The numbers from Celsius have been out now for a while and in a few weeks, probably around May 11, the company will release its Q1 2026 earnings. But the stock has come down substantially and that’s why I have asked David to have a look at the previous earnings.

As always, I have added and adapted to David’s output, so you can see this as a collab article.

The key numbers

Q4 2025 revenue came in at $721.6 million, up 117% year-over-year and beating analyst expectations by over 10%.

Year-over-year growth was primarily driven by the addition of Alani Nu, of course, but still, a beat by 10% is very strong.

Full-year 2025 revenue reached $2.52 billion, an 86% increase versus 2024.

That growth was largely driven by North America, where revenue increased 89.1% year-over-year. $1B came from Alani Nu. The other acquisition, Rockstar Energy, added $55.6 million, while the core Celsius brand grew 7.5% to $1.46 billion.

Source

Q4 gross profit came in at $341.8 million, up year-over-year but down sequentially versus Q2 and Q3 but that’s not unusual, as there is some seasonality for energy drinks and, therefore, for gross profits.

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Full-year gross profit increased by $587 million to $1.27 billion, up from $680 million in 2024, up 86.7%.

The stock dropped after the earnings were released, but this was also the period when everything went down. The geopolitical tensions between the United States and Iran were starting.

Multi-brand portfolio

Looking at the full-year market share, we can still see that Red Bull and Monster are on top of the market, but Ceclius remains strong in a third place. Alani Nu and Rockstar Energy maintained their Q3 positions into Q4, with market share remaining stable. Altogether, the combined portfolio controls just under 20% of the U.S. energy drink market.

Celsius remains well-positioned, expanding strategically without overextending. While it’s unlikely that Celsius will overtake Red Bull or Monster in the near term, it holds a unique advantage with its multi-brand portfolio.

Having a multi-branded portfolio has both advantages and disadvantages. Celsius must execute multiple marketing strategies, as each brand targets a distinct consumer segment.

While all products fall under the energy drink category, each brand targets a different demographic. On the other hand, the risk of becoming obsolete diminishes significantly with diversification.

Think here of the next new fad we see every year, that slowly fades into obscurity. Celsius can simply move within its product offering, ride the entire wave of new fads, and remove the old products from its lineup.

Not so for Red Bull and Monster; both have their flagship products and occasionally play with other varietuies.

Celsius has three different product lines to work with. Celsius itself is focused on a younger core of customers who are conscious about their health.

Alani Nu focuses on a female audience, with a strong emphasis on lifestyle and wellness.

And lastly, Rockstar, which focuses on a male audience, using high-energy, high-performance slogans. Psychology here is one of the extreme sports.

Having these three different lines can increase the overall marketing costs. This is something which is visible in the numbers.

Marketing and selling expenses increased by $200.6 million, driven by diverse campaigns totaling $76.6 million (notably “Live. Fit. Go”) and marketing focused on Alani Nu totaling $65 million.

Source

Celsius wants to prioritize differentiation, which, in turn, increases costs because packaging must remain fresh and maintain its uniqueness and appeal.

I don’t see its marketing costs going down anytime soon. Developing brand awareness through marketing initiatives and expanding abroad will both need a big marketing push.

Combine this with different marketing campaigns for all the products in its portfolio, and the costs can only become higher in the near future.

The chart above highlights how the top three brands are currently competing in the market.

MULO (Multi-Outlet) includes channels such as grocery stores, mass retailers, and drugstores. It also includes convenience stores. Think of 7-Eleven, gas stations, and similar retail formats. Monster and Red Bull remain the category leaders, but Celsius (across its full portfolio) is steadily gaining share, as you can see.

Competition

Recently, Celsius stock went down after Costco Wholesale introduced Kirkland Signature energy drinks.

Nothing new under the sun, we might say. there are plenty of competitors. However this time it is slightly different. Costco is a US-based retailer that sells bulk goods at lower prices. Here, it is the same: Costco sells a lot of products under its private label, Kirkland Signature.

As you can see, Kirkland Signature energy drink has the same look as Celsius: white with colored banners featuring fruit images. The flavors? Similar to Celsius’s popular flavors. But the drink is much cheaper than Celsius.

But does it all matter? We often see new energy drink brands coming onto the market. It is not an easy market, and gaining traction often takes considerable time and investment.

I think it is too early to tell whether the new offering impacts Celsius’s top line. Celsius generated about 11% of its sales within Costco in 2025, a large number, but let’s not exaggerate. Implementing a new product does not mean it is doomed even within Costco. People still have brand loyalty or they don’t want to be seen with the “cheap knock-off” version. And many people are simply not aware of the product. See this X post, for example:

Numerous competitors have come and gone. The energy drinks market is growing rapidly and becoming increasingly attractive, enticing competitors to capture a share of it.

There was another worry as well. Iran bombed aluminum smelters in the Middle East and two major sites were seriously damaged. But the Middle East as a whole (not these two) are only responsible for 9% of the global supply. So, I think this fear is exaggerated.

If you are not a paying subscriber, the article ends here for you. I hope you enjoyed it. If you want to know if I would buy Celsius now, consider upgrading. One good idea might pay back the investment.

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Some weeks ago, Topicus (TOI.V) (TOITF) reported its Q4 and FY 2025 results and this is a deep dive into those earnings and the potential AI impact on the company.

As you probably know, I have a second service called Best Anchor Stocks, which is run by Leandro. He is also a Topicus stockholder and wrote an earnings analysis for Best Anchor Stocks subscribers. I used that as a basis for this article, but I added context, commentary, and my takes. Of course, as always, I will update the Selling Rules, the Quality Score and the valuation.

Right now, the stock is down more than 50% from its all-time high, set not even a year ago.

Is that warranted or not? Let’s find out.

The Numbers

Topicus grew its revenue 20% year-over-year in both Q4 and the full year. Q4 revenue came in at €436.8 million, up from €364.9 million. Full year revenue came in at €1,552.3 million (or about $1.8B), up from €1,294.9 million. Not bad for a “small” European software compounder that most people haven’t even heard of.

Organic growth was 4% for both periods, with maintenance and other recurring organic growth at 6%. Now, 4% organic growth doesn’t make you jump out of your chair. But 6% on the recurring side, the revenue that’s sticky and predictable, is actually quite decent for a serial acquirer that constantly buys companies with sometimes flat but mostly declining organic growth. Remember, the Constellation/Topicus playbook is to buy cheap, stabilize, and slowly get that organic revenue moving upward. The 6% recurring organic growth tells you the existing portfolio is healthy.

What most people miss here is the composition of that revenue. Maintenance and other recurring revenue hit €1.097 for the full year, up from €900 million in 2024. That’s a 22% increase and represents about 71% of total revenue. This is the core of the business. This revenue stream is highly predictable, sticky revenue and margins are high.

Professional services came in at €372 million (up 14%), while hardware and other revenue jumped to €39 million from €25 million, a 59% increase that likely reflects some of the acquired businesses. But overall, it’s just 2.5% of revenue.

One of the problems with Topicus is that the numbers are not easy to read and that was the case again with these earnings. The headline earnings look terrible if you take them at face value. Net income dropped 53% for the full year, from €149.5 million to €70.1 million. On a per share basis, diluted EPS fell from €1.11 to €0.50. If this is all you look at, you’d think the company is under pressure. But it’s not.

The full-year net income decline is almost entirely driven by a €221.7 million non-cash (!) expense related to the Asseco Poland investment. When Topicus elected to record this investment at cost under the equity method of accounting, it triggered this one-time charge. It’s accounting noise, not operational problems. On top of that, the company also recorded €119.7 million in income from derivatives, fair value adjustments, and a dilution gain tied to Asseco. So, even within the Asseco-related items, it’s a messy picture that tells you essentially nothing about how the actual business is performing.

This is why you need to look at cash flows. And the cash flows are singing a beautiful song.

Operating cash flow grew 19% for the full year to €412.7 million, up from €347.6 million. In Q4 alone, CFO jumped 35% to €107.7 million.

The metric that matters most for Topicus is free cash flow available to shareholders, or FCFA2S. In short, FCFA2S is the cash flow Topicus would generate for its shareholders if it stopped doing acquisitions, after stripping out all the money that goes to minority partners and Constellation Software, the parent company.

FCFA2S grew 23% to €218.7 million for the year.

In Q4, FCFA2S was up 40% to €51.2 million. One thing I appreciate about Topicus versus Constellation is that FCFA2S is actually a clean number here. There’s no IRGA (intergroup revolving account) muddying the waters, which makes Topicus’ cash flow a much more transparent measure of what shareholders are actually earning.

Digging into the FCFA2S numbers, a few things stand out. Interest paid on other facilities nearly doubled from €5.7 million to €13.0 million in Q4, and went from €21.1 million to €24.9 million for the year. Not very high on the total, but it reflects the higher debt load from the Asseco stake and, of course, other acquisitions.

Lease obligations also grew meaningfully: from €24.6 million to €30.1 million for the year. This tells you the acquired businesses come with real physical footprints.

But the most important takeaway is that despite these increased costs, the FCFA2S still grew 23%. That’s strong.

Topicus now also receives interest and dividends from its Asseco stake. This contributed €9.5 million in 2025 and €1.4 million in Q4 alone. It’s a small but new source of cash flow that will recur and probably grow over time.

Record Capital Deployment

This is where the quarter and the year get really exciting. 2025 was by far the strongest year on record for Topicus in terms of capital deployment, and it wasn’t even close.

Between Asseco and other acquisitions, Topicus deployed €662 million of capital (net of cash acquired) during 2025. To put that in perspective, last year the number was €77 million. The year before that, €199 million. This was a big shift.

Now, a huge chunk of this was the Asseco Poland investment (€384.9 million net). But even excluding Asseco, the company completed acquisitions for total consideration of €390.4 million (including holdbacks and contingent consideration). The net cash spent on non-Asseco acquisitions was €248.3 million (€311 million in acquisitions minus €62.7 million in cash obtained with those businesses). That’s still an all-time record for Topicus.

What’s important here is that this capital deployment was roughly 3 times the full-year FCFA2S. In other words, Topicus deployed significantly more than it earned. How? By leveraging. That’s only good as long as the leverage stays manageable. And it does.

Topicus ended the year with €326.7 million in cash and total debt of €692.5 million (split between €345.3 million in revolving credit facility/current term loans and €347.2 million in non-current term and other loans). That puts net debt at roughly €366 million.

That’s a leverage ratio of about 0.9x operating cash flow. For any normal company, that’s very conservative and that also goes for a serial acquirer.

I also want to highlight the maturity structure: the non-current term loans of €347.2 million don’t come due until at least 2032.

That’s crucial because it means Topicus can continue using debt as fuel for acquisitions without worrying about near-term refinancing.

The balance sheet also reveals the scale of change this year. Total assets grew from €1.54 billion to €2.51 billion — a 63% increase in a single year. Intangible assets (the acquired software) went from €951 million to €1.20 billion. The investment in equity method associates (Asseco) is now €515 million, up from just €2.5 million. This shows that the company completely transformed in 2025.

And there’s still plenty of dry powder. Topicus has room under its revolving credit facility, generates over €400 million in annual operating cash flow, and has debt maturities far out. This is a company that could keep deploying capital aggressively if the opportunities are there.

The environment looks favorable for deals. Private equity distributions grew meaningfully in 2025, but these were concentrated in large deals. The mid-market, where Topicus hunts, remains stagnant. PE holding periods have stretched, and limited partners are pressuring funds for returns. That’s the kind of environment where a disciplined buyer like Topicus can find deals at attractive prices.

You should know that right now many VMS companies are somewhat in panic. They don’t want or can’t adapt to the new AI wave. They see valuations crumble and that’s when they are more ready than ever to sell. With so much flexibility left, Topicus can seize the moment for some attractive acquisitions.

Of course, capital deployment is always lumpy for a company like this. Remember that just two years ago, Topicus was being criticized for paying a special dividend because it couldn’t find enough deals. How the tables have turned.

AI Disruption? Look At These 3 Numbers

Let’s address the (supposed?) elephant in the room. A significant part of Topicus’ drawdown from its all-time high is tied to the broader AI fear sweeping through the software industry. The narrative is that AI-native tools will replace vertical market software. I’ve written extensively about why I think this fear is overblown for a company like Topicus, but let’s look at what the actual numbers tell us.

First, organic growth. Maintenance and recurring organic growth of 6% doesn’t scream “being disrupted by AI.” It’s right in line with the historical trend. If AI were eating Topicus’ lunch, you’d expect to see churn accelerating and organic growth collapsing. We’re not seeing that. Not yet, anyway.

Second: staff expenses as a percentage of revenue actually decreased in 2025.

