Surprise! Here’s a new Potential Multibaggers pick! This is a company I already put on My Stocks On My Radar list two years ago and here we are, picking it.

When a company’s numbers are extremely good, sometimes you see people react with suspicion and I think that was the case here for me for a long time. I’ve studied accounting scandals and very often, you have a somewhat opaque company that posts incredible revenue growth for several years. Well, to be honest, this company fits that mold. That’s why it took me so long to trust it. I’ve spent two years studying the business, but a few changes finally made me pull the trigger and pick this stock as a Potential Multibagger.

The founder-CEO here is one of the most impressive operators I’ve come across in years, and I read about a lot of founders. There are many CEOs I admire: Matthew Prince of Cloudflare, George Kurtz of CrowdStrike, David Vélez of Nubank, and so on.

But only once before did I have what I had with this CEO. I heard him on a podcast and it was like lightning struck. The first time I had that was in February 2017, when I heard Tobi Lütke, the founder and CEO of Shopify, on a podcast. I immediately bought shares, then started thinking I was an idiot because I hadn’t followed my process. I had just bought shares of a founder I had heard for an hour. How light-headed, how naive, how stupid.

But then I realized something. If Tobi Lütke could make me so enthusiastic, he must have the same effect on his executives, his employees, his customers, his investors, and so on. Wasn’t that worth something, or even a lot? That’s what I spent three months researching. I found that all the best founders and CEOs had similar traits and their companies as well. And it made me so enthusiastic that I started Potential Multibaggers on May 1, 2017. The first pick? Shopify, of course.

This was the same. I heard the founder-CEO in a podcast episode and I was blown away by what he said and how he thinks. Like the best CEOs, he thinks totally differently from the crowd.

This is an outsider CEO, like many of the best in their field. He is totally obsessed with his company, like the best in their field. And like many of the best in their field, he was rejected by venture capital companies. But he built the business. All of his competitors were funded by VCs, and (almost?) all of them are gone.

For years, public market investors told him his company was worthless. His reaction: he bought as many shares as possible. Not just through a public-market share buyback. He went to big investors and (ex-) employees and tried to convince them to sell their shares. He often succeeded, as those people started doubting the company or simply wanted liquidity. He even borrowed money to do this. Normally, you wouldn’t want this as an investor, but he was right, and he probably turned that investment into more than 10x in just a few years.

Thinking differently isn’t easy, and it can be, or seem, risky, but if someone is really focused, it can be a huge competitive advantage. As David Gardner said about the competition in e-commerce and about how Amazon won: “How about this as a competitive advantage? We have Jeff Bezos, and you don’t.” I think you should never underestimate how important that is.

As always, I have an advantage over you here. I’ve done a lot of research, listened to hours of interviews with Foroughi and his Chief Technology Officer, listened to and read the earnings calls, and read everything else I could find. There are definitely risks to this investment, so, as always, I wouldn’t make this a big position too fast.

This pick is also different than the most of the Potential Multibaggers. Most of my picks are stocks that have already run up a lot, and most think they have missed it and that I’m too late. Some of my best picks are made like that (Shopify, Cloudflare, CrowdStrike...).

But this one fits in another category, which has been successful as well. It’s down almost 60% from its highs. But the same was true for Nu Holdings and, more recently, Axon. Both have worked out great so far. Let’s hope the same happens to this pick.

Every VC rejected this founder, so he built his company profitably from day one, paying engineers out of his own pocket before there was a product.

I’ve followed this company for two years. Everything I found only convinced me more. Now I’m buying.

Below: the name and the full story. Don’t want to miss my new pick?

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It’s the 15th today and that means you get the Best Buys Now.

For newer Multis: these are not trades. I pick the stocks of companies I want to own for a very long time. And I already warn that being right can feel wrong for a surprisingly long time sometimes.

There’s no limit on the number of stocks. Sometimes, I see many attractive stocks; sometimes, I don't. This time, there are eight stocks. In other words, quite a lot.

And as usual, I put my money where my mouth is. Tomorrow, I’ll buy for the PM Forever Portfolio. I’ll buy most or all of these stocks (depending on the cash).

Just one last remark before we start: while the picks are numbered, that order is completely random. It’s not a ranking. I have ranked the Best Buys Now alphabetically.

So, without further ado, let’s jump in.

If you don’t want to miss opportunities like this, feel free to subscribe.

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Anthropic's boss is afraid of frontier AI models, but so far, they have not killed the Overview Of The Week, so we are good up to now. :-) Let's go!

Articles In The Past Week

After a few weeks with many articles, this week was calm. This is just the second article.

The previous one was about Axon. You can find the analysis and the answer to whether the stock is a buy now here.

A New Potential Multibaggers Pick!

So, why only one previous article?

Let me start with the minor reason. I was at the Portfolio Day in Brussels on Wednesday, a conference for investment professionals. You can see a picture here from Brussels, together with Pieter Slegers (Compounding Quality), Kevin Schoovaerts (Atomical Capital), Sam Hollanders (Chess Capital) and Jurgen Vluijmans (JVL Communication), some of the people I go to Omaha with every year.

From left to right: Sam, Jurgen, Kevin, me and Pieter.

But that’s not the main reason that I only published one article. It’s much more exciting! I have been working on another Potential Multibaggers pick! I still have quite a bit of writing to do, but it will be published in the coming week. If I had to guess, I'd say Thursday.

You can start guessing what the pick is! :-) Hint: it’s on the Stocks On My Radar list.

Memes Of The Week

I made the first meme myself. I have often been made curious when I hear an analyst talk about his/her model. But when I see it, it’s just junk.

For Duolingo, social media has always been a great driver for the brand. For a while, it was less funny and less unhinged, but it seems management turned that back. When Apple released its iPhone Duo, this was the reaction Duolingo’s X account posted.

Interesting Podcasts Or Books

This week, I (re)listened to multiple podcast episodes about the new Potential Multibaggers pick. There was also one that made me add a stock on the Stocks On My Radar list (see below).

But I also listened to Leandro of Best Anchor Stocks, my second newsletter that Leandro fully runs. If you don’t know Leandro, there’s a reason I started working with him almost 5 years ago. He’s very smart, does outstanding deep research and he can explain what’s important and what’s not. He did so in the most recent Chit Chat Stocks episode. He talks about two subjects: BBB Foods, a stock Leandro wrote about and invested in in January of this year, and which is up 50% since then.

The second part of the episode is about the robotics industry. If you haven’t read Leandro’s deep dive about robotics yet, I highly recommend it.

You can listen to the interview with Leandro here.

The markets in the past week

What did the indexes do this week? Most of us will guess the market dropped but by how much?

As you can see, the Russell 2000 was by far the biggest loser, with 2.41%. The S&P 500 was down 0.66%, and the Nasdaq fell 0.66%.

The Russell 2000 dropped much more than the Nasdaq and the S&P 500 because of rising oil costs. The Russell 2000 has more industrial companies, which means greater exposure to oil, which has been rising quite a bit recently. Those companies also face greater fear of an economic slowdown than companies fueled by AI.

The Greed & Fear Index dropped further into FEAR territory.

Quick Facts

1. Anthropic, OpenAI and Elon ask AI Slowdown

It was all over the news recently. The 27-year-old British researcher Jacob Coxon resigned from Anthropic after just 4 months and wrote a post about it. It starts like this.

Source: X

In the thread that follows, he accused both Anthropic and OpenAI, his former employer, of irresponsible behavior. With self-improving AI, he argues the genie is out of the box because developers don’t know how to control it. As you can see, the post got more than 170 million views. He now has 290,000 followers, but before the post just a bit over 2,000. This post already caused a stir.

Four days later, Anthropic’s founder and CEO Dario Amodei published an essay titled We Must Pace the Frontier. In the essay, Amodei argues frontier labs should slow the pace of innovation because safety work is falling behind.

To start with, Amodei proposes permanent outside evaluators with deep access to AI labs. Next, he wants frontier companies in democratic countries to agree on safety standards and limits in AI progress, checked by regulation. The end goal is international collaboration, including China. I can tell you: this won’t happen. It’s impossible. On top of that, the timing makes it impossible to ignore the bigger picture.

Now, first, before the rest, many people in AI have been warning about the dangers of the technology. Amodei has been one of them for years, and the same can be said about Elon Musk and pioneer Demis Hassabis, the founder of DeepMind, which was bought by Google.

But there’s another context as well. Open-weight models are improving fast and getting dramatically cheaper. As Guillermo Rauch posted recently, open models went from 28.4% to 62% of token volume through Vercel’s AI Gateway in just two months.

I mentioned earlier in my Duolingo article that the company could bring down its AI costs by 99% compared to the beginning, also by switching to open-weight models. Frontier model tokens are very expensive.

But of course, that raises a question. When the leaders of the most capital-intensive closed AI labs ask to slow down together, who benefits most? I had to think, as so often, of the quote from Charlie Munger.

OpenAI, X and Anthropic have by far the most money, together with Google and Meta. With Anthropic’s pending IPO, it could add another $100B of cash to its balance sheet. Regulation and controls favor those with money, not the new players.

On top of that, we have seen this move before. In March 2023, just four months after the launch of ChatGPT-4, Elon Musk signed the open letter calling for a six-month moratorium on training AI systems more powerful than GPT-4. The letter talked about an “out-of-control race” and argued that development should stop until the risks were better understood.

Four months later, Musk launched his own AI company, xAI and another four months later, Grok was released, Musk’s own frontier model. In other words, it’s not crazy to think that it was developed in the same period Musk was publicly calling for the industry to pause. That could make him catch up, obviously.

There’s also an economic angle. It might slow down the capex race between the frontier models. Is this what Amodei wants his investors to believe? Regulation would definitely be hard for smaller competitors and for open models. Don’t forget that many of the open-weight models come from China (Kimi, DeepSeek, Alibaba’s Qwen, ...), which makes it easier to convince lawmakers to deem them ‘unsafe’ until proven otherwise. That clearly benefits the big frontier models.

And then there’s a legal argument which makes a lot of sense. The Hugging Face hack probably scared these companies. What if the bots had hacked a bank or a healthcare provider? What would the implications have been? For the internet, Section 230 protects internet platforms from much liability for third-party content. AI models don’t have such protection.

So, if these companies can show they use outside evaluators, document risks, and follow recognized safety procedures, it could help if something like a bank hack and theft happened. The companies can then claim they exercised good care and, therefore, are not negligent.

Now, all this doesn’t mean that AI has no potential dangers, but the accidents that have happened so far (see the Hugging Face hack I wrote about last week) are still contained. But also: I don’t believe that frontier models will just stop developing new models and that’s also not what Amodei says Anthropic will do. So I don’t think this has a chance. And I don’t think safety is the main reason. Control is. And if you think this is new... This is from more than 7 years ago, when Amodei still worked at OpenAI.

Source

PS: Just before I published this, I saw Mark Zuckerberg came out with a statement that AI development needs to move faster. So far for the American AI consensus.

