For the full year, it raised revenue guidance from $90B to $90B+ and boosted EPS guidance ever-so-slightly from $8.05 to $8.10.

Oracle trades for 18x EPS (again no free cash flow). EPS is expected to grow by 7% this year and by 35% next year.

Meta Muse is the company’s new consumer agent grounded in dense customer data profiles to better understand goals and desires. It can work behind the scenes on your behalf to complete a task, finish a piece of work or schedule an upcoming week. To ease inevitable privacy concerns from some, data and credentials are stored on a secure virtual machine with a separate dedicated agent to verify every single request for risk before approving.

While this all sounds nice, there’s encouragingly some promising early demand news pointing to Meta being on a great path. The early Meta Muse usage blew past internal expectations for Meta.

It already had the world-class distribution full of trillions of interactions to reimagine and add value to. And now? It has a promising new agent offered as a standalone app that’s shattering their usage goals & in the top 5 on the App Store. They’ve already built this directly into WhatsApp. If things keep going this well, they will be big parts of all other core Meta apps too. So many high margin revenue opportunities will be layered into their existing experience over time.

Need to book an appointment? Send an email? Schedule your life? Or fill out a form? That’s what Muse is for, with intuitive ways to monetize heavier usage via $20 & $100 monthly tiers. These early learnings should also provide highly valuable data to inform that roadmap and give Meta a better chance of shaping it in ways that more quickly appeal to users (the benefit of getting to debut compelling innovation across several different scaled products). 

So now? Crystal clear evidence of using AI to make core app engagement & monetization better… building a paid model business as its LLMs shoot up leaderboards & undercutting competition on token costs… successfully scaling the beginning of its army of agents… both across consumers and enterprises.

Speaking of which, Meta just announced acquiring Stilla AI. This will be used for its business agent to help merchants with customer service, pursuit of optimal growth, and transactions across its core apps. This should accelerate product development, build on the million merchants who are already using these tools and fuel the fire. They were founded just two years ago with only a little funding to date so this deal is inevitably very small. I’m a fan.

So many ways to make this hefty AI infrastructure spending productive. Meta has a very strange way of showing they can’t monetize or win in AI.

Vibe Coding?

While the vibe coding disruption risk narrative has mostly died down, McDermott still got the question. The answer hasn’t changed. At the center of each part of ServiceNow’s immensely broad platform… across IT, data infrastructure and security… is the Configuration Management Database (CMDB). This provides an organized and giant web that guides 100B total workflows and shows how everything in a company connects to each other. It offers a complete view of permissible relationships and a level of enterprise understanding that virtually nobody can match. It’s this understanding that uplifts the raw potential of an AI model to (as we so often discuss) turn probabilistic potential into reliably certain outcomes.

ServiceNow has all of the apps, data and integrations needed to enable agents to complete complex work. It has the “AI Control Tower” that uses this holistic view and offers a complete idea of permissible and shadow AI where vibe-coded alternatives can’t. It has an agentic assistant to help guide customers through these capable tools and optimize value creation. And? It offers this while integrating related agents right into CMDB and modern vector search tools, providing  a reliable and concrete sense of what they’re actually allowed to do. For icing on the cake, this service in aggregate is provided for a lot less money and a lot less headache than companies trying to “just vibe code” the experience. Most are understandably choosing to focus on their core value proposition and leave this tedious work to ServiceNow.

Recent Customer Engagement:

Mastantuono was energized by the quality and cadence of recent customer engagements. In their prospective client conversations, hesitation tied to customers experimenting with vibe coding to replace software platforms has greatly eased. ServiceNow’s world-class suite of productivity and work optimization apps, data infrastructure tools and cybersecurity modules all continue to resonate. Furthermore, these successful products are pairing perfectly with ServiceNow’s overarching AI asset visibility and orchestration platform. Because? Agents need great data and tools to do complex work just like people do. ServiceNow’s core platform provides all of that in one place. This formula is amplified by abundant partner integrations, assuring that customers pick the cheapest models for specific parts of workloads and can use popular coding agents alongside their ServiceNow deployments. It is positioning itself as the everything platform in next-gen enterprise software. While many companies push for that label, NOW comes as close to embodying it with high-quality apps as any other competitor. And that’s why customer engagements are going so well.

