changes through the year led to it lowering ARR by $117 million heading into 2025 and expects another $200 million hit at the end of next year. Finally, it expects growth mix-shift to move towards new clients and products and away from existing client expansion.

Adobe is expected to compound EPS at a forward 2-year clip of 13%.

Firefly refers to its family of large language models (LLMs) like Gemini for Google or Claude for Anthropic. Adobe offers these models for customer use and also creates popular services from them to automate various parts of content and CRM workflows within “Firefly Services.” This is a vital part of what powers “scaled content production” on the creative side and “scaled customer interaction personalization” on the experiences side. Pepsi and Tapestry are new users of Firefly Services as total Firefly generations (usage) rose to 16 billion vs. 12 billion Q/Q and 9 billion 6 months ago.

“Integration across the clouds is driving record customer adoption and usage.”

CEO Shantanu Narayen

This year, Adobe added its AI Assistant product to Acrobat and Reader. This allows for conversational querying of unstructured PDFs and will soon be able to create relevant slide decks from these documents. This quarter, it added new AI agents for contracts and scanned documents and raised the size of documents that this assistant can handle. It also added additional language support. Adobe launched its AI Assistant for the Acrobat Desktop app, joining its mobile and web offerings. And for Acrobat Web, it launched a new Adobe Express integration to help users create images and “quickly stylize” PDF content. As a reminder, Adobe Express is its overarching “quick and easy create anything app” that offers guardrails, processes and GenAI model-inspired content automation for customers. It organizes, maintains and expedites digital asset creation.

All of this AI Assistant integration work in the Document Cloud is resonating. AI Assistant queries doubled Q/Q (small base, but still) and this innovation helped facilitate 50% Y/Y monthly active user (MAU) growth for Acrobat Web specifically and 25% MAU growth overall. Furthermore, Adobe recently conducted a productivity study that revealed how the AI Assistant for Document Cloud can cut time to task completion by 75%.

“We observed year-end seasonal strength in the enterprise segment.”

CFO Dan Durn

Its new video model is now in public beta, with interest in the product called “massive.” This helped foster 70% Y/Y growth in Premiere Pro (expensive tier for its video product) beta users, as the video model inspires many more customers to sign on. This will become broadly available early next year. As a reminder, Firefly Services is the engine powering GenAI automation, and is what led to strong adoption of apps in this suite.

During the quarter, Adobe also upgraded the Firefly Image model to 4x the pace of image generation, and continued infusing more GenAI work into Photoshop, Express and Illustrator too. Adoption of Lightroom Mobile (photo editing) was noted as a standout, with Generative Remove and upgrades to editing workflows both helping. Adobe Lightroom was named the Mac App of the year this year as well.

Adobe Express is now up to 180 integrations and added new players like ChatGPT, Salesforce’s Slack, Wix and Hubspot to the roster to bolster interoperability and diminish user friction. 4,000 businesses now use Express, while this product also had an excellent back-to-school showing, with 84% Y/Y growth in students on its premium plan.

The Adobe Experience Platform (AEP) and native apps revenue bucket crossed $1 billion this quarter with more than 40% Y/Y growth. Apps like Customer Journey Analytics and Journey Optimizer are doing quite well, as 48 Fortune 100 members are now using this suite of products. And while AEP offers foundational insight into best CRM practices, Adobe Experience Manager (AEM) (they need to change this product name) enables customers to take these learnings and deliver highly targeted ad placements and interactions with consumers. All of these tools “deliver productivity gains” while automating things like pipeline and customer lead generation. Firefly Services augments this by uncovering similarly-minded, copy-cat consumers for clients to target.