The new pick will be released on Thursday. If you want it from the moment it’s published, this is the time to join as a paid subscriber.

Below: why I think investors should skip the Anthropic IPO, the pick that just launched in the US (the first reactions are great), the pick that’s taking on NASA (and why I like the move), the new name I just added to my radar after one podcast, and much more. Don’t miss this. Don’t miss the pick!

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On Wednesday, August 5, Axon reported its Q2 earnings. I was on holiday in Sardinia then, but of course, I want to know what’s going on with the companies you and I hold in our portfolios. That’s also because, as you probably know, I add money to my portfolio every two weeks and that’s why I want to know if the stock is attractive to add to my position. Here we go!

The Numbers

• Revenue: $904 million, up 35% YoY, beating the consensus by $28 million, a beat of 3.2%, which is pretty significant for such a big and widely followed company. It’s also the tenth consecutive quarter with revenue growth of more than 30%.

• Software & Services revenue: $398 million, up 36% YoY.

• Connected Devices revenue: $507 million, up 35% YoY. Within that category, Platform Solutions (in-car video, fixed cameras, drones, counter-drone, VR hardware) grew to $150 million, up 123% YoY.

• Dedrone: passed $100 million in revenue in a single quarter for the first time.

• Annual recurring revenue: $1.639 billion, up 39%.

• Net revenue retention: 126%, versus 124% a year ago.

• Future contracted bookings: $15.1 billion, up 41%.

• Adjusted gross margin: 62.9%, down from 63.3% a year ago, up from 61.6% last quarter.

• Adjusted EBITDA: $242 million, a 26.8% margin, up more than 40%.

• Operating income: $47 million, versus a loss of $1 million a year ago.

• Non-GAAP EPS: $1.88, versus $2.18.

• Free cash flow: negative $1 million, versus negative $115 million.

Axon also raised full-year revenue guidance from 30-32% to 32-34%, the second raise this year, and held the adjusted EBITDA margin guide at 25.5%.

This is an overview in the company’s earnings slide deck.

Earnings per share dropped while revenue grew 35%. That looks awful, right? It isn’t.

In Q2 2025, Axon’s pre-tax income was negative $38.9M. But it reported positive net income of $36.1M, because it booked a $75M tax benefit that quarter. So, you can’t really compare the quarters on this basis. This quarter, pre-tax income was $32.7 million, so much better than last year’s Q2 numbers.

You can also see the improvement in operating income. It came in at $47M this quarter, while there was still a $1M loss in Q2 2025.

I also like to see operating leverage. If you grow revenue by 35%, as Axon did, but the costs grow faster, you are not doing better with scale. But that’s not the case. SG&A (Selling, General and Administrative) grew 20% and R&D (Research and Development) 28%. So, there is operating leverage. President Josh Isner on the call:

A little over a year ago, we began flattening the organization to empower people closest to the work, reducing layers of friction and moving faster. We paired that organizational change with disciplined investment in AI tools for our teams. We didn’t rush to deploy every tool or ask people to use AI for the sake of using AI. We rolled it out deliberately, and we focused on where it can make our people more effective.

I like that, of course. Empowering the people closest to the work is a recipe for success.

In the last quarter, GAAP net income came in at $169M. But that was because of $189M of rising value of Axon’s investments. That’s a distortion, because the company doesn’t sell, but it has to adapt to the market value of its investments every quarter. Shopify is another company that has this.

Axon gives revenue per product line, but I prefer the Fiscal chart.

If you want a Fiscal subscription as well (highly recommended, I use it multiple times every single day), you can get 15% off through this link.

As you can see, the two legacy products, TASERS and body cameras (personal sensors) grew the least, at 21% (still very strong) and 3% respectively.

Software and services, mostly Evidence. com, was up 36% to almost $400M, and Platform Solutions was up a whopping 123% to $150M.

Last quarter I wrote “34% Growth Before Optionality.” What I meant was that Axon grew 34% while the new products contributed almost nothing. This quarter the optionality showed up just in time to offset the slowdown in body cameras.

But the body cameras are only in a temporary dip. Q1 is the worst quarter for new bookings for body cameras. As these are shipped a quarter later, that’s the effect you see. President John Isner said to expect camera shipments to grow by 20% to 30% QoQ in Q3 and probably closer to 30%.

The story is not that much different for TASER. Even if growth is still 21%, very respectable, it would have been higher without the seasonally weak Q1. In Q3, Axon booked the highest TASER unit volume ever. It also signed its biggest TASER order ever. President John Isner on the call:

That may sound crazy for a product category that has been around for three decades. Well, it’s real, and it speaks to how much opportunity remains.

I also want to talk about free cash flow because the company seems to be at a turning point there as well. It was still negative, $1M, but that was a negative $115M last year. That’s already a big improvement, but COO and CFO . It was negative $1 million against negative $115 million a year ago. A big improvement, and COO and CFO Brittany Bagley reaffirmed the full-year target of $450 million in free cash flow.

We are two quarters into the year and the mid-term score is negative $56M. In other words, for that $450 million target, Axon has to generate $506 million in free cash flow in the second half of the year. That’s a big acceleration. Q4 is seasonally Axon’s best quarter each year, so that won’t be different this year. Management also said that the inventory investments it made with the tariffs will moderate after this year.

In the first half of the year, Axon spent $145M to build out its inventory. That depressed FCF, but it was not even the biggest contributor. The biggest drain on FCF was receivables and contract assets, with $257M. Receivables are when the invoice is already out, but not paid yet. Contract assets are customers paying over the years they take the subscription for both hardware and software, for example. In both cases, Axon has already spent to deliver the goods, but it hasn’t received payment yet. FCF is, therefore, systemically suppressed.

So the numbers are excellent. But the most interesting stories of this quarter are not in the numbers.

Below: the protest movement that’s smashing cameras in 460 American cities (and why I think it’s actually good news for Axon), my Selling Rules, my proprietary Quality Score and Valuation. Don’t want to miss these? Subscribe now!

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It’s Sunday and at Potential Multibaggers, Sunday’s Funday because that’s when you get the Overview Of The Week. Tomorrow, markets are closed for Labor Day, so you have extra time to read. Let’s dive in.

Articles In The Past Week

This is already the fourth article this week. Let’s look back at the three previous ones.

On Monday, I added to the PM Forever Portfolio, like I do every two weeks. You can find what I bought here.

The second article looked at Rubrik’s earnings and whether the stock is attractive right now. You can find it here.

In the third article, I analyzed the developments at TransMedics. You can read it here.

Memes Of The Week

Just one meme this week. Or more a joke, actually.

Interesting Podcasts Or Books

I listened to three good podcast episodes this week.

Two were interviews with Gavin Baker. Gavin Baker is the founder, Managing Partner and CIO of Atreides Management. The fund invests in growth stocks, mainly in technology. Before he founded Atreides in 2019, Baker spent 18 years at Fidelity. He was a portfolio manager and also managed Fidelity’s venture-capital investing arm.

Gavin Baker was interviewed on The a16z Show from the venture capital company Andreessen Horowitz. Baker explains why many more data centers should be built, as failing to do so could cause token disparity. But that was just one of the many things he talked about. You can listen to the interview here.

The second interview with Gavin Baker I listened to was on Invest Like The Best.

The two together give you a pretty good idea of where we stand on AI.

The third podcast episode I listened to was with Doug Leone. He is a legendary venture capitalist at Sequoia Capital, which he joined in 1988. In 1996, the legendary founder of Sequoia, Don Valentine, made Leone the Managing Partner together with Michael Moritz. He backed companies like ServiceNow and Nubank. In the episode, he talks about Nubank’s founder and CEO David Vélez, by the way. You can listen here.

The markets in the past week

So, what did the indexes do this week? Let’s find out.

As you can see, the S&P 500 was up 0.09%, the Russell 2000 0.11% and the Nasdaq 0.40%.

Despite the slight move up, the Greed & Fear Index dropped to FEAR.

Quick Facts

1. Is The Market Cheap?

You have been hearing for years that the market is very expensive. Often this graph is used to prove that the market is expensive.

But there are reasons to believe the Shiller PE Ratio (or CAPE, cyclically adjusted price-to-earnings) no longer works well. The most important point is that companies now spend most on R&D and software. GAAP accounting sees this as an immediate expense, not an investment that can be written off over time. The fact that R&D and software are seen as expenses, not investments, means that earnings are understated. And that situation has become more and more so with modern companies. They are (or at least were before the big AI investments) not capex-heavy companies, like the railroads, car companies, and other capital-intensive industrials that used to be a much bigger part of the S&P.

There is another consequence. Companies can scale much faster than in the old days. The CAPE is ‘cyclically adjusted’ by looking at the average of earnings of the last 10 years. That was OK before modern times. If you wanted to scale, you needed time. Building new Walmart stores takes time. But nowadays, you can grow so much faster. If a company grows its earnings quickly, it’s not reflected in the CAPE because earnings from 10 years ago carry as much weight as current earnings.

Another reason that the CAPE is high is that the COVID period is still included. But the market is forward-looking. It doesn’t care anymore about the past.

Earlier this year, the Fed paper titled “The CAPE That Cried Wolf“ was published. What I wrote above is the conclusion of that paper. But it’s also very logical if you think about it. The paper estimates that earnings look 44% weaker than they would have been earlier. If you apply that to the current 42.38, the adjusted CAPE would be 23.7. Not cheap, but not extremely overvalued either.

That’s why I always love it when there’s a credible alternative data point. This is one.

Source

The PEG of the S&P 500 has not been this low since the 80s. Of course, you can say a lot about this. For example, this uses the forward PE and you have to believe the earnings forecasts. But I do and I think they are often conservative for many companies.

Now, of course, that doesn’t mean I say the sky is only blue. There are clouds in the form of interest rates that keep going up. Usually, this means that more expensive stocks will have a hard time keeping their valuations. That means they will either have to grow into their valuations faster or that the stock price will drop. We will have to see.

Below: why Nvidia pays $13 billion for Hugging Face, the lawsuit that could cost Amazon more than $20 billion, the week's moves of the Potential Multibaggers, and much more. Don't want to miss anything?

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TransMedics (TMDX) reported Q2 2026 on August 4. I was on holiday so I couldn’t do the analysis back then. That’s why I’m doing this article now. But sometimes, often, actually, some delay is good. It cuts out the noise and highlights the really important things.

The stock initially fell, but recovered and now it’s up about 10% since the earnings.

In my last update, in May, I gave a Valuation Score of 10/10 and I called it a STRONG BUY at $64. Since then, the stock is up more than 40%.

So, is it still a buy today? Let’s find out.

The Numbers

• Revenue: $189.9 million, +20.7% YoY, +9.2% QoQ.

• Product revenue: $111.2 million, +15.7% YoY, +3.0% QoQ.

• Service revenue: $78.8 million, +28.6% YoY, +19.4% QoQ.

• Gross margin: 59.6%, up 140bps QoQ.

• Adjusted operating margin: 13.6%, up from 10.4% in Q1, down from 23.2% a year ago.