For the full year, staff costs were €835 million on €1,552 million in revenue, or about 53.8%. In Q4 specifically, this ratio dropped even further to around 52%. And this happened during a year of massive capital deployment, where newly acquired businesses typically come with a bunch of employees and usually drag efficiency down.

Within staff expenses, R&D spending grew considerably faster than overall staff costs. That’s the exact pattern you’d want to see in an AI world: the company is getting more efficient on the operational side while investing more in product development. One quarter doesn’t make a trend, but it’s a data point worth tracking closely.

Third, contingent considerations grew in 2025, while impairments slightly decreased. Contingent considerations are extra payments that the sellers of an acquired company can get if the company reaches certain milestones. An impairment is a write-down of an asset (like goodwill or an investment) when its value has dropped below what you paid for it. It’s an accounting recognition that you overpaid or the asset lost value.

If AI were destroying Topicus’ portfolio, you’d expect to see the opposite: acquired companies missing their milestones, resulting in lower contingent considerations and more impairments showing up. This is another indicator that the acquired businesses are performing in line or better than expected.

Now, I don’t want to be dismissive of the AI risk. It’s real, and it’s uncertain. But there are several structural reasons why I think Topicus is better positioned than most:

The switching costs in vertical market software go far beyond price. I’ve given the example before of a clerk in a Belgian municipality who’s been using Cipal Schaubroeck for twenty years. You’re not ripping that out because some kid built something with Claude. The compliance requirements, the security concerns, the retraining costs, the risk of downtime and so much more parameters protect the VMS software.

Topicus is heavily exposed to Europe and to government entities. These are among the most conservative buyers of software on the planet. As Asseco recently noted, customers in their space are reluctant to even store data outside of Europe or use the hyperscalers. That’s a structural tailwind for an entrenched European VMS player.

And perhaps most importantly: Topicus is not just a software company. It’s a capital allocator. If the VMS landscape changes because of AI, Topicus can pivot its capital allocation to wherever the returns are best. The compounding machine doesn’t depend on any single piece of software but on the discipline of buying great businesses at good prices.

Conclusion

2025 was a good year for Topicus. The company crossed €1.5 billion in revenue for the first time, deployed a record €662 million in capital, grew FCFA2S by 23%. Still, the stock price is down by more than 50%. The AI narrative has created fear, and the Mark Leonard succession story at Constellation has added uncertainty, even though Topicus has been operating independently under Robin van Poelje for years now.

The business is performing. The capital allocation is performing. The balance sheet is in good shape with room to keep going. That’s all I needed to know to know that the sell-off is, so far, only based on sentiment and stories, not the data.

So, on to the Selling Rules, the Quality Score and the valuation to know if Topicus is a buy.

The Selling Rules

I made Selling Rules for Topicus. Here they are.

Let me go over them one by one.

1. Organic revenue growth

You want to see organic revenue growth. Topicus buys businesses with low, no or even negative revenue growth. That’s why they are much cheaper. But the company optimizes those businesses to see revenue growth again, especially recurring revenue.

At the same time, I want to look at the 3-year trailing twelve months, not just the quarter or the year. The reason is that if Topicus does a big acquisition one day, it will need time to turn that business around. And there’s another reason to do this. Let me explain that with the numbers of this year.

Organic growth was 4% in both Q4 2025 and full-year 2025, but over the last three years it was 7.7%. So, you might conclude that organic growth was weaker in 2025, but that is not necessarily the case. In 2025, Topicus had record capital deployment. If you acquire more businesses, organic revenue will be lower that year because the new businesses have more influence on the total. Conversely, if the company deploys less capital, organic revenue will be higher.

2. FCFA2S

Free Cash Flow Available To Shareholders is a temperature check for how well the business compounds. I’m very happy that Topicus reports it, as it shows the fundamentals. If the company acquires well, FCFA2S will grow at a good pace.

So, why 15% and 10%?

FCFA2S shows what the business would do without acquisitions and accounting necessities. If growth is under 15%, it means that the business is decelerating in revenue growth or that the company’s acquisitions are of poorer quality.

Under 10% growth, the thesis would be broken.

Again, this is not something you want to look at on a yearly basis, let alone quarterly. Acquisitions are made when they are attractive. Once the company would start doing them just because, it would be a red flag. The lower quality would then also be visible in FCFA2S.

3. Recurring revenue as a % of total revenue

Recurring revenue was €1.097B in 2025, 71% of total revenue. This is the structural health metric for VMS businesses. The entire Constellation/Topicus model depends on sticky, recurring revenue.

If recurring revenue as a percentage of total declines, it means either: Topicus is acquiring lower-quality businesses (more project/services revenue), or its businesses see churn in recurring contracts. Both signal a deterioration of the business.

A drop to 65% recurring revenue, therefore, would signal more services-heavy businesses, which have worse economics: lower margins, less predictable, and lower switching costs. Below 58% fundamentally changes the character of the portfolio from recurring revenue to consulting/services, and then Topicus is simply another story, and the thesis is broken.

4. Net Debt / CFO Ratio

Net debt was €742.4M at the end of 2025, and cash from operations came in at €412.7M. That means a net debt/ CFO ratio of 1.8x. This is conservative for a serial acquirer but it is significantly higher than the previous years.

Constellation Software has never taken more than 2x in debt, but Mark Leonard also said that this may change because of certain circumstances.

So, a higher ratio would not be a red flag immediately, but of course, too much is too much. If the ratio were 3x, I’d trim because of the higher risk. Ät 3.5x, I’d sell, because it would totally change the dynamics. The same goes for issuing shares to pay debt. That would undercut the whole model. This is not about issuing shares if it’s an offensive move. In other words, if Topicus sees more opportunities than it has money and it is convinced this will be temporary, it’s OK to raise some money. But if it’s to pay off debt, that’s a red flag to me.

If you are not a paid member, this is where it stops for you. If you want to learn about Topicus’ Quality Score and my current valuation, you can try out Potential Multibaggers for 7 days. You can unsubscribe in the first 7 days with just a few clicks.

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I promised you that there would be a second article from Zack this week and here it is. As always, I will update the Selling Rules, the Quality Score and then evaluate the current valuation.

Hi Multis, Zack here, with CrowdStrike’s earnings analysis.

To kick off the Q4 FY2026 earnings call, CEO George Kurtz highlighted seven points that perfectly encapsulated the quarter. I thought to myself, why reinvent the wheel? So to start, I’ll let Mr. Kurtz take it away with those seven highlights, with my own commentary interspersed:

One, all-time record net new ARR of $331 million for the quarter, which grew 47% year-over-year, coming in well ahead of our expectations. For the year, we delivered $1.01 billion in net new ARR, up 25% year-over-year. Our first year delivering over $1 billion of net new ARR.

Two, ending ARR of $5.25 billion, crossing the $5 billion milestone, which accelerated to 24% growth year-over-year.

Both ARR and Net New ARR continue to signal sales acceleration and market share gains.

For SaaS companies, annual recurring revenue (’ARR’) is often a better indicator of performance than revenue because it provides a clearer view into current and future obligations.

That said, Revenue came in at $1.31B, an increase of 23% year-over-year, beating estimates by 1%.

Gross margins continued to stay steady: GAAP subscription gross margin at 79% (up from 77% in Q4 last year), and Non-GAAP subscription gross margin was 81% (up from 80% last year).

Back to George Kurtz:

Three, record free cash flow of $376 million for the quarter, or 29% of revenue. For the year, we delivered record free cash flow of $1.24 billion or 26% of revenue.

CrowdStrike continues to impress with growing free cash flow and margin. This led to cash and cash equivalents growing to $5.23B ending FY2026:

If you want Fiscal AI at a 15% discount, you can do that here.

CrowdStrike has not taken any debt since 2021 and the rock-solid balance sheet provides stability and optionality for future acquisitions or buybacks.

On the topic of share buybacks, CrowdStrike recently repurchased $50.6M in shares, its first move since announcing its $1B program last year.

Moving on to Kurtz’s comments on operating income:

Four, all-time record operating income of $326 million for the quarter, or 25% of revenue.This is the third consecutive quarter of record operating income. For the year, we delivered $1.05 billion of operating income, exceeding the billion-dollar operating income milestone for the first time.

It’s worth noting that this refers to non-GAAP operating income. On a GAAP basis, there was a slight loss from operations of $6.9M.

While CrowdStrike is still technically at a GAAP operating loss, the gap (pun not intended) is primarily driven by Stock-Based Compensation (’SBC’).

Even when accounting for SBC, CrowdStrike is on the verge of being GAAP operating profitable again.

In fact, after adding in other income and tax provisions, the company achieved GAAP net income of $39M or $0.15 in EPS. This marks CrowdStrike’s first positive quarterly net income since the July 2024 outage.

Speaking of the 2024 outage, this was also the final quarter impacted by the Customer Care Program (’CCP’) credits. It turns out the CCP had a major silver lining despite the short-term revenue headwinds as Kurtz noted:

As we lapse the one-year mark from the end of our highly successful CCP program, we have seen that accounts that took CCP deals have gross and net retention rates higher than the company average, have shown a strong trend of early renewal, and have already expanded more than twice the total $80 million of ARR value we provided.

Talk about turning lemons into lemonade!

Onto Kurtz’s fifth point:

Five, record net new ARR from cloud, next-gen identity, and next-gen SIEM collectively. Ending ARR for these solutions collectively grew more than 45% year-over-year. Amidst today’s AI backdrop, our endpoint business accelerated for the second consecutive quarter.

New products are the bread and butter of CrowdStrike’s land-and-expand model. 45% year-over-year growth signals a massive appetite for the broader platform.

Here’s the performance breakdown followed by a quick summary of each module:

Source: CrowdStrike

Cloud Security: Protects cloud infrastructure and AI workloads. As AI usage increases, CrowdStrike’s revenue will grow along with it.

Next-Gen SIEM: Collects and analyzes event data to respond to threats in real-time. Growth in this newer module continues, indicating increased usage and market-share gains at the expense of legacy providers.

Next-Gen Identity: Protects credentials for both human and AI “employees.” Since 80% of breaches now involve compromised identities rather than traditional viruses, this layer is mission-critical.

While it isn’t illustrated in the graphic above, there have been two consecutive quarters of acceleration for the more established endpoint product. This is despite a false narrative that endpoint security is becoming commoditized.

The reason for the reacceleration? AI adoption.

With the rise of Model Context Protocol (’MCP’) servers, localized LLMs, and AI coding tools, the endpoint is becoming a massive attack surface as evidenced by George Kurtz:

As of Q4, our sensors detected more than 1,800 distinct AI applications running on enterprise devices, representing nearly 160 million unique application instances across our customer base.

With the proliferation of AI agents and processes running on local devices, basic antivirus protection is no longer good enough and more advanced endpoint protection is critical for modern companies.

Other Product Updates

CrowdStrike officially moved to acquire SGNL (zero trust solution for AI agents) and Seraphic Security (enhanced web browser security), two additional tuck-in acquisitions to expand its AI-focused modules.

They also announced the general availability of AI Detection and Response (AI-DR), which has been quite a success so far, growing 5x from last quarter.

Source: CrowdStrike

AI-DR acts as a modern “firewall” for AI. Just as a traditional firewall stops malicious files from entering your system, AI-DR prevents sensitive or “bad” information from being sent to AI models using prompt filtering and governance guardrails to ensure agents stay within their authorized boundaries.

With new module growth, it’s no surprise adoption rates have remained strong:

And continued product adoption goes hand-in-hand with Kurtz’s next point:

Six, dollar-based net retention of 115% and gross retention of 97%, showcasing best-in-class durability and stickiness.

Customers aren’t leaving, they are staying, and spending more.

DBNRR (dollar-based net retention rate) is 115%, which means the total revenue from the specific group of customers who were with the company a year ago grew by 15% over the last 12 months, including all customers who left or reduced their spending.

After a downtick in DBNRR for FY2025, we see re-acceleration heading into FY2027:

And to cap it off with the last achievement:

Seven, we delivered $1.69 billion in ending ARR from accounts that have adopted the Falcon Flex subscription model, growing more than 120% year-over-year, turbocharging our land and expand motion.

Falcon Flex subscriptions continue to be a huge success in growing customer product adoption and revenue and it’s becoming a bigger piece of the ARR pie.

Falcon Flex allows customers to toggle between modules within a single commitment without renegotiating contracts, leading to more seamless procurement and spending.

Critics worried this might artificially inflate adoption metrics with temporary usage, but “reflex” (renewal) data from George Kurtz debunks that:

The proof of Falcon adoption success is in the reflex. Customers are using what they buy and expanding their Flex commitments. More than 380 Flex accounts have already reflexed, representing more than 23% of the Flex customer base, up from 5% in Q1. The average ARR lift after a reflex is 26%, happening on average within seven months.