Sources of AI Momentum & Potential Upside to the $30B-$32B 2030 Guidance:

ServiceNow sees a massive opportunity to steadily “agentify” (automate with AI models, harnesses and agents) workloads across all IT asset and service management businesses, its data platforms and everything else it provides. Much like the ongoing multi-decade cloud transformation that has fueled structural growth, this should provide the next structural growth tailwind to join the cloud migration opportunity. Agentifying workloads means making them far more efficient and scalable, which naturally supports overall platform consumption and ServiceNow monetization (thanks to its consumption/subscription hybrid model). Productivity tends to yield more activity, as companies discover incremental growth and innovation that emerge with more attractive returns. Specifically, companies that use ServiceNow agents for various workflows end up delivering a 4.5x revenue uplift vs. the beginning of the term… far higher than a typical non-AI deal.

ServiceNow’s platform, I think, is well positioned to capture an attractive amount of that emerging market. Mastantuono agrees, as she called the prospect of the AI business outperforming current multi-year forecasts and enabling an overall growth acceleration “reasonable.” The long-term guidance offered at its investor day a few months ago was again called prudent.

Near-term AI product priorities include:

Current M&A Interests:

No big blockbuster deals are currently in the appetite for ServiceNow. They are, however, interested in adding bolt-on agentic capabilities that allow them to go to market with new apps and tools faster than doing so organically. Along these lines, they just purchased a company called Sweep. Sweep built agents that track and analyze CRM metadata to fix issues as they pop up for customers on ServiceNow, Salesforce, HubSpot and several other platforms. They turn decades of jumbled and unstructured mess into valuable insight that will help customers uncover new business optimization strategies. If a customer alert didn’t trigger properly, a sales rep isn’t courting leads or some marketing channel is not working as well as it could, Sweep unlocks actionable awareness. 

Generally speaking, this will help ServiceNow and its clients extract value from the massive base of data already on its platform. These tools, along with Sweep's deep HubSpot and Salesforce integrations, should greatly expedite full CRM migrations to ServiceNow's platform. Specifically, ServiceNow sees these occurring in 3-6 months instead of 12-18 because of the purchase. Finally, considering this is small (estimated $100M-$300M deal) and the product was already being actively used on the NOW platform, integration work should be easy. 

Security Positioning:

ServiceNow’s budding security division (turbo-charged by Veza and Armis M&A) is providing new revenue opportunities which complete its workflow chain. ServiceNow's platform already had the resolution piece via deep experience in tracking security and IT issues and spearheading the repairs. Now, with Armis providing asset visibility and Veza providing identity and access controls, they can play a much bigger role in detection and alerts without requiring partners. Even though M&A was a big help, they already had $1B in organic annualized security revenue and it’s also great to see them growing that business so quickly post-acquisitions. We should not shrug off how meaningful it is that this company now has a top-10 security business by revenue (and outgrowing the other 9). Customers were yearning for a workflow automation and data infrastructure partner to integrate security too… and they now are in a meaningful way.

More:

No Capital Raises:

Lapointe reiterated that “under the current operating plan” SoFi does not see any need for capital raises “at this point in time.” Some were worried about that language, but leadership can’t promise no capital raises ever again. No matter how responsibly they manage their balance sheet, how affluent their typical borrower is or how effective they are in pricing risk, they are a creditor tied to economic cycles. There are macroeconomic possibilities that are highly unlikely, but would still force many, many institutions to seek external funding and shore up their balance sheets. It would not be wise to pigeonhole themselves with a promise no bank could possibly keep. 

It’s important to mention that past SoFi capital raises did not hurt net income or tangible book value per share. All of them allowed SoFi to retire enough highly expensive debt to pocket interest expense savings needed to at least (or in some cases, more than) offset share count growth. The reason we all can’t stand equity raises is because dilution eats into the profit per share. That hasn’t happened for SoFi. These decisions haven’t been harmful for shareholders because of the unique nature of SoFi’s previous capital structure and getting a bank charter. That charter has allowed it to shift most of its funding to much cheaper deposits. Now that this balance sheet optimization process is largely done, future capital raises are even less likely in my mind.

Guidance Notes:

Lapointe confirmed what most of us have been thinking: Because SoFi is now assuming 1-2 rate hikes in its guidance, if those don’t occur, there might be potential upside to forecasts. They don’t need significant brightening in any trends to hit their current 2026 forecast even if rates actually are hiked twice. For the 2025-2028 operating plan, Lapointe was bluntly asked if SoFi remains confident in 30% revenue growth through 2028. Here’s what he had to say:

“We feel confident. We have large and mature businesses that are growing extremely well. At the same time, we have less mature businesses, like I said at the top of the hour, that are starting to scale but not contributing meaningfully. We have strong confidence in our ability to grow revenue.”