• Adjusted EPS: $0.44 versus consensus of about $0.48.

• Cash: $472.7 million.

• Guidance: low end raised, now $737-757 million, 22-25% growth.

Here you have an overview from the Q2 2026 earnings call slide deck.

Source: Fiscal AI. You can find all transcripts there, earnings slides, the consensus estimates, financial data, charts, and so much more. Get a 15% discount through this link.

The Main Reason?

In the Q1 article, adjusted margins were 18.5%, or $112.2 million of adjusted operating income on $605 million of revenue. In May, the company guided for gross margins of about 16%, because of the investments it was making. But those margins are now seen as lower. CFO Gerardo Hernandez on the Q2 earnings call:

We now expect full-year adjusted operating margin, excluding the impact of PAD Aviation, of approximately 12.5%-14%. The range primarily reflects potential variability in revenue performance, while the reduction from our prior expectation primarily reflects the higher planned investment in OCS Kidney.

So margins went from 18.5% last year to a guidance of 16% for the whole year in May, and now to a guidance of about 13% for the whole year. The market doesn’t like that.

At Canaccord Genuity’s 46th Annual Global Growth Conference, CFO Gerardo Hernandez gave more context:

The way we should see or expect for the future years is we should not see an increase in operating expenses similar to the one that we had in 2026. This year was really the step up. In 2027, we will see some increase, probably more around the low teens, which certainly will help us to continue to expand our operating margin.

Hernandez added that there will be margin improvement next year, combined with a growth acceleration. On top of that, both Hernandez and founder and CEO Waleed Hassanein repeated their long-term goal of the old promise of about 30% operating margin at 10,000 transplants. To remind you, that goal has been set by management for the end of 2028 and it’s one of the Selling Rules I set.

In other words: 2026 is the investment year, but then it should get better next year and thereafter.

It may look like a detail, but TransMedics’ management raised the low end of the guidance. That detail is more important than you might think, because it points to a reacceleration in revenue growth. Let’s do the math together. In the first half of this year, revenue came in at $363.9 million. The guidance range of $737-757 million means that in the second half, the company has to have revenue of $373 to 393 million. If you know that in the second half of 2025, revenue was $304.6 million, that implies revenue growth of 22.5% to 29%. In the first half of this year, it was ‘just’ 20.9%. It’s good to see this, but management shouldn’t be shy about sharing this.

In my last update, I called TransMedics a STRONG BUY at $64. The stock is up more than 40% since.

Below: the numbers management shared about the company’s biggest potential market, why I’m removing a Selling Rule for the first time ever, why margins jumped when I expected them to fall, and whether the stock is still a buy after the run. Don’t want to miss the valuable insights? Subscribe now!

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As one of the last Potential Multibaggers, Rubrik (RBRK) reported its Q2 results on August 27. The company beat every single guided metric, raised full-year guidance for revenue, ARR, earnings, and free cash flow, and posted its first operating profit as a public company. But the stock is down 18.5% since the earnings.

To be honest, I’m a bit confused at this moment. It could be a buy-the-rumor, sell-the-event thing, based on my superficial look at the earnings. But that’s why I love this work so much. Together with you, I can find out what is really going on. Of course, we know that in the short term, the market is very fickle. Over the long term, the results matter and that’s what I want to assess. Is there real weakness here or not?

Let’s find out together.

Rubrik’s logo, source: the company

The Numbers

• Subscription ARR (annual recurring revenue): $1.661 billion, up 33% YoY. Net new subscription ARR of about $96 million, up 35% YoY.

• Subscription revenue: $407.2 million, up 37%.

• Total revenue: $427.3 million, up 38%, beating consensus by $31.3 million, or 7.5%. Very strong.

• Non-GAAP EPS: $0.20, much better than the consensus of $0.04.

• Subscription NRR: over 119%.

• Customers with $100K+ in subscription ARR: 3,084, up 23%. These customers now make up 88% of subscription ARR. Customers spending over $1 million grew more than 57%.

• Non-GAAP gross margin: 81%, versus 81.6% a year ago.

• Non-GAAP operating income: $33.5 million, or 8% of revenue, against a $4.4 million loss a year ago.

• Free cash flow: $65.7 million, up from $57.5 million, a 15% margin.

• Cash: $1.75 billion, against $1.13 billion of convertible debt.

Revenue growth of 38% is great and much better than the consensus. But as I already explained last quarter, it even understates things.

Rubrik used to be a hardware company, although it always intended to switch, but it was just easier to start.

Customers who gave up their right to a free hardware refresh received cloud credit as compensation, and when they use that credit, it appears as a one-time revenue bump. Rubrik calls this “material rights.” This compensation negatively affects revenue, of course, because those customers use credits they got for free. If you exclude the material rights, revenue grew 43%. That’s the third quarter in a row at 43%.

Source: Rubrik’s Q2 earnings slide deck

You can see the reported growth sliding from 51% at the peak last year, but the normalized line, excluding material rights, has been at 43% for three quarters. Very strong.

Net new subscription ARR accelerated to 35% growth. At $1.66 billion of ARR. Founder and CEO Bipul Sinha called it the tenth consecutive quarter of beating guidance since the IPO, and he was very proud of the acceleration:

And this quarter, we accelerated, yes, let me repeat, accelerated net new subscription ARR growth.

He’s right, although the acceleration is minimal, as you can see on this chart.

Rubrik had an operating profit for the first time as a public company. Non-GAAP operating income was $33.5 million, or 8% of revenue.

There were several contributors to this: non-GAAP sales and marketing dropped from 49% of revenue to 44%, R&D from 22% to 21% and general and administrative even dropped in absolute dollars, from $37.4 million to $34.6 million. If revenue then grows by 38%, you know that there’s operating leverage. Management also put this in the slides deck.

Free cash flow was $65.7 million, up 14% YoY. The margin came down from 19% to 15%. But the quarters differ quite a bit and so does the timing of big contracts, so let’s look at the first six months to smooth that out already a bit more. The H1 margin was 17%, up from 15% a year ago. The full-year guidance of $323 to $333 million of FCF means 36% to 40% growth in FCF.

I think you know by now I also like the Rule of 40. If you add FCF margin and revenue growth and it’s above 40, you have a good company. For Rubrik, you add up 15% FCF margin and 38% revenue growth, you get 53%. Without the material rights, that would even be at least 58%. Very strong, in other words.

All in all, very strong results overall. Which leads us to the next question.

Why Did The Stock Drop?

In the earnings slides deck, there’s a chart of cloud net new ARR.

The left panel shows the calculated cloud net new ARR sliding from $101 million in Q1 to $89 million this quarter, with year-over-year growth at minus 4%. Ouch, right? No, not really.

Rubrik has been migrating its legacy self-hosted customers to the cloud platform. Those customers were already paying Rubrik, but the moment they were switched to the cloud, their money got counted as new cloud ARR. That means it boosted the cloud new ARR for a long time.

But that migration is done now and therefore, the numbers look bad. In the right panel, the same two quarters with the migrations removed from both years show the real numbers: 20% growth, just like last quarter.

Cloud ARR is 89% of subscription ARR, exactly where it was last quarter. CFO Kiran Choudary said at the Analyst Day in June that it would stay around 90%.

The non-cloud business, which had been shrinking for years, is growing again. That’s good for margins. Founder and CEO Bipul Sinha explained where the demand comes from:

Given the geopolitics and given all the things that we are seeing around the world in terms of security, every country is now concerned about containing their supply chain and economic infrastructure. And as you can imagine, digital infrastructure and AI infrastructure is an important economic infrastructure. And that’s why folks are working on digital embassies and containing data, containing infrastructure in their own sovereign realm.

Let me recapitulate: the migrations ended, which looks optically bad, but it’s not. The growth that came on top of that, has a better margin and comes from governments, defense and regulated industries. Non-cloud is guided to contribute only low- to mid-single-digit net new subscription ARR in the second half, so this isn’t a meaningful growth engine but the higher margins are good.

So the first reason for the drop is superficial, not a structural weakness. But there’s a second reason. We also dive deeper into Rubrik’s unique position in cybersecurity and why AI is such a tailwind.

You also get my proprietary Potential Multibaggers Quality Score and the valuation and then you know if the stock is a buy or not.

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Today, just like every two weeks, I added to the Forever Portfolio. For newer Multis, that’s the portfolio with my real money, and I’m always fully transparent about what I buy and when I buy it.

I would have liked to get this out before the market closed, but it just didn’t work. Don’t worry about that too much, though. This is not a matter of timing, but of holding the best investments as long as possible. What we want are companies that can perform for a very long time, and if that’s your investing perspective, a day doesn’t really matter.

Let’s go over the picks one by one.

Four buys for the Forever Portfolio today, with my own money. One is a brand-new position I’ve waited over 10 years to buy.

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They say meeting your heroes often turns out to be a disappointment. For me, it was even better than I could have ever imagined.

On Thursday, I got to spend a few hours talking with David Gardner in Dublin, and he even bought me a Guinness. I also got to wear his legendary jester hat for a moment.

I don’t know if many of you know him, but David Gardner co-founded The Motley Fool with his brother Tom in 1993.

He is an independent thinker in the stock market who has openly shown people how he picked dozens of stocks that went on to multiply many times over. He picked at least 7 stocks that went up more than 100x.

Nvidia is up 1,425x since he first bought it in 2005. That means every $1,000 invested turned into $1.425 million.

But it’s not really about the money. It’s about the way he approaches life.

He knows money is a nice bonus, but far from the most important thing in life. For example, he owns 679 board games and plays a game every single day, either in person or online.

There aren’t many people I truly look up to. A few years ago, I was standing just a few meters away from Bill Gates in Omaha, and it didn’t really do anything for me. While I have respect for what Bill Gates built out with Microsoft (how could you not?), I never saw him as a personal example of how to live a good life. Mind you, that was before the whole Epstein thing associated with him now came out.

David Gardner was a huge influence on Potential Multibaggers. I’d say Potential Multibaggers is 50% David Gardner, 25% Phil Fisher and 25% everyone else combined (with Peter Lynch and Charlie Munger leading that pack).

This is how David signed my copy of his book.

Every speaker tipped three stocks, so David Gardner did this as well. Two are Potential Multibaggers already: Mercado Libre and Axon Enterprise. I have been looking at the last one quite intensely lately. Not because David Gardner called it, but because the stock price is down so much: Intuitive Surgical. I will not be a Potential Multibagger, but I could see myself buying it for my portfolio. It’s having its second-biggest drop in the last decade.

Last month, I discussed the idea of buying Intuitive Surgical with a friend in this business. He had talked about this stock to doctors, all specialists. All knew and loved this brand and that’s usually a very good sign.

I also discussed the most recent Potential Multibaggers stock with David Gardner and let me tell you, he’s also very excited about this company.

That leads us to the next part of this Overview Of The Week.

Articles In The Past Week

This is just the second article this week, but that doesn’t mean you didn’t have enough to read. The first article of the new Potential Multibaggers pick goes deep and it’s as long as three typical articles. You can read it here.