Our multiple time reflexes on average have an ARR lift of an additional 48% from their initial Flex subscription.

In summary, Falcon Flex unlocks never-seen-before adoption for customers. Flex is now how we go to market.

It’s clear that Falcon Flex isn’t just providing a short-term bump in revenue; customers are continually increasing their spend commitments over time.

For FY2027 guidance, management shared the following:

• ARR guide of $5.5B for Q1 FY2027, $6.5B for the full-year FY2027 (24% growth year-over-year)

• Revenue guide of $1.36B for Q1 FY2027, $5.91B for the full-year FY2027 (23% growth year-over-year)

• Non-GAAP income from operations guide of $309M for Q1 FY2027, $1.4B for the full year FY2027 (33% growth year-over-year)

• Free Cash Flow Margin of 33% in Q1 FY2027 and at least 30% for the full FY2027.

Overall, guidance is solidly on track. Historically, CrowdStrike “beats and raises,” which suggests we could see even higher margins and top-line acceleration as the year progresses.

Other News

Microsoft Partnership

CrowdStrike announced a significant partnership with Microsoft, allowing organizations to purchase the Falcon platform with Microsoft Azure consumption credits. This is significant because Microsoft’s E5 solution is one of CrowdStrike’s biggest competitors.

For Microsoft to offer their biggest cybersecurity competitor a space in their marketplace is further validation that some customers prefer CrowdStrike as a “best-of-breed” vendor over Microsoft, which is often chosen simply because of convenience or cost consolidation to a single vendor.

Amazon Web Services Growth

In related news, CrowdStrike announced it has generated nearly $1.5 billion in total contract value on the AWS Marketplace, up 50% year-over-year. Success on AWS could potentially foreshadow significant contributions from the latest Microsoft partnership as well.

These cloud market partnerships are an efficient way to generate sales for CrowdStrike, as they allow the company to leverage Microsoft and Amazon’s sales to cross-sell their products at a lower commission fee than the larger overhead of managing a direct salesforce.

Memorandum of Understanding (’MOU’) with Saudi ARAMCO

CrowdStrike signed an MOU with the Saudi-owned ARAMCO. While it’s just an initial proposal, it elevates CrowdStrike from just a software vendor for enterprises to a trusted national security partner for mission-critical assets.This could set the stage for future multi-million dollar deals in sovereign markets leading to long-term contracts driven by sticky infrastructure-level integration.

Perplexity Comet

CrowdStrike and Perplexity also announced a partnership. This is what Mark wrote about it in the Overview Of The Week:

Earlier this week, CrowdStrike issued a press release announcing a strategic partnership to integrate the CrowdStrike Falcon platform with Perplexity’s Comet Enterprise.

If you’re not familiar with Comet Enterprise, it is Perplexity’s enterprise-focused AI browser that allows employees to research, analyze information, and interact with AI directly within a browser interface while giving organizations administrative controls over security, data usage, and governance.

Source

As companies increasingly incorporate AI tools into everyday workflows, CrowdStrike is positioning Falcon to secure these emerging environments through partnerships like this one. The collaboration also highlights the value of CrowdStrike’s recent acquisition of Seraphic, a browser security company, which provided the browser-layer runtime protection needed to integrate Falcon directly into AI-driven browsing platforms such as Comet Enterprise.

The AI “Threat”

A modern-day analysis would not be complete without addressing the AI “threat” that hangs over each SaaS company.

Last month, Claude announced the release of Claude Code Security:

Source: X

Like clockwork, CrowdStrike sold off 7% by the end of the day.

A couple of days later, George Kurtz fired back his own rebuttal:

Source: X

Pretty ironic, right? Even Claude agrees it cannot create CrowdStrike.

To press further, Anthropic (Claude) is a customer of CrowdStrike:

Source: Stockscurrent

If the capability were there, Anthropic would have built it in-house but clearly, that isn’t the case. Let’s take a deeper look at why:

Claude Code analyzes the code that it created itself to find vulnerabilities, functioning much like an automated application security testing (’AST’) tool. It flags issues and suggests fixes. This is helpful, and it will likely become an efficient, low-cost alternative for developers looking to ship cleaner, more secure code.

One market fear is that if code ships with zero vulnerabilities, the need for an expensive platform like CrowdStrike vanishes. But remember: 80% of all breaches are not malware-based. So even if Claude fixes every code vulnerability, a stolen identity or a human error (like clicking a phishing link) can bypass secure code instantly.

In contrast, CrowdStrike monitors in real-time, living deep within the operating system to block malware execution and track hackers moving through the network. While Claude proactively analyzes and asks for approval, CrowdStrike reacts in milliseconds to stop active threats.

George Kurtz highlights this distinction perfectly:

Here’s what you have to remember, is that what customers want is real-time prevention. You have to be in line, you have to be able to get the data in milliseconds, and you have to make a decision. That’s not the case with an LLM.

In short: Claude may allow developers to build more securely, but CrowdStrike is still needed to operate securely.

The Long-Term AI Moat

But let’s take it a step further. What if AI eventually builds a competing security platform?

CrowdStrike maintains a few distinct advantages over an alternate AI-built platform or other competitors for that matter:

1. CrowdStrike is a Net Data Creator. The platform generates real-time proprietary telemetry from approximately 2 trillion objects and over 1 trillion security events daily. These create unique patterns and security rules that don’t exist anywhere else on the internet. So any new security platform that may be spun up, no matter how advanced, will be behind the ball due to its lack of learned real-time customer data insights.

2. This usage data enables a technique called “Cyber-Reinforced Learning from Human Feedback” (’RLHF’). Breaches in real time produce expert-labeled data as a by-product of operations. This closed-loop system creates a flywheel: more events occur, which are validated by their experts, lead to platform improvements that no other competitor has, lead to more product adoption and additional events.
   

3. Lastly, reliable Cybersecurity hinges on deterministic outcomes. You can’t simply be right 90% of the time or suffer from occasional hallucinations. Stopping adversaries requires both efficacy and precision; you don’t get a second chance if it fails. Would an organization risk its infrastructure security to save money on less-tested alternative solutions? Cybersecurity is non-negotiable.

AI as a Tailwind

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.

Conclusion

With that, we conclude with another record-breaking quarter for CrowdStrike.

The company has successfully navigated the 2024 outage, turned its recovery program into a growth engine, and is now crossing the threshold into meaningful GAAP profitability. Module adoption and growth prove that AI is a tailwind for the business, not a threat, and with the $5 billion ARR milestone in the rearview mirror, the path toward its $10B ARR goal by 2030 looks to be on track. Remember that the goal was initially for $10B in revenue in 2032.

Thank you for reading! If you enjoyed this article, please give me a follow @ZackStacksKap. I often provide additional commentary on this and other Potential Multibagger stocks and would love to hear from you on X.

With that, I pass it over to Kris for the Selling Rules, the Quality Score and valuation.

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This week, you can expect two articles from Zack. This is the first one. Of course, as always, I will update the Selling Rules, the Quality Score and look at the valuation. But first, the word is Zack’s.

Hi friends, Zack here, covering TransMedics’ (TMDX) Q4 2025 earnings.

In the current “SaaSpocalypse” environment, few Potential Multibagger stocks have been spared a significant selloff. TransMedics, however, has remained pretty resilient over the past few months. It dropped with the total market, but all in all, not too much.

The reason is simple: its competitive advantage isn’t in software but in the physical organ-preservation device the company has pioneered. When you factor in the extensive FDA approvals required to reach this stage, you have a company that is remarkably “AI-proof.” Knock on wood. Hopefully, our friend Claude isn’t reading this…

How was the performance to conclude FY2025? Let’s find out.

The Financial Numbers

• Overall Revenue: $160.8M, a 32% increase year-over-year, beating estimates by 4%.

• Net Product Revenue: grew 34% year-over-year, driven by organ system sales.

• Service Revenue: grew 39% year-over-year, reflecting the continued scaling of their logistics and aviation wing.

• International Revenue: As you may recall from last quarter, TransMedics began its international expansion into Europe via Italy. International revenue grew 24% YoY, and though it still only represents 3% of total revenue, management expects more meaningful volume in the second half of 2026. Since Europe accounts for roughly 45% of global transplant volumes, the OUS (outside the U.S.) opportunity remains massive.

• Gross Profit: $93M, a 29% increase year-over-year.

• Gross Margin: 58% versus 59% last year. Slight compression in margin was due to higher clinical service expenses as they expanded their organ care program along with increased freight costs with their growing aviation and logistics fleet.

• Operating Income: $21M versus $8M last year.

• Operating Margin: 13% versus 7% last year. Strong signs of operational leverage are being exhibited here, with expenses growing more slowly than revenue.

• Diluted Earnings Per Share: $2.62 versus $0.19 last year. Note this includes a significant one-time tax benefit; without it, diluted EPS would be $0.53, still almost triple that of last year.

Zooming out on FY 2025, we see a consistent trend of rising revenue growth and increasing operating margin:

A bit of a chart crime in that it shows growth slowing to 37% but I think most investors would take 30%+ growth in a heartbeat. FY2025 operating margin jumped significantly from 8% to 18%, indicating TransMedics is well on its way to the stated long-term goal of 30% operating margin by 2028.

This was also the first year finishing with positive cash flow, leading to an increase in the company’s cash position without taking on additional debt:

If you want Fiscal AI at a 15% discount, you can do that here.

In FY2025, TransMedics has successfully transitioned from the “startup” cash-burn phase to a “self-funding growth” phase, which is excellent to see.

Guidance

For 2026, TransMedics expects roughly 22.5% growth at the midpoint. While this looks like a stark deceleration, management has a history of guiding conservatism or call it serious sandbagging if you like. At this time last year, they also guided for 22.5% and ultimately finished the year at 37%. I have high confidence that they will beat this guidance again.

Organ Transplant Numbers

In FY2025, TransMedics completed 5,139 U.S. OCS transplants, a 38% increase year-over-year. This accounted for 26% of the total U.S. transplants, up from 20% in 2024.

CEO Waleed Hassanein made a powerful point on the call:

We strongly believe that the OCS NOP once again played a key role in driving overall liver and heart market growth due to the increased use of DCD and DBD donors in the U.S.

Since 2022, U.S. national transplant volumes for liver, heart and lung grew at a rate of 25%, including OCS NOP transplant volume. Without OCS volume, national volumes for the same organs would have declined by approximately 1% over the same period.

TransMedics is taking market share by expanding the total addressable market by making more organs viable. But in this context, that sounds cold, as the reality is that TransMedics helps save more people’s lives.

TransMedics U.S. market share by organ continues to confirm this trend:

Source: TransMedics Q4 2025 conference call transcript

The company also shared revenue by organ for the quarter:

Source: TransMedics

Putting these data points together, the liver is doing very well with both revenue growth and market share. However, the heart is growing at a slower pace and lung is declining (although at low volume).

The active trials for the heart and lungs aim to address the shortage of available organs for transplantation. Before we jump into how that works, I think it’s helpful to understand the two types of donor states:

1. Donation after Brain Death (’DBD’)
   In DBD cases, the brain is no longer functional, but organs are maintained within the donor’s body because the heart is still beating and blood is circulating. This makes it much easier to keep the organ in good condition.

   Because this is the “ideal” scenario, doctors often default to the lowest-cost preservation method: static cold storage (essentially a high-tech cooler with ice). In their eyes, the incremental improvement of an advanced system doesn’t always justify the extra cost (over $100,000) or the perceived risk of changing a “working” process.

2. Donation after Circulatory Death (’DCD’)

   DCD occurs when the heart has stopped and blood is no longer circulating oxygen. In this case, organ preservation is extremely time-sensitive; if they aren’t preserved quickly, they deteriorate and must be discarded.

   Historically, DCD organs were discarded at a much higher rate because cold storage couldn’t keep them viable. Transplant centers are much more open to using TransMedics here because, without it, the organ would likely be unusable.

Tying it all together, TransMedics’ Organ Care System (’OCS’) extends the life of these organs, allowing them to capture a large percentage of the DCD market.

As TransMedics builds more valuable clinical data, they hope to prove that the OCS drives better outcomes in all organs (both DCD and DBD) and also saves costs in the long run due to fewer complications and logistical costs. Convincing stakeholders that OCS is the new “standard of care” is the primary goal for these trials, which we will review next.

OCS Heart ENHANCE Trial

Source: TransMedics

The heart trial is split into two parts.

• Part A is designed to showcase how OCS can safely exceed the conventional time and distance limitations by maintaining a DBD heart past 4 hours.