Finally, on the previously offered long-term 25%-30% return on tangible common equity (ROTCE) goal, I think SoFi could get there quickly if it wanted to. There’s a clear path if it chooses to prioritize near-term profitability over long-term compounding and building the best possible business that it can. That’s just not the correct decision for maximizing shareholder value, so it’s not the decision they’ll make. They will continue to pursue growth with that 30% incremental EBITDA margin target, striking a compelling balance between top-line success and still solid margin expansion.

Remaining Personal Loan Runway:

There’s ample opportunity to refinance a boatload more 25% APY credit card debt to 12% personal loans for prime borrowers. Creditors have no incentive to refinance this highly profitable product for customers. SoFi can easily do it in a highly profitable manner. That has yielded explosive market share gains for years, and they don’t think they’re done yet.

While there has been a push from SoFi into lower credit quality buckets to cater to some loan platform business (LPB) capital market partners, Lapointe explicitly said SoFi doesn’t need this to find growth. There is plenty of opportunity remaining among prime borrowers… whether that’s from refinancing or taking share from charter-less digital lenders with inferior cost structures and an inability to compete on price.

Going forward, alongside ongoing personal loan growth, LPB volume will continue to feature more small and medium business (SMB) demand as well as mortgages. They have significant committed capacity from partners and are ramping these businesses to utilize it. Lapointe called home/SMB the next leg of LPB growth, but again was careful to say the personal loan side still had plenty of room to run. 

Many have incorrectly assumed that SoFi is shifting volume away from this LPB business because it has to. As they’ve explicitly said, it’s because they want to lock in multiple years of visible revenue to fund investments in more products. And now that they’ve just wrapped up two quarters of hefty balance sheet originations, LPB originations should accelerate during the 2nd half of the year.

A Quote on the Current Health of SoFi’s Members:

Big Business Banking & The Tech Platform:

SoFi was pulled into Big Business Banking (BBB) by large financial services players seeking a nationally chartered bank that could handle their fiat and crypto payment flows on a single regulated platform. Providing this unified capability opens two large opportunities for the company. First, it should attract a lot more deposits to juice net interest income. Second, it will  provide several fee-based revenue streams related to the 24/7, lightning-fast and relatively cheap SoFi Exchange Network (SEN).

It's no secret that the Tech Platform has been the most disappointing piece of this business. Everywhere else you look, trends look elite and then some. I think this provides SoFi with another enterprise banking revenue opportunity. This time, it's from a payment settlement point of view, sitting in the flow as the bank and stablecoin issuer rather than just selling the APIs outright. And since SoFi Tech Solutions supplies the  infrastructure behind Big Business Banking, its success provides proof of concept and creates a catalyst for faster growth than previously seen over the last few years. The company overall continues to remain in 30% top-line compounding mode while this segment underwhelms.

As a reminder, the cost savings provided by owning its tech stack creates a lower cost structure and differentiation in a highly competitive banking industry that I find highly compelling. It helps build a sustainable moat where that is rare. That makes the Galileo and Technisys purchases worth it to me regardless of enterprise sales momentum. But still, I’d love to see that part of the business doing better, and it sounds like they think that will happen in 2027. We’ll see.

More Notes:

AI Augmenting Migration Appetite:

The motivation to migrate and modernize data systems continues to be directly fueled by AI. Companies know that scaled usage of agents requires clean, unified data systems that can be readily and rapidly fed to these tools on command. This is helping compress sales cycles for some customers. Meanwhile, SNOW infuses this new technology throughout its own platform and creates entirely new offerings that enhance its value proposition and reduce the sales cycle even further. This is driving the fantastic results delivered over the last couple quarters.

Evolution of App Layer:

Snowflake CEO Sridhar Ramaswamy had a very interesting take on where he sees the software industry going. Rather than ubiquitous vendors for various point solutions, he sees those tools being more frequently built by AI. Coding agents are increasingly capable of building custom products on top of existing data infrastructure to run surveys or complete simple tasks that were previously outsourced to smaller software vendors. He called this “building skills” as a new way of conversationally building and delivering applications. That all would position Snowflake as a dominant data vendor poised to take the biggest pieces of this emerging opportunity.

Thanks to tools like those built by SNOW, they can also be built conversationally, allowing people without any coding background to construct these apps, but also creating a standard set of inputs for models to understand. That standardization eliminates potential vendor lock-in as Snowflake customers mix and match all potential models to arrive at the best combination at the lowest cost.

Product GPM:

While higher OpenAI and Anthropic-related costs tied to their AI products are weighing on product GPM, this is a tradeoff SNOW is committed to. I agree with this decision.

