Wow, what a trip this has been so far.

I picked CrowdStrike (CRWD) as a Potential Multibagger on June 29, 2020, almost six years ago exactly, at $98.10. That means it is almost a 7-bagger. But in typical Potential Multibaggers style, it has been very volatile and, I’m sure, will remain so.

This is how multibaggers go. Everyone wants to celebrate a multibagger, but very few have the stomach to hold on to stocks through the ups and downs.

Don’t be mistaken in thinking that CrowdStrike was an easy hold. It first became a threebagger in a relatively short time and then went back to square 1 in January 2023.

That means the stock was down 65% from the top. Of course, as always, the cynics were ready to chime in: to get back to even, the stock has to almost triple.

There are two problems with that.

The first false assumption is that everyone picked the absolute top. If you picked the absolute bottom, everyone would accuse you of cherry-picking, and they would be right. But if someone cherry-picks negatively, it just passes as if that’s normal. My irritation about this is one of my pet peeves.

Secondly, the percentages make it seem impossible. To be exact, the stock would have to win 186% to get back to the top. Including the stock price, that’s almost a triple. Sounds hard, right? But the stock just has to regain the lost dollar amount. Math is somewhat misleading here. Not factual, of course, but psychological. It makes it sound almost impossible or very hard. But if you look at the bottom, this often happens and usually very quickly.

Just look at what CrowdStrike did from January 2023.

As you can see, the stock is more than a 7-bagger from that point. I looked at when it exceeded its previous top. The poetic beauty of the facts is that it was exactly a year after that bottom.

As long as a company keeps performing fundamentally, the stock return will come. Sometimes it goes swiftly, sometimes you have to exercise years of patience. That’s the entrance ticket for outsized returns.

This is what Charlie Munger said about this.

But enough musings. It’s time for action. And Zack will help me. He will analyze the earnings, although I also contributed a few elements. Even when someone else writes, I still analyze, so I don’t lose touch with the stock.

After the analysis, I take over again for the Selling Rules, the PM Quality Score update and the Valuation to see if CrowdStrike is still attractive at this price, or if it would be wise to sell or trim. Take it away, Zack.

Hi Multis

Leading up to earnings, CrowdStrike went on a generational run, more than doubling from the AI-fear lows set earlier in the year.

The sentiment on X went from “CrowdStrike is going to be replaced by Claude!” to “CrowdStrike is overvalued!” in a matter of months.

CrowdStrike stock run(Fiscal.ai)

So what happened in the past 4 months? Did something fundamental change? Read on to find out.

Headline Numbers

Let’s first dive into the numbers.

Revenue grew to $1.39B, 26% increase year-over-year, exceeding estimates by 1.7%.

Annual Recurring Revenue (’ARR’) grew to $5.51B, growing 24% year-over-year.

As a reminder, for SaaS companies, ARR is often a better indicator than revenue because it more accurately reflects current and future obligations due to the nature of GAAP revenue recognition.

Net New ARR which came in at $256M, up 32% year-over-year indicating continual expansion of contracted revenue with existing and new business. A related note: both SGNL and Seraphic closed in Q1, contributing $7.8M of acquired net new ARR to this quarter.

Charting ARR over the past few quarters, we see the reacceleration of revenue continue after an initial slowdown in the quarters prior:

The growing ARR is also reflected in the increased module adoption that continues to march up and to the right:

ARR and adoption charts(Fiscal.ai)

There’s one more forward-looking number worth paying attention to: RPO or Remaining Performance Obligations. That’s revenue that is already under contract but that can’t be booked as revenue yet because CrowdStrike still has to deliver the services. RPO came in at $8.8B, up 29% year-over-year. That’s growing even faster than ARR and revenue. Probably, that’s a result of the bigger and longer contracts that CrowdStrike can sign.

Subscription Gross Margin came in at 78%, or 81% on a non-GAAP basis. Both were up by 1% compared to their respective quarterly numbers from last year.

Operating Income (Loss) was ($30.6M) compared to ($118.7M) in FY 2026. Non-GAAP income was $325M compared to $201M in FY2026. The biggest contributors to the swing in income were a reduction in expenses related to the July 19th incident (damages from the big outage), which dropped over 50% compared with last year, and reduced SBC (stock-based compensation) as a percentage of revenue.

While operating income is still in the negative on a GAAP basis (mostly due to SBC), we see that Operating Cash Flow continues to grow every quarter, reaching a record high of $591M, growing 54% year-over-year.

Net Income (Loss) was $27.8M compared to ($104.3M) in Q1 FY2026. Non-GAAP net income was $283.4M compared to $184.7M in Q1 FY2026. GAAP net income got an $18M boost from gains on strategic investments. CrowdStrike has a venture fund, the Falcon Fund, and probably one or a few of those investments did very well.

Earnings Per Share (diluted) on a GAAP basis was $0.11 compared to a loss of $0.42 in Q1 FY2026. Non-GAAP Earnings Per Share (diluted) was $1.10 compared to $0.73 in Q1 FY2026.

Free Cash Flow was $468.5M compared to $279.4M in FY2026 while maintaining a stellar 34% free cash flow margin.

Cash and cash equivalents stood at $4.55B. This rock-solid balance sheet continues to provide security and massive optionality via future acquisitions or buybacks.

In Q1, CrowdStrike repurchased $176 million in shares at an average price of $365.63, leaving approximately $1.3 billion remaining under their current authorization. Management noted they will remain opportunistic in returning capital while staying focused on capturing the significant growth opportunities ahead.

CrowdStrike also announced a 4-for-1 stock split, the company’s first as a public company. While stock splits are purely cosmetic, they can increase liquidity for both shares and options. Shares will begin trading on a split-adjusted basis on July 2, 2026.

Guidance

For Q2 FY2027, management guided:

• ARR: $5.793B – $5.795B (24% YoY growth),

• Net new ARR: $284M – $286M (28 – 29% YoY growth)

• Revenue: $1.436B – $1.442B (23% YoY growth)

For the full year FY2027:

• ARR: $6.531B – $6.556B (25% YoY growth); a slight raise.

• Net New ARR growth: raised to 27.7% at the midpoint which is a 520 basis point increase from prior guidance, implying $1.279B – $1.303B of net new ARR. This is a meaningful revision and signals that management sees future business expansion in the pipeline.

• Revenue: $5.915B – $5.959B (23 – 24% YoY growth); a slight raise.

• Free cash flow margin: At least 30% for the full year

Overall, these were incredibly solid numbers across the board, showing clear signs of top-line reacceleration and improving operational leverage as they shake off the final impacts of the July 2024 incident.

Now let’s move on to what CEO George Kurtz referred to as the “Mythos inflection moment”.

The Mythos Moment

First, a quick recap of what transpired over the past few months:

A shift began at the RSA Conference in late March 2026, slightly before Mythos was even announced. Founder and CEO George Kurtz mentions that every meeting he had that week boiled down to the same thing:

Every meeting was literally the same meeting all over. Help us protect these AI workloads that are running on the endpoints. All the developers are running it, marketing is running it, accounting is running it. We heard just crazy stories about AI run amok.

Organizations want to move faster in adopting AI without compromising security.

Then, in April 2026, more fuel was added to the fire with Anthropic releasing a new frontier model referred to as “Mythos,” which demonstrated an ability to identify software vulnerabilities and construct sophisticated cyberattacks at an unprecedented speed and scale.

Claude Mythos(Anthropic)

Source: Anthropic

Now, any reasonably technical person or AI agent can potentially conduct serious cyberattacks against enterprise infrastructure, and cybersecurity’s role in the enterprise has evolved overnight. Founder and CEO George Kurtz:

For the first time in my career, the market’s view of cybersecurity’s role has shifted from being viewed primarily through the lens of risk management, compliance, and protection to being recognized as a strategic accelerator and a critical enabler of AI adoption.

The funny thing is that if you have been following CrowdStrike for a few years, George Kurtz has said this forever. So, it was with pride that he said this. Cybersecurity is now a necessity for enterprises that want to leverage and accelerate AI quickly, as deploying AI across an organization without proper security controls is too risky. Secondly, on the defensive end, frontier AI models (e.g. Mythos) have increased the attack surface and lowered the barrier for adversaries, increasing the security gap enterprises were already facing.

In response to this potential threat, new programs were created: Anthropic’s Project Glasswing and OpenAI’s Trusted Access for Cyber (’TAC’).

CrowdStrike was the only cybersecurity company selected for both, underscoring its leadership in this space. These programs gave enterprise companies early access to frontier models to ensure that necessary cybersecurity guardrails were in place before the models were released to the public.

This quarter, CrowdStrike also took the initiative in launching Project QuiltWorks.

Source: CrowdStrike

This is an industry-wide coalition of the world’s top AI companies, consulting firms, and cyber insurance companies, all under one roof, with the goal of providing auditing services with the CrowdStrike platform to identify vulnerabilities within companies.

As you can imagine, all of this serves as a new marketing and sales pipeline for the business, positioning CrowdStrike as the thought leader and best-of-breed in this space.

It’s ironic how what initially started as a threat to the CrowdStrike business is now a sales generator. I mentioned that in last quarter’s analysis of the “AI Threat” and it looks like it’s playing out exactly as I saw it then:

To flip the script, rather than a threat, AI and the “agentic workforce” represent a massive new market for CrowdStrike. AI adoption means a new attack surface that must be secured. As it grows, CrowdStrike becomes an even more necessary layer of protection for the AI stack. We are already seeing this reflected in the growth of the modules (Identity, Endpoint, AI-DR, etc.) mentioned earlier in this article. CrowdStrike is set to benefit from this AI revolution, not be replaced by it.

This entire pivot was further proof to me of just how much the market is driven entirely by narratives. Especially in an environment with volatile price action, you can clearly see how negative narratives drive down prices, which then fuels an even more negative narrative. The cycle repeats endlessly until the story finally turns. Keep in mind, this whole roller coaster happened despite zero evidence of fundamental weakness.

So the narrative flipped, the fundamentals are stronger than ever, and the stock just doubled in four months. I bought back then, based on the valuation, which is in the paid part below.

Below: the customer behavior that proves how sticky this platform is, the AI giants that are now building on top of CrowdStrike, the exact price I’d buy more of this stock at, and what I’m doing with my position after a 7-bagger.

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

Before we dive in, I just want to set the record straight, as there are some newer Multis who might not know this. The Best Buys Now are not short-term opportunities. In other words, this is not for traders.

That doesn’t mean that I sometimes don’t add stocks that I think have short-term potential. I added BE Semiconductor Industries to my 10 Stocks For 2026, for example. The stock is up about 140% year-to-date.

AMD was in the Best Buy Now in March 2023, and it’s up almost 500% since then. Nvidia was a Best Buys Now in June 2022 and it’s up a whopping 1,155% since then.

But sometimes, it can take years before a stock takes off. In April 2023, I picked Datadog at $67.32. For more than 3 years, it underperformed but then it shot up like a rocket in the last few months. That pick is more than a three-bagger now. That’s just sometimes how the market works.

There are many more big winners, like CrowdStrike (up 587% since the Best Buys Now of January 2023), Cloudflare (up 420% since that same Best Buys Now), ASML (more than a threebagger since the Best Buys Now of October 2023), and many others.

There have been misses as well, of course. There were stocks like Fiverr, which was in the Best Buys Now a few times and which I ended up selling. The same goes for Paycom and other stocks. But one Nvidia, AMD or CrowdStrike wipes out the losers and then some. That’s how I invest.

And then there’s a category that underperforms but that I still believe in strongly for the long term and I’m convinced they will have their Datadog moment, that moment that made it worth waiting for.

But enough introduction, let’s go to the picks of this month. Just one remark, while the picks are numbered, this is completely random, not a choice of one above the other.

1. Broadcom

Broadcom (AVGO) was a Best Buys Now in February 2025 and it’s up 62% since then, but I think it’s attractive again.

After the Q2 earnings on June 3, the stock fell 20%.

There could be a few extra reasons (like the SpaceX IPO sucking up money), but I think there were two main reasons for the drop. The first was that guidance was not raised for the year, the second was that guidance for Q3 gross margin was 74%, down from from 77.1%.

But the margin guidance was lower because the mix changed. Broadcom sells high-margin software and lower-margin custom chips, and when chips grow faster than software, the margin will drop. It’s that simple.

There was a single $10 billion custom-chip order that will be in Q3. CEO Hock Tan already announced that last year.

Revenue was up 48% to $22.2 billion, AI chip revenue up 143% to $10.8 billion. The problem is not demand, but TSMC capacity. You can see this in the booking, orders for later delivery. They were above $30 billion, while only $10.8 billion was shipped. Customers don’t do a one-time order but are making reservations for the next few years.

But Broadcom is more than a chipmaker now. Almost 40% of AI revenue comes from networking, the switches and optics that move data between chips. And that’s one of the bottlenecks in data centers.

Broadcom launched a new platform with Apollo and Blackstone that will finance over 20 gigawatts of compute capacity through 2028. In other words, Broadcom helps finance the buildout.

I think the valuation looks good after the drop. Just look at the forward PEG.

That’s a 2026 PEG of 0.47, a 2027 PEG of 0.30 and a 2028 PEG of 0.45. That’s all very cheap.

As you can see, I added the number of analysts, because the more analysts, the higher the reliability of the consensus. Beware, it’s still an estimate and it could be quite wrong. And don’t forget that Broadcom has a history of consistent outperformance versus the consensus.

Here’s where the free part ends. If you are a paid sub, keep reading, as there’s much more.

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Because of a technical flaw, this Overview Of The Week was not published yesterday. I’m very sorry, but here it is.

Happy Father’s Day to all Belgian fathers!

Yes, in Belgium, we celebrated this a week earlier. If you are Dutch, American or in many other countries, it’s next week. If you are in Switzerland or Lithuania, it was last week.

My wife and daughter spoiled me this morning with a delicious breakfast.

Articles In The Past Weeks

In the past weeks, you got four articles, but this week, the pace dropped a bit and this is ‘only’ the third article this week.

In the first article, I looked at Kinsale and its Q1 results.

Yesterday, you got an analysis of the outstanding Cloudflare results.

Memes Of The Week

This week, you couldn’t ignore the SpaceX IPO. And of course, this meme is as true as it is funny.

This is another one about the SpaceX IPO.

Because of the IPO, Elon Musk became the first trillionaire ever. The difference with the other billionaires is so big that we are all actually closer to Larry Page, Sergey Brin, and Jeff Bezos than they are to Musk. Pretty crazy. That gave rise to this meme, I guess.

This week, there was also the launch and suspension of Fable 5, the version of Anthropics Mythos for the general public. The American government thought it was too dangerous for foreign use, including Anthropic’s own overseas employees. Pretty wild. That’s when you get situations like this.

Interesting Podcasts Or Books

This week, I listened to The Compound and Friends. The theme was the state of the market and why the knockout punch everyone expects doesn’t come. Interesting stuff.

Oh, one tip, if you are only interested in the investing stuff, you can start at minute 10. Before that, they talk about basketball and other things. You can listen to the episode here.

The markets in the past week

Last week, the market indexes lost quite a bit, mostly because memory stocks dropped sharply. How about this week?

As you can see, it was a volatile week and the indexes only got in the green on Thursday and Friday. The S&P 500 was up 0.65% and the Nasdaq 0.70%. The Russell 2000 was up 3.90%, which is actually what you want to see, as it means the market strength is broadening. If you don’t know what I mean, I refer to the podcast episode above.

Weirdly enough, the Greed & Fear Index dropped further into Fear territory.

Quick Facts

1. The SpaceX IPO

Last week, I said not to buy the SpaceX IPO. This week, some said that I was apparently wrong. I think they read me wrong, haha. I’m not a trader. I’m an investor. There’s a fundamental difference between the two.

Now, some also thought I said I would never invest. I have not written that in any way or form.

I just never invest in IPOs.

This is what I wrote in 2020 already:

Why I never buy IPOs

I wait for at least 2 quarterly results, preferably even more, but normally at least 8 or 9 months after the IPO. There are several reasons for that.

1. FOMO or fear of missing out: a lot of investors don’t want to miss out on the next ‘hot’ stock but fear of missing out is not the best investing principle. You buy a stock not because the company executes so well or because you are impressed by the conference calls but simply because so many people tell you it’s so exciting.

There seems to be huge social proof and as human beings, we’re very susceptible to social proof. If so many pundits are upbeat about it, it must be a good investment, right? Well, maybe. But wait for it and you can have proof in the quarterly results. You can judge for yourself then instead of believing others.

2. The bank-fueled hype machine: banks buy the shares of companies that want to IPO and then sell them at the IPO. That means that if the bank buys for $31, like nCino and shares jump 150% that they pocket that difference. That’s why they will do everything in their power to push everyone in the industry to hype stocks before the IPO. And you know how it goes in a business where everybody knows everybody: most will simply do what they’re expected to do and will contribute to the hype. As an outsider, I am a bit more skeptical.

3. Execution. Very important: I want to see how a company executes under the eye of the world for at least a few quarters. Public scrutiny is something else than operating as a private company. The expectations come from outside analysts now and missing earnings in your first few quarters paints a whole different picture.

4. The lock-up period: After 6 months (mostly) the lock-up period expires so insiders can sell as many shares as they want. Management and early investors often seek to cash out at least a part of their holdings and that means that millions of shares flood the market.

5. Price drops: That selling often causes the price to drop, so plenty of time to buy then. I’ll give some examples of the best stocks, although I picked them randomly. I just had a look at them and they fitted into a pattern that I often see.

This is Shopify in its first 6 months of trading:

Then look what happens over the next three months, after the lock-up has expired:

In investing, patience is a virtue. Don’t be the ball but be the player that controls the ball. And think who can take advantage of hyping you up for an IPO.

I added more examples than just Shopify, but I didn’t want to make this too long.

That’s why this visual is so good.

Now, it’s very hard to pinpoint the exact buy point before it goes up. But I can wait out ‘dead money,’ unlike funds, which are judged on their quarterly performance.

So, if SpaceX’s stock drops enough, I might be interested. But don’t expect a second Tesla. Why not, you may ask? Well, because of this.

A whopping 25,420% gain? Up more than 250x? That would mean SpaceX would have to grow into a company with a market cap exceeding $500T. To give you some perspective: the total market of all American stocks is $79.5T, and the market cap of the whole world is $136T.

I’m happy to wait for the drop. And I’m pretty sure it will come. When? It could already start in three months, but more likely between 6 and 9 months.

Now, if you hold IPOs long enough, that can still work out. Look at this table. But also look at the difference in P/S between SpaceX and the rest of the IPOs.

But of course, there is Elon Musk. He knows how to pump the stock of his companies. I mean, if you can keep up this stock's momentum with those fundamentals, you can do it with another stock as well, right?

Now, I’m not dunking on Elon. That would be utter stupidity. Long-term Multis also know I owned Tesla in the past but took my gains. I admire Elon deeply and after reading Walter Isaacson’s great Elon biography, that admiration even grew.