• Part B is to demonstrate the superiority of the OCS system over conventional cold storage within 4 hours.

Founder and CEO Waleed Hassanein noted that progress in Part B hit a snag: the makers of a competing static cold storage box are refusing to allow their technology to be randomized against the OCS. He did express confidence that they could bypass this roadblock, but wasn’t really clear on how that would be done.

While this roadblock seems like a negative, I actually view it as a positive as well. Why would a competitor try to stop the trial from happening? Most likely because they know the OCS device is superior and should the data come to light, that would eat into their market share.

OCS Lung DENOVO Trial

Source: TransMedics

This program is aimed at revitalizing the U.S. lung transplant market as a whole. In general, lung volumes have been small. The main issue with lungs is that they are susceptible to edema (fluid buildup) when put them on cold storage. This trial will try to demonstrate that by utilizing OCS, lung transplants have a higher survival rate and fewer complications.

The last piece that was mentioned was not necessarily a trial but a publication.

The Liver Registry Publication is an upcoming peer-reviewed paper that will detail real-world clinical data from TransMedic’s more than 9,000 OCS liver transplants. Through this publication, they hope to demonstrate “unequivocal, drop the mic, statistical superiority,” as stated by Waleed Hassanein. Although liver already makes up a large proportion of market share, this data would be the final stamp of evidence to overcome any lingering hesitations, validating the economic and clinical value compared with competing organ preservation methods.

This quote is from another conference last December but I think it demonstrates Waleed Hassanein’s confidence in their product:

OCS machine perfusion based on 9,000 livers we have done, we are convinced that it should be malpractice if the livers are not put on the OCS. I mean, we are talking about significant survival difference, significant improvement in post-transplant complication rate.

Bold words. So basically, he states that, with this evidence, OCS should be the standard of care in any liver transplant scenario.

TransMedics’ roadmap for continued market share expansion is highly dependent on the success of these trials, which are currently expected to take 12 to 18 months to enroll. The liver publication should be out by the 2nd half of this year.

OCS Kidney Updates

The team also shared updates on the OCS Kidney device, which is currently in development. With over 20,000 kidney transplants performed annually in the U.S., the kidney market represents a huge opportunity to expand TransMedics’ TAM. Over 8,000 kidneys are thrown away each year due to low viability from cold storage. This represents “low-hanging fruit” for TransMedics to capitalize on as they apply their technology to save these otherwise wasted organs.

Source: TransMedics

The team plans to unveil the OCS Kidney device in early 2026 and initiate a clinical trial by early 2027, with the goal of proving statistical superiority over traditional cold storage.

Competition

Competition was a hot topic in the past, but talk has cooled significantly as TransMedics continues to grow its volume and market share. That sentiment was reflected in Waleed Hassanein’s blunt response to competition during the call:

Listen, we’re very cognizant of everything that moves in the field of organ transplant. We are not seeing competitive dynamic impacting our ability to execute in 2026 and beyond, and I will leave it at that.

He didn’t waste his breath. This should inspire confidence that there isn’t much standing in their way.

Further evidence of weak competition can be seen when looking at Xvivo, one of their closest competitors in terms of scale. This was shared on X:

As you can read from his last sentence, it’s a different mix of transplant organs and they serve in Europe, but if you read the rest of the X post you can see Xvivo is clearly struggling while TransMedics thrives.

In fact, this revenue chart tells the whole story:

There may have been signs of potential competition leading into 2022, but since then, it has become clear who the “top dog” is.

It’s also worth noting that another competitor, OrganOx, was acquired last year and no longer provides public financial data. Based on the most recent data, it appears their revenue is much closer to Xvivo than to TransMedics, and their technology only covers the liver and lacks the integrated logistics (aviation/transport) that make TransMedics so unique.

Government Policy Alignment

TransMedics is also moving toward becoming a more integrated partner with the U.S. government. As Waleed Hassanein noted:

Specifically, we are exploring if TransMedics can be a more integrated contributor to the national transplant ecosystem in the U.S.

The government is currently working to modernize the national transplant program by increasing organ utilization and upgrading infrastructure. If this partnership comes to fruition, it will embed TransMedics even further into the national infrastructure, creating a massive moat around their business.

Conclusion

TransMedics continues to impress with consistent executional excellence. On top of the usual KPIs, key things to watch are the clinical trial results and the timeline for the new OCS systems. These milestones are crucial to reaching their goal of 10,000 annual transplants by 2028 and 20,000 to 30,000 by 2030.

If you enjoyed this article, please give me a follow @ZackStacksKap. I often provide additional commentary on this and other Potential Multibagger stocks and would love to hear from you on X. Thank you for reading!

With that, I pass it over to Kris for the Selling Rules, the Potential Multibaggers Quality Score and the valuation.

Hi Multis

Kris here. I think we can agree that Zack did a great job with the analysis. Now, we update the Selling Rules, the Quality Score and the valuation to assess if the stock is a buy at this point.

The Selling Rules

I don’t just follow up on the Selling Rules I have made in the past. I also update them regularly and that’s why I added a new Selling Rule.

The new Selling Rule is that I want the medical trials to go right. If TransMedics can’t expand OCS indications, revenue growth will almost certainly start to slow.

The Potential Multibaggers Quality Score

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Mercado Libre (MELI) reported its Q4 2025 earnings at the ned of February. The company announced more investments and that made the stock drop like a bomb. It is now down more than 35% from its top.

So, let’s look at the numbers first.

The Numbers

• Revenue: $8.76B (+44.6% YoY), beating estimates by $300M

• EPS: $11.03, missing estimates by $0.41

• Operating margin: 10.1% (down from 13.5% a year ago)

• Full year revenue growth: 39%

• Full year income from operations growth: 22%

Marketplace:

• GMV: $20B (+37% YoY FX-neutral in Brazil, +35% in Mexico)

• Items sold growth: 45% YoY in Brazil (accelerating from 42% in Q3 and 26% in Q2)

• Unique active buyers: 83.2M (+24% YoY)

Mercado Pago:

• Monthly active users: 77.9M (~28% YoY)

• Credit portfolio: $12.5B (+90% YoY)

• Assets under management: $19B (+78% YoY)

• Nearly 3 million new credit cards were issued in Q4 alone

Regional Breakdown:

• Brazil: 54% of revenue

• Mexico: 22% of revenue

• Argentina: 18% of revenue

• Other: 4% of revenue

Advertising:

• Revenue grew 67% YoY (FX-neutral)

And here’s an overview from Mercado Libre’s earnings call slides:

Investing For Dominance

Let me repeat something I’ve said in my previous MELI articles. Every single time Mercado Libre has deliberately compressed margins to invest in the long-term opportunity, it has paid off. Every. Single. Time.

And each time, analysts doubted the company. Same story, over and over again. Sometimes, the markets are funny in their own way. Management was very transparent about the investments, which I always like.

In the shareholder letter, management quantified the margin impact of the investments (note: CBT = cross-border trade, 1P= 1st-party selling, where MELI is the merchant)

We estimate the combined impact of our strategic investments, which include the lower free shipping threshold in Brazil, CBT, 1P and the credit card, was equivalent to 5-6 percentage points of operating margin in Q4’25.

So, without the deliberate investments MELI made, the operating margin would have been around 15-16%. That’s strong, and it would have probably meant a beat on earnings, too.

CFO Martin de Los Santos added on the conference call that the company won’t hesitate to keep investing:

Our main focus is on capturing the large opportunities in front of us in commerce, fintech and advertising. And we will not hesitate to invest in order to capture those opportunities as we have done in the past, even if that puts some short-term margin pressure. We’re not trying to optimize short-term margin.

Now, if you’re a trader, you hate hearing this but as a long-term investor, this is music to my ears. And importantly, these aren’t vague promises. The results are already visible. Even with all these investments, full-year income from operations still grew 22%. The company makes the right choice to grow faster at the expense of higher short-term margins.

So, yes, analyst calls like this one are correct but myopic, only looking at the year ahead.

Source: Seeking Alpha

That was the reason Mercado Libre dropped more after earnings. Thank you to all traders and short-term focused analysts.

Commerce: Brazil Is On Fire

The free shipping initiative in Brazil that we discussed extensively last quarter continues to deliver beyond expectations. As a reminder, Mercado Libre lowered the free shipping threshold (from R$79 to R$19), and the results are remarkable.

Items sold in Brazil accelerated from 26% year-over-year in Q2, to 42% in Q3, to 45% in Q4. Overall, it was 43.2% (the number disappears for one reason or another when I download the chart).

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The unique active buyers grew by 24% YoY, the highest number of new buyers ever.

New CEO Ariel Szarfsztejn was proud:

New buyers that have come to MercadoLibre since June when we launched the new value prop are buying more items across a larger number of categories with higher retention rates compared to cohorts of new buyers prior to that change.

You can see this here.

It’s very impressive to see this. Usually, when an e-commerce business grows quickly, the average number of items sold per user drops. That MELI can make both grow so strong is another testament to the strength of this company.

I think this is a point many miss. So, anyone saying that the margin compression is important is not looking at Mercado Libre as an investment but as a trade. As an investor, you think like a business owner, and as a business owner, I’d be delighted with these results.

The logistics network is absorbing all of this beautifully. Unit shipping costs in Brazil declined 11% during the quarter. More volume is a leverage, as fixed costs go down as a percentage of delivery costs.

Mercado Libre introduced a slow-ship network to fill idle capacity, which I like a lot. When you have trucks and warehouses not in use at any given time, you can ship lower-value items during periods of lower traffic at almost no incremental cost. It’s a brilliant solution and it’s one of the things that competitors without such a big delivery system simply cannot copy, unless they invest heavily for years. Mercado Libre has already done those investments.

Mexico is performing well too, with 35% GMV growth. Cross-border trade saw a 74% increase in FX-neutral GMV. Mercado Libre now operates fulfillment centers in both the U.S. and China to serve its Latin American customers. This is a direct copy of what Amazon does worldwide. Here’s the regional breakdown.

An update on first-party (’1P’) that flew a bit under the radar. 1P is when Mercado Libre is the seller. Amazon started mostly with 1P and then expanded to 3P. Mercado Libre did it the other way around.

CFO Martin de Los Santos confirmed that 1P is now profitable before allocating central and indirect costs. That means it’s still not fuly profitable, but it’s early and this is a meaningful milestone. Scale will do the rest.

Remember, 1P exists as a sort of customer service to fill gaps in selection and pricing where third-party sellers underperform. It grew by about 80% FX-neutral in 2025 and is clearly gaining traction, especially in categories such as supermarkets. It’s an addition to the core 3P model, definitely not a replacement and it’s a good thing to see that there is a path to profitability.

Mercado Libre also changed its shipping fee structure for merchants in Brazil in January, moving to a model that charges based on actual dimensions and weight rather than flat rates. It’s still too early to tell what the financial impact will be, but it shows the company continues to fine-tune its business consistently.

This is just about a third of this article. Do you want to know whether I see MELI as a great opportunity now or not?

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I’ll start with a Peter Lynch quote. I’ll come back to it later in the article, but it’s important to keep in mind when you look at Hims & Hers.

Never a dull moment with Hims & Hers (HIMS). That’s a prime example of an understatement.

First, a partnership with Novo Nordisk, then a legal battle, and now a partnership with Novo Nordisk again. And that is just one of the multiple developments at Hims & Hers.

If you want to hold this stock, you need an iron-clad stomach. Many Potential Multibaggers have that, but this is by far the most volatile stock I’ve ever covered.

Depending on how you count, this is the fourth or even fifth 30%+ drop in the last year.

Let’s first look at the earnings results that were published at the end of February but we hadn’t had time to cover yet.

The Numbers

Revenue for Q4 2025 came in at $618M, up 28% YoY, in line with consensus. EPS came in at $0.08, a beat by $0.03.

For the full year, revenue was $2.35B, up 59% YoY.

Adjusted EBITDA for 2025 was $318M, up almost 80% YoY, at a 14% full-year margin. Net income was $128M. Operating cash flow hit $300M.

Subscribers grew to over 2.5 million. Monthly revenue per average subscriber hit $83 in Q4, up 11% YoY. Annualize that and you’re approaching $1,000 per customer per year. When it comes to health spending, people simply don’t hesitate the way they do in most consumer categories.

The number of personalized solutions tells an even more important story. At the end of 2025, approximately 65% of subscribers, about 1.6 million people, were on personalized treatments. At the end of 2023, that number was only 600,000. Nearly a million net new personalized subscribers in two years. That number shows what Hims & Hers wants to focus on.