Memes Of The Week

No memes this week, I thought. And then I saw this headline. It’s not meant as a joke, but it is one.

This is like excluding Lionel Messi from the 100 greatest soccer players, Usain Bolt from the 100 greatest sprinters and Tom Brady from the 100 best quarterbacks. In other words: utterly ridiculous. In the previous years, Jensen Huang had always been included, so it was a deliberate and extremely dumb intentional choice.

Interesting Podcasts Or Books

Even the book I will be talking about has a link with David Gardner this week.

And, no, I’m not talking about his own book about investing, which I highly recommend. I have three copies. I have already listened to the audio version, I pre-ordered the hardcover version before it was out and let David sign that one. It will be on a bookstand in my library soon, next to my other investing idol, whom I look up to at least as much, if not more, for his life wisdom as for his investing: Charlie Munger. The third copy is the paperback version to annotate. I’m reading that one now and adding my own thoughts in the margins.

But I’m always reading multiple books simultaneously, and that’s the case right now as well. The book is called The Score.

I listened to David Gardner’s interview in his series ‘Authors In August’ and I decided to buy the book right away. I not that far yet, but I really like it already.

You can listen to the interview with C. Thi Nguyen here.

The markets in the past week

So, what did the indexes do this week? Let’s find out.

As you can see, there’s a discrepancy between the S&P 500 and the Nasdaq at one side and the Russell 2000 on the other hand. This is the reason.

As you can see, of the Mag7, only Tesla was down. This made the difference compared to the Russell 2000, where the Mag7 is obviously not in.

The Greed & Fear Index remained in NEUTRAL.

Quick Facts

1. The Nvidia Earnings

As many of you will know, I’ve been an Nvidia shareholder since 2017. In 2020, I sold a big part of my position to buy a car but I built up my position again from that point and multiple of my buys after that are also up more than 10x.

This week, the company reported its earnings. Let’s look at the numbers first:

The numbers:

• Revenue: +106% YoY to $96.2B, a $4.1B beat (4.4%).

• Gross margin: 75% GAAP and non-GAAP

• Operating margin: 66%

• Non-GAAP EPS: $2.22, a $0.13 beat, +128% YoY.

• GAAP EPS, fully diluted: $2.46, +128% YoY. This includes Nvidia’s stakes in other companies and that’s why non-GAAP is better in this case.

• Data Center: $89B, vs. consensus of $85B, +117% YoY and +18.3% QoQ.

  • Hyperscale $48.7B, +13% QoQ

  • AI Clouds, Industrial & Enterprise $40.3B, +25% QoQ and +138% YoY

• Edge Computing: $7.2B, +27.5% YoY, +13% QoQ.

• Operating cash flow: +57% to $24.1B,

• Free cash flow: +59% to $21.3B.

• Capital return: $20B buybacks, $6B dividends in this quarter. That’s 60% of the free cash flow vs. a target of 50%.

• Q3 guidance: Revenue $108B +/-2%, +12% QoQ and +89% YoY, $3.4B better than the consensus. Gross margin 74%.

• FY28 guidance: This was very strong: revenue growth of 70%, not comparable to the consensus of 44%.

This is crazy, never seen before. The fact that Nvidia, the world’s largest company, keeps growing by more than 100% is just breathtaking. It added nearly $15 billion in revenue sequentially and it said to expect to add another $12 billion next quarter.

This was the fourth consecutive quarter in which revenue growth accelerated, which is against all odds for a company of this size.

But the biggest news was that CFO Colette Kress guided for 70% revenue growth for next year. Wall Street looked like a fool with that 44% revenue growth consensus. To add to that humiliation, Nvidia’s executive said it would have doubled if there had been no memory shortage.

Probably, Nvidia will do better than that guidance again. So, it could end up with $680 billion in revenue next year. That’s more than Alphabet and Apple, with higher margins.

Seriously, who are the people who are bearish about either Nvidia or memory companies like Micron?

So, why didn’t the stock shoot up, as you would expect after such incredible earnings?

To be honest, I don’t know. Some pointed at the margin guidance. Nvidia sees them drop from 75% this quarter to 74% in Q3, 71%-72% in Q4, then 72%-73% for FY28. The culprit is memory, which sees “extreme pricing conditions.”

But seriously, if a company guides for 70% revenue growth, saying it would be above 100% without constraints, and you are bearish because of a margin that might drop (it’s just guidance), I think you focus on the wrong thing.

If you look at this, you also see something incredible.

I think it’s safe to say the consensus is too low, as not all analysts have already updated their guesstimates. But even with these, the stock is very cheap.

The forward PEG divides the forward PE by the growth. Lower than 1 is cheap, between 1 and 2 is fair, above 2 is expensive.

Nvidia has a forward PEG of 0.25 for this year (even if the company only reports in January). For next year, that’s 0.22. So, the stock is still incredibly cheap.

And if you think that Nvidia is not profitable, its profit in the last quarter was bigger than that of 12 iconic companies, including Apple, Walmart, and Coca-Cola.

Source

2. Warren Buffett Turns 96

Today, Sunday, August 30, Warren Buffett turns 96. He is not the CEO and Chairman of Berkshire Hathaway anymore, but he still goes to office every day. Recently, he announced that he was the one behind the big Alphabet investment, not Greg Abel. So, he is still very much active.

Last year, for his 95th birthday, I compiled 95 lessons from the investing GOAT. 95 quotes and a short takeaway from each. The document is chock-full of his best insights. You can find it here.

3. The Return of all Nasdaq 100 stocks

This week, I saw this and I think it gives a good overview of all the Nasdaq stocks.

Source

Below the line: the warning I have about one of my picks after its outstanding earnings, a new stock on my radar, the new chip that surprised everyone, the legendary CEO stepping down and much more. Don’t want to miss all the valuable info?

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Here it is, the new Potential Multibaggers pick!

Just like so many other picks, this one is fully focused on the future. What I mean is that I don’t know whether the stock will be up next year or the year after that, but I have found enough evidence to believe that over a 5+ year period, this stock has significant potential.

And it’s a story of dedication. As many of you know, I spent years as a teacher of 15- to 18-year-olds in Belgium. But I’ve always done more than I was asked. I did unpaid extra volunteer hours because I wanted to help students and guide them through the jungle of possibilities in higher education and beyond. And I showed them what was possible if they really wanted to realize something.

Over the years, I’ve come to realize that these conversations with students have given me an edge in investing as well. I can see drive and separate it from fake drive. What I mean is this. People who are really obsessed with something will almost always succeed because they endure years of disappointment without stopping. It’s like that quote attributed to Winston Churchill.

Some are driven by the outcome. But real visionary founders don’t care too much about a final outcome. An outcome is just the start of something new. Look at Elon Musk. He could retire as the richest man in the world, but still, he keeps grinding every day. It’s a process-driven obsession. Visions are easy, living for years or decades chasing that vision, that’s what sets apart the real winners from the losers.

In that sense, people often misread founders. It’s not the eloquent loudmouth who is the best founder, although many visionaries are not afraid to talk about their beliefs and passion. The main filter is: Can they keep going? Even when most have already stopped?

I remember a 15-year-old student. He bluntly said: “I will be a photographer.” Not “I’m dreaming of becoming a photographer” or “I really want to become a photographer.” No: “I will be a photographer.” There was no other way and he organized his whole life around this conviction.

Well, guess what? He’s 30 now and one of the most successful photographers in Belgium, working with celebrities. He often takes pictures of rock stars, TV celebrities, and he took the official pictures of the Belgian Red Devils for the most recent World Cup. His name is Damon De Backer, if you want to look him up. Here’s his picture of Kevin De Bruyne, for example.

Source, published with Damon’s permission

So, why did I write about this? Because so many founders were like this ex-student. Full of determination, willing to keep going when everyone else stopped, organizing their life around their obsession.

The founder/CEO of this company is definitely one of those people. And that is the founder-CEO profile you want. I’ve listened for hours and hours to him and what he has built so far already is impressive. But I believe, just like him, that this is just the start.

Just like many other Potential Multibaggers stocks, the stock is already up a lot and many will think that they “missed it.” Even when I know that some of the best stocks have this characteristic, I still sometimes have that thought. But I know I have to put that thought aside and just go for it.

I want to point out, as I always do, that I have an advantage over you. I’ve done the research, and not just over the last few weeks. This company has been on my radar for a long time. It was on the Stocks On My Radar list for a year and a half. Recently, I intensified the research and I really loved what I found. That means I may be in a different place than you are right now when it comes to conviction, and that’s completely normal. It may take you a while to get there but with these articles, I’ll try to help you.

The stock is not particularly cheap, as is often the case with stocks of outstanding companies. It’s essential to have enough conviction to hold or add to your position if a stock drops. And as a real Potential Multibagger, it will drop. That’s why I scale into positions over time, and I’ll be doing that here too.

But enough introduction. Let’s go to the meat of this article.

The new Potential Multibagger is...

My previous pick is up 63% since I made it a Potential Multibagger four months ago. That could happen to this pick as well.

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Last week, the title of the Overview Of The Week was “We Are Soooo Back” as I was back from my vacation in Sardinia. But...

On Wednesday, I’m already off again. It’s a bit ironic, isn’t it?

This time, I’m going to Dublin, to Investicon. If you happen to be there as well, please come say hi to me.

There are many reasons I’m going, but one of them is that I can meet one of my investing heroes, David Gardner.

I’m not sure if I’ll be able to talk to him (I hope so) but I know for sure I can listen to him. That’s not the only reason I go. It’s also to meet some people and exchange ideas about the stock newsletter business.

Now, does that mean you won’t get any new articles in the upcoming week? No, not at all. To the contrary.

I have been researching stocks quite a lot recently, as I mentioned a few times in our community and in the Overview Of The Week. That crystallized in a new pick.

It will be released in the first part of the week. Those articles go deep and that means they are a ton of work. I'm still working on it and I don't know how much time I will need, but I'd love to publish before I leave to Dublin.

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I don’t know how much time I’ll have to write for the rest but I will be back for next week’s Overview Of The Week.

Articles In The Past Week

This is the fourth article this week. Let’s look at the three previous articles.

On Monday, I added to my PM Forever Portfolio. In this article, you can find what I bought.

In the second article, I analyzed the Mercado Libre earnings.

The third article was an analysis of Tempus AI. Is the stock still attractive after the big surge, partially caused by the Moderna news this week? You find the answer here.

Memes Of The Week

Two memes this week.

This is the first.

This one was shared with me by multiple people.

Interesting Podcasts Or Books

This week, I listened to two episodes of Invest Like The Best.

First, I listened to the episode with Ben Thompson of Stratchery.

He had an interesting story about AI. Almost 90 minutes long, but not a minute too long. You can listen to it here.