But that doesn’t mean I can’t say Elon’s a stock pumper. Part of that is naive optimism, as he always thinks that things will be rolled out much faster than possible. Just like Steve Jobs, he has a reality distortion field. That’s a power, as he can bend reality into the shape he wants it to be over the long term, but over the short term, it makes them almost impossible to work with and irritating when it comes to setting expectations.

A new example of this came today when Elon replied to a post on X.

To be honest, I would be surprised if SpaceX’s revenue would be greater than $1T in 2031. I can’t say it won’t reach that in, let’s say 2038 or so, but even that is very uncertain.

Sometimes, people have trouble seeing the negative pendant of geniuses, but I don’t. It makes these incredible people, who change the world we live in, much more human to see them multi-faceted, just like we are all not one thing, but many things at the same time.

2. There’s TSMC And The Rest

This week, I saw this image.

This again shows how important TSMC (TSM) is for chips. All other foundries combined only have a quarter of the whole market.

Here’s where the free part ends. If you are a paid sub, keep reading, as there’s much more.

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Cloudflare (NET) reported its Q1 2026 results on May 7. I didn’t find the time to cover them right away and then I saw that it had its annual Investor Day on June 9. I waited a bit so I could cover both in one article. And here it is.

We’ve owned Cloudflare since I picked it at $39 in 2020, and that definitely helped me to unpack everything and put certain things in perspective.

Let’s walk through the numbers first.

The Numbers

• Revenue: $639.8M, +34% YoY. That’s the same growth as Q4. It beat the consensus of around $622M by about $17M or 2.7%.

• Non-GAAP EPS: $0.25

• Non-GAAP operating income: $73.1M, or 11.4% of revenue, up from $56.0M a year ago.

• Free cash flow: $84.1M, up from $52.9M in Q1 last year.

• Free cash flow margin: 13%

• RPO: $2.543B, +36% YoY. RPO is the remaining performance obligation. That’s revenue already under contract but not yet booked because the service still has to be delivered.

• DBNRR: 1118%. (dollar-based net retention, how much customers Cloudflare had a year ago are spending now, including the churn of customers that stopped).

• Large customers (over $100K a year): 4,416, +25% YoY. This is now 72% of revenue, up from 69% last year, and grew by 38%.

• Very large customers: deals over $1M grew 73% YoY. Cloudflare added as many $5M+ customers in this quarter as it did in all of last year.

Cloudflare has said on multiple occasions that investors should not focus on the DBNRR, but I still read a lot of takes saying it was bearish that DBNRR dropped from 120% in Q4 to 118%.

Cloudflare said that its sales teams focused on new businesses, and not as much on the expansion of existing customers. But still, retention was great.

Founder and CEO Matthew Prince on the call:

Our quarterly gross retention reached its highest level in four years, reinforcing that customers understand Cloudflare is a must-have rather than a nice-to-have.

Gross retention is different from dollar-based net retention. It looks at what you had in revenue from your customers last year and you withdraw all the churn of customers who left, but you don’t count what they spent more. So, the maximum is 100%. The highest gross retention in four years means very few customers are leaving.

The focus on new customers paid off. New business grew at its fastest rate since 2023.

Guidance went up as well. Management raised the full-year guidance to $2.805 billion to $2.813 billion, about 30% growth at the midpoint. For Q2, Cloudflare guided to $664 million to $665 million, also around 30%. I’m pretty confident the real result will be higher.

Also important: network capex is expected to be 14% to 15% of revenue for the year, which is still almost nothing compared to the tens of billions the hyperscalers are investing into data centers. And knowing this team, they’ll probably beat all of it.

The 20% Layoff

On the same day it reported this quarter, Cloudflare also announced it was letting go of about 1,100 people, about 20% of the company. That’s the news that made all the headlines, and I understand why it shocked people.

A company growing 34% laying off a fifth of its employees sounds bad. But when you look at what Cloudflare said about this, and at what it has been doing internally, it’s a very different story.

The cuts hit every function and every part of the world, with one exception: the salespeople who carry a quota and sit in front of customers. Those were barely touched, and management still expects its sales capacity to grow this year. The whole reorganization will cost $140 million to $150 million (about $40 million of that non-cash), mostly in the second quarter, and it should be done by the end of the third. The free cash flow targets for the year didn’t change.

So why do this now, when things seem to be going well? Because Cloudflare has ramped up the use of its own AI tools internally for the last six months. The results convinced management to act.

Cloudflare has been pretty cautious with AI internally, but that changed in November. Since then, people suddenly got much more productive, in some cases two times, ten times, even a hundred times as productive. Matthew Prince described it in his typical colorful language:

It was like going from a manual to an electric screwdriver.

The numbers the company shared were impressive. Cloudflare’s use of AI is up more than 600% in three months. In engineering, 97% of the team now uses AI coding tools, all of them running on Cloudflare’s Workers platform. People in finance, HR, and marketing all use AI intensely. That’s on an internal system the company built and calls Cloudflare OS. On the Investor Day, a few interesting examples were given.

The layoff is the consequence of that. Prince was clear about what it was and wasn’t:

This isn’t a cost-cutting exercise or an assessment of individuals’ performance.

To me, this is a clear signal that the second AI wave has begun. The first wave of the AI boom rewarded the companies that built the data centers, the chipmakers and memory suppliers. A lot of that (but maybe not everything) is now priced in. The next wave will reward the companies that take all that AI and turn it into real earnings by changing how they operate. Cloudflare is one of the first to do that systematically.

It also helps to compare this to the other layoffs we’ve seen this year. Plenty of big technology companies have cut staff, but most did so because they had to. Often, that was to compensate for their enormous data center investments. Cloudflare cut while growing 34% and raising its guidance. That’s a very different situation. And it’s actually a very good thing to do.

The other thing I appreciated was the honesty. Cloudflare paired the layoff with what it called industry-leading severance, and instead of hiding behind the usual corporate language, Prince called it a hard day and said the people leaving will go on to build great things. He also made clear this isn’t a company shrinking. He expects to have more employees in 2027 than at any point in 2026. When an analyst asked why he would do this right after such a strong quarter, he put it like this:

We’re the fittest we’ve ever been, but we’re gonna get even fitter to win the next chapter.

I respect this move a lot. I’m sure Cloudflare will take on many more employees once the new system is in place. Right now, there’s overcapacity. But the companies that will win over the long term are those that can leverage the efficiency gains at a larger scale and I think Matthew Prince knows this better than anyone else.

Sales productivity went up year-over-year for the ninth quarter in a row. Hiring of new salespeople grew at its fastest pace since 2023. We already saw that customer bookings grew the fastest since 2023. They also filled the pipeline at the fastest pace in five years and beat their internal plan for the quarter by more than they have in any first quarter since 2021, during that crazy COVID peak.

The customers keep getting bigger, too. Large customers now make up 72% of revenue, up from the high 50s a few years ago.

The Agentic Internet, Cloudflare’s Biggest Tailwind

Below: Cloudflare’s premium role in the agent traffic, why OpenAI and Anthropic both build on Cloudflare, the "Google Zero" problem of the internet and how Cloudflare seems to be the only one working on a solution, why the dropping gross margin is actually good news. And of course much more, like the valuation.

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Kinsale (KNSL) reported its Q1 2026 results quite some weeks ago, but I had not covered them yet. Since the earnings, the stock is down about 13%.

If you zoom out a bit more, you see that Kinsale has the worst drop since it became a public company in July 2016. The stock is down almost 45%.

Last quarter, when premium growth slowed to 1.8%, I made the case that the slowdown was intentional and good. Kinsale was leaving underpriced business, to the competition.

So which is it this time? Is this a disciplined company riding out a soft market, or has the growth story simply ended? That’s an important question, as it means more or less the same as: Is the investment thesis still intact?

The Numbers

Gross Written Premiums: $482.0 million, down 0.5%. Yes, down. As far as I know, it’s the first decline. This is probably the main reason Kinsale’s stock dropped. Let’s part it for now, but obviously, we’ll get back to this.

Net Written Premiums: up 5.6%. Gross down, net up. We get back to that later as well, of course.

Net Earned Premiums: $406.9 million, up 11.2%. Earned premium is the part of written premium that gets “used up” as a policy runs off, and it is the part that shows up as revenue. It lags written premium.

Underwriting Income: $94.5 million, up 40%.

Combined Ratio: 77.4%, down from 82.1% a year ago. The combined ratio is the loss ratio (claims paid out) plus the expense ratio (the cost of running the business). Under 100% is an underwriting profit. So 77.4% means Kinsale kept about $22.60 of every $100 in premium as pure underwriting profit. That’s before a single cent of investment income. This remains very impressive.

Net Income: $112.6 million, or $4.88 per share, up 26.1%.

Net Operating Earnings: $117.8 million, or $5.11 per share, up 37.7%. Operating earnings leaves out the ups and downs of the stock portfolio, so it shows the insurance business more cleanly.

Operating Return on Equity: 24%. The average US insurer sits somewhere in the low teens, so this is still outstanding.

Book Value Per Share: $85.31, up 25.6% in a year. Great result.

Net Investment Income: $55.4 million, up 26.5%.

Float: now $3.3 billion.

Here’s an overview from the earnings slide deck.

So: EPS up almost 38%, a 24% ROE, book value growing at 25%, a combined ratio under 78%. Read these numbers and you wonder why the stock is anywhere near its lows. The top line growth and the quality of the earnings are the reason.

Below, for paid subs: why the biggest division is shrinking on purpose, the new competitors that worry me more than the giants, and what I'm doing with my position on Monday.

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Pfew... Yesterday was a deep red day. After such a day, I appreciate the weekend even more than in other weeks.

And of course, weekend also means a new Overview Of The Week.

Articles In The Past Weeks

We are keeping up the pace. This is again the fourth article this week. Let’s look back at the three previous articles.

In the first article this week, I presented you the second part of the deep dive on the newest Potential Multibaggers pick. It’s already up 30%, but if you want to hold for the long term, reading this can help you decide if you still want the stock.

In the second article of the week, we dissected Celsius Holding’s earnings.

Yesterday, I published the third article of the week, another earnings deep dive. This time, the outstanding Datadog earnings reflected the fundamental change the company has undergone over the last few quarters. We looked at what changed.

Memes Of The Week

It’s funny how people react to this section. Some people love it and others hate it. Now, if you hate it, you can scroll past this section, but if you love it, you would have to miss the memes otherwise, so I’ll keep them in.

This is not really a meme but from the Potential Multibaggers community. The Friday bloodbath left some traces, haha.

Bryan Johnson, the millionaire health freak who became even more famous because of the Netflix documentary Don’t Die: The Man Who Wants To Live Forever, also posted a stock market meme about Friday’s market action.

I also laughed hard with this one because it’s so true for so many investors.

This one went viral on X because of the funny cross-reference between the comics and movies and the chip company.

The high token costs also created a few memes, like this one.

Earlier this week, the market was much better than Friday and this inspired Multi bep for this funny thought.

Interesting Podcasts Or Books

This week, I listened to an episode of David Gardner’s podcast Rule Breaker Investing. David Gardner is one of the best investors of the last decades. He has picked multiple 100+ baggers like Amazon, Tesla, Nvidia, and several others. And yes, he kept them.

He recently turned 60, and in that context, he made an episode titled “60 Thoughts As I Turn 60.“ He puts them in three categories: investing, business and investing. Recommended!

The markets in the past week

The markets were down substantially, by 2.5% for the Russell 2000, 2.8% for the Nasdaq a whopping 5.1%.

Last week, I wrote:

In exactly two months (March 31 to now), the Nasdaq is up a whopping 29.71%. That’s crazy. And unsustainable.

I hate the word correction, because it implies that the market has done something wrong. But right now, I think a correction would be welcome.

Now, sometimes, you have to be careful what you wish for. But what feels bad for the short term can be very healthy for the long term.

The Greed & Fear Index dropped from Greed to Fear.

Quick Facts

1. Don’t Buy SpaceX’s IPO

What a coincidence (not). Just a week before SpaceX’s IPO (scheduled on Friday), the company announced that Google will rent computing power from SpaceX for $920 million per month for 32 months. That means an additional $ 29.44 B in revenue.

But mind the details. It’s $920 million per month. Not a $29.44B contract. The difference is in this sentence:

After December 31, 2026, the agreement may be terminated by either party upon 90 days’ notice.

Google owns 6% of SpaceX. At the expected IPO value of $1.75T (yes, a T), that means that it has an investment of $105B in SpaceX at that valuation. So, it’s not that it doesn’t want to help SpaceX.

It even inspired someone to make this GIF. It’s a bit cynical, but you can’t say it’s total nonsense.

Source

And some other suspicious things are going on. This for example.

If you still believe price targets, please let this convince you to stop attaching any credibility to them.

But back to SpaceX and why you shouldn’t buy the IPO. It’s quite simple. You are the exit liquidity. That’s a fancy name for being the sucker to pay insiders, VCs and early investors at peak hype valuations.

Before the Google deal, SpaceX traded at 94 times the 2025 revenue. That’s not a typo. 94x forward revenue, not profit. That’s bonkers.

Suppose that SpaceX grows its revenue by 50% without the Google deal. That’s very strong growth. That would mean $28B in revenue. Add one year of Google revenue and you have $39B. Very strong, but that still means SpaceX’s valuation is 45 times revenue.

If someone wants to buy Potential Multibaggers for 45 times the forward revenue, please contact me.

Still not convinced not to buy the SpaceX IPO? Look at this.

Ok, if you want to buy, I know what you are going to say: SpaceX is an exceptional company. Well, here are some other exceptional companies like Cloudflare, CrowdStrike, Facebook, Shopify, Palantir, and multiple others.

Source

Focus on the last column. The stocks of these outstanding companies that went public that year dropped by 55% on average within a year.

I may buy SpaceX at some point, but not at the IPO.

2. Bullish For Nvidia

I don’t know if people think about what happened in the context of Nvidia. This is pretty important.

SpaceX doubles the price of operation to rent out its GPUs to Google. This means two things:

1. There are still not enough GPUs to quench the chip thirst. Nvidia ramps up its production continuously, but it can’t follow the demand. Google decided, therefore, to rent the GPUs from SpaceX.

2. This also shows that Nvidia’s GPUs are probably better to run Gemini on than Google’s own TPUs. Why would Google pay double the market price for GPUs if its own TPUs are cheaper than that market price to start from. It would simply make no sense.

Jensen Huang has said on several occasions that Nvidia’s Blackwell costs twice as much as an ASIC chip, of which Google’s TPU and Amazon’s Trainium are examples. So that means Google pays four times as much for GPUs as it would if it simply deployed its own TPUs.

There is something interesting that Jensen Huang adds to the price. He says that even if Blackwell is twice as expensive, the compute power, efficiency, energy efficiency, etc., means that Nvidia’s GPUs are twice to eight times as effective. Google seems to admit that with this rent.

3. An Earnings Bubble?

This week, I read this interesting post.

The argument is simple and correct. While many compare this to the dotcom bubble, probably because AI a revolutionary tech innovation, this looks more like the build-up for the Great Financial Crisis.

These charts are shared to convince people that this is different than the dotcom bubble.

Source

Do you know why that’s convincing? Because it is different than the dotcom bubble.

In the buildup to the Great Financial Crisis, banks and home builders also posted big earnings gains. But they poked them up with very risky behavior.

Now, don’t get me wrong. What happened then was much riskier than what happens now. Now, the financial system will probably not in danger.

What I mostly mean is that people want to predict the next bubble by making it fit into the mold of a previous one.

Right now, I have the same opinion as the takeaway of what I showed you earlier. Yes, this is a bubble. Yes, it will pop. But probably not now yet.

4. When Good News Is Bad News

Over the short term, the market doesn’t trade on the economy but on interest rates.

We saw a big drop in the indexes this week. Most of that was from Friday. The Nasdas lost dropped 4.18% in a single day. The reason? The job report came in, and it blew all expectations out of the water. The US economy added 172,000 jobs in May, double the expected figure.

The market had been counting on rate cuts, but with higher interest rates and this strong jobs report, the odds of a rate hike are higher than of a cut.

But there’s a caveat. The job report looks like a blow-out economy, but if you look closer, there’s something else going on.

Just to be clear, the trend is cooling. Higher-wage cyclical jobs are still shrinking, and those are usually a better indicator of the trend, not people temporarily hired for the World Cup.

The takeaway for Multis? Nothing about the fundamentals changed this week. The price is a fickle market trying to price a company’s next decade and more. That’s an impossible exercise and that’s why emotion over the short term matters a lot. In the long term, a company’s return is determined by fundamentals, though.

When you join Potential Multibaggers now, you get my entire investment system:

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Datadog (DDOG) reported its Q1 2026 results on my mother’s birthday (May 7), and I had not reviewed the earnings yet. Now that I have, I can say it was potentially the best quarter this company has ever delivered. And the market agreed. The stock is still up 58%, even after the drop in the last few days. It was up 90% just a few days ago. Crazy.

If you want the best stock screener, the best charts, the best analyst estimates, the best earnings calls, Morningstart research, and sooooo much more, join Fiscal and get 15% off.

I keep repeating this, but it’s good to see this live for long-time Multis. Stocks can do nothing for years and then suddenly shoot up like a rocket over a small period of time. As long as the company keeps performing and the fundamentals stay intact, this often happens. But it can take years of patience. Years of nothing and then suddenly everything. That’s the stock market for you.

Datadog’s outstanding quarter also crushed one of the most superficial bear cases I heard about Datadog: that AI is going to eat it. At the end of the article, you’ll understand why this is ridiculous.

The Numbers

Datadog’s Q1 revenue came in at $1.006 billion, up 32% year-over-year. The consensus was $960 million, so this was a $46 million beat, or 4.8%. It was the first time Datadog crossed a billion dollars in a single quarter. A nice milestone.

This was the fourth consecutive quarter of accelerating revenue growth, and not by a bit. Just look at this beautiful climbing line.

It’s impressive that Datadog can do this at this scale.

CFO David Obstler said on the call that ARR (annual recurring revenue) growth accelerated in each month of Q1, and management said the trend continued in April. I think that’s one of the reasons why the market reacted the way it did to these earnings.

Non-GAAP EPS was $0.60, beating the consensus of $0.51 by $0.09. Non-GAAP operating income was $223 million, good for a 22% operating margin. Free cash flow was $289 million with a 29% margin.

Datadog ended Q1 with about 33,200 total customers, up from about 30,500 a year ago.

When you plot this on a chart, which Fiscal can do, of course (get 15% off here), you see something interesting.

Customer growth is not responsible for the revenue acceleration we saw. So, what is? This.

If you wonder why the green lin, with customers with ARR of more than $1M stops a quarter earlier, it’s because Datadog only provides once a year. But you see the trend. It’s big customers that power the growth. There were about 4,550 customers with an ARR of $100,000 or more, up 20.7% from 3,770 a year ago. For the biggest customers, it’s probably even more. Don’t forget that Datadog has usage-based billing and with more AI, that means more usage, as I have always said, long before the market agreed.

Net retention has not moved in a long time. It’s always 120% or a bit higher.