The Experience and Creative Clouds are rapidly converging around the “GenStudio” product umbrella. This unified bundle includes Firefly services, Express, all AEP apps and pretty much everything else that it offers outside of Document Cloud. If we think about it… conjoining experience and creative products makes a ton of sense. It’s one thing to understand your customers, how to talk to them and where they are… it’s another thing when the vendor who does this for you can also create beautiful, on-point marketing materials. GenStudio makes CRM an end-to-end endeavor for Adobe, while creating true differentiation vs. companies that typically only do one of these things (CRM or content creation). This will vastly “accelerate the content supply chain for customers,” with Firefly services facilitating that.

This quarter, Adobe added a new performance marketing tool to GenStudio to help customers manage ad placements across social and other channels. It plans to keep adding more & more tools to this newly organized bundle, and it will organize the enterprise go-to-market strategy around GenStudio. It expects this revamped focus to deliver a “pipeline acceleration throughout the rest of the year and beyond.”

“GenStudio extends our end-to-end content supply chain solution empowering freelancers, agencies and enterprises to accelerate the delivery of content, advertising and marketing campaigns.”

CEO Shantanu Narayen

More Experience Cloud Highlights:

Analysts criticized Adobe on the call for the smaller-than-typical net new ARR beats and the somewhat underwhelming forward guidance. It was asked if there’s some “leaky bucket” or churn issue preventing all of this positive sentiment and momentum from generating faster growth. If things are so amazing, why does forward guidance imply net new ARR deceleration? Leadership reminded us that it beat and raised three times this past year, and does like to lean prudent with its forecasting, but the concern was still palpable. As Adobe explained, the priority is on scaled adoption rather than monetization at this point. 2025 priorities include accelerating freemium access to its various apps based on all of the new GenAI upgrades. Monetization will come over time as it uses this new value to create more expensive subscription tiers. For example, it will soon add a new tier for its Firefly video model. Monetization will happen, but that’s still a secondary focus and likely led to some guidance disappointment for next year.

“When it comes to the core business, we are very focused on introducing new value. That is going to create more segmentation and more tiering. We can align value and pricing there.”

President of Digital Media David Wadhwani

As a reminder, Adobe doesn’t participate in the infrastructure layer of the GenAI opportunity. It focuses on building great models and apps. It stands out in its ability to unleash a massive supply of data – from PDFs to customer interaction history and more – to train a broad suite of apps across all clouds, including this one. That means more content to season and train models than others have, and also more applications to which these advancements can be added. Across Photoshop, Adobe Express, Lightroom (photo editing), Premiere (video editing) and so many more tools, Adobe is racing to add GenAI value across a larger set of tools.

The quarter was not terrible, but it was underwhelming for one of the highest quality names in software. It likely will raise new concerns around how meaningfully Adobe can turn GenAI momentum into financial gain, as the monetization so far has been more muted than for others. That adds to noise surrounding Canva and other competition beginning to steal market share, which is where the concerned sell-sider questions came from. Still, the firm continues to steadily compound top and bottom lines at massive scale and continues to be optimistic about GenAI monetization being a “when” rather than an “if”. I do see clear differentiation in pairing the experience and creative use cases together, which makes me optimistic about where GenStudio can go. And I do still see this as a fantastic company at a somewhat reasonable valuation. The multiple is starting to look quite tempting, but, as of now, I prefer to own other names. It’s interesting.

Ongoing Momentum:

Co-Founder/CEO Tomer Weingarten spoke about the net new ARR acceleration seen last quarter that positively diverged from typical seasonality. While everyone thought this would come from the CrowdStrike outage, it has actually come from the firm’s own better execution. It’s just a few quarters into its go-to-market overhaul and bringing on much more enterprise talent to pursue larger contracts. The fruits of those changes began to pay off last quarter, with SentinelOne in a better competitive position (per Tomer) than it has been in years. This should lead to a continued acceleration in net new ARR growth through most of next year. He didn’t want to call this a formal forward guide, but this was still wonderful to hear. SentinelOne has always had great tech. A leading, 5th straight perfect detection score from Mitre indicates that clearly, especially considering competition refused to participate in this study. Now? It’s combining elite tech with stronger go-to-market motions. 