The Stock Crash

On February 5, 2026, Hims & Hers announced it would begin offering a compounded semaglutide pill starting at $49 per month, with subsequent months at $99 per month. Novo Nordisk’s FDA-approved Wegovy pill had launched barely a month earlier, on January 5, with a starting cash price of $149 per month.

On February 7, 2026, Hims & Hers then announced it would no longer offer the compounded semaglutide pill. Only 48 hours, but what chaos.

The problem was that Hims & Hers was caught between a rock and a hard place. Because of strong patents, they couldn’t use Novo Nordisk’s SNAC delivery system for the pill to work in the gut. But if they used another mechanism, which they did, they actually needed FDA approval. And the FDA was swift to react to that aspect. With good reasons this time, if you ask me.

FDA Commissioner Marty Makary said the agency will “take swift action against companies mass-marketing illegal copycat drugs,” and general counsel Mike Stuart of the Department for Health and Human Services said he referred the matter to the Department of Justice for investigation.

Novo Nordisk filed a patent lawsuit and the 10-K filing disclosed that the SEC has opened an inquiry into Hims’ marketing, disclosures, and regulatory compliance around compounded GLP-1 products. But of course, with the new partnership, Novo Nordisk dropped the lawsuit.

Still, the FDA, DOJ, and SEC are simultaneously investigating Hims & Hers. Andrew Dudum’s response on the call was short:

I don’t think we can share too much on anything ongoing, but continue to welcome their conversations.

The existential risk posed by this compounding battle has largely been mitigated by the new partnership, but the regulatory overhang hasn’t fully disappeared. But I don’t think the outcome will be much worse than a fine, if anything.

The Q1 Guidance”Miss”

Q1 2026 guidance is $600M to $625M in revenue, which is just 2% to 7% YoY growth, and quite a big miss versus the consensus of $652M. But the details are important and the numbers have to be adjusted.

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David wrote an article about Global-e (GLBE), but I added quite a bit, so you can see this article as a joint effort, although let me be clear about that, David did by far the most work.

Of course, as always, after the earnings analysis, I will look at Global-e’s Selling Rules, the PM Quality Score and the valuation to decide if Global-e is a buy now.

Hi Multis

David here.

Global-e’s stock recently experienced some weakness, in line with broader market trends, but moved about 15% to $36 following the earnings release. It’s down a little bit to $34.68 at the moment of writing.

So, let’s jump in.

The Numbers

Revenue

Revenue in Q4 was $336.7 million, an increase of 28% year-over-year. The two revenue streams, service fees and fulfillment services, contributed $160.9 million and $175.7 million, respectively. Service fees increased 37% year over year, while fulfillment services grew 20.6% year over year.

One nuance here: the fulfillment take rate came in slightly below expectations this quarter. That’s not a sign of weakness, but because average order values were higher than expected. That means more GMV per transaction, which was good for GMV. So the “miss” on fulfillment take rate is a good miss.

For the full year, revenue mix remained stable with 47% ($451.2 million) from service fees and 53% ($510.9 million) from fulfillment fees. Both segments delivered approximately 27-28% annual growth.

Global-e guided for its first $1 billion+ revenue year in 2026. For any company, that’s a significant threshold.

Gross Profit

Gross profit totaled $154.8 million, compared with $118.7 million in the same quarter last year and up from $99.6 million in Q3 2025. That’s a 46% profit margin.

Gross Merchandise Volume (the total dollar amount of everything sold on the platform) increased 37.8% year-over-year to $2.361 billion, bringing the total GMV for 2025 to $6.569 billion, representing 35% annual growth.

A number that puts the GMV in perspective: Global-e’s total annual GMV for 2020 was $774 million. The company did $1 billion in GMV in November alone.

Global-e delivered strong operating results across key metrics, supporting a solid financial foundation for continued expansion.

The result exceeded company guidance across key metrics, and investor sentiment appears particularly positive regarding the company’s forward guidance.

Current Results and Future Guidance

Global-e updated its full-year outlook last quarter to the following:

The improved outlook for GMV, revenue, and adjusted EBITDA was discussed in the previous analysis. Management provided several drivers supporting the higher guidance, which was useful for evaluating how these expectations translated into actual results.

The table below compares company guidance with actual reported results.

This was the first full year of GAAP profitability, with a GAAP EPS of $0.39. The amortization of the Shopify warrant, a recurring drag on GAAP results for years, is now essentially gone. That removes a structural GAAP headwind and makes the reported numbers cleaner going forward.

Cash generation remains strong, with $216.2 million in free cash flow generated in Q4.

A portion of this cash is expected to be returned to shareholders. As highlighted previously, Global-e authorized a $200 million share repurchase program.

As of the end of Q4 2025, approximately $72 million in shares had been repurchased, representing about 1.8 million shares. The company indicated that repurchases are expected to continue under the existing authorization.

Management confirmed on the call that the company has continued buying in Q1 2026, with $128 million of capacity still remaining on the program.

Alongside year-end results, Global-e also released its 2026 outlook:

The company expects GMV growth of 28.6% to 34%, revenue growth of 25.8% to 32%, and adjusted EBITDA growth of 30% to 43%.

The adjusted EBITDA guidance, $259M to $284M, at a 22% margin at the midpoint, would give Global-e a Rule of 50 for the full year. That means revenue growth plus EBITDA margin exceeds 50. Usually, The Rule of 40 is seen as a benchmark for great companies..

Also important: Q1 2026 guidance calls for GMV growth of 38.8% at the midpoint. That’s an acceleration.

The outlook indicates that management expects the growth momentum achieved in 2025 to continue.

Growth

Global-e delivered growth across all key metrics in 2025, and the projected growth rates are not extreme.

The strong GMV demand is currently increasing and is even ahead of the most optimistic projections. This strong performance reflects both new merchant additions and growth from existing merchants, with results exceeding historical averages. Management continues to indicate a strong merchant pipeline.

The net-dollar-retention rate for 2025 came in at 122%, an improvement over 2024. Gross dollar retention was 96%. These numbers tell you two things: existing merchants are growing on the platform, and very few are leaving. The 122% NDR means that even without signing a single new merchant, revenue would still grow by 22% from the existing base alone. Very strong.

And that will probably continue. President and co-founder Nir Debbi said on the call that it “looks stronger today than it did in the same period in 2025.” 2025 was already a record year for growth in new merchant contributions, so that statement deserves attention.

Another tailwind can be found in foreign exchange (’FX’). As Global-e is in the middle of international transactions, the FX part of its business cannot be underestimated. Global-e collects revenue globally, but reports in USD.

With a weakening dollar, it can report higher revenue and profit in USD.

The table above illustrates Global-e’s geographic revenue mix. Approximately half of the revenue is generated in the United States, while the remainder is derived from international markets. As a result, a meaningful portion of revenue is affected by foreign exchange movements.

The partnership with Shopify continues to deliver strong results. The collaboration supports continued expansion of the merchant base and geographic coverage.

More specifically: Managed Markets 2.0 is now live. The critical upgrade in this version is full integration with Shopify Payments, replacing the separate payment rails used in the previous version. This means merchants can now run their international store exactly the same as their domestic store; they have the same processes, the same financial flows, and no learning curve. CEO, Chair of the Board and co-founder Amir Schlachet called it the biggest change. Management expects this to have an even bigger effect in the back half of 2026.

And one more thing, Global-e has already integrated the Universal Commerce Protocol (’UCP’), co-developed by Shopify and Google. As agentic commerce evolves, the complexity of cross-border infrastructure only increases and that is exactly what Global-e is built to handle. The company is more than ready.

Tariffs as a lead-generation mechanism

And then... we have to talk about tariffs. It was by far the most discussed topic on the call and one of the things I (Kris) am most asked about in the context of Global-e.

When the tariffs were introduced in 2025, in the short term, this created some pressure on US volumes. But as Amir Schlachet said on earlier calls, the tariff complexity had a positive effect on the pipeline in the midterm and that is now showing up in the Q4 numbers and 2026 guidance.

The EU de minimis removal is the next wave. Until now, small packages into Europe could pass customs without an import tariff. That’s about to end. When that comes into effect, it adds another layer of trade compliance for merchants, which is another boost for Global-e. Companies that previously shipped small parcels into Europe without customs handling will now need what Global-e does.

Global-e also launched its duty drawback offering for U.S.-based merchants in Q4. It allows merchants to reclaim import duties on internationally exported goods, and reclaim certain tariffs on returned goods. Initial adoption among the first group of merchants is described as “very high,” and it’s now being rolled out to all eligible U.S. clients. It’s embedded in the 2026 guidance, though management took a conservative approach given it’s still a new offering.

Saying to merchants: “Hey, if you just take this subscription, you will earn it back multiple times through claimbacks, where we do all the complicated stuff for you” is a pretty good selling point.

Or, in other words, the tariffs are an outstanding lead-generation mechanism for Global-e. Back to you, David!

Costs

One aspect I always look at is the costs. Not only the costs to generate revenue, but also the other costs that a company chooses to make, such as sales and marketing, and general and administrative costs.

The table below presents these costs as a percentage of gross profit. The left side compares Q4 2024 with Q4 2025, while the right side compares full-year 2024 with full-year 2025.

Cost of revenue remained stable at approximately 54% in both 2024 and 2025, with limited variation on a quarterly basis. These costs are typically more difficult to optimize and include items such as payment processing fees, shipping, and logistics.

Operating expenses declined relative to gross profit compared with both the prior year and the comparable quarter, contributing to improved profitability.

More numbers:

• R&D dropped from 9.2% to 8.5% of revenue in Q4.

• Sales and marketing fell from 11.3% to 9.4%.

• G&A from 4.1% to 3.2%.

You see that everything moves in the right direction. Management is guiding for this to continue.

AI and Other Improvements

Global-e is increasingly using artificial intelligence to improve growth and operating efficiency.

One example is a large language model used in customer support, where chatbot interactions are reducing the need for human intervention.

Another example is an internally developed AI tool designed to improve sales efficiency. The tool analyzes customer characteristics, product attributes, and geographic priorities to estimate conversion potential before sales outreach. This helps improve demo targeting and conversion rates while supporting more efficient sales and marketing spending.

But the AI story at Global-e goes considerably deeper than these two examples.

Vibe coding is already having a measurable impact. Entire features and even entire subsystems are designed, developed, tested, and deployed through AI-assisted coding. The efficiency gain is already visible in the lower R&D spend as a percentage of revenue in 2025.

Global-e also launched a full-site localization offering. It’s an in-house LLM-based service that translates entire merchant websites into multiple languages, including text embedded in graphics, a common problem for merchants.

Amir Schlachet made a good point on the call about this. Scale and AI are not separate advantages but they compound each other. Data fuels AI models and Global-e has unique, proprietary transaction data across 200+ markets that no competitor can even dream of.

The bigger Global-e gets, the better the models get. That’s a self-improving moat over time.

Conclusion

Global-e posted a strong quarter and 2026 looks to be strong as well. Does that make it a BUY?

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This is such a period in which the punches don’t seem to stop when you are a growth investor. But that’s also often when the best opportunities are found.

Just look at this “unknown” company.

It just delivered record revenue of $23 billion, up 36% YoY, grew net income by 260% to $1.6 billion, and generated $3.4 billion in adjusted EBITDA. Would you think the stock would drop 25%?

Of course, it’s the old story: the stock price determines the stories that are being told. If you think that the fundamentals determine the stories, very often that’s not the case.

Just look at the stock price yesterday, up 8.23%. Fundamentals that suddenly improved in a day? Yeah, right.

I’ve seen this before with Sea (SE). I picked it at $54 back in 2020. I held and bought more when it crashed from $350+ to under $40. And I held when the market declared Sea a “Covid stock.” Every single time, the company has proven that great execution overcomes market sentiment over time.

The question is whether this time is different or just another chapter in the same book.

That’s what we will explore in this article.

The Numbers

Let’s start with the full-year numbers. In 2025, Sea generated $22.9 billion in total revenue, up 36%.

Adjusted EBITDA came in at $3.4 billion, a jump of 75.2%.

As you can see, Shopee did especially well, with more than a fivefold increase in adjusted EBITDA. This was mainly because of economies of scale. As you may know, Shopee raised its take rate, which positively impacted profitability.

I know that if I say take rate, many comment that it’s unsustainable, but the biggest part of that was driven by ads, which are growing fast. Therefore, this is sustainable and probably there’s a lot of growth left.

Garena’s adjusted EBITDA was up 38%, also very strong for a division that mostly runs on a game from 2017 (Freefire, of course). Monee’s (formerly Sea Money) adjusted EBITDA was up 43% YoY.

If something’s adjusted, it’s always interesting to know what. If you start with net income here, what’s added back (because it’s EBITDA) is the I (interest income or expense), the T (taxes) and the DA (depreciation and amortization). There’s also stock-based compensation and loan provisions.