The Core Business Keeps Accelerating

For most of 2025 and until a month ago in 2026, software stocks were beaten to a pulp on the fear that AI was going to disrupt or replace SaaS. The narrative was that LLMs and coding agents would make a lot of cloud software obsolete. Anything that wasn’t directly an AI play looked vulnerable.

And then Datadog reported. It was the turnaround for software, it seems. CEO Olivier Pomel on the call:

Non-AI customer revenue growth accelerated again this quarter to mid-20s percent year-over-year, up from 23% last quarter and 19% in the year ago quarter.

So, the non-AI part of Datadog’s business, the part that the market wrote off, just posted its third consecutive quarter of accelerating growth. From 19% to 23% to mid-20s. Or put differently, traditional SaaS customers accelerated their Datadog spend. SaaS dead? Hahaha.

This is the Anti-Non-AI Bubble I have talked about for months now. The SaaS market is much bigger than everyone seems to factor in now. Founder and CEO Olivier Pomel confirmed how much growth Datadog can still have just by taking market share alone already. From the J.P. Morgan conference two weeks after the earnings:

We’re the leader in observability, we’re #1 there, but we still have only 13.6% of the market according to Gartner. So this tells you how early it is in the market for us, how much opportunity there is ahead of us, even factoring out all of the new developments with AI.

The AI-native cohort, of course, is also growing rapidly. Datadog now has 22 customers spending more than $1 million annually on AI-related work, and 5 spending more than $10 million. And Pomel disclosed at the recent Investor Day in February that AI-native customers represent about 11% of Datadog’s total revenue today, up from 5% in 2024, and just 2% in 2023.

But many seem to forget that the other 89% is everything else, and that part is accelerating faster than it has in years. Datadog is in a premium position. it gets the AI tailwind on 11% of its revenue (and growing fast), and the SaaS tailwind on 89%. What a great double engine!

The Training Reversal

There was something else that caught my ear on the earnings call that I really liked. CEO Olivier Pomel on the call:

Interestingly, last year, when we reported earnings, we said we’re mostly interested in inference workloads and training is not really a market for us yet. Now we actually see training becoming a market.

That’s an important reversal. So, what changed? Pomel explained the mechanism in more detail at the J.P. Morgan conference:

Models went from being mostly pre-trained to being largely post-trained. The post-training was becoming increasingly specialized to different types of verticals. The stacks that are used for post-training also are becoming richer and richer. And we saw instead of having 5 to 10 companies doing that, now there were 50 to 100.

Twelve months ago, training wasn’t a market for Datadog but now it is. How can this change so fast? Olivier Pomel explained at the J.P. Morgan Conference that the kind of training had changed.

Pre-training is the huge, expensive first step in which a model learns from scratch on incredible amounts of internet data. Only 5 to 10 companies worldwide could afford that. Post-training is what comes after: based on the pre-training, you can teach the model to be good at something specific, like coding, or medical questions, or customer support. It’s cheaper and easier, and now 50 to 100 companies are doing it, but that could soon be 500 or 1,000. This is a very interesting development and another reason Datadog looks well-positioned to profit from AI.

In Q1, Datadog brought in two new deals with the AI research divisions of two of the world’s largest tech companies. One was a 7-figure deal, the other even an 8-figure deal. These are hyperscalers with top-notch engineering talent and a strong culture of building everything in-house, but they still came to Datadog. That says a lot.

Olivier Pomel on the earnings call:

Hyperscalers typically have a culture of building everything themselves, and they certainly have the balance sheet and the human capital to support some of that build-out. Like if there was ever a set of companies for whom it makes sense to do it themselves, that would be those companies. And yet, we see that they have the same issues.

Don’t forget that Anthropic also signed a bit contract. We discussed this last quarter.

Below: the rest of the AI story, why every huge AI company uses Datadog, and what I'm doing with the stock right now.

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✅ Valuations & Buy/Hold/Sell scales: cut through the noise and know exactly when to act

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Celsius Holdings (CELH) reported its Q1 2026 results on May 7, and the stock kept dropping. It’s now 12.4% lower than before the earnings.

Year-to-date, the stock is down 34% and from its 2024 all-time high, it’s down almost 70%.

The real question is, of course, whether the market is wrong and gives us an opportunity to buy, or if the weak stock price is a sign that there’s more.

Let’s look at the numbers first.

The Numbers

• Revenue: $782.6M, up 138% YoY, beating the consensus by $22M or 2.9%.

• Adjusted EPS: $0.41, up 128% YoY, beating the consensus by $0.12 or a whopping 41.4%.

• GAAP EPS: $0.33, up 120% YoY.

• North America revenue: $747.3M, up 144% YoY.

• International revenue: $35.3M, up 55% YoY.

• Brand split: Celsius $348M (+6% YoY), Alani Nu $368M (+60% pro forma YoY), Rockstar $67M.

• Gross margin: 48.3%, down from 52.3% last year in Q1, but better than the 47.4% in Q4 2025.

• GAAP net income: $110.1M, up 148% YoY.

• Adjusted EBITDA: $195.5M, up 181% YoY. EBITDA margin of 25.0%, up from 21.2% last year.

• Buybacks: 700K shares for $24.1M at an average price of $35.39. $236.1M still left of the $300M buyback program.

So on the surface, the results look really strong. Celsius posted substantial beats of the consensus, with better margins. And yet, the market didn’t seem to care. Let’s look into more detail.

The Celsius Brand Problem

I start here because I think the 6% growth for the Celsius brand is why the market doubts the company’s growth story. For the first time, Alani Nu was bigger than Celsius. Revenue for Alani was $368M, compared with $348M for Celsius.

A part of that is seasonality. Celsius is the fitness brand of the portfolio, and apparently, people drink fitness drinks more in spring and summer than in January and February. Alani Nu is more seen as an everyday brand. For full-year 2025, Celsius did $1.46 billion and Alani Nu (acquired in April 2025) did roughly $1 billion. So, on an annual basis, Celsius was still bigger last year. But Alani Nu posted 60% revenue growth versus 6% for the Celsius brand. Is it in trouble? Monster grew more than 20%. That 6% growth for the flagship brand looks very weak.

At the Deutsche Bank conference on June 2, John Fieldly explained what’s going on. Before PepsiCo, Celsius was distributed by more than 300 independents. This is important to know.

To get shelf space at certain retailers, Celsius often did custom flavors. Fieldly gave an example. A convenience chain of 300 stores didn’t believe Celsius would sell, so the company created a Cherry Cola exclusively for them. It worked, and therefore, they could also sell Celsius on the shelves. That flavor only existed for those 300 stores. And there were many flavors like that.

In the PepsiCo system, that approach doesn’t work. If you have national distribution, you need national consistency. So Celsius is removing all regional flavors and focusing on the national flavors. Fieldly:

We want to have a consistent portfolio around the country. As we say internally, we want to keep the fast cars on the track.

Each flavor removal immediately results in lost revenue. That’s a big part of why the Celsius brand grew only 6% this quarter.

The core Celsius 12-oz cans grew 11% in convenience stores. So, that proves Fieldly’s story. The assortment is shrinking, but what remains of the legacy brand is doing well.

Fieldly also said something at the conference you don’t often hear from a CEO:

Especially on Celsius, we should have had more innovation. That would have added more complexity with the integration of Alani and Rockstar, but we should have had more innovation, and we’re cycling over 6 innovations versus last year.”

So Celsius underinvested in flavor innovation on the flagship brand. The reason was the integration of Alani Nu and Rockstar. Understandable. Last year, there were 6 innovations, so that makes the comps tougher. Management will continue to focus on the integration now but go full-in on innovation in 2027.

Alani Nu: Firing On All Cylinders

If the Celsius brand looks weak but is better than it looks at first sight, Alani Nu is firing on all cylinders. I think we can already say now that this was a killer acquisition for Celsius. That it would overtake Celsius in sales so fast was really unexpected.

Revenue was $368M, up about 60% pro forma. Pro forma means this is against Alani Nu’s sales last year, before Celsius bought it. Scanner data, which measures what consumers bought, even showed the brand up 100% YoY.

So consumer demand grew faster than the reported revenue number suggests. That’s important, and it’s worth explaining why the two numbers are quite a bit apart.

The company gave us a breakdown:

Alani Nu sold $230.7M in Q1 2025, the quarter before Celsius bought the company. But not all of that was from the US energy drink market. Take out $32.6M from Canada and from non-energy products like protein bars, and you get $198.1M of U.S. energy drink sales. That’s the right number to compare this quarter with.

From there, scanner data shows U.S. energy drink sales grew 85% YoY, not the 100% I mentioned earlier. The difference is Cherry Bomb, a limited-time flavor that Celsius shipped to stores in Q4 2025. Consumers bought most of those cans in Q1 2026, but the company already booked revenue when the cans shipped, so the revenue was in the Q4 results. Without that distortion, growth would have been 85%.

Apply 85% growth to that $198.1M, and you get about $168M of additional revenue. That’s the white bar.

Then there’s a $ 26.5 M deduction. When Alani Nu was sold directly to retailers like Walmart, Celsius booked the full wholesale price. Now that Alani Nu is being sold through PepsiCo’s DSD (Direct Store Delivery) system (which means Pepsi trucks deliver cans straight to store shelves instead of to a retailer’s warehouse), Celsius sells the cans to Pepsi first, and Pepsi takes a cut before reselling them to retailers. So even if the same number of cans are sold to consumers, the revenue Celsius reports per can is lower.

So the takeaway is: consumer demand for Alani Nu grew by 85%. That’s phenomenal growth. Of course, even if Pepsi takes a part of that, volume is much bigger and on top of that, Celsius also had to pay its previous distributors, but in another way.

At the Deutsche Bank conference, Celsius shared that Alani Nu’s availability in convenience stores went from 65% in January to 91% in May. That’s a sea change.

Normally, when a brand expands distribution that fast, sales per store go down. The new stores are usually lower quality and it takes time for shoppers to find the product. With Alani Nu, sales per store actually went up over those five months.

The bear case on Alani Nu is that it’s a flavor brand, riding LTOs (Limited Time Offers), like Cherry Bomb and Lime Slush, that are fashionable for a few months and then disappear.

The fear is that once the LTO cycle slows, the brand fades. But the data shows the opposite. The brand is reaching more stores and the consumer is buying more per store, not less. That’s a really strong indicator that the brand has staying power.

There’s a related concern: that Alani Nu is just stealing sales from Celsius. Fieldly was asked this directly at the conference. His answer was that there’s some overlap, but Alani Nu is also reaching consumers that Celsius wasn’t. I think he’s right, and the proof is in the share number. If Alani Nu were just stealing Celsius’s sales, then the core Celsius brand wouldn’t have grown by double digits on a normalized basis (see above for that).

The market got the two big numbers wrong. The question is whether it’s also wrong about the rest, the margins, the Costco threat, and the current stock price. Below are my answers.

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On April 8, I launched a new Potential Multibaggers pick. The stock is up 31% since then.

And no, this is not an AI momentum stock. It’s a stock that I genuinely believe I will hold for the next few decades. Of course, a lot can go wrong along the way and if the thesis is broken, it’s good to sell.

Many misunderstand this Warren Buffett quote:

He doesn’t say that he will hold stocks forever. He says he wants to hold stocks as long as the investment thesis remains intact. If the holding period is forever, it means there were never situations in which the thesis was undercut.

But enough introduction.

Let’s dive in.

If you are still a free subscriber, you already missed 31% gains, which would have probably paid for your subscription multiple times over. So, what are you waiting for?

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I hope you had a great week. To round it off, or to start it, here’s a new Overview Of The Week. We’ve got quite a bit to cover, so let’s start right away.

Articles In The Past Weeks

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

In the first article this week, we saw that the numbers Hims & Hers posted were actually much better than they appear at first glance. It shows why deep research matters.

In the second article of the week, I showed which position I trimmed and the ten stocks I bought.

Yesterday, I published the third article of the week. This time, we looked at a stock that I rate a strong buy.

If you don’t want to miss these updates, make sure to subscribe.

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Memes Of The Week

Here’s the fresh harvest of the best stock market memes.

Here is the first one already.

And this one went viral as well.

Multi Bep made this great one specifically for Potential Multibaggers. At the same time, I think it’s very generally applicable.

Multi Rule No.2 posted this one, a variation on a classic.

The last one was posted by Multi Julien. It’s not an actual meme, but sometimes, reality feels like a meme.

Interesting Podcasts Or Books

This week, I listened to an episode of David Senra. He interviewed Rick Rubin. I love music and Rubin has produced some of the best work of the best artists.

He worked with the Beastie Boys, Slayer, Metallica, Public Enemy, Run DMC, LL Cool J, Red Hot Chili Peppers, Johnny Cash (the legendary American Recordings series), Nine Inch Nails, Tom Petty, System Of A Down, Sheryl Crow, Rage Against The Machine, Macy Gray, Jay Z, Slipknot, Neil Diamond, Justin Timberlake, Linkin Park, Weezer, Lana Del Rey, Lady Gaga, Eminem, Kayne West, Neil Young and many, many more.

But he is not just a producer. Sometimes, he resembles a zen master. His life takes are fantastic. You can listen to the episode here.

The markets in the past week

So, what did the markets do in the past week?

Once more, the indexes were up. The S&P 500 was up 1.47%, the Russell 2000 was up 1.75% and the Nasdaq 2.39%.

In exactly two months (March 31 to now), the Nasdaq is up a whopping 29.71%.

That’s crazy. And unsustainable.

I hate the word correction, because it implies that the market has done something wrong. But right now, I think a correction would be welcome.

The Greed & Fear Index remained in Greed territory once more.

Quick Facts

1. The Most Expensive Market Ever

I’m still torn about this market.

On the one hand, the valuations are crazy. Just look at this chart, for example.

Source

So, if you combine all of these valuation methods, we have the most expensive market ever. So, sell, right?

Well, not so fast.

First, I think quite a few of the used metrics are flawed. Market cap to GDP, for example. It’s often called The Buffett Indicator because Buffett called it “probably the best single measure of where valuations stand at any given moment.” And look where we are right now.

232%. If you know that 100% is considered fair and anything above 120%-130% (opinions differ) expensive, what is this market? Nonsense?

Well, not so fast.

First, the market has been expensive, based on this indicator, since 2012. If you had used it for market timing purposes, you would have lost a ton of money. This is how $10K has done since that ‘overvaluation’ started.

There are multiple reasons for the disconnection and for why the Buffett Indicator no longer works.

One is that many American companies get more of their revenue from global markets than in 2001, when Buffett wrote about the market cap/GDP indicator. Apple, Microsoft and many other companies get more than half of their revenue from abroad now and that is not included in the GDP, as that is Gross Domestic Product.

Secondly, it also doesn’t account for the higher gross profit margins companies have.

So, I wouldn’t attach too much weight to the Buffett Indicator. Of course, there will always be someone telling you that you should have known, based on this indicator or any other, when the eventual drop comes. But those people probably didn’t make much money for a long time, so pity them instead of paying any attention.

The Buffett Indicator is just one metric that doesn’t work anymore. Price/Book is also flawed. Companies need less capital in general to earn a ton of money. If you have a cybersecurity company, for example, you may need some data centers but you don’t even have to have your own. You could rent capacity from Amazon, Microsoft or Google (among others). Compare that to Coca-Cola building another factory.

And that’s also the reason the price-to-sales ratio doesn’t work anymore.

This market is expensive, for sure. But always be careful with charts like these.

2. A Very Cheap Market

As I just said, how you look at the market really depends on your perspective. This chart, for example, uses the gold price to evaluate markets and it says that markets are very cheap right now.

Source

I think F. Scott Fitzgerald’s quote is important in this context:

The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.

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It’s not always easy in this overheated market to find opportunities, but I think this is one. Patient investors can now buy this stock at the cheapest valuation it has ever been, despite 33% revenue growth.

The company has no debt, a ton of cash and high free cash flow and it’s totally under the radar of most investors.

There are two headlines that may screen ugly if you don’t know the company’s context but that actually show strength.

And a negative catalyst on GAAP earnings just stopped and the company did an interesting acquisition. It also showed how AI already adds value. Not with big words, as many do, but with concrete numbers.

Curious?

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It’s the last week of the month, and traditionally, that means that I buy my second batch of stocks for the Forever Portfolio.

This time, it’s a little bit different from other editions. I have trimmed a position, which I rarely do.

It had become my second-largest position, and to me, that was too big. Now, mind you, I have trimmed, I have not sold the position that’s important. I’m just taking off some gains of the table here, because I think that it has become too big a position in my portfolio.

That doesn’t mean that I recommend selling or trimming the stock. It only means that for me, in my personal situation, with my personal thinking, the position got too big. It had become the second-biggest position because it had grown so much.

So, without much further ado, let’s dive in, and I’ll explain to you what I sold, and especially, of course, which positions I added to.

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The poll I launched on Slack showed that you were looking most forward to the Tempus and SEA earnings analysis and you got those two first. The number three was Hims & Hers. So, here’s that one.

I wrote in my previous earnings analysis that this is by far the most volatile stock I’ve ever covered, and nothing has changed. Right now, the stock is down 55% over the last year.

If you want a Fiscal subscription, you get 15% off with this link.

So, is this a moment to buy or should we be cautious? Let’s find out.

The Numbers

• Revenue: $608M, up 4% YoY.

• US revenue: $530M, down 8% YoY.

• International: $78M, up 969% YoY.

• Subscribers: 2.58M, +9% YoY. Personalized: ~1.7M, +20% YoY.

• Monthly ARPU: $80, down from $85 a year ago.

• Gross margin: 65%, down from 73%.

• Adjusted EBITDA: $44M, a 7% margin, down from $91M and 16% in Q1 2025.

• GAAP net income: −$92M, versus +$49M last year.

• Free cash flow: $53M.

• Guidance Q2: revenue $680–700M (+25 to 28% YoY), adjusted EBITDA $35–55M.

• Guidance FY2026: revenue raised to $2.8 to 3.0B, above the consensus of $2.71B.

• 2030 target: reaffirmed $6.5B+ revenue and $1.3B+ adjusted EBITDA.

Those numbers don’t look great, do they? So, I understand the questions and FUD (fear, uncertainty and doubt) around HIMS.

Until Q1 2025, everything seemed to go well. Revenue was up a lot every quarter and ARPU (average revenue per user) peaked in Q1 2025.

Right now, in Q1 2026, revenue was down QoQ and up only 4% YoY, margins were down, and it posted the first GAAP loss since Q4 2023. Add a miss of $8.75M for revenue and a miss of $0.03 for EPS and it’s not too crazy to think the company is falling apart before your eyes.

I’m going over a few things, though, that could put things in a different light.

The Revenue & EPS Miss

Let’s take the revenue first.

In March, the company stopped advertising compounded GLP-1s and shift to branded weight-loss products, mainly Novo Nordisk’s (NVO) Wegovy pen and Wegovy pill, although Eli Lilly’s Mounjaro is also possible.