“It’s just a very different picture than we had last year… I'm fairly confident that we can keep accelerating net new ARR and that next year is going to look better in terms of net new ARR. But, I don't want people running in all kinds of speculation. I just think that the strength you've seen in Q3 should carry on. And I think every indication that we have sitting here points in that direction… “I'm more encouraged now than I've been in a while… It's clear that we're going to have a better year next year than the one we had this year.”

Co-Founder/CEO Tomer Weingarten

“Q4 has traditionally been a strong quarter for us, and I think it's going to continue to be a strong quarter for us.”

Co-Founder/CEO Tomer Weingarten

Endpoint Security Demand:

Endpoint security demand enjoyed a “reawakening” for SentinelOne last quarter. CrowdStrike issues helped, but weren’t the largest factor in that positive development. Per Tomer, SentinelOne is getting more “consideration and attention than it has seen in 3 years.” He reminded us that this sector always delivers strong growth and has a large runway of legacy endpoints still left to displace. Endpoint is at the heart of breach protections. While there’s “always a lot of action” in this area, that was more noticeable last quarter. 

“I think the traction in Endpoint is most likely going to taper up…. And we’re in a better competitive position to capture that demand.”

Co-Founder/CEO Tomer Weingarten

Outage Benefits:

Tomer poured more cold water over the benefit of the July Crowdstrike outage and how go-to-market, product expansion and better overall execution are far more important factors driving its success. It’s a lot easier to displace McAfee and other legacy incumbents than it is CrowdStrike, and, “given their discounting,” not all of these disgruntled customers are worth pursuing. It’s important for SentinelOne to avoid abandoning all of the positive momentum it’s enjoying from its own changes to try to steal a little more short-term market share. This is why the uptick from the outage last quarter was small and why the impact will be a gradual trickle-in and better contract bidding consideration, rather than a large, one-off quarterly spike. Still, its pipeline size is up 40% Y/Y and that is part of the reason why.

“I just want to focus on doing the most I can do with my time. That's not always that displacement opportunity.”

Co-Founder/CEO Tomer Weingarten

Go-to-Market Overhaul Progress:

“There's been like almost a year of stabilization and rebuilding of our go-to-market force. The vast majority of that is in the rearview mirror. From here, it's net positive evolution, I would say, versus fixing things that we felt were really broken.”

Co-Founder/CEO Tomer Weingarten 

Lenovo Impact:

We got a lot of new information on the financial impact of the Lenovo deal. SentinelOne is leaning quite conservative in ARR assumptions from these shipments, as it responds to uncertain churn and rollout pace dynamics with prudence. Shipments will immediately impact revenue, but it will be slower to add that revenue to ARR. It appears SentinelOne is being extra careful to not repeat old mistakes of getting too aggressive by counting some non-recurring revenue in ARR. As it gets more comfortable with these variables, it will begin adding this business to ARR and does see a potential upward revision in ARR contribution from this contract in the coming years. The impact of this new partnership will ramp a bit throughout 2025, but will be more pronounced in calendar 2026.

“We think 3 years forward. We want to see our growth rate as high as it can be throughout these years, not just next year.”

Co-Founder/CEO Tomer Weingarten

Non-Endpoint Notes:

Profitability:

SentinelOne expects margins to ramp meaningfully next year. Tomer acknowledged that the firm could maintain 40% revenue growth, but knows investors want to see near-term profits in this environment. Still, he thinks the company can get close to a rule of 40 next year. Estimates call for a rule of 40 (revenue growth + profit margin) score of 29 based on EBIT margin and 35 based on FCF margin, so this could be taken as a raise for next year.

More Room for Cost Cutting:

“We need to continue to focus on eliminating unnecessary costs to put money back into the big bets that we're making as a company.”