Product GPM is still lofty and fell by less than 2 points Y/Y. Despite that, the company is driving great EBIT-level leverage thanks to strong OpEx efficiency gains. Furthermore, these costs are delivering the raw tools needed for the sharp and impressive growth acceleration currently unfolding. I’d say procuring compute is a great move to make, especially with the ample opportunity to optimize this spend down the road. Ongoing token deflation (I think) is inevitable, Snowflake will keep buying larger chunks of compute at bulk discounts and they’ll use cheaper models more often whenever cost optimization becomes the focus instead of rapid scaling. Right now, it’s time to grow.

Risks to AI Ramp Forecasting:

Like many other SaaS companies during the pandemic bubble, Snowflake enjoyed historically strong consumption tailwinds that were unhealthy and unsustainable. Customers used Snowflake’s platform with very little operational focus or regard for cost optimization. When the bubble popped, that meant a lot of companies sharply cut back on their usage of Snowflake to prioritize mission-critical tasks. This is leading many to worry that explosive AI product usage will eventually mean the same thing. When the team says things like “customers are ramping far more quickly than before” that’s both exciting and, for the reasons just mentioned, a bit anxiety provoking. Snowflake leadership isn’t concerned. They now fixate on helping customers optimize usage, making sure engagement with the platform is healthy. It even offers hands-on tutorials to assure customer success.  Sure, this could all mean modestly slower near-term growth and slightly elevated costs, but it also builds customer trust and means smoother long-term compounding.

News circulated around social media about an AI agent bypassing Shop Pay (Shopify’s checkout accelerator) to buy a product through a Shopify store. In other words, the agent chose to use a vaulted Mastercard on the website instead of going through Shop Pay. The ironic thing is that people make these decisions all the time. Checkout options have many convenient choices from various checkout accelerators with pre-loaded information like the one in question. It’s not just Shop Pay. Checkout is hyper competitive and always has been. Also note two important things:

Luckily, Shopify doesn’t need remotely close to 100% payment market share, and its world-class value proposition is still highly relevant in the agentic commerce era.

While agents can fill out info, they also occasionally hallucinate and fail as they collect and enter information. Every failure means a lost sale for the merchant and a lost positive outcome for vendors to monetize. A structured, authenticated, one-shot checkout is the more reliable path for an AI transaction for the same reasons that it’s more convenient for a person. That’s still what is best for conversion rates.

World-class fraud systems and a massive base of pre-validated identities in the scaled Shopify ecosystem are also required for agents to work most effectively. These autonomous assets to a merchant are strangers capable of doing immense damage if not properly implemented. This makes digital wallets an important tool for confirming an actual human is tied to this agent request, which is also good news for wallets representing large batches of people like Shop Pay.

It’s also important to understand that the agents people worry about are being built by companies extensively using Shopify modules too. For example, Shopify was named a partner for Anthropic’s commerce agents launch, which directly uses Shopify Catalog just like OpenAI does.  These two companies know that shorter workflows mean cheaper costs and while the savings per transaction are tiny, that adds up at global commerce scale. This naturally motivates them to work with the checkout providers enabling the lowest failure rates, i.e. Shopify.

I think SHOP is going to keep doing very well in checkout, but also believe the plan B is acceptable too. The unit economics of a shopper/agent using Shop Pay on a Shopify merchant site are better than anything else. The company can use that advantage to fund rewards and incentives, absorb a modest margin hit, and make Shop Pay the option an agent optimizing on a consumer's behalf will rationally pick. I don’t think that’s necessary for Shopify to be a big player here, but it’s doable if required.

The biggest risk here is that customer relationships go away when agents are doing all of the shopping. Even if Shop Pay is used alongside Shopify Catalog and Shopify Payments, a customer doesn’t necessarily know that if they’re not spearheading the transaction. I do think people naturally enjoy shopping for things and will keep doing it. I don’t think golf courses should be worried that people will stop golfing because robots can do it for them. I don’t think people who like to shop will stop doing it because agents can do it for them either. Sure, they’ll use chatbots like crazy to expedite discovery, but I don’t think that threatens Shopify's future.

Outside of checkout-specific defensibility:

And most importantly, Shopify’s most valuable asset and the biggest reason for AI companies all needing to go through them is their massive base of merchant data. They have 14% of U.S. e-commerce market share (and rising) and the mountain of product listings and descriptions that go alongside it. These are plugged right into AI assets via Shopify Catalog to ensure best in class inventory accuracy and product metadata availability. Listing quantity means AI companies must use Shopify to gain access to a large chunk of merchants. Listing quality makes partner agents more likely to use Shopify merchant products in outputs.