I wrote about the mess that came before that decision: the $49 compounded pill that lasted just 48 hours before the FDA, the DOJ and the SEC came knocking and it was withdrawn. The branded pivot is the cleanup of that mess. It took the GLP-1 risk off the table.

But it changes how the money comes in. The compounded business sent out medication in longer cycles, while branded GLP-1s go out monthly. That means there is less upfront recognition. It’s a bit similar to a software company switching from upfront software sales to a SaaS model. So, it’s often the same dollar amount (or even more), but recognized over more periods instead of all at once. In accounting, that looks like a revenue decline.

CFO Yemi Okupe was very clear about this:

These dynamics affect only the timing of revenue recognition and not customer demand or engagement.

That timing change removed about $65 million from Q1 revenue. If you add it back, the quarter would have come in at $673 million, quite a bit higher than the $652 million consensus. So the revenue “miss” wasn’t really a miss. Of course, if revenue is lower, EPS will be lower as well. So, that “miss” had the same cause.

And don’t forget the comparison. Q1 of last year was the best quarter in the company’s history, as I already showed on the chart. GLP-1s had just started on the platform and sold like crazy. So, while the 4% YoY growth looks very weak, it’s not really how you should look at this quarter. On a comparable basis, revenue would have been up about 15%. That may not be a number that excites you, but it’s not as depressing as that 4% revenue growth, right?

US revenue fell about 8% to roughly $530 million, but it would have been up 4% YoY on a comparable basis. Again, not something that will make you jump around in joy, but still a lot better than what you think on first sight.

International revenue jumped almost 10x to $78 million. Of course, this is on a small basis, but still, it’s important. You can see the opposite movements in this chart.

The $92 Million GAAP Loss

Now the GAAP net income loss. I saw this scared quite some investors. After all, the company had been GAAP profitable in every quarter since Q4 2023.

The company gave us the full breakdown, so let’s use it. It’s in the appendix of the earnings call slides. Most will probably never look at that, but we do. I see many takes against adjusted numbers vs. GAAP and to a certain level, I understand that. But adjusted numbers can sometimes give you insights that GAAP earnings can’t. That was definitely the case this time.

After stock-based compensation, which is a quarterly item and hasn’t moved much, the biggest piece is restructuring: about $33 million, of which $28 million is in write-downs related to the compounded GLP-1 supply chain. If you build infrastructure for a business and then you decide to leave it, you write it off. That’s a one-off cost. Take it out, and the gross margin was about 70%, right in line with where Hims & Hers has always been.

And there are other one-offs and non-cash items. There’s a ‘loss’ of $17.6M that’s a provision because Hims & Hers expects that the acquisitions will have higher earn-outs. That’s exactly what you want. Maybe you know this from the contingent payments Topicus and Constellation have. There are certain milestones. You take a base case for your accounting, but if the companies do better than expected, the same percentage of earnings is a higher number. Or because you cross certain expectations, that percentage can even be higher. In other words, that’s something to celebrate, even if this is seen as a “loss” in accounting.

There was also $13.4 million in M&A costs. Hims & Hers has bought quite a few companies: Eucalyptus, YourBio, ZAVA and Livewell. The acquisition process produces costs (think of legal, for example) and the integration process as well.

Then there’s something we saw earlier this quarter from Shopify and Tempus, for example. There’s $9.7 million in losses because some of the investments Hims holds have dropped in value on paper, even though the company hasn’t realized them.

If you look for other numbers, you can look at $89.5 million operating cash flow and $59.5 million in free cash flow this quarter. I think that shows better how Hims & Hers did this quarter. Even if you want to deduct stock-based compensation, you get $22.7M in FCF-SBC. That shows that the GAAP loss is mostly accounting.

Novo Nordisk GLP-1

So why did Hims & Hers do this? The change to branded GLP-1 provides the company (and its investors!) with much greater regulatory certainty. There’s no more Novo Nordisk litigation, and the company goes out of the way of the FDA and the SEC.

And it’s working. Within six weeks of putting Novo’s products on the platform, Hims & Hers fulfilled more than 125,000 Wegovy shipments. Founder and CEO Andrew Dudum on the conference call:

We see it in the scale of new customers coming in the door today, which is larger than as Yemi said, any spikes we saw even during the most important seasonal campaigns such as New Year’s and Super Bowl campaigns.

The New Year and the Super Bowl campaigns are the two most important campaigns for the company. Now, the new ‘normal’ pace after the Novo Nordisk deal is bigger than those peaks. That’s not in the numbers yet, but it’s an important data point. Management says it’s on track to add more than 100,000 weight-loss subscribers per month.

If the company can keep up that pace, subscriber growth would probably land somewhere in the low 30s a year from now.

Subscriber growth looks slow right now, but that is mostly because these new subscribers are just starting to come in. We should see acceleration in the next quarters. The early engagement numbers look good as well. Nearly 90% of these new subscribers download the app, and, on average, they speak with a doctor or nurse from the Hims & Hers care team three times in the first month. That tells me these subscribers are engaged and that makes them more likely to stay.

On the economics, CFO Yemi Okupe said branded and compounded are “roughly comparable” on a dollar basis. The branded GLP-1 has a higher price but a lower margin, and the compounded was the other way around, so they more or less even out. So the company gave up a high-margin product that carried a lot of legal risk and replaced it with a fully legal one at a lower margin that brings in more people. I think that makes sense. It takes away a major risk while still driving growth.

I find it ironic. In the US, Hims & Hers and Novo Nordisk now sell Wegovy through a partnership. That is the company that tore up the first deal and accused them of “illegal sham compounding” last year. Providers on the platform can also send prescriptions to Eli Lilly’s LillyDirect. And then last week, Hims launched generic semaglutide in Canada at C$149 a month, undercutting everyone, on the same molecule Novo uses. It’s important to know that Novo Nordisk’s patent in Canada has expired.

There’s a second irony. While Hims & Hers reduced a major legal risk by partnering with Novo Nordisk, it also introduced a new risk. The partnership already broke before. But right now, Novo Nordisk’s Wegovy is a big revenue growth driver. If the relation gets troubled again, this might have serious consequences for Hims & Hers. But that risk is worth taking more than the legal troubles that the company might have faced otherwise.

Not A GLP-1 Company

I didn’t buy this stock for the GLP-1s. I’ve written that many times before. If this were a GLP-1 company, I would never have been interested. The GLP-1s may be 30% of revenue or less this quarter, given the accounting change we saw earlier. But people keep staring at that one part of the business and completely ignore the rest of the platform, which accounts for 70% or more of the revenue.

That platform is an attempt to bring personalized, proactive, data-driven healthcare. Peter Attia writes about this in his book Outlive, and calls it medicine 3.0. Hims & Hers not only wants personalized healthcare but is also on a mission to make it affordable for everyone. Right now, that kind of care costs the wealthy tens of thousands of dollars a year. Founder and CEO Andrew Dudum put it like this on the call:

Netflix and Spotify reshaped how people could access not only a broader range of content, but also the best the industry has to offer. Health care must evolve towards that same consumer-oriented distribution model.

This quarter, some things pointed to this again. Take testosterone, for example. Tens of thousands of men now already take it, and the early results are strong. Andrew Dudum:

More than 95% of individuals utilizing a testosterone support offering experienced an increase in testosterone levels within the first 2 months of treatment, with an average increase of over 80%.

Most men never even know they have low testosterone levels. They just feel tired and blame it on their age, stress or something else. With Hims, they can take an at-home blood test, get treated, and then retest to see if it worked. That is a Medicine 3.0 example, because you find the problem before the patient even knows to look for it.

Then there is Labs. You take a blood test at home, and the app reads out more than 130 biomarkers for you, with AI helping to explain them. Andrew Dudum on the call:

On the Labs side, also, it’s just providing people data that, frankly, used to cost somewhere between $5,000 or $10,000... And then from there, 70% of those people are identifying an area of concern and an area of clinical risk that the platform can actually help treat.

So seven out of ten people who run Labs tests find something they should treat and they can find the treatment on the same platform that just identified the problem. That is great for cross-selling, of course. It’s the kind of preventative care I want to see. And it makes Labs a great entry point to everything Hims & Hers does and sells.

Sexual health and hair loss each took three to four years to cross $100 million in annual revenue. Weight loss did it in seven months.

Andrew Dudum thinks testosterone, menopause and Labs can each get there soon as well.

The GLP-1 noise is the easy part. The hard question is whether there's a real moat underneath, and that's exactly what comes next, along with my verdict on the stock.

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It’s Sunday Funday time again!

Yes, a new Overview Of The Week. Without too much ado, let’s dive in.

Oh, don’t forget your tea or coffee! :-)

Articles In The Past Weeks

This is the fourth article this week. I’m keeping the pace high.

In the first article this week, we did a deep dive on the Nu Holdings earnings and looked if this was a good time to start a position or add to it.

We did the same thing with the Sea Ltd. earnings.

Yesterday, I published the third analysis this week. This time, we looked at Tempus AI. I analyzed the earnings, set up Selling Rules, updated the Quality Score and looked that the valuation. Is it a buy? You can find out here.

Memes Of The Week

Last week, there were most memes ever since I started compiling them. But the selection of this week is not wrong either.

This is the first one, about the SpaceX IPO.

Source

Here’s another one about the SpaceX IPO.

This is not a meme, but I still include it here. It’s the first time a part of an S-1 makes it in the meme section of the Overview Of The Week. Congratulations, SpaceX! This TAM (total addressable market) thing is the most ridiculous thing I have seen since the WeWork IPO.

Flo is our Meme King, but this week, his meme game was great again. His comment was: “This will get the stock moving.” It’s hilarious.

This is not a meme, but I found it funny enough to include it here.

Nvidia had its earnings this week. This meme played on that.

Brad from Stock Market Nerd also had a funny meme. The new favorite hedge fund trader is Leopold Aschenbrenner (first pic).

This is not the meme, but funny anyway, because it’s true.

Interesting Podcasts Or Books

It’s been a while since I shared a book here. Not that I stopped reading, but I also read a lot about other subjects. For example, I just finished The Obesity Code by Jason Fung. It really helped me to better understand GLP-1s. Not that that is the subject, not at all. But if you understand the problem better, you understand the solution better.

I also read about many other subjects and also novels, usually combining five books or more at the same time.

But before I share a book here, it should have something to do with investing. If you want me to change that, let me know.

In 2024, I read The Power Law by Sebastian Mallaby. The subtitle says it all: Venture Capital and the Making of the New Future.

It may sound a bit boring, maybe, but it’s a phenomenal book.

That’s why I also didn’t hesitate to buy Mallaby’s new book The Infinity Machine. Again, the subtitle says what it’s about: Demis Hassabis, DeepMind, and the Quest for Superintelligence. I only started it yesterday, but it starts out really great.

The markets in the past week

So, what did the markets do in the past week?

The Russell 2000 is almost always the most volatile index and that was the case again this week. It jumped 2.72%. The S&P 500 was up 0.88% and the Nasdaq 0.45%.

The Greed & Fear Index remained in Greed territory.

Quick Facts

1. AI Bubble Signs

Let me show you a chart that bothers me more than I would like. The Information put together the spending commitments of OpenAI and Anthropic to the four big U.S. cloud providers, as a share of those providers’ total revenue backlog.

Source

OpenAI alone has committed $280B to Microsoft and $300B to Oracle. Anthropic has $100B at Amazon and $200B at Google. Add it up and these two companies make up 43% to 54% of the entire revenue backlog at Microsoft, Oracle, Google, and Amazon.

Read that as what it is. Half the future revenue of these giants comes from two companies that don’t make any money. Anthropic spends about $3 to make $1, and that’s before staff, before electricity, before anything. Microsoft put $300B into capex and realized $18B in AI revenue.

You know me, I’m not a doomthinker. But I also don’t live with my head in the clouds. I know that these huge companies have gigantic resources. So, I’m not saying they will crack. But what if OpenAI gets into trouble, for example?

We already know about the circle. Everybody’s revenue is everybody else’s cost. OpenAI buys from Microsoft and they buy from Nvidia. Meanwhile, many enterprises paying for this are burning their annual AI budgets in four months with no measurable return.

I’m not saying it ends tomorrow. These things run far longer than you would think. But there are other signs as well.

2. DeepSeek Moment 2.0?

Something else that makes the AI ecosystem look fragile is this. It comes from the same player that first shocked the world with its much cheaper and technically differentiated AI. This is what it announced this week.

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Two weeks ago, Tempus AI (TEM) reported its Q1 2026 results. The stock fell about 12% in the days that followed, and it’s now down about 55% from its October high of around $103.

Tempus was the most requested earnings analysis in our community. Your wish is my command!

I want to start with a contradiction. CEO Eric Lefkofsky opened the call by saying, “We had a great quarter,” and the press release talks about accelerating demand. But what if you read this? Revenue down sequentially, EBITDA negative, hereditary growth collapsing, profitability out the window. That sounds pretty bad, doesn’t it?

The difficulty is that both things are true and that can be confusing. So, this is a quarter where you have to know the context before you judge and that’s what I will try to provide in this article.

But first, a quick reminder of what this company is, as it’s not one that many really understand.

What Tempus Does

Many see Tempus as a diagnostics company and they are. But the tests are just the start of the story. The real business is using those tests to collect enormous amounts of patient data, DNA, RNA, imaging, and clinical records, and then structuring that messy data with AI and licensing it to pharmaceutical companies that can’t get it anywhere else. The confusing part is that this business currently accounts for only about 25% of the company’s revenue. 75% is still the tests.

Of course, the data business has much higher margins. And there’s a flywheel. The more data comes in through the tests, the better the tests become, which sells more tests, which generates more data and so on. Almost no one else in the industry has both parts of the ecosystem.

The whole idea behind the company is on one slide from the earnings call deck.

The next slide completes the story.

The Numbers

Revenue: $348.1M, +36.1% YoY, beating the consensus of about $345.4M.

Gross profit: $222.0M, +43.1% YoY, growing faster than revenue.

Non-GAAP EPS: -$0.13, a $0.07 beat, improved from -$0.24 a year ago.

GAAP net loss: -$125.9M, versus -$68.0M a year ago and -$54.2M last quarter.

Adjusted EBITDA: -$2.8M, versus -$16.2M a year ago, down from +$12.9M in Q4.

Diagnostics revenue: $261.1M, +34.7% YoY, on oncology volume growth of 28%.

Data and Applications revenue: $87.0M, +40.5% YoY, with Insights (data licensing and modeling) up 44.1%.

Guidance: raised to $1.59–1.60B for the year (25% growth), adjusted EBITDA guidance kept at about $65M.

Some numbers evolve in opposite directions, and that’s puzzling. Gross profit grew 43% and revenue grew 36%, so the company became more profitable at the gross level. But the net losses almost doubled. Both are true. I’ll get to that later in the article.

What The Market Didn’t Like

I have recently started looking at this before my analysis. The reason is that it forces me to look into the negative story first and if I feel that it sounds convincing, it can influence the rest of my article and even the long-term thesis evaluation. If you first look at the information and then only at the end to the bearish story, it’s hard to rewrite the full article from a new perspective if you think bears have a valid point. That’s the great thing about investing and the investing process: you can always keep learning.

As far as I can see, there were four things the market didn’t like.

• The sequential revenue decline, from roughly $367M in Q4 to $348M in Q1.

• The negative EBITDA. A year ago, management made a real moment of crossing into positive adjusted EBITDA, and Q1 went back into the red.

• Hereditary growth: the headline says 54%, but Tempus bought Ambry in February 2025, so most of that growth comes from Ambry. Real growth was just 7%.

• What I would call ‘the gap.‘ I mean that there’s a big gap between gross profits up so much and GAAP losses down so much.

Let’s go into them one by one.

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A few hours ago, I launched a poll in the community. The question was which earnings analysis I should do next.

SEA Ltd (SE) was number two. That was great, as Zack had promised the SEA analysis for Friday, but he was early and already sent it this morning. Awesome, Zack!

So, even if Sea was only number two in the poll (you can still vote if you are in the community for the next one you want me to tackle!), the SEA analysis is the first to be published. But, I’ll clear the floor for Zack. I’ll see you back for the Selling Rules, the Quality Score update and the valuation. At the end of the article, you should know if SEA is a BUY.

But to know that, we need top-notch information on the earnings. Take it away, Zack!

Hi Multis

It’s been a tough earnings quarter for multiple Potential Multibaggers stocks in terms of post-earnings price reactions. In the private chat group, I made a tongue-in-cheek comment the day before Sea Limited’s earnings:

I was generally right with the metrics, except for the price reaction:

A 10%+ earnings reaction made me think the sell-off streak might be broken, but a few days later it was reversed, and we’re pretty much back where we started.

It’s another testament to how random stock price reactions to earnings can be. There’s a lot of noise and just a bit of signal. To separate both better, we have to analyze the earnings. Let’s jump into the results to find out.

Sea Limited Group Results

First, we look at the results of the whole group.

Source: Sea Limited

Revenue came in at $7.1B, growing 47% year-over-year, beating estimates by a whopping 11%. I already want to stress that right now, at the stage Sea is at, this is the most important metric to look at. The company is investing heavily and this 47% revenue growth shows that the investments are working. The majority of revenue growth came from Shopee and Monee; we’ll dive into each segment in detail later, of course.

Gross profit was $3.1B, growing 40.7% year-over-year.

Gross margins were 44% versus 46% the previous year. Investments in Shopee continued to pressure margins.

Operating Income was $593M, growing 30% year-over-year.

Adjusted EBITDA increased to $1B, growing 9.3% year-over-year.

For Sea Limited, we primarily use Adjusted EBITDA as the core profitability metric to remove accounting distortions that don’t reflect the true growth of the business, specifically Bookings (more on that in the Garena section).

Single-digit EBITDA growth doesn’t sound like much, but the fact that the company grows its profitability despite the big investments is great.

The largest contributor to Adjusted EBITDA was Garena, which had a standout quarter. You can see that in the graphic below with my annotated year-over-year growth:

Source: Sea Limited

Net Income was $438M, growing 6.7% year-over-year which led to an EPS of $0.70. Again, good to see that despite the big investments, Sea remains solidly profitable.

Additionally, Sea repurchased 1.8M shares for $168.4M this quarter under its $1B share repurchase program.

The limited FY 2026 Guidance was reiterated: GMV growth of 25% year-over-year and adjusted EBITDA no lower than 2025 in absolute dollar terms. Sea has a history of often general, loose guidance, so this is no surprise.

Overall, the top-level business metrics looked great, but the individual segment metrics tell the real story.

Shopee

Gross Merchandise Volume (GMV) was $37B, 30.2% growth year-over-year.

Orders came in at 4B, 29.3% growth year-over-year.

Gross Merchandise Volume (GMV) was $37B, up 30.2% year-over-year, while orders came in at 4B, representing 29.3% year-over-year growth.

Source: Sea Limited

Investment continues to drive higher volume and more purchases:

• Monthly active buyers increased 16% year-over-year

• Monthly average purchase frequency grew 12% year-over-year.