I also listened to the episode with Gavin Baker. He is Chief Investment Officer and Managing Partner of Atreides Management. That hedge fund has $7 billion in assets under management. Before Baker started it, he was a portfolio manager at Fidelity and did very well with his deep knowledge about semiconductors and tech. He talks about the state of AI investing. You can listen to this episode here.

The markets in the past week

Sometimes, there’s a discrepancy between your portfolio and the indexes. That’s why I find it interesting every week how the indexes did.

As you can see, the indexes were down. The S&P 500 lost 1.43%, the Russell 2000 1.65% and the Nasdaq 2.05%.

The Greed & Fear Index dropped from GREED to NEUTRAL.

Quick Facts

1. The Robots Are Coming!

This week, I saw this graph.

Source

The robots are coming and the estimates grow hard.

Of course, as an investor, and especially of growth stocks, you have to follow such trends. Right now, I don’t see a great way to invest in robots, except for Tesla, but there, the robo optimism is probably baked into the stock price. If you have ideas in this space, feel free to let me know!

This is especially interesting because the second technology is often even more decisive than the first. What I mean is that LLMs are great and such, but I don’t think they will change the world as much as something that has an impact in our day-to-day personal life. The internet paved the way for the smartphone and that changed our lives much more than the internet had already done.

I think that robots will be much more decisive for AI than LLMs. It’s the real-world application of AI. As with all things, that will bring good and bad things with it.

2. The Biggest User Of AI Tokens? AI Agents!

a16z, the famous venture capital company Andreessen Horowitz, published this chart this week.

Source

This is pretty crazy to see. Because if robots will have a big impact on our daily lives, agents have that potential as well. I would love to have fully personalized AI agents that know me and what I want.

We don’t have that yet, but as you can see, the number of AI agents has exploded and their consumption of AI tokens as well. They now use almost 5x more tokens than humans.

That also means that what many say is wrong. There is no AI bubble. The infrastructure companies all say they have contracts for 5 years out. Not at a fixed price, mind you. The customers just want to make sure they have supply. Right now, companies like Micron and Nvidia can’t make enough chips to satisfy the demand. If you think that will suddenly drop off a rock, you probably don’t follow this closely.

And yes, I know open models are taking market share. Here’s the chart of token use of open-source models vs OpenAI and Anthropic.

Source

Some see the ramped-up use of open-source models as a sign of oversupply. Please, don’t share this opinion. It shows huge ignorance. For many open-source models, you even need much more tokens, from 1.5x as many to as much as 10x for simpler tasks. The difference is that you don’t have to pay Anthropic or OpenAI so much for their premium models.

More and more, agents route tasks to the optimal model. For simpler tasks a cheaper model, for the most complex problems, the frontier models. But they all need chips. A ton of chips. That’s why I think the current pessimism you hear (and I have been hearing for three years) is too early. For memory, we are only in the first year of the cycle. It can easily take 5 or 6 years in total. And yes, I’m fully aware that’s long, a so-called supercycle, but this is one if I ever saw one.

The only caveat is that if there are restraints, people get creative and maybe someone comes up with an alternative or a workaround for the (memory) chip shortage. If that’s not the case, I don’t see any indication that companies like Micron will continue to benefit from the huge demand.

A new pick is coming in the next few days. So, it’s time to join!

Below: what the agents are telling us, an accidental leak, and much more.

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Tempus AI (TEM) reported its Q2 2026 results on July 30.

The stock climbed steadily over the next two and a half weeks and was up about 24% by August 17. A week earlier, it was even up almost 35%.

Then, on Wednesday, it jumped again. This time, the reason was that Moderna and Merck published outstanding phase-3 data on their personalized cancer vaccine. We’ll see how Tempus is involved later in this article. This second jump means that Tempus AI’s stock is now up 47% since the earnings.

At the same time, it’s still down 35% from its high set in October 2025.

That’s why I prioritized this analysis. I want to know if Tempus AI’s stock is still attractive at this point or not. When it traded at $46.18 a few months ago, I gave it a 9/10 Valuation Score. The uncertainty was the only reason I didn’t give it the maximum score. How about now? Is the stock still attractive for long-term investors?

Let me go through the quarter first. At the end of the article, we’ll look at the Moderna breakthrough. Of course, we will also look at the Selling Rules, the PM Quality Score update and the stock’s valuation to decide if Tempus is still attractive now or if it is time to take profits after this move. So, first to the results.

The Numbers

Revenue: $382.5M, +21.6% YoY, beating the consensus by about $3M.

Diagnostics: $289.3M, +20%.

Data and Applications: $93.2M, +28%, with Insights, Tempus AI’s data licensing and AI modeling division, up 36%.

Hereditary: $107.4M, +5%.

Gross profit: $246.5M, +26%, a margin of 64.4%, up from 62% in Q2 2025.

Non-GAAP EPS: -$0.04, an $0.11 beat, up from -$0.22.

GAAP net income: $5.6M, versus a $42.8M loss a year ago. It was the first positive GAAP quarter ever.

Adjusted EBITDA: $8M, versus -$5.6M in Q2 last year.

Oncology volume: about 96,500 tests, +31%, accelerating from 28% in Q1.

MRD volume: about 9,000 tests, +38% QoQ.

Guidance: full-year guidance raised to $1.595-1.605B, which means about 25% growth YoY.

Here’s a summary from the earnings slides.

Tempus had its first quarter with a GAAP profit but I think you should ignore it, as it’s only a paper profit. Fair value changes accounted for $97.4M. Tempus already owned about 20% of Personalis and then announced that it will buy the company. The stock shot up because of that and the paper gains of the existing position have to be counted for GAAP. But this is not real profitability.

Loss from operations was -$75.9M, worse than -$61.8M a year ago, mostly because of stock-based compensation. If you strip that out and also the acquisition costs and amortization of intangibles, the non-GAAP loss from operations was -$2.7M versus -$17M last year. So, there is improvement, but with a big asterisk. Non-GAAP net loss was -$7.7M, versus -$37.3M last year.

Hereditary

Hereditary testing looks for cancer risks you were born with, not for a tumor you already have. For example, it can look for a BRCA mutation, which raises the chances of breast and ovarian cancer a lot and healthy women can be screened earlier if they know they have this mutation. Tempus got the biggest part of Hereditary with its Ambry Genetics acquisition in 2025.

But just like last quarter, this section is not doing great. It grew just 5% YoY to $107.4M. CEO Eric Lefkofsky said last quarter mid-teens growth would return in the back half of the year. The explanation is that Q2 2025 was abnormally strong, so the comps are very tough.

Tempus also launched two new tests in the hereditary branch. xH reads the entire genomes of patients with blood cancers such as leukemia and lymphoma. Rare Whole Genome does the same for people with rare diseases that are extremely hard to find. Often, those people already got many tests, and this genome test can finally give them the diagnosis they have been looking for.

Both have just launched and won’t fix the slow revenue growth in Hereditary soon. But they are promising nonetheless.

The ASP Boost

ASP means average selling price: what Tempus actually gets per test from insurers and Medicare. It’s now $1,850, up from around $1,740 in Q1.

There were two important developments this quarter. The first is that the FDA approved xT CDx in its tumor-only version. A tumor-only test reads the cancer alone, without also sequencing the patient’s healthy DNA to compare with. Tempus already had approval for the version that does the test that does both readings.

With this approval, now every solid-tumor test Tempus has can be sold as an FDA-approved test. The result is that Medicare used to pay $2,900 but now pays $4,500. That’s theory, because in reality, not every test gets the full price. Founder and CEO Eric Lefkofsky said you should expect an increase of about $200 per test, or roughly $85 million a year, starting in 2027.

The second development is the expected boost from xF. That is a liquid biopsy test that reads tumor DNA in the blood when you can’t use tissue. The FDA is now assessing the xF test, and CFO Jim Rogers said the company wants to set the price at $7,500 once approved. CEO Eric Lefkofsky explained the reasoning for this price:

And look, it’s an evolving market. Our assay is most comparable in terms of size, like literally size like megabases and size totality to Guardant’s recent assay that they got approved. And I believe their ADLT pricing is something like $8,300 or $8,400. And so we -- it would be very hard for us to go to the market with a almost identical, at least in terms of like size and complexity assay that’s radically less expensive.

Guardant Health’s similar test sets the reference price for other companies. That’s how it often goes in healthcare.

So, you can see that the ASP is currently $1,850. If you add $200 from xT CDx and $550 from xF, then you get $2,600. In other words, that’s 40% more revenue from tests Tempus already has.

I think this is why the stock jumped after the earnings release. Higher profits on the same tests cost almost nothing extra, and that means more gross profit. Right now, Tempus has about 386,000 oncology tests a year. $750 more per test means $290M of extra revenue even if there are no additional tests, which is very unlikely. The number of tests grew over 30% and that’s why management projects about $400 million extra revenue in 2028.

xF isn’t approved yet, though. Lefkofsky expects it in the market in the second half of 2027.

The Data Business

This is the most interesting division of the company.

A few months ago, I gave Tempus a 9/10 Valuation Score at $46.18. The stock is at $72.69 now, up 57%.

Below: how Tempus is connected to the Moderna cancer vaccine breakthrough everyone talked about this week, the reason pharma giants almost can’t leave Tempus anymore, the AstraZeneca test that was passed and if Tempus AI’s stock is still a buy after the jump.

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Mercado Libre (MELI) reported its Q2 2026 earnings on August 5. In other words, when I was still in Sardinia. The stock first dropped about 5%, then recovered and is now down 7.6%.

Look at the revenue growth in the last 4 quarters: 39%, 45%, 49%, 50%. That’s impressive.

It was the 30th consecutive quarter of more than 30% revenue growth.

But still the stock is down. Let’s break things down to understand.

The Numbers

• Revenue: $10.17B, the first quarter with more than $10B in revenue. It was up 50% YoY in USD, +43% FX-neutral, beating estimates by $378M or 3.9%, which is a lot at this size and with so many analysts following the company.

• EPS: $9.19, beating estimates by $0.20, but down 12% YoY

• Net income: $466M, -11% YoY, a 4.6% margin

• Income from operations: $683M, -17% YoY, a 6.7% margin, down 550 bps YoY but roughly flat versus 6.9% in Q1

• Gross margin: 40.9%, down from 45.6%.

• Adjusted free cash flow: $214M, versus $454M a year ago

Marketplace:

• GMV: $21.9B, +44% YoY, +36% FX-neutral

• Items sold: 795.4M, +45% YoY

• Unique active buyers: 89.3M, +26% YoY, almost 19 million added in a year

• Items sold per unique active buyer: 8.9, +14% YoY. Strong with so many new users.

• Same- and next-day shipments: 225M, +38% YoY

• Live listings: 859M, +60% YoY

Mercado Pago:

• Monthly active users: 88.0M, +30% YoY

• Assets under management: $23.2B, +68% YoY

• Credit portfolio: $16.4B, +75% YoY, with $15.9B originated in the quarter

• Credit card portfolio: $7.7B, +91% YoY, now 47% of the book

• TPV (total payment volume): $101.0B, +56% YoY and +56% FX-neutral

• NIMAL (net interest after losses): 20.7%, better than the 17.8% in Q1

Advertising: +73% YoY in USD, +62% FX-neutral

Revenue by country: Brazil $5.53B (+59%), Mexico $2.34B (+55%), Argentina $1.84B (+20%), Other $463M (+63%)

As always, Mercado Libre gives a clear overview of the key metrics in the slides.