Net income came in at $1.6 billion, versus $448 million in 2024. That’s a 260% increase. Very strong.

For Q4, revenue was $6.9 billion, up 38% YoY, beating consensus by about 6%. For revenue, that’s a lot.

Gross profit rose 36% to $3.0 billion. Operating income grew to $565 million, nearly doubling YoY.

The EPS came in slightly below analyst estimates. And the 2026 Shopee guidance mentioned ‘at least the same adjusted EBITDA’ despite 25% GMV growth guidance. That alone was enough for a 25% selloff.

So, what is the market actually worried about here? It’s not the growth because that was great. It’s the uncertainty about why continued growth in guidance doesn’t translate into greater profitability.

The market is always very impatient about an investment phase, even if it thinks it’s a good investment. The reason is simple: the market is not dominated by investors, but by traders.

Of course, that means we can focus on the crucial question: is this a temporary and intentional investment or a fundamental weakness in the business?

Let’s first dive into the different divisions.

Shopee

Shopee had a phenomenal 2025. I am sensitive to words and, to be honest, I myself wouldn’t expect the word “phenomenal” in an analysis of a stock that just dropped 25%. That also means that I use it very intentionally. Just look at why I use it.

For the full year, GMV came in at $127 billion, up 27%. As a reminder, GMV or gross merchandise volume, is the dollar amount of everything sold on the platform.

There were 400 million active buyers and 20 million sellers. For Q4, GMV was $36.7 billion, up 29% YoY from 4 billion orders, up 30%. Revenue came in at $5 billion for the quarter, up 36%, with core marketplace revenue (so, the countries in Southeast Asia) growing 50% YoY to $3.6 billion. That’s really impressive.

I have already mentioned this earlier in the article, but adjusted EBITDA for Shopee went from $156 million in 2024 to $881 million in 2025. Remember, this was a deeply loss-making business just a few years ago. The fact that Shopee generated almost $900 million in adjusted EBITDA while growing this fast seems to be completely ignored by the market.

This difference between GMV growth and revenue was mostly driven by ad revenue, which grew over 70% in Q4, with ad take rate up more than 80 basis points YoY. More than 20% more sellers are now paying for ads, and their average ad spend increased by more than 45%.

The overall take rate reached 13.5%, up from about 11.3% just two years ago. That’s a big improvement. And the great thing about ads is that it’s a self-fortifying machine. If more merchants run ads, those that don’t yet see them work also start using them.

But the market only looked at one thing. CEO Forrest Li stated that Sea aims to grow Shopee’s GMV by around 25% YoY, with adjusted EBITDA “no lower than 2025 in absolute dollar terms.” In other words, margins will compress. The market didn’t like that, to put it mildly.

But there’s a fundamental difference between a company that can’t generate margins and one that chooses not to because it sees larger opportunities ahead. If you are a shareholder of Mercado Libre, you have seen this play out there too: invest heavily, market panics, then the investments pay off nicely. Rinse and repeat. Sea’s investments have clear timelines and identifiable returns.

CFO Tony Hou was very explicit about this on the conference call (for context: VIP program is Shopee’s equivalent to Amazon’s Prime):

If you look at the fulfillment network, there will be a period of time we build it up, but there’s a clear investment cycle come with it rather than that is ongoing perpetual investment...

If you look at the VIP program, there’s a pure time that we will kind of educate the market, but as we get everything in place, I think the cost structure will be a lot better.

He also added something crucial: the 2-3% EBITDA of GMV margin target for e-commerce remains firmly achievable. And if you look at Q4 2025’s EBITDA margin at around 0.55% of GMV, that still improved year-over-year. The sequential decline from H1 to H2 was a conscious ramp-up of investments, not a competitive threat, which the market seems to assume. It’s funny how the market always seems to prefer the negative explanation. Of course, if you are an analyst, it’s better to be negative than positive. It makes you sound smarter, as you seem to warn investors. The funny thing is that many bring this as if bringing negative news is hard. It’s exactly the opposite. If you are positive, you get a lot more mud thrown at you in the market. Trust me, I know. :-)

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Logistics

SPX Express, the company’s fulfillment arm, now processes over 30 million parcels every single day, making it one of the largest e-commerce logistics providers in its markets. In cities like Bangkok and Jakarta, instant and same-day delivery already made up more than 10% of order volume by the end of 2025.

That’s not just a charity service, of course. Aside from appreciating the service and not churning as quickly, such buyers also spend around 15% more on average than before they started using the program. That’s a great flywheel: better delivery leads to more spending. This is a part of the Amazon playbook, of course.

The great thing is that buyers have the choice. In Indonesia, orders using the cheaper shipping option more than doubled in Q4. Fulfillment services, from warehouses closer to buyers, already handle more than 10% of orders in some markets. The goal is to double that by the end of 2026.

Shopee also expanded instant delivery into groceries, partnering with local supermarkets in Thailand to deliver fresh groceries in as little as 1 hour. This expands the addressable market.

Then, Brazil. CFO Tony Hou explained the Brazil logistics angle nicely:

We have been operating with a much more efficient logistics network compared to what’s available to our — to the other players in the market with much lower cost. And we are able to run the businesses profitably with sort of a much lower basket size.

Brazil was again the fastest-growing market for Shopee in 2025. Delivery times improved by about 1.5 days YoY in Q4, which is quite impressive.

Shopee Mall GMV more than doubled YoY, and more than 300 new brands were onboarded. That matters because Shopee Mall is the higher-end segment. It has branded sellers and, therefore, higher basket sizes. It shows Shopee is moving upmarket in Brazil, not just sticking to cheap goods, as it’s often portrayed wrongly. That’s just the foot between the door.

The next step in Brazil is rolling out fulfillment capability at scale in 2026, another investment.

The VIP Membership Program

This is Sea’s equivalent of Amazon Prime. Subscribers get better free shipping deals, daily vouchers, and exclusive discounts.

Total VIP members surpassed 7 million by year-end. That’s impressive because it’s more than double what it was just a quarter ago. In every market where it launched, members increased their spending by double digits after joining. In Indonesia, VIP members spend 30-40% more than before joining. In some markets, VIP members already contributed more than 15% of total GMV in Q4.

Tony Hou shared a very interesting detail. Historically, the biggest challenge for subscription programs in Southeast Asia was the low payment success rates. Most people don’t have credit cards for auto-renewal. Retention rates were only around 40%. But by working closely with Shopee and Monee to enable smooth payment processing, Sea increased subscription retention from 40% to 70% in Indonesia over just a few quarters. And probably, there’s more room for improvement. This may seem like a detail, but it’s fundamental.

It also shows that the SEA ecosystem works. It’s a structural advantage that competitors without a fintech arm will have a very hard time replicating. Such seemingly “small” details add up.

The Content Ecosystem

This was an investment that already showed clear positive results. Orders driven by YouTube content more than tripled in Q4 YoY. The Meta partnership, launched in October, already has more than 3 million affiliates who linked their Shopee and Facebook accounts. Content’s share of business is already more than 20% and growing.

AI across Shopee

This one doesn’t get enough attention. I mentioned it in the Overview Of The Week a few weeks ago.

Sea is deploying AI across its e-commerce platform in ways that directly impact revenue and cost. On the search and recommendation side, they rolled out multimodal search: users can now search with a picture plus a description, similar to how you’d use Gemini or ChatGPT. CFO Tony Hou said the higher ad take rate is partly a result of the AI improvements: the platform now understands products and what users are looking for much better.

On the seller side, Shopee built AI chatbots that sellers can customize for their own stores. This helps sellers reduce employee or service costs. At the same time, it improves upsells to buyers.

Shopee also introduced tools for sellers to create product videos, pictures and descriptions using AI. All of these come with a positive return on investment for the ecosystem.

As mentioned in the Overview Of The Week, Sea also announced a partnership with Google, which is still in development. There are no details yet, but it builds on what they’ve been doing together for years on Google Shopping and Google Ads. On top of that, Google’s AI would also help with game development for Garena.

Forrest Li framed the company’s AI philosophy pragmatically:

We try to focus on the applications and how to connect that fantastic technology to people’s daily life from every corner of the world... We’re not going to try to make some fundamental large language model breakthrough. We’re not going to build data centers.

In other words, Sea will be an AI applier, not an AI builder. That’s a good strategy, I think.

Taiwan and competition

One more highlight: Taiwan. GMV growth accelerated to double digits in 2025. Shopee’s automated locker network grew to over 2,800 locations, making it the only e-commerce player at that scale in Taiwan. These lockers run at 30% lower per-order costs while also functioning as last-mile hubs. This kind of infrastructure moat is an extra defense against competitors.

When you look at the competitive landscape, CFO Tony Hou noted it remains “relatively stable across most of our markets.” No dramatic shifts is good news.

The US recently scrapped the de minimis rule, which allowed packages under $800 to enter the country tax-free. That was the backbone of how companies like Temu and Shein shipped cheap goods directly to American consumers. Now that this loophole is closing, those players need to find growth elsewhere and Sea’s markets in Southeast Asia and Brazil are the obvious targets.

That’s what the market was afraid of and yes, competition got tougher. But SEA doesn’t seem to suffer. Shopee’s take rate keeps rising, order growth accelerated to 30% in Q4, and the active buyer base keeps expanding. Companies that are losing a competitive fight don’t show numbers like that.

One more thing on the guidance. Sea has a long history of guiding conservatively and then beating. At the start of 2025, they guided for around 20% GMV growth. The end result was 27%. For 2026, the 25% GMV target will probably be a floor, not a ceiling.

Monee

Monee, Sea’s crown jewel, as I like to call it, keeps delivering. This segment generated $3.8 billion in revenue for the full year, up 60% YoY. Adjusted EBITDA crossed $1 billion, up 43% YoY. The fintech arm alone generated over a billion in adjusted EBITDA.

The loan book reached $9.2 billion at year-end, up 80% YoY. An 80% loan book expansion sounds risky, right? I heard this as an explanation for the big stock price drop.

But there’s a very important number to look at here, the 90-day NPL ratio. NPL stands for non-performing loans or, in other words, loans that can’t be paid back.

The 90-day NPL ratio held steady at 1.1% at the end of Q4. That’s very strong and even an improvement from a year ago. For context, this is far more conservative than comparable operations like Mercado Pago, where similar delinquency metrics can run much higher. For comparison, the average NPL ratio across Asia was about 2.7% in 2024.

On top of that, remember that Sea is lending to consumers and small businesses in emerging markets, the riskiest segments. Traditional banks in those same markets, with their decades of experience and conservative underwriting, are running NPL ratios 2-3x higher.

But, also very important to acknowledge, a loan book growing so fast will automatically lower the 90-day NPL ratio. Loans need time to go bad and if you grow your loan book fast, this will naturally bring down the 90-day NPL ratio. Nevertheless, the numbers look very conservative.

The growth came from three drivers.

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I hope you don’t feel sick yet from the plunges in our picks. I’ve said this multiple times, but it feels like 2021 or early 2022. Our stocks have dropped hard and the indexes are still close to all-time highs, although the Nasdaq is also down 7.5% now.

During uptimes, Potential Multibaggers will do much better than the averages, but during downtimes, this strategy will dramatically underperform. That how it has always been and will remain.

As my investing horizon is far away (20+ years) I don’t mind the big volatility (up and down) too much, but I know that many of you have a different investing horizon or are more affected by the sudden price moves.

Duolingo (DUOL) is now down almost 82%.

And the Q4 results on February 26 added another drop to what was already a painful crash. The stock was down 20% in the after-hours, but recovered a bit. But with the general market, Duolingo’s stock keeps falling as well.

Let’s look at what’s going on here.

The Numbers

Let me first give you the Q4 numbers:

• Q4 revenue: $282.9M, +35% YoY, beating estimates by $7M.

• Non-GAAP gross margins: 72%, down about 1 percentage point YoY.

• Adjusted EBITDA: $84.3M at a 29.8% margin. Strong.

• Net income: $42M (but note: FY25 had a one-time non-cash tax benefit of $256M that inflated full-year net income substantially — exclude that noise).

• Free cash flow: $93.7M for Q4, about a 33% margin. For the full year, free cash flow reached roughly $360M.

Of course, for a company like Duolingo, the engagement numbers are at least as important:

• DAUs (daily active users): 52.7M, +30% YoY (vs. +36% in Q3).

• MAUs (monthly active users): 133M, +14% YoY (vs. +20% in Q3).

• Paid subscribers: 12.2M, +28% YoY (vs. +34% in Q3).

• Paid subscriber penetration: 9.2% of MAUs, up from 8.1% a year ago.