• Fulfillment order volumes grew 25% quarter-over-quarter

Shopee VIP membership continues to boom, reaching over 10M members (up 40% quarter-over-quarter) with program retention averaging 80%. Keep in mind, it had only 1M members just one year ago. That’s 10x growth in twelve months!

VIP is Shopee’s higher-tier membership subscription (think Amazon Prime or Coupang WOW) offering perks such as free shipping with no minimum spend.

Source: Shopee Indonesia

Unsurprisingly, VIP members spend more, with a double-digit uplift of 30% to 40% in some markets. VIP members currently contribute around 20% of GMV across Asia, and the program just expanded to Brazil in April.

On the AI front, innovation continues to drive efficiency and growth for Shopee:

• AI-enhanced search/recommendation algorithms for buyers and AI-generated content tools for sellers led to a 14% improvement in purchase conversion rates year-over-year.

• 80% of customer queries are now handled by AI chatbots, helping reduce cost-per-contact by 30%.

• AI-driven personalization and targeting contributed to the strong ad growth

Moving on, Shopee Revenue grew to $5.1B, 45% year-over year:

Source: Sea Limited

Breaking out the Shopee revenue segments further:

Core Marketplace Revenue grew 60% year-over-year to $3.8B. Marketplace revenue consists primarily of transaction fees and advertising revenue.

Product Revenue grew 50% year-over-year to $612M. These are first-party products that Sea sells itself rather than relying on third-party merchants. It comes at much lower single-digit gross margins (4% this quarter), but management believes this is worth the cost to improve the buyer experience, expand selection, and ensure prices remain competitive.

Value-added Services Revenue was down 5.9% year-over-year to $692M. This drop was due to shipping subsidies as they build out better delivery and fulfillment services. Despite that, we’re seeing those investments pay off. From CEO Forrest Li:

With greater economies of scale, we are seeing lower delivery costs per order for these faster services compared to last year. For example, in Indonesia, our instant delivery service can deliver orders in as little as two hours in urban areas. Order volumes for this service grew over 35% in the first quarter, with cost per order reducing by around 20% year-over-year.

The overall Take Rate increased sequentially to 13.7%. That’s largely due to ads, which grew 80% year-over-year, and to an increase in ad take-rate of more than 90 bps year-over-year.

Source: Sea Limited

Despite that, Adjusted EBITDA was still down 15% year-over year at $223.2M

Shopee’s Adjusted EBITDA margin continues to track lower than in previous years, but as management has reiterated multiple times, the company is in an investment cycle. Management’s medium- to long-term target is to achieve an Adjusted EBITDA margin of 2% to 3%, up from currently 0.6%, as you can see. That said, the longer this goes on, the more critics will point to it as a persistent, structural defensive posture due to rising competition. The rising take rate is a counterargument.

Fred Liu of Hayden Capital had an insightful comment related to this in his most recent investor letter:

For example, China is the most competitive ecommerce market in the world with four large ecommerce companies all competing heavily. Despite this, all the companies are making ~2% EBITDA / GMV – 3x higher than Shopee’s current 0.7%. I think China clearly illustrates that relative competition and absolute market share isn’t necessarily correlated with lower terminal margins.

Source

It seems more than plausible for Shopee to increase its EBITDA margin to its target goal once this investment cycle scales out, despite competitive forces.

Competition

Some new data came out this past quarter on the e-commerce landscape in Southeast Asia. Below is a chart I made aggregating data from a report:

Source: Momentum Works

TikTok Shop is indeed gaining GMV share, some at the expense of Shopee, but also other players, which aren’t depicted here. More importantly, Shopee still gained market share in the biggest market (Indonesia) and retains a dominant share over the region overall:

Source: Momentum Works

Some of this data may elicit some fear regarding competition. Even I had questions, but I also found alternative third-party data depicting TikTok Shop’s GMV decelerating, not accelerating:

Source: X

So what data should we trust? Below is a recent interaction I had with Fred Liu on the topic:

Source: X

That looks better for Shopee, doesn’t it? It was a good reminder of the wide range of conclusions one can draw depending on where data is sourced. It’s on us as investors to aggregate information and make our best educated guess. Third-party data is merely one data point among direct earnings reports. One piece of data should not be the end-all, be-all.

Personally, I see rising Shopee GMV, orders, revenue, and take-rates over the past few quarters. Management also commented on the competitive environment in Q4 2025:

Regarding your question on the competitive landscape, I think what we observed is relatively stable competitive landscapes across most of the market. Yeah, I think that we didn’t observe anything very different from what we see from last quarters.

TikTok Shop has grown in the region but so far has not adversely affected Shopee. In addition, there is no proof that they can’t co-exist. TikTok Shop targets a spontaneous, discovery-led “shoppertainment” audience buying low-cost items like fashion and cosmetics.

Shopee, on the other hand, captures high-intent, utility commerce where buyers proactively search for goods, including consumer electronics and everyday household products. More importantly, they have a comprehensive platform to nurture existing customers and drive repeat purchases, rather than relying on one-time, impulse-driven relationships.

If anything, Shopee is encroaching on TikTok’s territory with its expanding partnerships with YouTube and Meta as confirmed by CEO Forrest Li:

Our content ecosystem continues to grow healthily. In the first quarter, orders from live streaming and short-form video grew more than 50% year-on-year.

These orders accounted for more than 25% of total physical goods orders in Southeast Asia. To further strengthen our content ecosystem, we continue to deepen our content partnerships.

Orders driven by YouTube more than doubled year-on-year. Our collaboration with Meta is scaling well with over 4.5 million affiliates across our market, up nearly 30% quarter-on-quarter. In Indonesia, we have extended our Meta collaboration to enable seamless product promotion and checkout, not just on Facebook, but also on Instagram.

That was Shopee, next we move to the fintech segment of Sea Limited.

Monee

Revenue was $1.2B, up 58% year-over-year.

Adjusted EBITDA was $275M, up 14% year-over-year.

Source: Sea Limited

While topline revenue growth has held strong, Adjusted EBITDA growth continues to slow due to two reasons:

1. Provisions for credit losses are increasing due to expansion of the credit book.

2. Sales and Marketing expenses continue to grow significantly (up 142% year-over-year this quarter).

Similar to MercadoLibre and Nu Holdings, Sea Limited is capitalizing on the opportunity to expand its lending services aggressively to capture market share. Just last quarter, they opened up their SPayLater (buy now, pay later) application to all users, and that momentum is continuing:

Source: Sea Limited

Loans Outstanding grew 71% year-over year to $9.9B

First-time borrowers this quarter were 4.9 million with 38 million active credit users, up more than 35% year-over-year.

Despite continued credit expansion, non-performing loans (NPLs) remained steady at 1.1%. As Kris mentioned in previous articles, NPLs can be artificially held down when a loan book grows this fast; there are simply more “good” new loans, outnumbering the bad, before the most recent cohorts have had time to season or default. In the future, it is completely normal to see NPLs rise slightly.

Sea has also been actively expanding credit to Brazil:

• The Brazil loan book crossed $1B, growing more than 250% year-over-year.

• SPayLater GMV penetration on Shopee Brazil is at 10%, well below mature Asian markets, indicating a massive runway.

• They obtained the SCFI license, which will allow Monee to broaden the scope of financial services offered.

Sea also continues to expand credit use cases to offline settings (Off-Shopee SPayLater). This past quarter, Off-Shopee SPayLater loans in Thailand and Indonesia exceeded 20% of the total portfolio. On-Shopee lending now accounts for less than half of their total fintech business. CFO Tony Hou noted:

This proves that we’re not only able to drive our SPayLater or in general, lending in the Shopee ecosystem, but also we successfully drive this in the off-Shopee ecosystem.

Critics argue that the fintech arm was only successful because it was piggybacking on Shopee’s massive user base. With Off-Shopee expanding past On-Shopee lending, that argument is convincingly refuted. Monee has evolved into a standalone financial solution.

The last point to highlight is the growth of on-book versus off-book loans:

Source: Sea Limited

Taking another look at this graphic, we see that off-book loans have stagnated for a while. In the past two quarters, however, we have seen some growth again, albeit just 10% sequentially. Off-book loans are loans funded without the use of Sea’s balance sheet, allowing it to obtain revenue from financial fees while offloading the risk to other institutions. This is a part of a bigger thesis I have regarding Monee, but more on that at the end of this article.

Moving on to the final segment of Sea Limited, its gaming division, Garena.

Garena

Q1 2026 came in stronger than expected, marking the best-performing quarter since the pandemic-fueled peak of 2021:

Bookings for the quarter came in at $931M, 20% growth year-over-year.

As a reminder, we choose to emphasize bookings over GAAP revenue due to revenue recognition rules. When Garena users buy in-game credits, it isn’t recognized as revenue until it is actually spent in-game.

While a 20% growth number doesn’t seem mind-blowing on the surface, zooming out reveals it was built on a very high base. Q1 2025 had a massive 51% year-over-year growth thanks to the Naruto Shippuden campaign. Stacking 20% growth on top of that is incredibly impressive at the maturity Garena is.

This quarter’s boost can be attributed to Free Fire’s collaboration with Jujutsu Kaisen, which generated over 700 million official content views.

Source: Free Fire

Unsurprisingly, the bookings boost lifted profitability, monetization, and engagement across the board:

Source: Sea Limited

Adjusted EBITDA came in at $574M, 25% growth year-over-year with a strong 61.6% margin.

Source: Sea Limited

Quarterly Active Users were 666 million.

Paying Active Users were 73 million.

Average Revenue (Booking) Per Paying User was $12.8

Quarterly Paying User Ratio increased significantly to 10.9% which means a higher percentage of active players are converting to paying users.

To close out this section, let’s take a look at the quarterly bookings chart again:

With this link, you get a 15% discount for Fiscal AI, so you can make these great charts yourself. Or use their top-notch screener. Or listen to the earnings calls, or… So much more.

After a slow period in 2023 and 2024, the quarters from 2025 onward prove that Garena can generate bookings acceleration almost on demand through high-impact partnerships with global IPs (Naruto, Squid Game, Jujutsu Kaisen). How sustainable this is in the long term remains to be seen, but I am very optimistic after seeing how significant these partnerships have been in driving bookings lately.

The Future: What Sea Limited is Building

This quarter was fantastic, with all business segments showing strong momentum. Let’s zoom out for a moment to gain perspective on what management is building for the long term.

As we saw in the Momentum Works report, Shopee is the undisputed #1 e-commerce player by GMV in Southeast Asia. Instead of just chasing raw user growth, they are deepening existing relationships through logistics investments and the VIP program. 10M VIP members against a backdrop of roughly 400M active buyers means penetration is only about 2.5%. Compare that to Amazon Prime or Coupang WOW, which exceed 50% penetration, and you see the massive runway ahead.

Additionally, continual improvement of customer experience leads to an increase in mindshare among buyers; they no longer consider comparing prices with other competing platforms, even if there may potentially be lower prices elsewhere.

CFO Tony Hou from the 2025 Q3 earnings call:

And Shopee remains consistently regarded as the e-commerce platform offering the most price-competitive products in both our Asian markets and Brazil, based on Qualtrics surveys.

I live in the US and I can resonate with this feeling as a frequent shopper of both Amazon and Costco.

When I go to purchase an item at either place, I can rest assured that I will most likely have paid close to the best possible price. Even if it isn’t, it’s not worth the effort to look elsewhere to save a bit more; the customer experience for members (e.g. perks, shipping, returns) more than makes up for it.

The large, high-engaged Shopee base serves as a zero-acquisition-cost funnel for Monee. When a Shopee buyer checks out, they are offered SPayLater:

Source: YouTube

Sea underwrites these loans using proprietary internal transaction histories, a massive data advantage over traditional banks in underbanked regions. Once a user builds a clean repayment history, Monee cross-sells them higher-value, off-Shopee financial products.

Combining these two businesses together creates the flywheel effect:

Source: Google Gemini

In the Monee section, I also mentioned off-book loans offering additional optionality. The shift toward an off-book model is the ultimate scaling mechanism. Actively utilizing partner capital allows Monee to act as a lending marketplace, taking high-margin origination fees while avoiding balance-sheet risk. This can unlock immense operating leverage.

What’s even better is that this model can be replicated across other developing countries that are underpenetrated in both e-commerce and financial services. We see that happening within Latin America (Brazil):

Brazil was the fastest-growing market in the past two quarters, and the investment is just getting started. In Q1 2026, SEA opened up three new fulfillment centers, bringing the total to five. The VIP program just launched this past April, and the loan book grew 250% year-over-year.

If you can’t tell already, Sea is successfully running the same playbook from Asia now in Brazil, and there’s nothing stopping them from applying it to other developing countries.

Here is the playbook summarized below.

Phase 1: Launch Shopee in the target country with aggressive, cash-burning market-share play, e.g., free shipping vouchers, discounts, low take rates. Subsidize with cash from other countries and Garena.

Phase 2: Once an active user base is established, transition from third-party to building out a proprietary logistics network (SPX Express) to drive down per-order delivery costs, speed up fulfillment, and establish a logistics moat.

Phase 3: Leverage Shopee customers to cross-sell low-risk fintech services such as a digital wallet for payments, but once credit history is established, start opening applications for SPayLater loans.

Phase 4: Lock-in engaged customers with higher-value services such as Shopee VIP, Off-Shopee loans, insurance, and wealth management services. Profit from long-term lifetime value from customers.

Taking a step back, we can clearly see Sea Limited executing this playbook masterfully. To realize it, you just have to look past the short-term price action and see the forest (or I guess Forrest?) from the trees. Shopee is solidifying its moat through a high-barrier logistics network and a sticky membership ecosystem; Monee is aggressively expanding its user base into a legitimate regional financial powerhouse; and Garena continues to serve as the ultimate cash cow, efficiently funding the entire enterprise.

So was the muted earnings reaction deserved? I think after reading this, you probably know the answer. But I’ll let Kris officially answer that with his upcoming parts of this article.

If you enjoyed this analysis and want to read more of what I have to say, you can find me on X @ZackStacksKap. Thanks for reading! Back to Kris.

Thanks, Zack. Fantastic work as always.

So that’s the quarter, and it was a strong one across all three segments. The question Zack kept pointing at is the one that matters: was the muted price reaction deserved, and is SEA a buy here?

That’s my part, and it’s for paying Multis.

Below the paywall:

The Selling Rules for SEA, the lines that would make me trim or sell.

The full Quality Score update.

My full valuation and where SEA lands in my QPI (Quality-Price Index), and what I’m doing with my own position in the Forever portfolio.

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Read more

Last Wednesday after the close, Nu Holdings (NU) reported its Q1 2026 results. The stock dropped more than 6% the next day but it had already dropped before and that means it’s now down 35% since its high in January of this year, just a few months ago.

Within minutes, the bear narrative was circling on X: provisions are surging, NIMs (Net interest margins) are compressing, asset quality is deteriorating, and the growth model hit its limits. Wow, that was fast! But was it correct?

If you are a shareholder, no matter how well you know the company, this will always sound convincing to some extent, even if it’s pure noise. But what is signal and what is noise? The company should help us, shareholders, to make that distinction and fortunately, Nu Holdings is generous in that regard.

This was one of the most informative earnings releases I’ve seen in a long time. Management analyzed almost every line item that the bears pointed out. I want to thank Nu’s management for making my job a ton easier.

It’s funny to see how two Latin American companies (NU & MELI) beat a large majority of American companies in providing detailed information to their shareholders.

Let me walk through what the market hated, what the data actually shows, and then everything else that matters for the next ten years of this company.

The Numbers

Let’s first look at the numbers. (FXN= FX-neutral, the business growth without currency impact.)

• Revenue: $5.32B, +53% YoY, beating the consensus of $5.06B by $260M.

• EPS (GAAP): $0.18, missing consensus by $0.01.

• Net income: $871M, +41% YoY FXN, down 5% QoQ from $895M.

• Adjusted net income: $937M, beating the consensus of $928M.

• Gross profit: $1.88B, +27% YoY FXN, down 7% QoQ, mostly because of elevated CLA (credit loss allowance), more on that later.

• Gross profit margin: 43.8%, missed by 8.5 pp

• Customers: 135M, +14% YoY. 4 million net adds in the quarter.

• ROE (return on equity): 29%. Adjusted 31%.

• Total credit portfolio: $37.2B, +40% YoY FXN, +7% QoQ.

• Deposits: $42.4B, +22% YoY FXN.

• NIM: 21.1% (from 19.5% in Q4 2025).

• Risk-Adjusted NIM (net interest margin): 9.5% (from 10.5% in Q4 2025).

First, a quick note on the EPS miss. Nu introduced a new P&L (profit & loss) framework in Q4 2025. Many have not yet used this new model. On top of that, the consensus is a mix of IFRS and adjusted numbers and you will sometimes even see a miss on revenue because of that confusion. So, I wouldn’t worry about the EPS “miss” too much. IR officer Guilherme Souto opened the call by pointing this out immediately:

We are aware that consensus estimates across the sell side reflect the mix of IFRS and managerial frameworks, and we encourage everyone to use the reconciliation report as a reference point for aligning models going forward.

I love it when a CFO points analysts to this directly. I think the estimates will be more accurate going forward.

What The Market Didn’t Like

Let’s start here, as I always try to understand the negativity to assess whether it’s warranted or not. I think three numbers and one extra element drove the (limited) selloff after the earnings and the bigger 35% drop since the all-time high.

The first is the 15-90 day NPL (Non-Performing Loan) ratio, which jumped from 4.11% to 5.00% QoQ. An 89-basis-point move in just a quarter is the largest in over a year. Read in isolation, that’s an ugly headline.

The second is the CLA (Credit Loss Allowance, the money Nu sets aside on its balance sheet for expected losses on its credit book), which jumped to $1.79B, +33% QoQ. That doesn’t look great either, does it?

The third one is risk-adjusted NIM. NIM, or net interest margin, is what a bank earns on its lending after subtracting its funding costs. Risk-adjusted NIM goes one step further by subtracting credit losses. That makes it a better measure of the credit book’s actual profitability. It dropped from 10.5% in Q4 2025 to 9.5% in Q1 2026.

Some, obviously people who want to feel sophisticated, point out the macro economy in Brazil and point out that 44% of Brazilians defaulted on their credit, so the loan market should absolutely be avoided at all cost.

Out of those four factors, you can build any bear case you want and that’s what I see happening quite widely.

And probably, if you are a shareholder, at least one of them, probably multiple, or all of them sound convincing. But none of them mean what you think. That’s quite a statement, I know. But if you have read this article, please let me know if your worries have decreased or increased.

Let me walk through the first three factors one by one. The macro thing comes later.

The NPL Bridge

For the first time, as far as I know, Nu broke down the 89 bp NPL jump into its drivers.

So, about two-thirds of the deterioration is simple seasonality. Every Q1 in Brazil looks like this. Just compare the last three Q1 numbers: 5.1% in 2024, 4.8% in 2025, 5.0% in 2026. You see the same pattern every year.

The 90+ NPL ratio, which is what turns into write-offs and losses, came down slowly from 6.6% in Q4 2025 to 6.5% in Q1 2026. That’s well below the 7.0% peak from Q3 2024.