The reason for the price drop is not hard to find. The market saw the same thing: margins down. The operating margin was 6.7%, down from 12.2% last year. It saw the operating income down 17% YoY while revenue grew 50%. If you don’t know the company or what it does, this would be very bad. But it’s not. It’s an intentional investment. That’s also why the margins were more or less the same as in Q1. If this were a breaking company, the margins would keep dropping.

The company gave us a nice waterfall graph again about the margins.

Let me start with the green this time. General and administrative contributed 0.5% to net margins and product development 1.2%. We also already knew this in Q1.

In the COGS, next to the lower free shipping threshold, there were also discounts for buyers who pay with PIX (Brazil’s instant payment system, essentially free for merchants) and lower take rates for sellers in certain categories and price ranges. On top of that, higher shipping costs from higher energy prices and higher POS device costs also played a role. Mercado Libre also decided to spend more to acquire new merchants in Mexico.

Mercado Libre reports under US GAAP, so it must use CECL, which stands for current expected credit losses. This means that from the moment there’s a new loan, Mercado Libre has to write down a provision for all the losses it expects that loan to generate over its entire period. That’s before a single dollar of credit income has come in. If your credit book grows by 75%, this has quite some influence on margins.

Provisions for doubtful accounts came in at $1,276M in Q2, up 85% YoY. That results in 2.4% lower margins. That sounds bad, but let’s do the math.

Credit revenue was $2,278M and provisions for losses $1,276M. The difference is $1,002M, or 9.9% of the company’s total revenue. A year ago, that was $636M, or 9.4% of revenue.

So while the credit book nearly doubled in size, it delivered more profit per dollar of company revenue than it did a year ago, not less. This is very important. The bad debt line is a growth cost that only exists on paper. Sometimes, there’s a gap between GAAP rules and reality.

Brazil, One Year Later

In June 2025, Mercado Libre lowered the free shipping threshold in Brazil from R$79 (about $15) to R$19 (about $3.50). It immediately impacted margin, of course. Many analysts called this a defensive move against Shopee, Temu and AliExpress.

While there may have been some pressure, this is also a typical Mercado Libre move. The company did similar things in the past. Then, the story was that it was a defensive move against Amazon. If it was, it worked like wonders.

And look at what happened since the introduction of the lower free shipping threshold:

• GMV in Brazil: +39%

• Items sold in Brazil: +56%

• Share of users buying 3+ categories per month: +10 percentage points

• Active sellers: +29%

• Ecosystemic user growth in Brazil: from 35% before the change to almost 50% now (ecosystemic users are users active on both the marketplace and Mercado Pago).

On top of that, the unit economics keep improving. A decade ago, exactly the same thing happened after the free shipping threshold was lowered. Half of the sales in the price range between R$19 (about $3.50) and R$79 (about $15), the new free shipping range, already recovered the extra cost of free shipping. Mercado Libre could do this through technological innovation, more scale, and filling up capacity that was not used before. In just twelve months, that’s strong.

And because it works so well, management decided to cut take rates in April. CEO Ariel Szarfsztejn explains why:

So yes, I think what we did in Brazil with take rates goes back to the basics of e-commerce, right? So when consumers are deciding where to shop, they are basically looking for the broadest selection at the best possible price with the fastest shipping and the best financing.

And clearly, getting the right selection is a key part of our strategy. That’s why we’ve been doing 1P (when MELI buys and sells products themselves, Kris). That’s why we’ve been doing CBT. (CBT= cross-border trade, Kris)

And that’s why this quarter, as we did back in 2024 and 2025, we decided to lower seller take rates. We’ve already proven that lever, and we’ve consistently seen that every time we lower take rates, we get an acceleration in effective or successful sellers in our platform.

Active sellers grew 29%. So, just like in 2024 and 2025, it worked again. It’s great to see that margins didn’t suffer extra from this move and that Mercado Libre keeps focusing on what is best for the business, not on what Wall Street wants.

Items sold in Brazil grew 45%, while FX-neutral GMV grew 36%. That means average prices came down, exactly what you expect from lower free shipping thresholds, discounts for PIX payments and much more cross-border articles. These cheaper items are exactly Shopee’s, Temu’s and AliExpress’s strength and this number shows that Mercado Libre is winning those customers as well. It’s also the reason the company can sell more items per unique active customer, despite the significant growth in the number of customers. Normally, you’d expect a slowdown.

New buyers usually buy very little in the beginning. So the users who were already there must be buying much more than the 14% extra we see.

1 + 1 = 5

Last quarter, I called Mercado Libre a STRONG BUY and I added to my position. The stock is up 23.5% since then.

Below: the brand-new number management just shared that proves that 1 + 1 can be 5, an update on the Selling Rules, the PM Quality Score, the Valuation and whether the stock is still a buy right now.

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Today, just before the market closed, I added to the Forever Portfolio.

For newer Multis, that’s the portfolio with my real money.

This is a short article about what I bought and why. I already announced most of what I would buy in the Best Buys Now article, and I’m not going to write all the same things again here. As always, I put my money where my mouth is and I buy the Best Buys Now.

Let’s go over them one by one.

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The Overview Of The Week is back!

While I announced that there would be no Overview Of The Week for two weeks. Many Multis missed their weekly write-up and I got dozens of messages about why there was no OOTW (or other articles). I see that as a great compliment. When they heard I was on vacation in Sardinia for two weeks, for the first time that long in over a decade, I got many friendly messages from people wishing me a fantastic vacation.

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And it was great. I’m essentially always ‘on’ and I ‘work’ 7 out of 7. I put ‘work’ between hyphens because it doesn’t feel like work. This is what I love doing. But switching off completely for two weeks was really refreshing! I feel like my energy reserves are back to where they should be. I prioritized sleep (of which I often don’t get enough), reading, playing chess, swimming and enjoying the beautiful island and coast of Sardinia. For once, no earnings, no stress, and no pressure to publish. I think you can already see this week that it’s paying off for you as well, as this is already the fifth article this week. Let’s look back at the four previous ones.

Articles In The Past Week

The absolute priority I had set for myself was the earnings analysis of The Trade Desk earnings. I took my time to dig deep and you can find the result here.

The second article was about another company that didn’t have great earnings, Celsius. You can read that analysis here.

Even during my vacation in Sardinia, I kept up my Duolingo streak. I mostly do chess now, but also sometimes Italian. I analyzed the most recent earnings in this article.

Yesterday was the 15th of the month and traditionally, that’s time for the Best Buys Now. They are doing great so far this year, beating both the S&P 500 and the Nasdaq convincingly, by 13% and 12.5% on average.

With the new Best Buys Now, I feel confident I can keep up the winning streak. You can find the selection here.

Memes Of The Week

No memes this week.

Interesting Podcasts Or Books

I didn’t read anything that had to do with the stock market during my vacation, and as for podcasts, I listened to a few, but in Dutch. For those who can listen in Dutch: De Beursvoyeurs Zomer, with my friends Jurgen Vluijmans (about Bill Ackman) and Pieter Slegers (about Warren Buffett).

I also listened to Philippe Gijsels talk about William O’Neil, which made me decide to read O’Neil’s book. I’ve had it for years but never started it. I still have to finish another one (a manuscript of a friend I’m proofreading) and then I will learn more about O’Neil’s CAN SLIM method.

The markets in the past weeks

Let’s check.

It was a great three weeks, as you can see. The Nasdaq won 7.02%, the S&P 500 5.04% and the Russell 2000 4.72%.

The Greed & Fear Index jumped from FEAR territory before I left to GREED.

Below: the lawsuit one of my picks is facing (and why I don't see it as a thesis breaker), the two picks that jumped 36% in three weeks, the 12 other picks that were up more than 5%, the big SMB opportunity one of my picks just started to deploy, and much more. The Best Buys Now beat the indexes by 13% on average this year. Don't want to miss the next ones?

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Today, it’s the 15th of the month and if you have been here for a while already, you know what that means: The Best Buys Now!

Until now, the Best Buys Now have performed very well this year. These are the results of the Best Buys Now compared with the S&P 500 and the Nasdaq Composite.

As you can see, the Best Buys Now had an average return of 22.24%, compared to 9.32% for the S&P 500 and 9.74% for the Nasdaq over the same periods.

As you can see, except in January, the Best Buys Now have convincingly beaten the S&P 500 and the Nasdaq in every month.

If you had invested $10,000 every month into the Best Buys Now, the S&P 500 and the Nasdaq, these would be the results.

In other words, you would have gained $15,602 with your investments, compared to just $6,522 for the S&P 500 and $6,821 for the Nasdaq. That’s about $9,000 more in returns than the indexes. Not too shabby, right?

With the stock selections in this article, I want to continue this streak.

So, without further ado, let’s jump in.

I have ranked the Best Buys Now alphabetically.

1. Adyen

Adyen (ADYEY) had its earnings this week and the Dutch payment company had a strong first half of the year. The stock shot up 18%. It’s up 31% since I added it to the Best Buys Now last month.

Of course, the stock is still down 31% over the last year.

A few weeks ago, the stock was down 50% from the 52-week high. That’s a lot, but it’s not an exception. The whole fintech sector is down a lot YoY, but recovering.

Adyen was lagging Stripe in AI and that’s probably one of the reasons for the lagging stock, but it has made some strong moves with its Adyen Uplift AI optimization suite and through its first acquisitions ever. This company has an incredibly high Potential Multibaggers Quality Score and right now, the price is also still attractive. At 13.58 times 2026 EV/EBITDA, it’s still as cheap as when it crashed 40% in a single day in 2023.

2. Global-e

This is probably the least known company on this list. Global-e (GLBE) helps e-commerce companies sell cross-border easily. From local currency, translation to customs, taxes, shipping and returns, and so much more.

The company had its earnings in the last week and while I still have to write about them, I have already looked at them and listened to the call (on my racebike, so I’ll have to listen a second time). The earnings were really strong and the company beat on EPS and revenue. Of course, you will get a deep dive soon, but this information is key.

Look at the revenue first. What you see is accelerating revenue growth in each quarter of the last year. At the same, the company made a big leap in GAAP profitability. The revenue growth acceleration as such is already impressive, but combined with high EPS growth, that’s even much stronger. It shows that there’s real demand for Global-e’s solution.

In June, the stock was also in the Best Buys Now and it’s already up 28%, but I believe there’s much more upside left. Here’s why.

If you want to know why Global-e still has a lot of upside and the 4 other Best Buys Now, subscribe now!