We go deeper into the numbers further in this article.

But overall, I think we can say without hesitation that the Q4 numbers were good. Revenue up 35% with a beat, strong free cash flow, DAUs and Paid subs up strong and so on.

The full year was strong as well: revenue crossed $1 billion, up 39%. Duolingo has now delivered 23 consecutive quarters of 30%+ revenue growth. Only Mercado Libre (28 quarters) has a longer streak among all 83,000+ publicly traded companies worldwide.

So why did the stock tank again?

The Strategic Shift

A few factors explained the drop.

First, the 2026 guidance. The company guided for bookings growth of 10-12% and revenue growth of 15-18%.

I already want to point out that Duolingo’s management are experts in sandbagging. Last year, they guided for 25% bookings growth in 2025. This is the real result.

That’s a big difference and this is just one example. Management really has a history of sandbagging. But right now, the market doesn’t really seem to care about that, not even as a footnote.

The adjusted EBITDA margin is expected to be around 25%, down from 29.5% in 2025. For a company that just delivered 39% revenue growth and 30% EBITDA margins, this is a dramatic slowdown.

But no blaming the macro situation here. It’s a deliberate choice. CEO Luis von Ahn is deliberately sacrificing near-term profits to have 100 million daily active users by 2028. That would be a near-doubling from the current 52.7 million. His strategy is simple: grow the user base now, monetize it later.

Or in his own words:

Long-term value in this business is driven by 2 things: the size of our active learner base, that’s like the size of the pie. And how effectively we monetize that base. You can think of that as the piece of the pie that pays. At this moment, we are prioritizing growing the size of the pie.

There was a remarkable moment when von Ahn pulled out his IPO letter to shareholders, so the first one, and read it aloud during the call:

Dear potential investors, the main thing you need to know is that I plan to dedicate my life to building a future in which, through technology, every person on this planet has access to the best quality of education.

The message was clear. He wants to play the long-term game. At least, it’s very clear. You can agree or disagree with the strategy, but you can’t say that von Ahn is not clear or doesn’t follow his guiding star.

The Paradox: Overmonetized AND Undermonetized

One of the most insightful moments of the call was when Luis von Ahn described a seeming paradox. He was asked how the shift back to user growth eventually becomes a monetization strategy again. His answer was fantastic:

Look, we got ourselves into an interesting situation where both Duolingo is undermonetized and overmonetized at the same time. It’s undermonetized in that, look, only about 10% of our monthly active users pay us. We wholeheartedly believe we can do much better than that. If you look at comps, if you look at things like Spotify, half of their users are paying them, give or take. And a lot of these freemium businesses, we really think we can get much higher than 10%.

However, the way we were increasing monetization was we found that the quickest way to increase monetization was basically by adding friction. The more we added friction, the more we got people to subscribe. And that’s okay, but I think that we got it to a point where it really became at odds with DAU growth.

This is honest and straightforward in a way you rarely see in business. Management is admitting that they over-optimized for near-term monetization growth by adding friction to the free experience, and it came at the expense of user growth. The quick fix, like doubling ad loads, reducing energy, and adding more paywalls, was easy money, but it hurt the long-term prospects.

Now, if you only have 10% of users paying and Spotify has 50%, you don’t need me to say that the upside is big. But you need to find different ways to monetize. Luis mentioned in-app purchases (avatar customizations), direct ad sales, and pricing experiments. These take longer to build than just cranking up friction, but they don’t kill DAU growth.

The User Deceleration

Let’s address the elephant in the room: user growth. Look at MAUs (monthly average users).

As you can see, from the first quarter of 2025 to the fourth quarter, there has been no meaningful growth in MAUs and for the second quarter out of three, the number of MAUs was down compared to the previous quarter. That doesn’t look great and it only confirms what management said, that MAUs need attention urgently.

At the same time, I think there’s an overreaction to this. It’s not the first time this has happened. Look at 2021.

You see a similar pattern, though Q4 was still slightly above Q3. But Q4 growth compared to Q1 was just 6.3%. It’s even lower now, at 2.2%.

To me, it’s clear that focusing on MAUs is clearly the right thing to do for management.

DAU growth also decelerated throughout 2025, from 40%+ in Q2 to 36% in Q3 and 30% in Q4. Management now expects about 20% DAU growth throughout 2026.

Is this saturation? The market thinks it is, but Luis von Ahn disagrees:

In the United States, 2% of all Internet users on a given day use Duolingo. So 2% penetration in the U.S. for daily users. In the U.K., that’s 3%. In Germany, that’s 4%. And Germany is not the highest country we have. We actually think we can get much higher than that. But even if we only assume that every country got to 2%, which is the U.S. penetration, we would more than double our daily active users.

For context, daily usage penetration for platforms like Spotify and Netflix in established markets ranges from 30% to 50%. Duolingo is at 2-4%. Now, I don’t claim that the TAM is as big for Duolingo as for TV entertainment and music, but I’m convinced that it’s higher than this.

And the churn data backs this up. When Duolingo surveys users who stop using the app, the most common answer hasn’t changed in years: they got busy. Not “I switched to ChatGPT“ or “I use Google Translate now.” They got busy, which, as Luis von Ahn candidly admits, basically means they’re scrolling social media instead.

I have mentioned this multiple times. I have a Duolingo streak of 1,500 days (today, yes) and it took away time from my social media scrolling. Since I use Duolingo, I almost never use Instagram anymore. Only when someone sends me a link.

On top of that, 40% of monthly active users are also the daily active users, which I still find very impressive and shows the power of the platform.

The AI “Threat” (Again)

Every earnings call, someone asks about AI disruption. And every time, the answer is the same, because the facts are the same.

Luis von Ahn:

AI translation has been essentially perfect among the large languages for like more than 10 years. I mean between Spanish and English, it’s essentially been perfect. Our users use Duolingo for 2 main reasons: one, as a hobby, they actually want to learn. And those people, whether there’s AI translation, it doesn’t matter, it’s a hobby for them. And then the other group of people is learning English. They want to learn English, and they actually want to learn English.

I’ve been saying consistently for months now. Of course, if the stock price drops, then the stories come. And the AI story is just that, a story.

Even more importantly, the data support this.

• Retention remains healthy (about flat) and in the cohorts.

• Paid subscriber growth was 28% in Q4.

• The DAU/MAU ratio hit an all-time high of about 40% in 2025, as I pointed out.

Marketing spend as a percentage of revenue stayed stable at around 12%, so growth is not driven by excessive marketing spending. If AI were meaningfully disrupting Duolingo, you’d see it in churn, engagement, or acquisition efficiency but the numbers are clear.

Do you think these things would happen if AI were killing Duolingo? Sure, I know what some think now: “It could happen.” Who knows, but I don’t pay much attention to stories without data to back them up.

I’ll put it differently: how many people do you know who have been learning a language through an LLM and have been doing so consistently for months? I know zero, while I know multiple people using Duolingo. How about you?

As for the “vibe-coding” threat, so someone building a Duolingo clone with ChatGPT or another LLM, Luis von Ahn put it best:

If I were to write down just the spec of Duolingo, just... and I’m not talking about recreating it in a programming language, like write it down in English, it would take me years because there are 1 million corner cases of things that we do that we’re really smart about.

And even if someone builds a decent clone, they still face Duolingo’s free product as their main competitor. Over 15 years, hundreds of apps have tried. Duolingo still holds roughly 85% of all language learning app DAUs worldwide. That number hasn’t changed. Not before and not now with LLMs.

So, can we please finally stop with this nonsense story? Of course, I’ll keep an eye on it because things can change quickly in tech. But so far, it’s a BS story.

Product Updates

There were a few interesting product updates.

First, the decision to move Video Call with Lily, Duolingo’s flagship AI conversation feature, from the $168/year Max tier down to the $84/year Super tier is one of the most interesting decisions in this whole strategy.

It’s not a defensive move, as Max retention numbers are “actually quite good.” Luis von Ahn was clear about this:

None of the Max numbers are making us do anything with video call. The Max numbers are actually quite good. We’re happy with the Max numbers. We are taking, what I call, an offensive move with Max.

I just believe that the cost of video call has gone down enough. It just kind of doesn’t make sense for us to just have it in Max when we can offer it in much cheaper packages.

There are about 10x as many Super subscribers as Max subscribers. If you put Video Call in Super, 10x more people get access to conversational practice and I’m sure this will boost engagement.

The data also backs this up. Users who engage with Video Call become promoters: they post online about how they’re shocked they can actually hold a conversation after using Duolingo for a while, and they tell their friends and family.

Of course, there’s a risk that this can cannibalize Max subscriptions and management knows that. That’s why it’s being A/B tested, like almost everything at Duolingo. If the data shows terrible Max cannibalization, they’ll restrict the feature, maybe one video call per day on Super, unlimited on Max. But they want to do this now, from a position of strength, rather than being forced into it later by a competitor.

As Luis von Ahn put it:

We’re going to do this on our own terms... at the moment, we really are not worried about competition. So we’re getting ahead of it.

Something that might get lost in the guidance drama: chess has reached 7 million daily active users in less than a year. Duolingo is now the second-largest chess platform in the world, after chess(.)com.

But if you search for “chess” on the App Store, Duolingo doesn’t even appear in the results. They haven’t done any App Store optimization for it yet. Those seven million DAUs (of which I am one) all come from essentially zero dedicated marketing.

Of course, many Duolingo language users are doubling up with chess. Luis von Ahn acknowledged that the majority are. Languages are still growing at roughly the same pace. But over time, more people are discovering Duolingo through chess, and that standalone user base is building. The cross-pollination works both ways, and users who study multiple subjects show higher retention.

If chess is the quiet blockbuster, math is the sleeping giant. There are roughly 1 billion people learning math worldwide. That’s a market almost as large as the language-learning market. The difference, as Luis von Ahn said, is that most of those people don’t want to learn math. They’re in school and have to.

But he thinks Duolingo can change that:

I believe that this year, we’re going to have the best tutor app for math.

Rather than pursuing school district deals, which are complex, slow, politically tricky, and expensive, management wants to position Duolingo Math as a supplemental tool, a bit like a competitor to Kumon. There’s a large market of parents already paying for outside help. And, as Luis von Ahn pointed out, the willingness to pay (from parents, not kids) is very high for math. I think we all know this. So, math could become a real revenue growth driver in the future.

New CFO & Buyback

Matt Skaruppa, Duolingo’s CFO since the IPO, has moved on. His replacement is Gilian Munson, who joined Duolingo’s Board years ago and chaired the Audit Committee. She’d been on the job for only 3.5 days at the time of the earnings call and delivered what was honestly an impressively detailed walkthrough of the guidance.

The best moment was how she presented the two paths Duolingo could walk:

We could have grown the business, probably we would be at about a mid-teens CAGR over the next couple of years. If we could keep our margins where they are, we’re probably looking at a $1.5 billion business, $400-plus million in adjusted EBITDA. But we, at the company, are really motivated to go for the bigger prize.

(...)

If we can get to that DAU and even reasonable monetization assumptions from where we are today, and we believe we can scale our expenses over time, you’re looking at a business in a couple of years, it could be $2.5 billion with over $700 million in adjusted EBITDA.

So: the safe path is a $1.5B revenue, $400M EBITDA business. The ambitious path, which requires hitting 100M DAUs, is $2.5B in revenue and $700M+ in EBITDA. Management is going for the ambitious path and I like that. It’s something I have seen from multibaggers in the past. Of course, we don’t know whether they will hit their target, but setting it is, in itself, what I like.

The Board also authorized a $400M share buyback. With the stock down 80%+ from its 2025 highs, that’s significant. Duolingo has the cash ($1B+) and the free cash flow ($350M guided for 2026) to fund both growth and buybacks. So, good decision at this price.

What Could Go Wrong

I read everything bearish I could, to know the bear case very well. There’s a lot of misinformation out there, like people saying AI is clearly eating Duolingo’s cake. But it’s too easy to just dismiss everything. My main takeaway of my bear research was that there’s much more uncertainty now. I agree there. The bookings guidance of 10% to 12% may imply that revenue growth falls to that pace in 2027, unless management can really accelerate the MAUs growth.

As we all know, markets hate uncertainty and opportunity costs. Most “investors” are no investors but traders in disguise. If you think like a business owner, you would think it’s a good decision to choose for the long term, not the short term.

Second, the 100M DAU target by 2028 implies accelerating from 20% growth to significantly higher levels in 2027 and 2028. That’s not easy. If DAU growth doesn’t reaccelerate or worse, if it keeps decelerating, it would suggest the issues aren’t just about overmonetization but about saturation, or engagement fatigue. That’s why I used this for my Selling Rules. More about that later in this article, of course.