So the headline that scared everyone is doing what it always does in Q1. But this time, because of the headline consensus misses (which came from quite some analysts using an old model in their estimates). That’s why the NPLs were singled out more, ignoring the seasonality.

CFO Guilherme Marques do Lago put it well. But before I quote him, I want to explain what NPVs are. It stands for Net Present Value, the value of all future profits from the loan book after costs.

The goal of our credit operations, it’s not to minimize NPLs at a point in time. Instead, it is to optimize for resilient NPVs. NPLs only capture the cost side of the equation. They say nothing about the revenues we generated from the customers who perform.

This matters and it’s also how I think. Banks that obsess over keeping NPLs low only lend to the safest customers, at the lowest spreads, with mediocre returns as a result. Nu price risk into the spread and accept that some customers won’t pay, and that makes it grow into much wider customer bases at much higher returns. The first is the incumbent model. Nu does the second.

The CLA Surge

The same logic can be applied to provisions. Just as a reminder. Credit Loss Allowance is the money on the balance sheet for expected losses on the credit book. It went from $5.30B at the end of 2025 to $6.10B at the end of Q1, an $800M increase. Management gave us the explanation again.

Growth and seasonality together explain $690M of the $800M, or 86%. Credit quality contributed almost nothing.

There’s an accounting rule that I also mentioned in the context of Mercado Libre. When a bank originates a new loan, it has to set aside the entire expected lifetime loss on that loan immediately, before earning a single dollar of interest. So if you’re growing fast, you front-load losses into today’s earnings while the offsetting interest income shows up over the coming quarters. That makes things look much worse than they actually are. That’s the ‘growth’ component, by far the biggest contributor.

Nu’s total exposure grew 44% YoY FXN to $70.7B. Total exposure is the credit card limits Nu has given its customers plus the money actually borrowed, so it’s much bigger than the drawn credit portfolio. Every dollar of that exposure gets a provisioning charge upfront, whether the customer ever uses the limit or not.

Look at the mix on the right side. In Q1’26, credit cards were 73% of the new exposure, and unsecured lending was 25%. That’s 98% combined. A year ago, credit cards were 60% and unsecured 28%, or 88% combined. Secured lending declined from 12% to just 2% over the last year, due to regulatory changes to the FGTS product at the end of 2025. FGTS (Fundo de Garantia do Tempo de Serviço) is a Brazilian employment-savings fund used to secure consumer loans.

Cards and unsecured loans have a higher expected loss than secured loans. They also yield much more, but the provision rises as more credit cards and unsecured loans are issued.

In short, the same dollar in loans now has a higher yield but also higher provisions than six months ago. That’s not because customers are of lower quality but because the yield is higher.

The NIM Drop

Now the risk-adjusted NIM. Yes, 9.5% is lower than 10.5%. But the overall NIM moved the other way. NIM, that’s before credit losses, went from 19.5% in Q4 to 21.1% in Q1, up 160 bps. As the risk-adjusted NIM went -100 bps, as we just saw, that means that the gap widened by 260 bps in one quarter. That sounds ugly, right?

But it’s simple. That gap is the same accounting requirement at work. The yield on the new originations shows up in NIM but the expected losses on those same originations show up in CLA (Credit Loss Allowance) right away. This is a way you can look at: the real losses will arrive over the coming quarters, but they are already in the books. At the same time, interest income continues coming in every quarter. By Q3-Q4 of this year, the two lines should meet back up. CFO Guilherme Marques do Lago:

We expect risk-adjusted NIM to move back towards the level we operated at during the second half of 2025 as the dynamics of first quarter normalize over the coming quarters.

So the compression is probably just a quarter of seasonality, not a structural break.

The Cohort Economics

Even if seasonality explains the Q1 rise, the loss rates Nu shows for some cohorts appear high in absolute terms. 22% in losses on unsecured lending and a whopping 33% in losses on Mexican credit cards. Aren’t those scary numbers?

Here, Nu’s most interesting new disclosure comes in. They gave us the full unit economics of the three biggest unsecured franchises, with every component broken out.

• Brazil unsecured lending: 62.2% in interest revenues, -12.2% in funding costs, -22% in losses = 28% net lending margin. That leads to a cohort ROA (Return on Assets) of 15.8% for a loan book with a 7-month duration. Do you already see what is happening here?

• Brazil credit card: 28.3% net interest revenue + 8.5% non-interest revenue, -0.3% funding, -16.6% losses = 19.9% net margin. Cohort ROA of 8.9% on a 3-month duration.

• Mexico credit card: 46.1% interest revenue + 21.5% non-interest revenue, -6.3% funding, -33.3% losses = 28% net margin. Cohort ROA of 14.1% on a 2-month duration.

For context: global bank credit card portfolios typically earn ROAs of 3-5%. Of course, that’s a different context. The best Brazilian incumbents earn 8-14% on cards, with much lower loss rates because they only lend to the top tier of customers. Nu is in a completely different league, and three things make that possible:

• Brazil’s policy rate (the Selic) is at 14.5%, which means lending spreads are structurally enormous.

• Nu’s cost to serve is $1.00 per active customer per month, an order of magnitude below that of the incumbent banks.

• A short-duration credit book that lets management react fast when something changes.

Just look at those durations again. Brazil credit card: 3 months. Brazil unsecured: 7 months. Mexico credit card: 2 months. Traditional Latin American banks operate with durations measured in years. Mortgage-heavy banks are in the high single digits in duration.

CFO Guilherme Marques:

We are not a loan book lender waiting quarters and quarters to see the impact of a credit policy change. We see it in days, and we act on it immediately.

Nu uses duration as a risk-management instrument. That’s why they can underwrite cohorts with high loss rates and still earn returns that don’t exist anywhere else in banking. You saw that in the numbers. In other words, that’s not risk-taking, it’s pricing risk at the correct premium.

Float

The credit story took all the attention this quarter, but something else caught my eye.

Look at this graph.

As you can see, float made up 41%. Float is the interest Nu earns on customer deposits that aren’t lent out as loans. With $42.4B in deposits and only $22.8B in net credit portfolio, that’s a loan-to-deposit ratio of 53.8%. So, for every $1 of deposits Nu has, only about 54 cents is currently lent out. Or put differently: Nu has a big pile of unloaned deposits sitting on the balance sheet, earning the local risk-free rate. Deposits compound faster than loans, which means that float income grows with them.

In Q1, the contribution of credit also dropped because CLA was higher, as we saw earlier. That part is seasonal and will largely reverse in the rest of the year. If you take a step back, you see that gross profit is becoming more diversified across credit, fees, and float. And that’s a good thing. It’s making Nu stronger.

This is the final proof. If you thought that Nu was a one-trick credit card pony, this quarter shows you are wrong. Fees and float together now make up two-thirds of gross profit.

Two Tailwinds In Brazil

In the Q&A, CFO Guilherme Marques do Lago mentioned two structural Brazilian tailwinds.

The first is the new Brazilian income tax exemption for monthly earnings up to BRL 5,000 (about $1,000). There are even partial reductions up to BRL 7,400 (about $1,500). That means that most ordinary people with a job will profit and those people are exactly More income means more loaning capacity and lower expected loss rates on the cohorts already on the book.

The second is about what I mentioned as a part of the bear case: macro. Yes, credit default numbers in Brazil are simply insane if you are used to the West. That 44% default number is correct.

But the problem is that bears make it sound as if this came out of the blue and now it’s an incredible, unprecedented time in Brazil, which is simply not the case. The default rate has been around 40% for a very long time already and yes, it went up slightly. Well, slightly, from give or take 40% to 44% is still a lot, as it’s up 10% but it’s not as if this is a new situation in Brazil. Don’t forget that this is the environment has operated in for years and it has thrived by pricing loans very correctly. We’ll see later in this article why they have even become better at this. Hint: AI.

On top of that, the government also knows this and it launched something they hope can help.

But back to the government initiative. Desenrola 2.0, the second round of a Brazilian federal debt renegotiation program. The first round (in 2023-2024) helped about 15 million Brazilians with defaulted debts renegotiate them at steep discounts, clear their names from the credit bureau blacklist, and rejoin the credit system.

Desenrola 2.0 is expected to launch in Q2 and Q3 2026 and should bring millions more newly bankable consumers into the system. Nu, as the dominant brand in Brazil, is well positioned to capture them as new customers. CFO Guilherme Marques do Lago called the program “either neutral or positive” for Nu.

Efficiency

Now to the efficiency ratio. The efficiency ratio measures how much a bank spends in operating costs to earn one dollar of revenue. The lower, the better. You may know this from your favorite insurance company.

A traditional Brazilian incumbent typically runs at 40-50%, meaning they spend 40-50 cents to earn one dollar. Nu came in at 17.6% this quarter. That’s about 18 cents to earn one dollar, which is less than half of an incumbent. Pretty impressive.

But it’s even better. Nu makes investments in three things that other banks are not doing: bringing employees back to the office, expanding internationally (to the US), and building out its AI infrastructure. If you strip those out, the “core” efficiency ratio is 16.6%. With just $16.6, the company can earn $100. That’s great. A year ago, the efficiency ratio was 21.4%, so this is a big improvement. The operating leverage is doing its work.

NU CFO Guilherme Lago told us not to extrapolate, though:

The first quarter came in better than expected for 2 reasons working together.

Number one, revenues accelerated faster than we anticipated, driven by both ARPAC outperformance and continued portfolio growth.

Second, OpEx came in below plan...

Roughly 1/3 reflects structural efficiency gains that are durable and compounding, mainly AI-driven improvements in operations and collections, software platform consolidation and hiring discipline. Now the remaining 2/3 reflect timing items that will normalize in the next quarters.

He gave us the full-year guidance: roughly 20% efficiency for 2026, in line with where 2025 ended, but including all the strategic investments. The core efficiency ratio (the trend excluding those investments) continues to go down, which is great to see.

ARPAC & Cohorts: No Plateau In Sight

Monthly ARPAC (Average Revenue Per Active Customer, remember that, as I will use it multiple times) for Q1 2026 was $15.9, +23% YoY FXN, up from $15.0 in Q4.

That’s the average across all customers. Mature customers, those who’ve been with Nu for 96 months (8 years), generate $30.8 in monthly ARPAC, nearly double the company average. And it keeps going up year after year.

Look at the cohort progression. It looks linear and so far, there is no plateau in sight.

Now think of the customer base. Nu has added more than 65 million customers over the last three to four years.

Just insane. But that entire cohort is still in the stage of the low ARPAC in the graph. If they do ever remotely do as well as the older cohorts, the revenue growth from existing customers alone will be huge. And that’s before Nu adds new customers, launches new products, or starts in another country.

Monthly costs to serve customers are around $1.00 per active customer. The ARPAC of $15.9 against $1.00 of cost, that’s phenomenal operational leverage.

The cost to serve is up 19% YoY, which is faster than historically, but still extremely low. ARPAC is up 23%, so the gap is still broadening. I expect the cost to serve to increase if the company focuses more on small- and medium-sized businesses and the wealthier segment of the population. But of course, in that case, the ARPAC should also rise.

Mexico: The First Quarter Of Profitability

It was great to hear that Mexico has already seen its first profit in this quarter. And not on some adjusted or managerial measure, but on an IFRS basis (International Financial Reporting Standards, comparable to GAAP).

That was even faster than management had foreseen. CEO David Velez:

In Mexico, we have moved from a $30 million quarterly loss to our first quarter of IFRS profitability, a milestone that arrived ahead of our own internal plan.

And again, management gave us an interesting slide full of information.

The number of customers rose from 2 million to 15 million over four years, while ARPAC nearly doubled from $6.5 to $12.4. The efficiency ratio dove from 120% to 42%. That’s incredibly strong and another testament to how well the company is doing. And as we already saw, the cohort ROA on credit cards in Mexico is 14.1% on a duration of just 2 months.

Mexico is no longer the experiment. Nu is already the third-largest financial institution in Mexico by customer base. The playbook that management applied in Brazil is working in Mexico.

The Mexican population is around 130 million, so there is still a lot of room to grow from the 15 million customers Nu has now. If Mexico grew to the same size as Brazil, you could expect more than 80 million customers. I’m not saying they will do that but that’s the potential. And management is not shy to show the opportunity.

Nu’s gross profit market share in Mexico is below 1%, in a $43B annual pool that’s expected to grow by 15% per year. Compare that to Brazil, where Nu has a 7% share of a $100B pool growing at 8%. The Brazilian pool is bigger and Nu’s share is much bigger, but the Mexican pool is growing almost twice as fast and Nu’s share is tiny. Over the next decade, Mexico could very well compound faster in absolute terms than Brazil.

Colombia is the third country where Nu is scaling. The customer base is approaching 5 million now and the country is still in investment mode, just like Mexico was from 2020 to 2025. Nu is now intentionally operating at a loss there to build out the brand. It’s that same playbook again

The US Opportunity

In previous articles, I already mentioned multiple times that Nu received conditional approval from the OCC (the Office of the Comptroller of the Currency, the US national bank regulator) for a national bank charter in January. Management has confirmed the seriousness of the move but has not shared the go-to-market strategy or any other details so far. But co-founder Cristina Junqueira, Chief Growth Officer, has relocated to the US and is now the CEO of NU there.

Again, management wanted to be very clear about this expansion. For competitive reasons, it doesn’t want to share its approach, which I think is fair, but it was clear to shareholders what this would cost.

CEO David Velez:

To be precise, the maximum OpEx headwind we expect from US investment in each of 2026 and 2027 is less than 100 basis points on our consolidated efficiency ratio. And this is inside the 20% efficiency ratio level Lago mentioned before. For a company at our scale, that is quite affordable.

Beyond that, any additional investment is explicitly contingent on clear evidence of product market fit and a credible path to profitable scalability.

This is how companies should take bets. The downside is capped and restricted in time. The upside is asymmetrically high if Nu finds product-market fit. If they don’t, the worst case is less than 100 bps of drag on the efficiency ratio for two years, and the core business doesn’t feel it. But if they succeed, Nu enters a whole new era in the world’s largest retail banking market.

Velez has been calling these expansions “call options” since Mexico was the new market. The Mexico call option has already turned out to be worth several billion dollars. Colombia is still vesting but looking promising. The US is a much harder market with stronger digital competition, but with that asymmetry comes huge potential upside.

There was an interesting question on the earnings call in this context. The question was why Brazilian investors are more constructive on the Nu story, including the US thesis, while foreign investors are very skeptical. It also hit home because when I talk about this potential expansion with Americans, they are either very enthusiastic (a minority) or very skeptical. CEO David Velez:

Every time we’ve launched a new country, the locals have been skeptical. When we launched in Brazil, the locals were very skeptical. When we launched in Mexico, the locals were very skeptical... if you’re a local by definition, it’s very hard for you to reimagine how things can happen differently. You are too consumed by the status quo.

That’s a very interesting answer on several levels. As NU is an innovator, the typical consensus is that they do not stand a chance. “Not here, not in this market.” That’s what most locals think. If you are American, maybe that’s what you think right now. And I understand that for sure. If Nu were to expand to Belgium, I might have the same reaction. It’s also why incumbents in any market consistently underestimate what a new player, with a new model, can do. It’s basically a summary of the Nu story for thirteen years already.

Small And Medium-Sized Enterprises

One analyst asked about SMEs. David Vélez:

I actually think this is probably one of the most underappreciated opportunities we have at Nu. We should be speaking more about it, but we’re not. The reality is we’ve kind of silently have built the largest SME base in Brazil with our 5 million SME customers effectively built with 0 customer acquisition cost.

5 million SME (Small and Medium Enterprise) customers. At zero customer acquisition cost. That’s crazy. Nu built this by cross-selling its small-business products to its existing personal-banking customers, since a large share of Brazil’s working population also runs a small business. Today, there are over 2 million Nubank SME credit cards in circulation, plus a growing range of secured and unsecured credit lines (some of them using Brazilian government guarantee programs).

In a country where small businesses employ around 70% of the workforce, this is a very interesting option.

AI: From Talking To Doing

Every company is talking about AI right now. A lot of it is theater, buzzword bingo. But Nu’s AI commentary was very specific, and we can check the numbers.

The first phase, AI Assistance, is largely complete now. AI tools have been rolled out to roughly 100% of employees. Engineering throughput is up 50% YoY, weekly token consumption is up around 10x since January and testing cycles are 90% faster. I love that level of detail!

The second phase, Workflow Reinvention, is in progress. AI executes the routine work and humans hold the judgment.

The most concrete example is Pix with AI, which already has more than 10 million MAU (Monthly Active Users). Pix is Brazil’s instant payment system, launched by the central bank in 2020. It is now used by virtually every Brazilian, for everything from paying for a coffee to paying rent. Nu’s AI layer on top of Pix lets customers do things like pay a friend by simply describing in plain language what they want to do, instead of typing in account numbers. That may sound small, but features like this can encourage people to use their Nubank app more.

The third phase is the AI-Native Bank, which is still in its early stages. The AI Private Banker gives customers financial insights, payment guidance, credit advice, and debt resolution, and it’s already at 15M+ MAUs.

Nu’s proprietary foundation models, branded nuFormer, are live for credit card decisioning in Brazil and Mexico, and for unsecured lending in Brazil. CEO David Velez:

We’re now able to use real-time AI valuation for every personal loan request, priced and approved individually based on its predictive net present value in under 1 second.

Let’s go back to where we started: why the stock dropped. The unsecured and credit card lending book is growing 53% YoY, with high ROAs, despite the big losses some love to accentuate.

And now we know how Nu does this. For every loan application, the AI runs the math on what the loan should yield, what the customer is likely to lose, and whether the loan’s lifetime profit is positive. In less than a second. So when you hear bearish takes that Nu takes on riskier customers to grow the book, it’s because Nu is pricing risk more precisely than anyone else in the industry.

The AI productivity is also showing up on the cost side. Remember that CFO Guilherme Marques do Lago said that about a third of Q1’s efficiency outperformance came directly from AI: improvements in customer operations, debt collection, software consolidation, and more disciplined hiring.

In other words, NU uses AI in its core operations, which is extremely important for its positioning.

Below the paywall:

My five new Selling Rules for Nu. I didn’t have any yet, so I built them from scratch. One of them puts a hard number on management’s promise that risk-adjusted NIM goes back up by Q4. If they miss it, I want to know.

The full Quality Score update. Including the one metric where Nu just knocked Adyen off the top spot after years. I didn’t expect that.

My valuation. You can’t value Nu like a bank and you can’t value it like a normal growth stock either. So I built something else for it

Read more

It’s Sunday again and that means the Overview Of The Week’s back!

The markets are always uncertain, but lately, with AI and its (supposed) consequences, it’s more uncertain than usual. But sun or rain, bull or bear, up or down, the Overview Of The Week is here!

I’ve written a lot this week and I was happy with this comment from Multi Kamran:

Thank you Kris ... one of your very best analysis! All the analysis articles since you came back from Omaha have been beyond awesome!!! Something happened with you when you visited us in the US!!