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I hope you can keep up with the pace. After two weeks of holidays, I’m full of energy to go through the earnings I missed while being in Sardinia. The good thing about not reacting directly after the earnings is that I don’t have any emotional reaction to the stock price, so it’s even easier to separate the business and the stock price. As you will probably know, Benjamin Graham famously said:

That means that the short-term price action is sentiment, over the long term, the business will follow the fundamentals. What many seem to forget is that in investing, even the short-term can feel and be very long. Benjamin Graham himself considered anything under three years as the short term and I think that’s still true today.

Duolingo (DUOL) reported Q2 2026 on August 5, after the close.

On Thursday, the stock fell about 15% but it has recovered most of the losses. Yesterday, it was even up, but today it’s down almost 8%.

This price action already shows what I said earlier. Had I written my analysis on the evening of the earnings and the next day, I’d probably be influenced negatively by the price action, or I might have wanted to prove too much that the market was wrong. Now, I don’t have that problem.

Let’s start with the numbers.

The Numbers

• Revenue: $298.5M, +18% YoY (+17% constant currency), beating estimates by $2.9M or 1%.

• Total bookings: $289.1M, +8% YoY (+6% constant currency)

• Subscription bookings: $250.3M, +10% YoY

• GAAP gross margin: 72.6%, quite a bit better than the 71% guidance.

• Adjusted EBITDA: $77.3M, which results in a 25.9% EBITDA margin

• Net income: $33.2M, down 26% but the difference is only taxes.

• GAAP diluted EPS: $0.66, beating the consensus by $0.05

• Free cash flow: $78.6M, a 26.3% margin

And then the most important for me at this point: the users.

• DAUs (daily average users): 58.7M, +23% YoY, accelerating from 21% in Q1

• MAUs (monthly average users): 140.6M, +10% YoY, accelerating from 6% in Q1.

• Paid subscribers: 12.7M, +17% YoY

As always, Duolingo gives us a clear and visually attractive overview.

The adjusted EBITDA margin fell from 31.2% to 25.9%, but that was announced in February. Duolingo had guided for 25% and delivered 25.9%, so not bad at all, especially because management said they wanted to invest in new users and the number of users accelerated.

Important in this context is the DAU/MAU ratio, which went from 37.2% a year ago to 41.7%. Last quarter it was 41%. Some bears say that Duolingo has all the high-quality users already and now focuses on low-quality users. That argument is contradicted by the growing DAU/MAU ratio. Low-quality users would bring that number down.

This is the revenue mix.

Subscription revenue grows 22%, very much in line with the DAUs growth of 23%. For a company that said it would stop squeezing its free users, this is strong.

It also shows that you should own Duolingo only for its subscription revenue, not for the other revenue contributors.

Guidance and the Bonus Plan

These are the numbers for the Q3 guidance Duolingo gave:

• $302M revenue (+11.1%)

• $307M bookings (+8.9%)

• Adjusted EBITDA of $76M at a 25.2% margin.

Revenue guidance was slightly below consensus and may have contributed to the initial drop, but it won’t be the main reason.

For the full year, there were no changes and that’s good news. That means 10-12% bookings growth and 15-18% revenue growth.

Keeping the full-year guidance while Q3 is slightly lower than expected implies the Q4 numbers have to accelerate. CFO Gilian Munson addressed this in the conference call:

We’ve always thought that acceleration is going to come over time. This is not a slow and steady. That’s not the way this place is. But we know that it’s going to take a little time for the work we’re doing to play through, and that’s what you see in terms of us holding which... the guidance, which implies Q4 gets better from a year-over-year rate of growth perspective.

And the incentive is there. CFO Gilian Munson talked about a bonus plan that pays roughly $10M in cash if Q4 DAU growth reaches 25% or higher:

While it is not included in our 2026 guidance, we do want you to know that the company has a bonus plan that will trigger if Q4 DAU growth is 25% or higher and would be paid out during Q1. Since it’s currently uncertain whether that threshold will be met, we have not included it in our 2026 guidance. If it were achieved, we would expect the payout to be roughly $10 million in cash, potentially higher if DAU growth is higher.

My idol Charlie Munger said: “Show me the incentive and I’ll show you the outcome.” Mostly that’s seen as negative, but it’s also very positive and I’m happy with this bonus plan that can act as a carrot for management and employees to reach the goal. Management said that it would focus on DAU growth and this bonus can definitely help.

Duolingo ships a new version of its app every week and each has about 350 changes compared to the last one. Management calls it The Green Machine. The team tests hundreds of things, measures, and keeps what works. It shows up in CURR. From the shareholder letter:

The main metric we use to evaluate the stickiness of our product is Current User Retention Rate (’CURR’), which is the proportion of “current user DAUs” who come back the next day. (...)

Because small improvements in CURR compound into large DAU gains, this is one of our most important leading indicators. Thanks to the Green Machine, our CURR is at an all-time high of 84%, up by about 1% from last year.

1% may not sound like much but at such a high CURR, any improvement is impressive.

Users Came Back

In June, Duolingo ran a one-time campaign that let users who lost their streak restore their longest streak by completing three lessons. From the letter:

The response was incredible: 15.4 million learners revived their streaks, including nearly 8 million users who had no active streak when the event began. This became one of our most successful campaigns. It shows how much the streak matters to our learners, as well as how large the opportunity is to bring former learners back to Duolingo.

Nearly 8 million people who had left Duolingo came back to do three lessons with just one campaign. That’s great. Trust me, the streak is very powerful (mine is 1,661 days now).

So the users came back. But the best news of this quarter is something else.

Below: what that is, the very ambitious target management has, how the CEO admitted he was “massively allergic” to something the company now applies, and whether the stock is a buy at $132, with my Quality Score and the Valuation.

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Celsius Holdings (CELH) reported its Q2 2026 results on August 6, and the stock fell about 20% into the low $20s.

It recovered a big part of the losses, though.

But at the same time, the stock is still down more than 70% from its 2023 highs (when I didn’t own it yet).

I wrote about the Q1 results in June. The Celsius brand grew 6% then, and I explained why that number was better than it looked at first sight. Management was removing regional flavors to create a single national assortment within the PepsiCo distribution network. Every removal costs revenue, but the core 12-ounce cans were still growing double digits in convenience stores.

Before we look at the analysis of this quarter, it’s good to know what we’re talking about, so let’s check the numbers.

The Numbers

• Revenue: $817.9M, up 11% YoY, missing the consensus by about $52M. That’s a big miss of 6%.

• Adjusted EPS: $0.36, down 23% YoY, missing the consensus by $0.06. The biggest reason was a distributor termination charge, which is nothing to worry about.

• GAAP EPS: $0.14, down from $0.33 a year ago.

• North America revenue: $790.7M, up 11%.

• International revenue: $27.2M, up 10%, and down from $35.3M in Q1.

• Brand split: Celsius $387.0M (down 12% YoY), Alani Nu $364.4M (up 21%), Rockstar $66.5M.

• Gross margin: 48.1%, down from 51.5% a year ago and roughly flat versus the 48.3% in Q1.

• GAAP net income: $55.3M, down 45%. Net income attributable to common shareholders: $36.4M, down 57%. (The difference is that Pepsi owns a part of Celsius).

• Adjusted EBITDA: $184.2M, down 12%, a 22.5% margin against 28.4% last year and 25% last quarter.

The Celsius Brand Is Now Shrinking

The Celsius brand had $387M in net sales, down 12% year over year. Next to the earnings miss, it’s probably the reason the stock got hit so hard.

CFO Jarrod Langhans gave more insight:

Starting with brand CELSIUS, net sales were down approximately 12% year-over-year, while retail sales in tracked channels were down 2% in the second quarter.

I’m going to discuss those 2 numbers separately because they are telling you 2 different things. The scanner number, down 2%, is the consumer...

The gap to reported net sales came from 3 things: shipment timing related to inventory rebalancing, increased trade and promotional investment, and softness in the club channel.

Scanner data measures what shoppers really bought at the store, not what Celsius shipped. That distinction is important.

The revenue bridge in the deck breaks the 12% down: scanner growth was minus 2%, contra revenue took a 3% hit (contra revenue is the money that never reaches the top line, things like promotional spending and discounts), the gap between orders and scans was 7%, non-ready-to-drink energy products dropped 2%, and international added 2%.

The 7% orders-versus-scan difference is inventory rebalancing in the PepsiCo distribution system. As SKUs come out (a SKU is a single item, one specific flavor in one specific size), distributors buy more inventory, but then buy less a while later. That goes in cycles.

The 2% drop is the real Celsius brand slowdown. And, of course, that’s not great.

When asked whether the SKU rationalization was the right call and what he’d do differently, CEO John Fieldly said:

We went too deep on the CELSIUS rationalization. I think when you look at we’re entering the year, we could have done a much lighter job on that. But then there’s also puts and takes. The integration on Alani could have been further challenged, and Rockstar. Looking back, I definitely would have not cut as many SKUs within the organization through these commercial plans.

I like the honesty, and I think it’s worth more than superficial marketing answers you often get. Adjusting the course is the best thing you can do for any business and acknowledging you were wrong so fast after implementing the rationalization is a strength.

There’s a second self-inflicted wound that has consequences for revenue growth. CEO John Fieldly said they deliberately held back innovation on the Celsius brand while integrating Alani Nu and Rockstar, and that means the brand is now lapping six innovations from last year with nothing new to replace them. It’s normal you don’t do great then.

There’s a number that remains very positive, though: dollars per point of distribution rose about 16% from Q1 to Q2, despite about 7% fewer points of distribution.

CEO John Fieldly expects Q3 to look a lot like Q2 for the Celsius brand, with a return to growth in Q4. So, if you care about the short term, don’t expect Celsius to move anytime soon. The weird thing is that the analysts don’t see an acceleration in Q4 or Q1 2027 in their forecasts.

We also have to talk about Costco. In June I wrote that Costco’s Kirkland energy drink was scaring the market more than it was hurting the business, and I estimated the total damage at maybe 1% to 2% of sales. I still think that argument is mostly right. Over 60% of energy drink sales happen in convenience stores and gas stations where people buy one cold can, and nobody drives to Costco for a single drink.

But management has now named club softness as one of the three reasons the flagship brand fell 12%. That doesn't prove Kirkland caused it, and club channel weakness can come from a lot of places, including Celsius pulling its own SKUs. But it's still remarkable.

If the scanner number for the Celsius brand stays negative once the innovation returns in 2027, private label is probably doing real damage.

Below: the real Alani Nu growth number (it’s better than the reported number), the Selling Rules, Quality Score and Valuation Score.
And also what I’m doing with the stock now. Don’t want to miss this?

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Last quarter I wrote an article called “Is This The Explanation?” I put forward a hypothesis: that the high growth in Joint Business Plans and the weakness in headline revenue could be two different sides of the same coin, that The Trade Desk (TTD) was circumventing the ad agencies to the brands themselves, and that this explained both the numbers and Jeff Green’s uncharacteristic silence.

I have to take that thesis back today. Not because the quarter was bad, though it was awful, but because Green himself said the opposite during this of what I thought could be the reason.