Disney CFO Hugh Johnston

Theme Park Expansion & Pricing:

“And given the level of demand that's out there for new lands and attractions, we're expecting to be able to both get increased attendance and higher pricing. We’re delivering more value.”

Disney CFO Hugh Johnston

It’s important to note that park price hikes will continue to focus on premium plans and add-ons like line-skipping. Disney is determined to keep prices for value packages lower and to minimize cost inflation there. It wants to keep these experiences accessible. That’s how it maximizes traffic and creates the most compelling omni-channel flywheel to drive interest in its content.

In Paris, weak traffic from the Olympics immediately normalized following the end of the games.

Important Consumer Health Insight:

“More broadly, as we look at things, the consumer is actually doing okay right now. We obviously saw a little bit of a hiccup in the summer with the parks. Right now, the consumer seems to be doing fine.”

Disney CFO Hugh Johnston

Skepticism Surrounding its 7% Operating Income Growth Guidance for This Year:

Johnston reminded us that profit growth will be back half weighted. New ships and vacation rentals will go live in the second half of the year and will be immediately profitable. Disney is also lapping one-off cost inflation and opening costs from last year, which will help growth as well. They’re “quite confident and have good visibility” in this guidance. They also have several levers to pull to meet if consumer weakening or some other headwind pops up.

Furthermore, it has baked a lot of Florida park traffic weakness in from the new Epic park from Universal. They were “pretty cautious and conservative on that.” And furthermore, in the past, new competition surrounding its parks has elevated overall consumer traffic in the area to buffer the comp headwind. It sounds like Disney was overly pessimistic with its assumptions. 

“Because we can't predict everything perfectly, we've got levers to manage. If we do get surprised, whether it's in the parks or whether we get surprised elsewhere in the portfolio, we have the ability to pull those levers and to deliver the guidance regardless of what's dealt to us in most scenarios.”

Disney CFO Hugh Johnston

Streaming:

It sounds like price hikes are coming. The hike in October “worked out very well” and is pushing Disney to get a bit more aggressive. The password sharing initiative is also “working out well” and that benefit to subscriber growth will ramp throughout the year. This was a massive help for Netflix, and should be a smaller, but still large help for Disney+, considering its relatively higher churn dynamics.

Speaking of churn, Disney’s fantastic box office turnaround is delivering subscriber growth and retention benefits as expected. Several more hit titles are coming in the next year. And along similar churn lines, it expects the full ESPN and Disney+ streaming integration happening this year to greatly help there too. As Johnston explains, it will create another reason for a household “objector” to demand their family keep the subscription… We need to watch the game. And as an important aside, moving ESPN to streaming will create an environment ripe for real-time advertising auctions, rather than purchasing millions of impressions well in advance. Impression value rapidly fluctuates as games develop, and Disney will be able to account for this going forward. This will make it a better advertising partner for every single buyer.

Disney+ is going to be the central entertainment hub that brings all of this together. And Disney will also look to potentially license content from other providers to bolster the appeal of the library even more.

Moana 2 is turning into the 4th recent major box office hit for Disney. It set a new 5-day opening record of $221 million, which is a full 8% higher than the previous record holder (Super Mario Bros Movie). But it wasn’t done breaking records. In its second weekend, it generated $60 million in sales, nearly doubling Frozen 2’s previous post-Thanksgiving record. Deadpool and Inside Out 2 delivered $300 million in added EBIT for Disney last quarter, and it looks like this one will be deeply profitable as well. What a turnaround for the film division. Everything (besides Star Wars) has been fixed. Amazing what can happen when you focus solely on storytelling and the highest quality projects in your pipeline.

Broadcom creates & manufactures a slew of semiconductor-related equipment within data center, networking and industry-specific use cases. Superchips and high-performance compute (HPC) can’t all be packed into the same corner of a data center. GPUs must be able to connect to one another to drive better bandwidth and performance, with faster, more efficient model training and inference to cut costs. This is where Broadcom thrives. 