And finally, the army of small brands on Shopify make up a sizable portion of its volume, while successful new business creation is a vital cog in its long-term growth engine. For these smaller companies, keyword marketing budgets are a main bottleneck standing in the way of reaching more people and connecting great products with interested consumers. In the age of AI, that bottleneck shifts. These agents can easily find everything and are motivated to find the absolute best option due to being graded on outcomes. There will be sponsored listings that will pop up from this, but that’s an obvious extension for Shopify’s advertising suite and another easy performance marketing outlet it can pursue for its merchants.

Quick Take:

All in all, I think the commerce landscape will keep evolving. I think channel usage will keep changing and risks will keep emerging. I just think Shopify will be the company setting the innovation curve, staying one step ahead of everyone else and remaining a big piece of the overall commerce space. As long as Tobias Lütke is leading this roadmap, Shopify should continue to do very well. This news does not change my feelings on the company.

AI Impact on Global E-Commerce Adoption & Trends:

About 9 months into agentic commerce’s proliferation, it’s already accelerating the pace of global e-commerce adoption. It’s making discovery exponentially more relevant and expedient, suddenly morphing annoying online shopping experiences into delightful outcomes. That is fostering an “inflection” in the typical 1% annual rise in e-commerce adoption rates, which is great news for Shopify’s largest business bucket (net positive even if it means slower offline growth).

In terms of concerns over agents disintermediating Shopify and displacing some of its role in e-commerce, they’re not concerned. Part A of this section already got into why I agree, but they added another important point that I didn’t mention. Merchants want to own this relationship. They want AI to source traffic and then to convert that traffic themselves. They want customers to eventually end up on their site. That's the only way they can collect vital data to understand customer demand trends and keep assortment compelling. And? A large chunk of them all reside under Shopify’s platform, allowing it to bargain with AI natives far more effectively than they could on their own.

All of this gives Shopify a great chance to keep doing exactly what they’re already doing. Strike partnerships with the AI giants that let merchants maintain this imperative context and deeply lean into Shopify Catalog for its vast base of accurate, real-time, metadata-packed assortment to provide LLMs with reliable information to fuel better outputs. These agents also routinely use Shop Pay and Shopify Payments for the reasons already described in section A as well. As leadership put it, complexity and commerce fragmentation fuels the need for Shopify. Agentic commerce is fueling overall demand. That formula is good for the company, regardless of some of the noise out there right now.

Consumer Health:

Just like Uber and other companies this week, Shopify talked up resilient consumer health and no changes to promising patterns since it reported earnings a few weeks ago. Always good to hear.

This was a boring interview. It reviewed a lot of what we already talked about from their earnings report and didn’t feature much that was new. Just like they said on the call, the business is booming, with AI expansion opportunities thriving, its drone business thriving and everything else growing at a healthy clip. Even for their most mature product line (Tasers) the newest iteration (TASER 10) has plenty of upgrade room ahead.

Other interesting notes:

Overcoming Softer Industry Trends:

Sector-wide insurance momentum has been a bit challenged lately. Customer acquisition expenses and overall cost of capital are both rising while concerns over peak cycle underwriting margins creep into the investor psyche. This is all happening amid less leeway for insurers to hike premiums than recent years. All of these headwinds are leading to waning industry marketing efficiency, slower growth, and expectations that return on equity (ROE) across the space could contract in the near term.

Lemonade doesn’t seem to be struggling with any of these obstacles. That’s partially tied to more modern and AI-driven marketing practices and a philosophy that uses superior levels of automation and operating efficiency to compete with lower customer pricing. We frequently talk about the sizable loss adjustment expense (LAE) ratio edge that it has over the big boys. That’s not supposed to happen at Lemonade’s size, and is evidence that their claims of superior AI optimization are entirely legitimate.

But there’s another factor helping the company that isn’t purely tied to Lemonade’s consistently strong execution. They’re tiny, and having great success with winning a larger piece of the pie. Insurance is gigantic and leaves miles upon miles of market left to take. That helps buffer any macro-related headwinds for the thriving little guys like Lemonade. Geico and Allstate can’t really do this because they are so large and don’t have nearly as much market share left to grab. They more or less grow as the industry grows, which makes exogenous swings in the backdrop more noticeable to their results compared to Lemonade. As Bixby said, it does impact them to a certain extent, but we’re talking growing 32% in a quarter instead of 33%. Not 10% growth instead of 33%.