And yeah, in a way, I feel the same. I got soooo much energy from Omaha. It was my third visit and by far the best. And the two previous ones were already so great! It feels almost like a rejuvenation process, haha. Talking to fellow investors, newsletter writers, portfolio managers, company management, people working at family offices and so many other professional and passionate investors really fed my enthusiasm.

On top of that, the event I organized with Pieter Slegers (Compounding Quality) and Brian Feroldi (Long-Term Mindset) also made me realize how much my articles mean to some people. I sometimes read that here (see Kamran’s comment above, for example), but hearing it in real life cranks up the good feeling for longer.

In Omaha, maybe 20 or 25 people also recognized me and wanted a picture with me. No, I’m not talking about my picture with Mohnish Pabrai, haha. Ordinary people whom I don’t know came asking for a picture with me, saying that they love Potential Multibaggers. That really felt great, and so, if you ever see me in real life, don’t hesitate to come talk to me.

On top of the wonderful experiences in Omaha, I had been on holiday in Egypt two weeks earlier. That definitely also helped.

And I see more opportunities now, which I like more than if stocks are expensive.

But enough about me, let’s dive into what you are here for.

Articles In The Past Weeks

This is the fifth article this week. Let’s look back at what you got before.

The first article this week was the earnings deep dive on TransMedics. The stock dropped about 40% over the last two weeks. You can read here if that means it’s a buy now.

Another stock that dropped a lot this year is Shopify. It’s down almost 50% fropm its highs in 2025. Same question, same approach: an earnings deep dive.

Friday, it was the 15th of the month and you know what that means: the Best Buys Now. This time, in a slightly new format.

Yesterday, you got my article about Mercado Libre. It’s another earnings deep dive that talks about the context of the margin compressions and negative free cash flow. You can read it here.

Memes Of The Week

There’s a good harvest of memes this week. It’s the longest selection since I started this.

This is the first one.

The second one laughs at the arbitrary nature of trade patterns.

For the third one, you have to read the text at the bottom first, the JPM assumption.

It’s funny to laugh with other people, but real intelligence shows when you can laugh with yourself. So, this is about many of us. :-)

And I think we all know this situation.

I made my own meme with this image.

And this shows that token costs hurt.

And we don’t stop yet. Here’s the next one already.

And the last one this week.

Source

Interesting Podcasts Or Books

The Compound and Friends is a podcast that is sometimes a bit chaotic, but the takes are always interesting. I listened to this week’s episode about the Nasdaq euphoria. You can listen to it here. I also listened to an episode of the great podcast series Founders. David Senra talks with Eric Jorgenson, the author of The Book of Elon, about, you guessed it, Elon Musk. It’s an interesting conversation on how Elon Musk functions.

The third podcast I listened to and that I want to recommend (I listened to more) was an older one that was still on my list. In the podcast In Good Company with Nicolai Tangen, the CEO of the largest single investor in the world, Norges Bank Investment Management, talks with interesting guests and Reid Hoffman is such a guest.

Hoffman was at Apple in 1994, founded a social network company called SocialNet in 1997 and was part of the Board of PayPal when it was founded. He became the COO of the company in 2000 and was part of the PayPal mafia, as the group was called. He then founded LinkedIn in 2002 and joined the Board of Microsoft in 2017, after Microsoft bought LinkedIn in 2016. He was also one of the first who gave capital to OpenAi in 2016 and joined the Board until 2023. Since then, he co-founded and funded several AI startups.

You can listen to the conversation here.

The markets in the past week

This is what the markets have done in the past week.

As you see, the S&P 500, up 0.13%, and the Nasdaq, down 0.08%, didn’t move much. The Russell 2000 dropped 2.37%.

The Greed & Fear Index remained in Greed territory.

Quick Facts

1. Why This Is Not Like The Dotcom Bubble

Last week, I wondered if the top was near. This week, I want to add some more thoughts about this.

First, I don’t think this is like 2000 yet. Markets are not as expensive as they were back then. I hear some people saying that. It’s nonsense. For example, Cisco traded at a forward PE of 150 at the time. Nvidia now? About 27. That’s a difference.

Maybe you think that this was the exception, but that’s not true. Look at this chart shared in the episode of The Compound & Friends I already referred to.

As you can see, the valuations were much, much more expensive back then. Now 59% of companies in the Nasdaq trade at a PE between 20 and 40. Back then, 76.4% was either unprofitable or traded at a PE above 60. So, no, this is not the same as the dotcom bubble.

This is another aspect of it, margins.

So, back then, 10% of the companies had negative margins. Now? None. There were no companies with margins between 50% and 100%. Now? 20.4%. If you look at 25% margins or more, then it was just 25.3%. Now 70.6%.

Things have changed. We live in the information economy now, not the mostly industrial economy of more than 25 years ago.

On top of that, there were hundreds of IPOs by companies that had one thing in common: they said they were internet companies and had no revenue yet.

Maybe you have seen this chart.

Source

It looks pretty scary, right? But with what you know now, it’s extremely unlikely that the market will drop 80% and take years to recover like back then.

Of course, a drop is always possible, but don’t be afraid of a dotcom scenario. Or at least not up to now.

Productivity is already scaling now, unlike then, the valuations are not like they were then.

For commodity products like memory, there will definitely be a bust at some point. I’m talking about Sandisk, Micron, etc. When? No idea. But if you look back at EVERY single infrastructure outbuilt in the past, that happened at a certain moment.

You saw the same in the infrastructure buildup for the internet. It’s not that we suddenly used less bandwidth in the early 2000s, to the contrary, but there was overcapacity because of efficiency jumps in internet delivery.

I think the same will happen now. I’m not worried about companies like Nvidia and AMD, as they have truly differentiated chips, but memory chips aren’t as high-tech as state-of-the-art GPUs. That’s just demand and pricing and if you look at the history of chips, especially those, they have always had a boom-and-bust cycle. Look at these charts and you will see what I mean.

This is Sandisk.

Look at revenue. It had a great jump, of course. But now look at net income. It was still negative in Q2 2025 and in Q1, it was already at $3.6B.

Ok, look at Micron.

Sure, Micron started at a higher income base. But, it’s the same pattern, revenue is up big, but net income much more. You can see that in the CAGR of 124.5% revenue growth, but 396.5% net income growth.

How is that possible? Simple. Pricing. Memory chip prices have ballooned because there is a shortage of memory chips. Once that imbalance is fixed, prices will drop by two-thirds or more. The question is when there will be more supply and/or when there are AI efficiency gains. I don’t foresee this going away anytime soon, so if you are a trader, I think there’s more juice in this lemon than you might think.

As for the market, I see two scenarios: the market will go down soon or it will continue to go up, haha. I’m making fun of it, but I mean it seriously.

Either the market lets off some steam soon (meaning in the next few months), which would be healthy, or the melt-up continues and that will only make the drop bigger.

But history seems to suggest that there will be a drop.

Beware: just because that’s what historically happened doesn’t mean it will now. But it’s possible. As always, we’ll have to see.

I get questions about where the system could break. Well, I don’t know. There are always many possibilities. Think of a black swan event, which is inherently unknowable. Or it could be spiking inflation. Or maybe it’s this.

Source

The earnings expectations for the S&P 500 for the next 5 years are now at 21%. That’s very high. Any disappointment there and the stock market tumbles. That’s how this game is played. And I don’t think it’s too crazy to expect lower EPS over the next 5 years. We all know about the gigantic capex the Mag7 and others are taking on now for data centers. You can’t extrapolate that line to the next five years and maybe some have, which could influence the average expectation.

Or will it be the new Fed Chair that causes pessimism in the market? I saw this graph.

Source

I should add again that I generally don’t draw too many conclusions from such charts. As so often, correlation is no causation. But still, it’s interesting to see.

I think that everyone who has followed me for some time knows I’m generally very optimistic. But I can’t close my eyes for certain things. That’s not optimism but pink glasses. I look at reality as it is and I believe things will turn out well. I do now as well, even if the stock market does not do great over the next few months or so. It will be a temporary hiccup. If it comes, that is.

2. Which Companies Are Interesting Now?

As you know, I invest in other stocks than the Potential Multibaggers as well. For newer readers, you could see that in the Best Buys Now article and in my portfolio, which is linked there.

In that context, I find this chart interesting. I had not seen it before I bought for my portfolio this week, but look, two of the stocks I bought are above the second line, the highest quality. Nvidia is, not surprisingly, the king of the heap.

I think if you look at the AI bottlenecks, you see that multiple big winners. And Coatue put that in a great visual.

Source

In the past 15 years or so, the Mag 7 has performed phenomenally, but will that continue? Their margins are no longer that high because of the huge investments they make and it’s very questionable if they will return in the first years, if they return at all.

On the other hand, they know that they have no other option. They have to spend to stay in the race. If they don’t do it, they will definitely be disrupted and that could cost them their existence as a relevant company.

Now, I know this still doesn’t really answer the question in the title of this paragraph. Which stocks are interesting now? Interesting and attractive are not the same, of course. I see a lot of interesting stocks that I wouldn’t want to touch now. On the other hand, there are also more attractive stocks because the AI trade drew money from elsewhere, mostly, but definitely not only, SaaS. Look at these two beauties, for example.

Just saying.

3. The SpaceX IPO

The new milestone for the market has a date: June 12. SpaceX will have its IPO on the Nasdaq on that day under the ticker SPCX. The company aims at a valuation of $1.75T to $2T.. That’s insane. It wants to raise $75B, which makes it by far the largest IPO in history.

Source

And no IPO without hype. After all, an IPO must be sold. Analysts called this a ‘Netscape’ moment. The Internet browser went public in August 1995. The shares were planned to go public at $14, were offered at $28 with a last-day change, opened at $71, reached $75 and closed at $58. It’s seen as the start of the dotcom bubble.

And yes, the peers of SpaceX immediately had incredible gains this week. Just look at these two: Rocket Lab and AST Spacemobile.

But the exceptional size of the IPO also has disadvantages. cut both ways. Some fear that the IPO will vacuum up even more liquidity from other places. SpaceX holds thousands of BTCs, and there is a fear that crypto traders will prefer SpaceX over crypto.

And talking about that, there’s a new Fed Chairman period. Look at this.

Now, as with so many things in the stock market, this is correlation, not causation. I think the SpaceX IPO could have a bigger effect on crypto than a new Fed Chair.

But back to SpaceX. MSCI and other index providers warn that SpaceX’s giant IPO will force big changes to benchmarks. Passive funds will have to buy massive amounts of the stock, and that could distort the market allocations for months. For months, meaning for six months, when the lock-up period ends. Then dozens of funds will dump SpaceX shares on the market.

Why? Because they are so overweighted SpaceX. They invested in private rounds and couldn’t sell. Scottish Mortgage Investment Fund (Baillie Gifford) for example, has a position of probably bigger than 15% of the fund and at this valuation probably more than 20%. They will want to take a big part of those gains. And they won’t be alone.

That could have effects for the market in another way. If all the money flows out of SpaceX, it could flow back into the market, into other stocks and that cause a new stock market impulse towards the end of the year.

Of course, that’s just theory. In theory, reality is easy, but in reality, it’s not.

If you are a free reader, it stops here for you. You do realize that I keep the best stuff for paid subscribers, right? If you want all the advantages of a paid subscriber, you can subscribe now.

Subscribe now

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Last Thursday, Mercado Libre (MELI) reported its Q1 2026 earnings. On Friday, the stock dropped close to 13%. Right now, MELI is down more than 40% from its 2025 high.

So, the market hated the earnings. Let me tell you up front: I loved them. And I love the market’s hate.

I’m going to explain why in this article. If you are a long-term investor and I do my job well, you will probably love it as well.

Let’s go through the numbers first.

The Numbers

• Revenue: $8.85B, +49% YoY in USD, +46% FX-neutral, beating estimates by $530M

• EPS: $8.23, missing estimates by $0.24

• Net income: $417M (-16% YoY)

• Operating margin: 6.9%, down 600 bps YoY

• Adjusted free cash flow: -$56M

I’m sure you are not impressed with some things here, like the FCF, for example, or net income down 16% YoY, margins down from 12.9% to 6.9%. And that’s already an important part of what the market hated about this quarter. Much more about this later and why I love it. Let’s first look at the different segments.

Marketplace:

• GMV: $19.0B, +42% YoY, +36% FX-neutral

• Items sold: 722M, +47% YoY

• Unique active buyers: 84.1M, +26% YoY, a record addition of 17 million in a single year

• Same- and next-day shipments: +39% YoY, accelerating from +29% in Q4

Mercado Pago:

• Monthly active users: 82.9M, +29% YoY

• Assets under management: $19.9B, +77% YoY

• Credit portfolio: $14.6B (+87% YoY, the largest nominal quarterly increase ever)

• Credit cards issued in Q1: 2.7 million

• Credit card portfolio: $6.6B, +104% YoY

Advertising: +73% YoY in USD, +63% FX-neutral

To summarize the numbers, this is the overview from the earnings call slide deck.

What The Market Didn’t Like

The market doesn’t like that the operating margin dropped from 12.9% a year ago to 6.9% in Q1. I already pointed that out shortly.

The market doesn’t like that EPS was down for the fourth quarter in a row.

And the market really doesn’t like that NIMAL (net interest margin after losses) compressed from 22.7% to 17.8%, which makes the bearish “the credit book is getting riskier” crowd start typing furiously. And it sounds informed, of course, as most people already have no idea what NIMAL is exactly, let alone what a good or bad NIMAL is. We'll come back to this.

Here is the evolution of margins and net income.

That already looks bad, right? But the margin compression is not a weakness. Management had announced it properly and they broke it down in detail. That breakdown shows the entire compression is the direct, predictable result of investment decisions that are working. In other words, this is not weakness, it’s deliberate investing.

Look at the operating margin waterfall:

The two big red candles are COGS (cost of goods sold) and bad debt.

The two big hits are COGS (cost of goods sold) and bad debt. The COGS went up because of more free shipping in Brazil and the rapid growth of the 1P business (first-party, meaning the products Mercado Libre buys and sells itself, as opposed to the 3P marketplace business where merchants sell on the platform). Both are very deliberate investments.

The bad debt was up because the credit portfolio grew 87% YoY, and management explained in detail how this works. When Mercado Libre writes a new loan, accounting rules require it to immediately provision for the full expected lifetime loss on that loan, before it has collected a single dollar in interest.

Two thirds of the 3.9 percentage points of bad-debt compression comes from this requirement. If your credit book is growing so fast, that accounting rule alone will compress margins, and it tells you absolutely nothing about whether credit quality is deteriorating or not.

The other third of the margin compression has a different explanation. Management extended the duration of personal loans in Brazil from 5 months to 8 months. They also broadened the reach of consumer credit.

Again, both decisions require taking higher provisions upfront. But this is not management being reckless. As Fintech President Osvaldo Giménez explained on the call, the goal is to reach customers who were offered a credit line in the past and didn’t take it. By lowering the spread and extending the duration, MELI can activate this group. The early signs are encouraging.

Two parts of the income statement improved this quarter. Product Development expenses dropped from 9.3% of revenue to 7.9%, mostly thanks to AI productivity gains. G&A (general and administrative expenses) also came down as a percentage of revenue, for the same reason.

In other words, there is no “weakness” here. Every single basis point of margin compression came from deliberate investment decisions, not from anything that’s getting worse in the underlying business. To the contrary.

I can’t stress enough how important that is. Margin erosion is a problem if it’s not announced or not deliberate. Mercado Libre has gone through multiple investment cycles before. Don’t forget that it didn’t have a distribution arm first, but over the last decade, it built by far the best delivery network in LatAm, beating Amazon at its own game. If you were already following the company a decade ago, the negative comments you hear now must sound very familiar.

Brazil Is On Fire

Last quarter, I wrote about how the lowering of the free shipping threshold in Brazil from R$79 to R$19 was working. This quarter, it’s working even better than last quarter.

Let’s look at the last four quarters of the growth of items sold in Brazil:

• Q2 2025: 26%

• Q3 2025: 42%

• Q4 2025: 45%

• Q1 2026: 56%

Four quarters of incredible acceleration. The growth rate has more than doubled from the level before the shipping fee change.

Total GMV in Brazil grew 38% FX-neutral, also accelerating. Unique buyer growth accelerated to 32% YoY, the fastest pace since the pandemic.

On top of that, the economics keep getting better, not worse. Unit shipping costs in Brazil dropped 17%, accelerating from the 11% decline we already saw in Q4.

Even better, roughly half of the profitability hit MELI took when it lowered the free shipping threshold has already been recovered. How? Through scale, productivity gains, efficiency improvements, and some smart pricing adjustments. Several categories below R$79 are now breaking even on a unit basis, less than a year after the change. That’s much faster than expected and once more a testament to the relentless execution of this company.

I want to show you a quote from CEO Ariel Szarfsztejn that I think captures what’s really happening here. I love that first sentence.

Free shipping has always been a long-term investment in user behavior, not a short-term promotional tool.

When we launched it in 2016, it took time for unit economics to improve enough to offset the investment but the compounding impact on engagement and scale validated the decision.

Today, like in 2016, the signals we see give us confidence: user behavior is responding as we expected, and unit shipping costs are falling faster than we had anticipated.

Mercado Libre has done this before. They have the experience and they know what metrics to look at. Does that sound like a company crushed by competition that has to give up margins? Not to me. You can’t have it more deliberate than this.

The buyers who have joined since the shipping fee threshold change are buying more items across more categories with higher retention than the cohorts that came before. Daily active users are growing faster than monthly active users, which means users use Mercado Libre much more often.

Conversion, frequency, retention, and NPS (net promoter score, how satisfied customers are) are all at record highs. Tell me: does this sound like a victim or a winner?

If you see the small slide in the items sold per unique users QoQ, that’s seasonality from Q4 to Q1. It’s really impressive that items sold per unique active buyer don’t slide more and are up YoY, as the company added a record number of new customers, and usually, new customers have fewer orders. Another sign of strenght.

By the way, this is happening in a market where Sea’s Shopee is also accelerating. Some bears love to say that Shopee is going to eat MELI’s lunch in Brazil. As you know, I’m a long-term shareholder of both companies and I think both can do very well.

Latin America is still in the very early days of e-commerce adoption, and as the market continues to grow, there is more than enough room for multiple strong players.

Just look at this chart that MELI has on its website. LatAm is literally at half the e-commerce penetration of the US and at 38.5% of that of China.

Also important: MELI’s conversion rate in Brazil is up 1 percentage point YoY. Conversion rate is the percentage of visitors who actually end up buying something on the platform. A 1% improvement may sound small until you consider the size of the platform. If MELI has, say, 100 million visitors a month, that 1 % extra conversion improvement means 1 million additional buyers per month.

The Logistics Moat Keeps Deepening

I want to underline two numbers that I think don’t get enough attention.

The first is 95.5%. That’s the share of all Mercado Libre’s deliveries that now go through its own logistics network. In other words, when you order something on MELI, there’s a 95% chance the package is moving through MELI’s own infrastructure at some point on the way to your door. The other 4.5% goes through external delivery services.