 It also offers a range of software tools, which significantly broadened out with its VMWare acquisition. VMware offers virtual, localized layers of software that sit on top of hardware. This allows the centralized hardware to run several different operating systems from the same place. The company, which is now a Broadcom unit, calls these “virtual machines” or virtual private clouds. By reducing hardware requirements, VMWare saves its clients money. 

This company does not compete with Nvidia in terms of designing GPUs. Instead, it focuses on networking and connectivity, which competes with Nvidia’s switches and its SpectrumX networking product.

Strange Accounting Items to Note:

Broadcom’s VMWare acquisition is impacting several company metrics. It’s greatly benefiting overall revenue growth, as well as infrastructure software revenue growth specifically. Finally, the acquisition is greatly hurting GAAP margins due to the M&A-fueled stock compensation, restructuring and integration costs. Y/Y comps will partially normalize next quarter as it comps over a partial quarterly contribution from VMW. Comps fully normalize the quarter after.

Infrastructure Software:

Per the team, multiple deals were slightly delayed and “slipped into Q1.” VMWare CPU volume booked (how it recognizes revenue) was 21 million this quarter vs. 19 million Q/Q. Annualized booking value (ABV) rose from $2.5 billion to $2.7 billion Q/Q to continue tracking well ahead of initial M&A synergy targets. It sees ABV rising to over $3 billion next quarter. 70% of VMWare’s volume is now for VMWare Cloud Foundation, which is its full suite of data center virtualization tools and the piece of VMWare that Broadcom is most determined to carry forward and grow. So far, 4,500 of Broadcom’s largest 10,000 existing customers have already become VCF customers, which is a big reason why this deal is going so much better than expected thus far.

From an operating expense point of view, quarterly OpEx fell to $1.2 billion vs. $1.3 billion Q/Q and $2.4 billion when it closed the acquisition. That has allowed AVGO to push the large chunk of VMWare it’s keeping from a 30% EBIT margin business to a 70% EBIT margin business. The normal thing is for M&A goals to be optimistic and unattainable… In this case it’s the exact opposite.

“We are well on the path to delivering incremental adjusted EBITDA at a level that significantly exceeds the $8.5 billion we communicated when we announced the deal. We're planning to achieve this much earlier than our initial target of 3 years.”

CEO Hock Tan

Semiconductor Solutions:

AI networking revenue rose 158% Y/Y to power 45% overall networking growth. Within this bucket, its custom AI Accelerator business (XPUs) business enjoyed 2x Y/Y growth thanks to great demand from hyperscalers across the globe. XPUs are separate pieces of hardware used to expedite workload and data processing or, generally speaking, extract more performance out of data center architecture. Broadcom is the first company to ship 3 nanometer XPUs to hyperscalers during the second half of fiscal 2025. 3 nanometer measures the size of transistors. The smaller the size, the more can be packed into chips to bolster power and performance. Next, it enjoyed 4x growth in AI connectivity revenue from its Tomahawk and Jericho Ethernet switching products. These help connect pieces of data centers to form larger compute clusters. Momentum for this segment has remained quite strong into Q1.

For non-AI networking revenue:

AI Networking Demand Outlook:

Over the next 3 years, it thinks the AI networking opportunity is “massive” and thinks it will keep rapidly growing its annualized AI revenue base of now $12.2 billion. Hyperscaler clients like Bytedance and Alphabet “have begun” to deploy Broadcom XPUs and ethernet switches. The full deployment process will be “multiple years, not a quarter-to-quarter journey.” For fiscal year 2027, it sees the serviceable addressable market (SAM) among its combined hyperscaler clients at roughly $75 billion (more than its current annual revenue base for that year alone). It feels perfectly positioned to capture a lot of that demand based on a current 70% market share of it. For more context on how exciting this opportunity is, this $75 billion SAM was just $17.5 billion for 2024.