There are no changes to growth expectations for Lemonade and no changes to their profit inflection schedules either. Leadership is highly confident in a predictable path to delivering operating leverage and positive EBITDA in Q4. GAAP net income positive about a year later. It’s business as usual.

Leveling the Playing Field:

Lemonade has been marketing to Americans for years without presence in all 50 states and without its full product suite in most of the places too. That’s quickly changing, as it uses new advancements in AI to accelerate product launches from sea to shining sea. This has helped them launch renters in as many states year-to-date as the three previous years combined. Not only does this expand the addressable market, but it makes national brand marketing campaigns all the more efficient, as Lemonade can sell an increasing number of products to more Americans. It also boosts lifetime value to customer acquisition cost (LTV/CAC), justifying incremental marketing aggression. 

In terms of extending cross-sell capabilities, most of the focus will remain on launching existing products in more places. They “think they have the products needed” to support multi-year growth plans, but did hint at adding new lines down the road. Travel insurance seems like an intuitive expansion area.

Lemonade sees the majority of its book eventually being made up of home and auto like other companies. For now, dominant pet and renters growth provide plenty of top-line growth and create strong customer relationships (best in class net promoter score) to make future cross-selling highly likely. They got me for pet and renters. They’ll get me for auto when it’s in Michigan. They’ll get me for home when I move. That exponentially grows my revenue contribution to the company with zero additional marketing spend. That’s their ideal customer relationship goal. 

Europe:

The UK launch continues to go extremely well, as that market quickly became its largest of the 4 European countries it operates in. This is Lemonade learning in action. They’re excellent at trial and error and even better at rapidly optimizing from real-world interactions and learnings. 

It’s exciting to see momentum in that part of the globe remain strong. Most large insurance companies in the USA don’t even try to compete globally. They’re satisfied with the sheer massiveness of this opportunity and feel no need to expand. For years, that made many assume U.S. insurance companies just didn’t know how to grow or compete outside of their home territory. Lemonade proves that theory wrong, as they’re successfully leaning into price comparison sites and performance marketing, which are working across the pond. They see no reason why the Europe business will remain materially smaller than the USA business over the long term.

Combined Ratio:

The combined ratio includes Lemonade’s loss ratio and all other operating expenses. Critics of the company celebrating strong loss ratios will argue that the combined ratio still looks bad so there’s nothing to be excited by. They’re wrong. Lemonade front-loaded massive fixed costs into its model to set the stage for decades of compounding with a malleable, easily-updated platform. That meant big losses at the beginning, as a lot of revenue is required to offset these hefty costs before things stop looking ugly on the income statement. We’re now getting close to that point, and it’s crystal clear to see how a few more years of steady compounding will deliver that inflection they’ve been promising for 4 years and foster rapid profit compounding thereafter. Just give them a little more time as they keep showing promising signs of progress. 

And? They expect that ratio to be best-in-class at maturity. Lemonade is confident in underwriting on par with the best insurance companies out there and matching their loss rates. Beyond that, it’s highly optimistic about its loss adjustment expense (LAE) ratio (cost to handle a claim) being far better than incumbents. That’s because of the tech and AI-native core, with automation being in the DNA of every microservice it provides. Lemonade’s LAE is 5% compared to 9% on average for large competitors. This is despite lacking similar economies of scale that inherently benefit LAE dynamics. I expect this lead to keep growing, other OpEx leverage to keep coming and for the profit skeptics to be silenced in the coming years.

A Quick Reminder on Car:

While most car insurance companies now collect telematics data, Lemonade collects a lot more of it. Bixby estimated that 90%+ of its customers are sending telematics data 90%+ of the time. This, according to him, compares to 10% of competing customers sending this data about 10% of the time. It’s clear to see how this creates a data advantage that has allowed Lemonade to understand customer risk more granularly, uncover attractive customers and offer them lower rates. They’re not in the business of overly generalized customer segmenting, undercharging risky drivers and paying for those losses by overcharging the safe drivers. They’re fixated on gaining a better sense of who those safe drivers are and pursuing only them with highly attractive deals.

Platform:

Uber One membership growth remains rapid at 50% Y/Y and is now up to 50% of gross bookings. This improves retention, lifetime value, marketing efficiency, cross-product engagement and overall revenue quality for Uber. You could rightfully say it’s a big deal and the best way in which Uber leverages the power of its best-in-class product suite breadth. They get more shots on goal with consumers and cater to more interests. This deepens relationships and makes Uber a lot harder to compete with for smaller competitors with fewer offerings. To fully capitalize on this strength, Uber has gotten a lot more intelligent in marketing products to members at the right time. If your location says your flight just landed at another airport, it might recommend an Uber Shuttle to affordably take you where you’re going.