The stock fell about 22.5% after the results were announced and kept sliding.

In July 2024, I gave The Trade Desk a Valuation Score of 3/10. Since then, the stock is down 86%, even though it initially continued to go up.

From the absolute top, it’s down even more, 90%. In the last two quarters, I was very critical of the company, and on top of that, the Quality Score deteriorated substantially. Unfortunately, this quarter is even worse.

The Numbers

Revenue came in at $715.1 million, up just 3% year over year, against a consensus of $751.4 million. That’s a miss by 5%, which is a lot for a revenue miss. And don’t forget that the consensus was already down because of the weak guidance in Q1.

But the consensus is not the number that matters the most here. The Trade Desk itself guided for “at least $750 million” three months ago, when Q2 was already well underway. They came in $35 million below their own minimum. That big revenue miss is a big part of the big price drop and I understand the market.

Profitability was not better. Non-GAAP EPS came in at $0.34, missing by $0.06. GAAP net income was $64.4 million, or $0.14 per diluted share, down 28.6% from $90.1 million. Income from operations fell 13%, from $116.8 million to $101.6 million.

Adjusted EBITDA was $241.3 million, a 33.7% margin, down from $270.8 million and 39% a year ago. So EBITDA declined 11% in absolute dollars, not just as a percentage. All these numbers look really bad.

The hit to profitability came partly from taxes. The company paid $48.7 million in taxes on $113.1 million of pretax income. That means a tax rate of 43%, against 32% a year ago.

Total operating expenses were $613.5 million, up 6% but excluding SBC, up 12%. This was mainly driven by platform operations, which were up 22% to $184.3 million. That is the data center and AI infrastructure build-out that has been going on for a few quarters now.

The Trade Desk repurchased $78 million of stock in Q2, with $269 million left on the authorization. That is about half the $164 million they bought in Q1. I don’t find this very confidence-inspiring. In the quarter the stock collapsed, with $1.5 billion in the bank and a lot of the buyback program left, they cut the buyback in half. Is this because of the new CFO or just because the company lost its faith in its own stock?

The company guided for revenue of “at least” $650 million. While the results were very weak, guidance was even worse. The consensus stood at $806.5 million. That’s a miss by a whopping 24%. For revenue, this is almost unprecedented. Adjusted EBITDA is seen at about $160 million.

In Q3, revenue came in at $739.4 million, so with guidance of $650 million that’s a YoY decline of about 12% and 9% below the quarter the company just reported. I can’t say anything else than that this guidance stinks. Very, very bad and disappointing.

Look at this list:

• Q1 2025: 25.4%.

• Q2 2025: 18.7%.

• Q3 2025: 17.7%.

• Q4 2025: 14.3%.

• Q1 2026: 11.7%.

• Q2 2026: 3.0%.

• Q3 2026 guidance: -12%.

This is just horrible.

And there is a detail that makes the 3% of this quarter even worse. The new CFO (another one), Nate Olmstead, said this on the call:

We also benefited from political spending related to the U.S. midterm elections during Q2.

So, this quarter, the 3% includes a midterm tailwind that did not exist a year ago. In other words, normally, it would have been even worse than 3%.

There is one more way to see how much has changed: the Rule of 40, revenue growth plus margin. A year ago this quarter, that was roughly 19 plus 39, or 58. This quarter, 3 plus 33.7, or about 37. On the Q3 guidance, it implies something in the low teens. Growth and margin used to be communicating vessels. Sometimes, there was more growth and that impacted the margins a bit and sometimes, there was a bit less growth, but then margins were generally better. Now, both go down together. Again, a very bad look.

Management leaned hard on macro. The word was used 14 times during the earnings call. There is definitely some truth in the macro comments. But in the same quarter, Magnite grew its revenue by 17% with CTV up 36%, Meta’s advertising revenue grew 27%, and Amazon’s ad services grew 26%.

I have argued before that Amazon and Meta are not the same as The Trade Desk. But it shows that digital advertising did not slow down to low single digits for everyone. Macro can explain why The Trade Desk is under pressure. It cannot, on its own, explain why The Trade Desk is under so much more pressure than the industry it operates in. Last quarter, Jeff Green explained that most of the company’s revenue comes from Fortune 500 brands that respond differently to macro shocks. That was a reasonable answer for a quarter with 12% growth. It’s not for 3% growth (including extra money from the midterms) and definitely not for the 12% drop guidance.

Customer retention stayed above 95%. It always does. And yet revenue grew 3% and is guided to fall 12%. Retention at The Trade Desk counts the number of companies, not dollars. It is not a dollar-based net retention rate.

There are three explanations for the lower spending:

One: clients cut their total advertising budgets, so spending on the platform fell along with everything else. That is cyclical and it means it will recover.

Two: clients kept their budgets but moved a smaller share of them through The Trade Desk.

Three: gross spend held up reasonably but take rate or revenue mix weakened, so less of that spend converted into revenue.

Management gave us no way to judge on what it is. Gross spend and take rate are only disclosed once a year.

Jeff Green said CPG (consumer packaged goods) and autos together are about 25% of the business and that roughly half of those clients are growing well. He also said the majority of the top 100 accounts are growing double digits, that clients outside the top 500 grew over 50% year to date, and that EMEA and APAC each grew almost 30%.

If you put that together, it looks very bad. If roughly 12% of revenue is the troubled part and the other 88% is genuinely growing at double digits, that troubled 12% has to be down something like 45% to 50% YoY to drag the total down to 3%. That is not cyclical softness but a total collapse. The alternative is that the healthy 88% is not really growing at double digits. One half of the story has to give.

Green said some version of “don’t overstate this” at least four times on the call:

This is more a cyclical issue with a handful of customers, and it’s not hard to look at their earnings and see that they’ve had some challenges. (...) please don’t walk away from this thinking that that’s affecting everyone. It’s actually just a couple of them.

When a CEO tells you four times not to worry, that’s pretty worrying in itself.

Below: I look deeper into the earnings, to understand all details, see a worrying trend that The Trade Desk is not responsible for, update the Quality Score and Valuation Score and ultimately tell you what I'm doing with my position: holding, adding or selling.

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Aaaah, it’s Sunday again. Every week you get the Overview Of The Week and every week, I hope you enjoy reading it as much as I do writing it.

Before we dive in, I’m leaving on holiday starting Wednesday. Sardinia is a great place to blow the dust off my Italian. I studied the language 30 years ago, but the last time I spoke it was 12 years ago.

It’s the very first time since I launched Potential Multibaggers as a paid service 6 years ago that I’m taking almost 2 weeks off.

That means there will probably be no Overview Of The Week next week and the week after that. But there might be an odd article. Writing is one of my favorite activities next to reading, so maybe I can’t resist the temptation. But in the first place, I want to be present with my family and the friends who join us. So, it is possible that you don’t get any articles in the next two weeks. Next to my Italian, my chess game should improve in those two weeks as well.

I’ll be on our internal discussion platform for paid Multis but probably not as much as usual. And I might post some vacation posts in our Casual Corner channel, the only channel that’s not about investing.

Multi Flo (and countless other Multis) have noticed that when I’m not at home, the markets tend to react very negatively to that, so brace yourself for the next few weeks. You could find some buying opportunities.

Articles In The Past Week

This is only the second article this week. One of the main causes was the abundance of material Axon has put out since the earnings. But it was a great investment of my time. I had already done a deep dive when I picked Axon, of course, but this taught me a lot more about the future of the company. And it left me even more optimistic about the company.

You can read the article about Axon here.

Next to that, I also continued my deep dives in some companies that are on the watchlist and could become a new pick. Don’t expect it any time soon.

Memes Of The Week

Just one meme this week. Not as much an investing meme, but still funny. Thanks for sharing, Multi bep.

Interesting Podcasts Or Books

This week, I did some catching up with one of my favorite podcasts, Invest Like the Best with Patrick O’Shaughnessy.

Very often, I don’t know the guests, but they always are very interesting. The first episode I listened to was with John Kim, on money raising. It was great to hear the other side of investing, which is not often talked about and how it is a game of trust. You can listen to it here.

The second episode illustrated what I like about this podcast. It was totally different and went in all directions but all interesting. Jeremy Giffon argued that internet fame, and especially that on X, where you have to have an opinion, is now worth more than money. But that was just one thought. You can listen to the full episode here.

The markets in the past week

Let’s check.

The Nasdaq continues to be the biggest loser, down 2.13%. The Russell 2000 lost 1.09% and the S&P 500 0.61%.

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The Greed & Fear Index stayed in FEAR territory.

Quick Facts

1. Optimism and Creative Destruction

This is not really a quick fact, but a quick thought.

One of the things I repeat over and over again is that optimism wins. That’s not naive but reality. If you look at history. Things just get better over time, with shorter periods of setbacks. Very much like the stock market, in other words.

But it’s also a warning signal for investors. Very often, the companies that play on defense lose. The new and better paradigm will almost certainly win and if you don’t adapt, you’ll be disrupted and perish. Joseph Schumpeter called this creative destruction, the idea that the economy can only stay vital when the new destroys the old.

That’s also how you have to look at the Mag7 capex boom. The risk of NOT investing so much is much higher than that of investing too much. Multiple Mag7 executives have already said this aloud, but many investors don’t seem to realize that it’s either going all-in or be disrupted. That’s why Alphabet announced more investments and that’s why others will invest more as well. They know that their very existence is at stake.

Morgan Stanley still expects a big jump in capex in 2027, but only a small one in 2028.

Source

2. The Worst July In 22 Years?

This week, I saw this table.

Source

This is about the Nasdaq. As you can see at the top, the average gains for July are 3.45% but right now, it’s down 7.08%. If this holds, it would mean the worst July month since 2004.

But you should also see this in the context of April and May, which were exceptional. You can’t have higher upside with deeper downside. The Nasdaq has been much more volatile than the S&P 500, but which would you prefer to have held in the last 20 years?

This is something many investors still don’t appreciate enough. The short-term volatility is the entrance price you pay for higher long-term returns. So, the choice is yours. What will you focus on? The short-term drops or the long-term climbs?

I see that most choose the short term. 99% of the news about investing, be it on mainstream media or social media, is about the short term. That leaves an edge for investors who look at the long term. It sounds easy, but it’s not. You have to have the stomach for it.

By the way, this image also fits into this picture. You have to know that the S&P 500 is up 8.5% and the Nasdaq 7.5%.

Source

In other words, up to now, the average individual investor is underperforming the indexes by about 20%.

Just to be sure, this is not looking down on the individual investor, as I am one myself. Every single investment strategy will underperform the indexes at certain moments and sometimes for a few years in a row. Look at the year before the dotcom bubble popped and how Warren Buffett did compared to the Nasdaq 100.

That’s an underperformance of 122%. But look at the next three years.

It’s important that you know what game you play and that you accept the ups and downs that come with every approach. The current winners are tomorrow’s losers and vice versa. That’s why yearly returns don’t mean anything.

Below: this week's news on the picks and much more. The perfect moment to join the Multis.

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