Furthermore, it was just selected by 2 more hyperscalers with a “line of sight" to develop these prospects into revenue before 2027. That should expand the SAM further.

Holiday Shopping Results:

“But the punchline remains a 24% growth year-over-year. I think in stark contrast to some of the other numbers you may have seen out there, I think our merchants had a very strong weekend.”

CFO Jeff Hoffmeister 

Enterprise Opportunity:

There has been a great deal of buzz surrounding Shopify’s enterprise growth, and for good reason. Still, it’s so early here. As CFO Jeff Hoffmeister reminded us, sales + implementation cycles are routinely 18+ months. It’s only 2 years into its go-to-market change that prioritized large enterprise selling and commerce components by Shopify (CCS) (à la carte buying for large enterprise) is less than 2 years into its launch. All of this is to say that Shopify has barely gotten through one full sales cycle here, and the momentum is already palpable.

Taking Shop Pay off Platform:

Shop Pay (its checkout accelerator) is still only for Shopify merchants. More than a decade ago, PayPal deciding to open up its own checkout button beyond eBay was the single most important decision it made for the stock’s fantastic run that followed. Shopify is gearing up to make this same decision, which Hoffmeister calls a “logical extension” of Shop Pay. Another future tailwind.

Why is it Winning in Large Enterprises?

The same things that have served Shopify well for nearly two decades are allowing it to find great success with the big boys. Its broader product breadth, perfectly unified product suite, slick 3rd party integrations and platform resilience all enable lower total cost of ownership. And? Shopify has worked very hard to tighten relationships with System Integrators (SIs) to educate them on these large performance and efficiency gains. That has paved the way for frequent referrals from these partners, and most of those referrals are for larger merchants. It’s worth noting that most of Shopify’s success here is displacing homegrown tools, which shows a still large greenfield opportunity for commerce modernization. Still, it is finding traction in large competitive displacements as well.

Price Hikes & Margins.

As a reminder, Shopify recently hiked its standard pricing tier for the first time in 13 years and its plus tier for the first time in 7 years. Going forward, price hikes will become more frequent as Shopify continues to add meaningfully more value to its offering. Those price hikes are extremely margin accretive, as they simply boost its high margin subscription revenue bucket with very little company effort.

It also plans to keep headcount flat in the quarters ahead. It will keep hiring sales and R&D talent, but is cutting some G&A roles to counteract that.

Quarter-to-Date Outcomes:

October was a terrible month for sports gambling outcomes for DraftKings and others. While over the long term, trends revert to the mean, short-term outcome-based volatility can be sharp. This does directly impact revenue and profit generation. November was “more of a typical month” and maybe a “bit positive.” The first day of December “was not positive.” This will continue to ebb and flow and provide a great deal of noise to be tuned out. Zooming out over more meaningful, structural time periods, this is irrelevant.

Demand:

Engagement was called “tremendous.” It’s still enjoying “some of its best numbers” for winter season sports. There’s generally a dip in the middle of seasons as interest wanes for fringe fans. That has not happened this year. Volume has remained stellar following a “really strong start” for the NBA season and throughout football season. For the NBA specifically, considering it is the highest hold rate (revenue/volume) sport, that’s especially encouraging. This is one of the reasons why FanDuel has a higher hold rate than DraftKings. That competitor does better in the NBA. DKNG does better in lower hold rate collegiate athletics and football overall.

The USA Market vs. The UK:

The UK is the most mature gambling market in the world. Many thought the USA would never approach the per capita volumes that the UK consistently churns out. Not so fast. As Robbins puts it, the U.S. “leads in every single entertainment spend per capita in the world.” There was no reason for gambling to be any different… and it won’t be. All signs point to per capita ceilings across states being similar to the UK.