The second number is 55%. That’s the share of shipments that come from Mercado Libre’s own fulfillment centers, meaning warehouses where MELI is storing the seller’s inventory, similar to Amazon’s FBA. The remaining 45% ships from the seller’s own (ware)house, but still moves through MELI’s logistics network from there.

Think about what these two facts combined mean. When you control 95% of your own delivery infrastructure and your unit shipping cost drops 17% in a single year while your shipment volume shoots up like a rocket, that is devastating for competitors that are paying third-party logistics rates.

Each additional package Mercado Libre handles makes its network cheaper to operate. Each additional package a smaller competitor ships through a third-party logistics network costs them about the same as the previous one. And, as Mercado Libre is the biggest by far, all competitors are smaller.

Same- and next-day shipments accelerated to +39% YoY, after running in the high 20s for four straight quarters. The customer experience is getting visibly faster at the same time that volume is exploding.

The company is also building a new 100,000 m² (more than 1 million sq ft) fulfillment center in Argentina, the largest in its network. It will open in late 2026. You see that management is still investing in its infrastructure investments as well.

Mercado Pago: The Real Story Of The Quarter

If you want to understand why this quarter matters, you have to understand Mercado Pago. The fintech segment grew 54% FX-neutral. AUM hit $19.9 billion. Monthly active users came in at almost 83 million, with MELI adding nearly 20 million users in a year. That’s about the population of Chile and more than that of many countries.

I want to expand a bit on the credit portfolio because that triggered a lot of headlines. The portfolio grew 87% YoY to $14.6 billion, and management noted this was the largest nominal quarterly increase ever. Of that $14.6 billion, $6.6 billion comes from the credit card book, now up 104% YoY. It now accounts for 46% of the total portfolio, up from 42% a year ago. The company issued 2.7 million new credit cards in Q1 alone. Pretty impressive numbers.

Here’s how CEO Ariel Szarfsztejn framed it in the shareholder letter:

Investing in our credit card is as pivotal for Mercado Pago as the launch of our managed logistics network was for our marketplace ten years ago. Just as fulfillment was a critical element of achieving market leadership in Commerce, the credit card is central to our ambition of being the region’s largest digital bank.

That’s a big claim but I take it seriously.

Older credit card cohorts in Brazil have been profitable on a NIMAL basis for some time, and they’re now generating enough profits to offset the dilution from the massive new cohorts being added.

In Mexico, where the credit card was launched about two years ago, the cohorts are performing even better than in Brazil at the same time. In Argentina, where MELI launched cards in mid-2025, the early data looks very promising as well, in line with the data in Brazil at the same time after launch.

This is the cross-sell working very well. If someone has a Mercado Pago credit card, it increases the marketplace conversion, the GMV per user, and the number of transactions in MELI’s ecosystem.

Even better, the 15-90 day NPL ratio (non-performing loans) for the credit card book actually fell 80 basis points YoY. So while the book more than doubled in size, the asset quality got better, not worse. That’s impressive!

The credit card also has the shortest duration of any product in the portfolio at just 2.7 months on average, which means MELI can adjust quickly if the macro conditions change. That’s important. If conditions deteriorate, MELI can stop issuing new cards, and within just a few months, the existing loan book will be largely paid off. With long-duration loans, you’re stuck with the credit risk on your balance sheet for years. The short duration of credit cards is a built-in safety mechanism that many bears don’t seem to understand.

Now about that NIMAL compression. Quick reminder: NIMAL stands for Net Interest Margin After Losses, which is essentially the profitability of the lending business after accounting for credit losses.

For comparison, Itaú, the largest traditional bank in Brazil, has an NIMAL of 6%. So even after this quarter’s compression, MELI’s 17.8% NIMAL is roughly three times that of a traditional bank. Boom! As it’s AL (after losses) that means the risk is already taken out.

The drop from 22.7% to 17.8% YoY looks scary at first glance, and many have pointed to it as a major issue. It’s not, as we already saw. Two thirds comes from the regulatory provisions, a third from the extension of loans from 5 to 8 months and lower spreads for better-quality customers.

Fintech President Osvaldo Giménez on the call:

We’re not trying to seek out riskier folks. We’re reaching out to customers who had a line of credit in the past and they were not taking it. So we are lowering the spread to see if we entice them to start trying our personal loan products.

And the asset quality data backs this up. The 15-90-day NPL remained at 8.0%, broadly stable YoY. Provision coverage stands at 103% for 15+ days past due and 149% for 90+ days past due.

In Argentina, where the broader financial system is seeing rising delinquency, MELI’s 15-90 day NPL actually fell QoQ while spreads increased. That’s not how a credit book under stress looks like, to the contrary.

Do you remember that I mentioned last quarter that MELI was sitting on close to $19 billion in AUM but wasn’t yet using those deposits to fund its lending? Well, AUM is now $19.9 billion and growing 77% YoY, faster than MAU growth (29%). That means existing users are keeping more money with MELI, not just that new users are signing up. This remains a competitive advantage Mercado Libre chooses not to use yet, but I’m sure they will do it one day.

Mexico, Argentina, And The 1P Milestone

Mexico’s items sold grew 34% and FX-neutral GMV grew 28%, still ahead of the market but slowing QoQ because of a tax reform for small and medium sellers. Argentina delivered 41% FX-neutral GMV growth on top of a very tough comp, with items sold up 35%. Chile delivered 40% FX-neutral GMV growth.

TPV (total payment volume) grew 41% FX-neutral in total, with Brazil at +26%, Mexico at +46%, Argentina at +55%, and Chile at +69%. Mercado Pago is taking market share in every market and growing like weeds. Tap to Phone, which is growing by triple digits in Brazil, just launched in Mexico.

There’s another milestone worth highlighting: the 1P business. Quick reminder: 1P is when Mercado Libre buys inventory itself and sells it directly to customers (as opposed to 3P, where merchants sell on the platform). It’s how Amazon started and still accounts for a big part of its revenue. Mercado Libre does this in categories where there’s not enough competition to drive prices down.

Last quarter, I mentioned that 1P had reached positive direct contribution in 2024. That means that for every product MELI buys and sells through 1P, the revenue from that sale covers all the direct costs tied to it (the cost of the product itself, shipping, handling, payment processing, and so on). In other words, each individual 1P sale was finally making money on its own, before any allocation of broader company overhead.

This quarter, management said that some of the categories MELI entered first with 1P are already fully profitable after less than two years. It means 1P is no longer just a margin drag, but is becoming a contributor to profits in mature categories. The rest of the categories should follow as they scale up too.

The numbers are getting really impressive. 1P grew 69% FX-neutral and now generates almost $5 billion in GMV (gross merchandise volume, the total value of goods sold on the platform). An example. Three years ago, MELI had just a 12% share of the cellphone market in Brazil. Today, MELI is the market leader with roughly three times that share. In three years, MELI tripled its share in a category it was barely competing in. That is the power of 1P used well.

The Ads Engine

Advertising grew 73% YoY in USD and 63% FX-neutral. MELI doesn’t break out advertising as a standalone revenue contributor, but TTM ad revenue is now estimated to be about $1.7 billion, up from around $1.55 billion at the end of 2025. This is the highest-margin business in the entire company, and it grew four times faster than the LatAm ad market in 2025.

There’s a structural story behind this that’s worth understanding. Traditional offline channels still account for roughly half of the Latin American ad market, versus about a quarter in the US. As those budgets shift to digital, Mercado Libre is capturing a huge share of the growth, because nobody else in the region has its combination of huge audience, deep first-party data and strong performance attribution.

eMarketer projects LatAm retail media spending to more than double from $2.5B in 2025 to $6.0B by 2029, and even at that level, retail media’s penetration of digital advertising in LatAm will be just 16.4%, versus a 22% global average today.

But it goes much faster than eMarketer thought just two years ago. Then it saw a $2 billion market in 2026. And guess who’s got the biggest market share by far, with over 50%? You guessed it.

As you can see, Mercado Libre has actively taken market share from Amazon in something seen as one of Amazon’s core competencies: advertising. Impressive.

The new AI-powered search that MELI launched in Q1 will play an important role for advertising. MELI already saw the shift from keyword to LLM search improve both organic conversion and the click-through rate for sponsored listings. The ad engine got more fuel, as it were.

On Agentic Commerce And AI

Speaking of AI, there is a question that keeps coming up: won’t AI agents disintermediate marketplaces?

I’d suggest reading the piece that MELI’s CMO, Sean Summers, published in March in the IR newsletter. His view, which I agree with, is that agentic commerce as currently pitched won’t scale. AI will compress and accelerate the shopping funnel, but consumers want to keep agency over their purchases.

The Amazon Rufus data illustrates this: 40% of holiday sessions used Rufus, and it drove 66% of sales, but Rufus is acting as a really good co-pilot, not an autonomous agent. The conclusion is simple: AI commerce will happen inside existing platforms with the deepest catalogs, richest data, the best AI recommendations, the best fulfillment, and the most trust. That’s exactly what MELI is in LatAm.

If you are still skeptical, talk with someone who uses AI every day, as I did in Omaha. They will tell you how much of the internet is closing down for bots. Scraping has become much harder and that means that internal agents will be much more valuable.

Internally, the AI productivity gains are showing up in MELI’s numbers as well. Tech headcount grew 8% YoY, but productivity KPIs are growing 7 to 10 times faster. Senior engineers who used to spend most of their time reviewing code are now building again, because the AI tools have made review materially less expensive. Code rollbacks are materially lower YoY. Mercado Libre has rolled out Claude Cowork to 31,000 employees, making it one of the earliest large-scale enterprise adopters globally.

And we’re already seeing the impact in the numbers. Remember when I said earlier that Product Development expenses dropped from 9.3% of revenue to 7.9%? That 140 basis points of leverage is MELI doing more with the same engineers, thanks to AI. It’s already a real, measurable contributor to the operating margin.

The AI Assistant in Brazil is also worth a mention. It now identifies funds held at other banks (via Open Finance) that could earn a higher yield with Mercado Pago and can act on those opportunities within seconds, moving balances between accounts. The Seller Assistant’s daily active users grew more than 40% month-over-month in March.

Below the paywall: my updated PMQS score, my valuation work, the updated Selling Rules, my Buy-Hold-Sell call. If you want this premium content, feel free to subscribe!

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It’s the 15th of the month, and you know what that means: the Best Buys Now!

But this is a special one, as I will change the format from now on.

Since May 2022, you got 5 Best Buys Now each month. But I felt a bit restrained by that format. The reason is that the market, well, fluctuates. I probably don’t have to convince you about that.

The consequence is that sometimes I see more than 5 opportunities, sometimes fewer than 5, but I still fill them up to 5. Sometimes with ‘cash’ as a Best Buys Now when I didn’t see enough opportunities. Sometimes with stocks ‘to consider’ when I saw more than 5.

I decided to throw that overboard from now on. I will give you the number of Best Buys Now I feel comfortable with. Freedom!

And that freedom will also expand to the kind of stocks I choose. What I mean is this.

In June 2022, I picked Nvidia as one of the Best Buys Now. The stock’s up 1,340% from that pick. And Nvidia was a Best Buys Now multiple times.

I also picked AMD in March 2023 and it’s up 420% from there and AMD was picked several times in the Best Buys Now.

In March 2024, Alphabet was a Best Buys Now. It’s up 184% (versus 45% for the S&P 500 and 63.67% for the Nasdaq). That one too was picked multiple times.

TSM is another stock I picked multiple times as the Best Buys Now and I think you can guess that one outperformed as well.

Everyone happy, right? Well, at the time I picked them, not always. I got a few comments that I didn’t pick enough Potential Multibaggers. I took that to heart, as this came from paying Multis and I always take their feedback seriously.

But I’m not going to take that into consideration again. I’ll tie the Best Buys Now more with my portfolio and what I want to buy now. If I feel that the best opportunities are not within the Potential Multibaggers, I could choose 3, 5, 6, 7 or 9 non-PM stocks at any time. In 2021, I didn’t do the Best Buys Now yet, but it would have been extremely difficult to choose from the stock I picked because almost everything was so overvalued and those that were not, turned out to be duds.

That’s not the case this month, to be sure. I have several Potential Multibaggers stocks, but it could happen in the future that there are none or just one or so. I’ll take how attractive a stock is as the only criterion. Not if it happens to be a Potential Multibaggers stock or not.

My portfolio does not only consist of Potential Multibaggers. My biggest positions (based on an original allocation, not because they have grown so much) that are not Potential Multibaggers (except for one Best Anchor Stock) are, in that order, AMD, ASML, Nvidia and TSM. I also have a position in BESI and Broadcom and several other stocks that benefit from the current AI hype. In March last year (2025), I wrote about considering these stocks:

I added to my position in the first two, but not Micron. This is what I wrote back then:

Micron

I’m not sure if I want Micron (MU) in my portfolio, but I think it could see a big jump from here.

The first reason is that the device may become the next data center, so to speak. This means AI will be placed on devices like phones and computers. They will communicate with the edge (that’s why Cloudflare is so expensive and for good reasons). But over time, this could become the primary way people use AI. Phone memory will be a key component in making this work. I think Micron’s mobile DRAM and HBM (high-bandwidth memory) will see massive growth in demand because of this.

If you look at Micron’s numbers, they already seem to imply that as well.

As you can see, the August 2025 EPS growth is expected to be dazzling. 424% growth. With an implied PE of 14.79, that means a forward PEG of just 0.35. For August 2026, we still see 62.25% earnings expectations. With a PE of 9.12, that means a 2026 PEG of 0.15.

So, why don’t I want to hold this stock?

Mainly because, just like other memory suppliers, Micron is in a commoditized market. Demand is expected to explode, but after that, as you can see from the forecasts for 2027, the demand is expected to drop again.

On top of that, I don’t consider Micron to be a top-notch company. That also means that if they miss the earnings expectations, the stock may drop, no matter how cheap it is.

But maybe the stock fits in your portfolio?

I have talked to people working for Micron customers, and none of them really likes the company. They buy because they have to. One reason is that Micron didn’t want to renegotiate deals made during COVID, when there was also a semiconductor shortage. With the unwinding in 2022, all other chip suppliers were willing to renegotiate the contracts for big deliveries. Micron was not and so, customers had to store the chips themselves and ordered much fewer the next year. The stock was cut in two because of that.

Of course, a rising tide lifts all boats but don’t forget that chips have always been cyclical. The reason is that people don’t have the imagination to see efficiency gains coming. They just project a line going from bottom left to top right when it comes to demand, but if there’s an efficiency quantum leap in memory chips, Micron, SanDisk and others could drop like a rock.

On the other hand, I want to be clear: I’m very happy for those making money from those stocks right now. It’s not the way I invest, but that’s for each their own. I see a lot of bitterness from some investors who missed the AI explosion. On X, they post bitter comments. As they say, a bubble is a run-up you missed.

I see other comments as well, from some that say I have “missed AI completely.” With Nvidia, AMD, ASML, TSM, Broadcom, and BESI in my portfolio, I want to miss every trend like this, haha. Sure, the gains on Sandisk and Micron were even crazier. But you will never have them all and on top of that, I repeat, I invest for the long term, not for a few years. So, I pick the top-notch companies, not the lower-quality names that catch a bid because of a temporary huge demand.

But enough about that. Let’s go to the Best Buys Now! They are in alphabetical order, not in order of preference.

I just realized that there is an extra element to look forward to the Best Buys Now: How many stocks will be chosen? I’ll number them.

1. Berkshire Hathaway

Say what? Berkshire Hathaway (BRK.B)?

That dog of a stock that underperforms the S&P 500 by 30% and the Nasdaq by 42% over the last year?

I can already hear the comments:

• “Kris, you’ve been brainwashed in Omaha.”

• “Kris, I think you lost your touch.”

• “Kris, this is the final element that I needed to know we don’t align anymore.”

But hear me out.

I see Berkshire as an alternative for cash here. Sure, if the whole market drops, it will slide a bit too, but it will definitely outperform. It’s like a hedge against a macro event (inflation?) or an AI bubble.

As I wrote in my article about the Berkshire AGM and my visit to Omaha, I also think that Greg Abel will be a good CEO for the company, the one it needs right now. A bit what Tim Cook did after Steve Jobs.

But especially, Berkshire has $400 billion in cash. That makes it antifragile, to use Nicholas Nassim Taleb’s term. Antifragility means that you become stronger when times are tough. You also have robustness, which means you can endure adversity, but with antifragility, you become stronger from it.

$100B of that cash is restricted for loss provisions in the insurance business, and Greg Abel made an effort to explain why $18B or so was not really cash but an accounting fluke. I didn’t even listen in detail. Because $280B or $300B, it’s still a gigatic heap of money. And that’s one of the main reasons why I buy Berkshire now.

2. Eli Lilly

Hell yeah! A new position that I will start just after this article.

Why?

Well, Mounjaro is now the number one drug in the world. It sold $8.7 billion in Q1 alone. Add $4.2 billion from Zepbound, which is basically the same drug, and you know that the company’s thriving. In the last 12 months, those two drugs alone did $43.18B in combined revenue.

And with retatrutide, a so-called triple G receptor agonist (GLP-1, GIP, and glucagon) in Phase 3 trials and label expansions (think of alcoholism, for example), I think the stock is interesting here. “Reta,” as it is already known, showed even greater weight-loss effects (up to 28.7% of body weight), as well as great effects on type 2 diabetes (not surprisingly) and knee osteoarthritis.

I expect Retatrutide to be an even bigger blockbuster than Zepbound and Mounjaro and I don’t think that is in the numbers yet. This is a forecast for Eli’s EPS growth.

I think that the estimates for 2028 and 2029 are way too low if the company can release retratrutide in 2027, as expected.

I already know a few people who use it, mostly people in body building (those guys are unpaid guinea pigs) because, unlike Wegovy and Ozempic to a great extent and Zepbound/Mounjaro to a certain extent, retatrutide does not impact muscles. For those guys, that’s heaven, of course. I’ve never seen them so enthusiastic about anything. Their doctors (who don’t know they take these things which are illegal until approved) are flabbergasted from their health checks with much lower cholesterol levels and all parameters in the optimal range, without changing much for the rest.

Now, I don’t know if I’d want to be an guinea pig, but I do know that if I see such enthusiasm in early adopters, you can profit by investing in that stock.

3. Mercado Libre

Is anyone who knows me surprised by this choice? I don’t think so.

I could write a ton about this stock and this company, but I’m already working on the earnings deep dive. I don’t think I will be able to finish it tomorrow, so it will be early next week.

This week, I heard about a book by Derek Sivers that I might buy.

When we talk about Mercado Libre, it’s simple: it’s a clear and resounding HELL YEAH!

More to come!

Ok, I’ll tell you the secret now, there are 8 Best Buys Now. But if you are a free subscriber, you miss 5 and you miss the deep dives on the earnings. You miss my portfolio and the mail with the exact allocation of what I will buy after this. You miss our community where you can discuss my choices and ask questions and you miss direct contact with me. I could go on, but the bottom line is:

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