Demand Trends:

There are no changes to the “robust” demand trends Uber celebrated on its last earnings call. Consumer behaviors remain resilient, and its growth engine continues to hum as expected.

“It's honestly more of the same for us. We obviously have a very broad audience of consumers. We track very closely consumer behavior… We don't see consumers trading down. Growth for lower-income consumer cohorts is just as strong as growth for us in higher income cohorts. And mobility business in the U.S. has accelerated since late last year. So at this point, the consumer for us remains robust, and we don't see any signal of that changing.” – CEO Dara Khosrowshahi

Layoffs:

The 10% layoff was done to “accelerate decision making,” eliminate inefficient teams and middle management layers and allow Uber to progress more efficiently. While layoffs are always sad, this one was done from a point of operating strength. Savings, as previously covered, are expected to go towards more AV investments and they also plan to pass some of it onto customers via lower prices to take more market share.

AV Update:

Uber continues to expect meaningful AV scaling to happen during 2028 and 2029. They are building out infrastructure and growing increasingly confident in the value they will provide manufacturers. Specifically, Uber expects to deliver 30% boosts to utilization rates vs 1st-party apps. That means they can promise fleets higher revenue minimums and attract more supply, which is imperative for long-term AV success.

Uber President Andrew Macdonald bought a little over $5M in common stock this week while Uber CEO Dara Khosrowshahi bought around $10M in stock. 

Core Operating Priorities:

The focus continues to be predominantly on personalizing and optimizing the home page for Reddit users. That’s how they match new people with interesting communities more frequently and ensure existing users are finding more topics and conversations they find interesting. Just like experience customization and creating a dynamic content feed have been a key ingredient for Meta’s decades of engagement growth compounding, successfully executing for Reddit can potentially deliver some of that success. There’s good evidence and reason that makes me think the same roadmap that worked for that social media giant will work for Reddit’s engagement success too.

Helping Content Moderation (“Mod”) Volunteers:

Reddit is helping its mods handle tedious and undesirable work so they can focus on the fun stuff. For example, they’re utilizing LLMs to automate enforcement of the rules these people set, so these people can spend more time enriching the conversation rather than policing it. Homepage upgrades also help these people, as it means communities are being fed people who are generally more interested and able to contribute.

Huffman’s Message to Skeptics:

Huffman pushed back on Reddit skeptics assuming growth rates would significantly slow at this scale like they have for some social media companies in public markets. He thinks they’re just a drop in the bucket compared to the company’s potential, and has clear, proven ways to invest in improvements that drive more compounding. Whether that’s the feed, search or getting better at nudging people from web to app (which boosted new user retention by 50%) the path to him is clear.

I agree with most of it. I think Reddit has a very long runway for high-probability average revenue per user (ARPU) compounding at an elite clip. They’ve seen other companies do what works and they can simply copy that work for their own app. And they are. I think their users are fiercely loyal, hungry for more and more content, and will readily use convenient shopping tools and other products on Reddit’s app. The only thing I continue to worry about is top-of-funnel user growth as AI chatbots give potential new Reddit people answers before ever coming to the website. That doesn’t impact the near-term financial trends that look remarkably impressive (50%+ revenue growth; 70%+ EPS growth), but it could eventually slow things down if Reddit doesn’t fix the issue. While ad load has more room to grow, rapid user growth is a more sustainable and healthy source of top-line expansion, as it creates larger cohorts of new people poised to expand ARPU for years to come.

Other Ways to Leverage Its Engaged Users & Data:

While the main focus is on improving the homepage, Huffman did talk about more possibilities. Reddit is happy to partner with AI companies and share data with them, but it also wants to make sure it’s being treated fairly in these deals and also has ways to retain a lot of this traffic for itself. Reddit offers an ocean of bottom-of-funnel purchasing intent data via product conversation on its app that feeds its customer interest graph. That can easily be leveraged to build relevant commerce experiences that boost monetization without ever having to send those customers away to a search engine or chat bot. Aside from shopping, Reddit has its eyes on doing a lot more in video content, and again, it has invested considerable resources in upgrading its native search experience.

I think this makes a lot of sense. Even if Anthropic starts to be more friendly and Alphabet renews its contract on favorable terms, why not give customers more things to do without shipping that traffic to sites competing for finite screentime? Why part ways with that session when you can instead turn it into more ad impressions, more gross merchandise value (GMV) flowing through your platform and a lot more revenue as a result? That’s the idea here. And again… I can’t help but go back to Meta. That consumer internet giant used commerce, search and video as three fantastic sources of revenue growth to feed its world-class compounding machine. Now, it should be Reddit’s turn.