Robbins was also asked about FanDuel’s parent company Flutter. That player operated in the UK and other legal markets long before DraftKings did. This led to a bit of a product gap between the two, with DKNG’s parlay menu being less complete than FanDuel’s. Parlays mix is one of the most important factors for increasing handle, and that’s the biggest reason for the gap between the two today. As of today, DraftKings feels like it has created product parity between it and the field, while even leading in some tech and platform resilience areas, as well as marketing and promotional efficiency. The company sees a clear line of sight catching all the way up to FanDuel (parlay mix-shift + more NBA success), which should mean its revenue and profit growth can greatly lead volume growth in the quarters ahead.

“Initially, we were behind when it came to product and technology, and it wasn't until we acquired SBTech and then ultimately put a lot of work into it over the last several years that we feel like we're really a premier place in the market when it comes to our technology and product capabilities… We feel like this is the time where we really can continue to gain share.”

Co-Founder/CEO Jason Robbins

“If you look at it from a handle share standpoint, we're actually neck and neck [with FanDuel]... I like that we're at a place where we get the same network effects… but we're actually still staring at so much upside with every move upward of hold rate.”

Co-Founder/CEO Jason Robbins

Robbins also told us that it will expand globally. He has toyed with this idea in the past, but this was the most explicit stating of his intentions that I can remember. Not only will this mean more market opportunity, but will also diversify DraftKings away from American football, which is the main cause of outcome-based volatility today.

Regulatory Climate Following Missouri Setting a Highly Favorable Tax Rate:

“It's always hard to get gaming bills done in an election year. I think this year coming up, 2025, we're going to get some real momentum, potentially even get some iGaming bills over the hump, which would be great.”

Co-Founder/CEO Jason Robbins

DraftKings is now approaching a 10.5% hold rate (revenue/total volume or similar to a take rate) and expects that to climb to 11% in 2025 as parlay mix improves. Last quarter, it told us about a historically bad October month in which the hold rate was just over 6%. It has never had that level of bad luck before and even had a sub-1% handle week there in New York. That led to a sharp downward EBITDA revision during its Q3 call. It lowered EBITDA by $120 million due to a $175 million outcome headwind.

New York reports weekly state-level data by vendor. In that state, DKNG’s hold sharply recovered in November to 10.1%, which was great to see. So far in December, there has been more bad luck for DKNG in New York. The hold rate has been slightly below 8% month-to-date. If New York resembles the rest of the nation, this creates risk for DKNG’s Q4 results and could lead to misses.

Does this matter for folks focused on quarterly timelines? Absolutely. Does it matter for someone like me who ideally wants to hold this for years to come? Not in the least. What does matter? That this company continues to dominate its category as one of two monsters, continues to maintain its momentum despite rapidly slashing marketing expenses, and is poised for years and years of profitable growth even without future regulatory tailwinds. These tailwinds, in my mind, greatly outweigh the risk of a state or two raising their taxes.

DraftKings trades for 100x forward earnings with EPS expected to compound at a forward 2-year clip of 131%. It trades for 40x forward FCF with FCF expected to compound at a forward 2-year clip of 165%. This is the market leader in a structural growth category delivering explosive margin-accretive growth at an extremely fair price. I don’t care about two weeks of data from one state. And I’d even root for hold rate noise to intensify so I can keep buying more shares. I was very close to adding on Friday and will likely add in the near future if this volatility continues.

JP Morgan initiated coverage of Celsius with an overweight rating and a $37 price target.

Starbucks will maintain its $0.61 quarterly dividend. It also hired a chief growth officer in China. The Starbucks China CFO will step down in December. He will focus on growing the firm’s social media presence there and reigniting growth. Changes are certainly needed in China, but I’d still love for them to sell a chunk of this business. Hard place to consistently win.

Wolf Research upgraded PayPal to outperform with a $107 price target.

SoFi app download data has been excellent since it announced it will offer access to SpaceX as an investment through its brokerage.

CrowdStrike secured key public sector certification in Germany (C5 Compliance Certification) to pave the way for future deployments there.