“For us, I think whether these relationships are formalized or not, Reddit wins because we have the data. We have the content that the models want. We have the content that the Internet consumer wants. And we will productize it and expose it in a way that is most accretive to Reddit. So that could be through partnerships, which we've done so far, and it can also be building our own products around search and shopping and all of these other behaviors that I think are important. So I think either way, Reddit is in a great place because we have the fundamental thing that people want.” – Co-Founder/CEO Steve Huffman

Why Vertical Integration Matters:

Alphabet is the most complete public cloud vendor when it comes to offering its own first-party solutions for each layer of the opportunity (chips; models; data; security; apps). And this matters. While the payback period for an Nvidia GPU is nearly 2 years, it’s about 1 year for their custom chips, materially improving overall unit economics and allowing Alphabet to invest more aggressively than peers without this edge.

More Notes:

Nu officially launched in the USA on Thursday. Alongside the launch of its full product suite, this also includes a product called Nu Global. It offers zero fee money movement across 35+ countries (initially Europe and Latin America). That should be popular for a lot of Americans who travel, have family elsewhere, etc. It's a great tool for competitors like Revolut and should be the same for Nu.

The launch also features a 3.5% savings APY and 4.5% for customers who also have a Nu Credit Card and are qualified users. This card offers 1.5% cashback for every purchase (soon to be 2%).

The U.S. market is fiercely competitive and features a sea of alternatives with perks that are as good or in some cases better than these. I think Nu winning in the USA is an uphill battle and a tough task for the company to execute... but... I also think this team is fantastic and there's a large Spanish-speaking population here that Nu can more effectively communicate than products built for native English speakers. This makes me cautiously optimistic that they can pull off the extremely difficult task of winning in this market. And if they don't? They'll shut things down, erase the margin hit and focus on markets that feature a smaller prize but much easier avenues to success.

The PPI rose by 0.4% M/M as expected while the core was cooler than expected at 0.2% M/M growth vs. 0.3% consensus. This data paired with smaller than hoped for Fed bond buying this week pushed rate hike expectations to 60% and treasury yields higher. On Friday, the Core CPI rose by 0.3% M/M compared to 0.2% expected and the CPI rose by 0.4% M/M as expected. Y/Y data was in line (2.4% for core which is solid). This all led to rate hike odds climbing above 80%.

I still don't think they hike. I think they're in do nothing mode until the  war in the Middle East finally ends. This source of inflation is too ephemeral, too uncertain, too volatile and too capable of rapidly fading for Warsh to be hiking an already elevated FFR. Things could easily change the day after a hike is executed to make that decision look bad, and they don't want to get caught with their pants down or force themselves into fixing a mistake. Warsh has a reputation to build. 

Again, core PPI data looked good and has largely looked fine throughout all of this chaos. Those are the more structural pieces of inflation that need to look good for healthy readings during normal times. Overall PPI data tends to be highly volatile and jumps around more. One bad month isn't a trend, and last month the data was meaningfully better than expected. 

Next, this is all tied to the same conversation on the 30-year yield rising to multi-decade highs. That's related to longer-term inflation concerns stemming from geopolitical outbreaks. Some will say fiscal discipline is another reason, but we haven't been responsible with a budget in decades yet rates haven't cared. It's the war... and an end to it should quickly ease all of these concerns.

Along similar lines, I do not see an elevated 30-year yield as a reason to change my approach. I again see that issue as pretty much purely tied to the war in Iran and also Fed willingness to step in with liquidity backstops. That appetite has generally been very large. This game is rigged. It has been rigged for a long time. It will stay rigged with Bessent explicitly saying "you don't bet against the house" as a nod to their willingness to support stable markets. They will fire whatever liquidity bazookas they need to fire to keep bond and capital market liquidity healthy. That almost feels inevitable, which is why I don't think seeing the 30-year go higher is a reason to move to the sidelines. They're going to do whatever they possibly can to artificially control the problem... especially heading into midterms.

Is it fair or sustainable that the government (both parties) will print their way out of this like they always have? Maybe not. I'll leave that for you to decide. But? It does mean I think I should continue owning the risk assets that I own amid this macro volatility.

If I'm wrong and rates do need to move higher? When I look across my portfolio, by far the most rate sensitive name is SoFi and they've already de-risked guidance by assuming 2 hikes in the forecast. And if a name like SoFi was punished because of hikes, I'd be a buyer in the mid $15s.