I also want to use my knowledge of past losers to assess Duolingo. I have an article here that is called The Wall of Shame, where I look at my past losers to learn one or more lessons from each one of them. Duolingo doesn’t seem to fit into one of the patterns so far. More in the Selling Rules.

Conclusion

Duolingo has built one of the most impressive consumer apps in the world. Five years of 30%+ revenue growth in every single quarter, gross margins above 70%, free cash flow margins above 30%, a strong balance sheet and a founder-CEO who clearly thinks in years and even decades, not quarters. And don’t forget that Duolingo has a product that more than 50 million people use every single day.

The 2026 guidance is disappointing in isolation, but I think it’s essential to understand why the numbers look the way they do. The company decided to build a much larger business. The parallel with Spotify’s 2022-2023 investment phase (before its massive stock rerating) is worth thinking about.

New CFO Gilian Munson described 2026 as “a foundational year.” That’s the right framing. This year will be messy in the financial models and most “investors” don’t have the patience and equanimity to endure such a year. I’m fully aware that this could take more than one year.

So, if you are not prepared for your investment to pay off, I can understand that you want out. But if management executes, so if MAU/DAU growth reaccelerates, if math and chess become meaningful growth engines, if new monetization methods offset the friction reductions, the business could become quite a bit larger and stronger.

I’m not going to pretend that I won’t have my moments of doubt. After all, management can have plans, but there are no guarantees that they will work or become a reality. That feels uncomfortable.

But if you look at the track record of Luis von Ahn and Duolingo, I can’t help but give him the opportunity to prove he will execute as he has planned.

On to the Selling Rules, the PM Quality Score update and the valuation, to decide if this is a stock to add to or to dump.

Selling Rules

It’s now more important than ever to follow up Duolingo, to know whether it’s just talking or executing. Focusing on the long term is what we want as long-term investors, but sometimes, companies use it to hide weaknesses. I don’t have that feeling for Duolingo but a feeling is not enough. Hard data matter and that’s why I made these selling rules.

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I hope you can keep up with the pace... This is the third article already this week, after the Adyen earnings analysis and the Best Buys Now.

You can imagine these are busy days for me, but fortunately, I get help from Zack for the Shopify (SHOP) earnings analysis.

Of course, as usual, I will then look at the Selling Rules, the Quality Score update and the valuation. I also contributed some extra content to the analysis. That’s how it goes when you know a company very well (as I’ve been a shareholder since May 2017): you want to add a few accents. But most of the work is Zack’s.

Hi Multis

It’s Zack, back for another quarterly review of Shopify’s earnings.

When I wrote last quarter’s article, Shopify’s price was sitting around $160, and a significant portion of my write-up consisted of holding despite the (over)valuation. It’s amazing how quickly things can change...

Now here we are, around $123 (up already from $112 or so), 30% lower. To add insult to injury, during the earnings call, the stock popped 8% after hours and then sold off 20% from its peak the next day.

Ok, enough about price action. I know it’s fun to talk about, but anyone can look at the ticker price. What we really want to know is how the business did this last quarter, so let’s get right to it.

Headline Numbers

Revenue came in at $3.67B, beating estimates by 2% and growing 31% year-over-year.

President Harley Finkelstein had this amazing stat to highlight:

“Q4 was our first-ever quarter of revenue above $3 billion. That’s more than all of our revenue in 2020.”

Wow, that’s impressive!

And this wasn’t a one-quarter fluke. Full-year 2025 revenue came in at $11.6 billion, up 30%, the highest annual growth rate since the COVID-driven results of 2021. Since its IPO in 2015, Shopify has grown revenue by over 20% every single year. That kind of durability is rare, but it’s exactly what we look for at Potential Multibaggers.

We can break out revenue further by looking at both Merchant and Subscription Revenue:

Grab your 15% discount for great charts like this at Fiscal.

Merchant Solutions Revenue grew 35% year-over-year and made up a bigger piece of revenue, especially in Q4 given the increased purchase volume. Subscription Solutions Revenue grew 17% year-over-year. Both solid growth numbers.

Monthly Recurring Revenue took another meaningful jump to $205M and 15% growth year-over-year, continuing to re-accelerate from 10% YoY growth a quarter earlier despite some comparability headwinds from the three-month trials last year. Tier adoption showed a slight uptick, with Shopify Plus accounting for 34% of MRR, up from 33% last year.

Worth noting here: the company shared that the 2024 and 2025 merchant cohorts are larger and more productive than prior cohorts, outperforming older cohorts in both GMV and revenue after similar time on the platform.

Source: Shopify

This is a really healthy sign. It proves that Shopify isn’t just adding more merchants but also better merchants.

Gross Merchandise Volume (’GMV’), the total dollar amount sold through Shopify, came in at $124B, 31% growth year-over-year.

This was also Shopify’s first-ever quarter with GMV above $100 billion. On a constant currency basis, growth was 29%. Regionally, North America did better than the expectations, mainly because of Plus merchants. But the international story stood out: nearly half of incremental GMV came from outside North America.

European merchants, in particular, had a superb quarter, with GMV up 45% (35% constant currency). Shopify now has nearly half its merchants from outside North America.

Gross Payment Volume (GPV), which is payment volume through Shopify Payments, came in at $84B, 38% year-over-year growth.

GPV penetration grew meaningfully to 68%, indicating increased adoption of Shopify’s payment solutions.

Shopify gave us this great-looking chart.

Gross Profit grew 25% year-over-year to $1.69B for the quarter.

Gross Profit Margin dropped to 46% from 48% last year. A couple of legitimate reasons for this:

1. First was the revenue mix. In Q4, we typically see a seasonal surge in payment volume, shifting the mix toward the Merchant Services segment. Because Merchant Services carries a lower gross margin (high 30s to 40s) compared to the high-margin Subscription business (low 80s), the overall blended margin took a temporary dip.

2. There were also a few other gross margin headwinds on the Merchant services side coming from a decrease in third-party referral and transaction fees. But this definitely has a silver lining. It means more revenue is flowing through Shopify’s own payment rails directly. That’s a short-term gross margin headwind, but a long-term moat builder.
   

3. There was an impact from PayPal accounting changes, but management said this is now fully normalized.

So, the slightly lower margins are nothing to worry about.

Operating Income was $631M, an increase of 36% year-over-year and Operating Margin came in at 17%.

Shopify’s continued operational profitability improvement is further highlighted through one of my favorite charts:

Source: Shopify

Every year, efficiency gains continue. Shopify is demonstrating it can grow revenue without proportionally increasing SG&A and R&D.

Let me put some numbers on this.

Operating expenses were 29% of revenue in Q4 and 35% for the full year, both 3-points better than in 2024. Moreover, CFO Jeff Hoffmeister pointed out that all four key opex/margin milestones (Q4 opex, full-year opex, Q4 operating margin, full-year operating margin) set new records versus 2024, which had itself set records versus every prior year since the IPO.

Shopify achieved operating leverage in every category: R&D, sales & marketing, and G&A, mostly through disciplined headcount management.

Shopify is accelerating product development without growing the team, by leveraging AI and automation internally. That’s practicing what you preach: in 2023, Shopify’s founder and CEO, Tobi Lütke, said the company was AI-first from then on. In other words, if you have a problem, first ask yourself if AI can solve it. Only if the answer is clearly no, can you hire someone.

Lastly, Free Cash Flow was $715M, up 17% year-over-year, with a 19% FCF margin.

For the full year, free cash flow hit $2 billion, an increase of 26%. Shopify continues to prove that it can grow the topline significantly while remaining operational and grow cash flow. We can see that reflected on their pristine balance sheet, where they just recently paid off their last bit of debt.

Grab your 15% discount for great charts like this at Fiscal.

Worth noting: they decided to repay the convertible debt in cash rather than issuing shares. That signals confidence in the future of the business.

Additionally, the board approved a share repurchase program of up to $2 billion, which leads us to believe they believe the company may be undervalued.

Moving on to Guidance for Q1 2026:

• Revenue to grow in the low-thirties (percent) year-over-year.

• Gross Profit to grow in the high twenties.

• Operating expenses as a percentage of revenue are expected to be 37% to 38%, indicating continued efficiency.

• Free Cash Flow margin is expected to be in the low-to-mid teens, a notable drop from previous periods. This is due to seasonally lower Q1 GMV and a higher tax rate than prior years.

In summary, the numbers were great, no question about that. But the highlight of the call was in the product updates.

Product Updates

Let’s just cut to the chase. There were many updates, but the clear star of the show was the agentic commerce solutions.

Harley Finkelstein mentioned the initial success in 2025 with orders from AI search up 15x since January 2025. He did add the caveat that these were smaller numbers, but the growth in this space is just starting.

Finkelstein framed it in terms of long-tail discovery: smaller merchants getting connected to the right buyers who might otherwise have never discovered them. He called it “merit-based discovery at scale.”

Instead of SEO and ad budgets determining who gets found, AI surfaces products based on relevance. That’s a fundamental shift in how discovery works. It disproportionately benefits Shopify’s massive base of smaller merchants who could never outspend the big players on Google Ads.

Multi Market Sense wrote this about Shopify in our Slack community.

I can soothe our fellow Multi’s worries. Shopify will benefit from agentic commerce. The diversification and independence of the shops will mean that the winner-takes-most dynamics, which have been typical for e-commerce, will change. If an agent can search 7000+ websites, that willl benefit the discoverability for Shopify stores. This will hopefully become clear by what follows.

The first AI feature is Agentic Storefronts, which allows merchants to sync product data across all AI-native platforms.

Source: Shopify

As you can see here, with just one click, merchants have access to millions of buyers through AI surfaces. In return, AI platforms get fresher, up-to-date information for a more consistent and trustworthy experience.

Tobi Lütke put this really well when he said something to the effect of: “Everyone else has to scrape the Internet, we actually have the source of it.” Shopify has structured billions of products so agents can surface the most relevant items in seconds. That data advantage, the “Catalog” as they call it internally, is the real asset here. They’ve been building this for 2 years, and it’s only now becoming visible and more relevant.

Multiple brands like Stanley, Vuori, Glossier, Steve Madden and others already sell through AI platforms but 2026 should see a big jump there.

You may wonder, what is the advantage of shopping via AI instead of traditional ways, such as search? A couple of sources reference higher conversion rates when using AI shopping:

• 38% higher conversion rate for AI-influenced shoppers compared to traditional browsing.

• 4.4x higher conversion rates for AI-generated product recommendations vs traditional search

While I can’t fully vet the studies deeply, intuitively, the logic holds water. Asking an objective AI to aggregate information and surface the “best” widget seems much more trustworthy and efficient than manual search at times. Oftentimes, we’re forced to sift through SEO-optimized blogs where sometimes “unbiased” reviews can be just thinly veiled sponsorships. AI shopping can cut through the noise and provide an immediate answer in a single response.

Universal Commerce Protocol (UCP) is co-developed with Google to serve as the “rails” for agentic commerce. It sets open standards for how agents can interact along the purchase journey (e.g., search, cart, checkout, purchase). Think of it as a common language that ensures all stores can communicate with agents in a consistent way, allowing for the same shopping functionality, whether you are on the merchant’s online store or shopping through AI chat. Because Shopify helped develop this protocol, all Shopify stores are UCP-ready by default.

Just to be sure, there’s another protocol as well, OpenAI’s ACP (Agentic Commerce Protocol). Shopify supports ACP too, but UCP is universal (not just OpenAI). When an analyst asked if this was VHS vs. Betamax, Finkelstein didn’t address this directly, but I think this misses the point. It’s an open system versus a closed one.

There’s a crucial point here that multiple analysts (and Market Sense) seemed to miss. Finkelstein had to repeat three times and probably he will get questions about it in the next conference call again. LLMs do not bypass Shopify’s checkout. Commerce has a front end (the interface buyers see) and a back end (processing, payments, fulfillment). Under UCP, even when ChatGPT runs the front end, Shopify still runs the back end. Order processing, payments through Shopify Payments, fullfillment, returns... all of it still flows through Shopify’s infrastructure. The economics for merchants and Shopify are identical to a regular online store transaction. Shopify doesn’t lose the customer relationship because the front-end is different. It just uses another discovery mechanism, like Google Search is one.

Moreover, there’s the Agentic Plan. It is an upcoming subscription tier that enables brands to sell products through AI-driven chat without a full Shopify store. This allows any brand, regardless of platform, to plug into agentic commerce features.

You might wonder: “Why isn’t Shopify gatekeeping these features for its own core subscribers?”

If you look back a few years, you will realize this is the exact playbook they used for ShopPay. By offering a best-in-class checkout experience to non-core subscribers, they created a low-friction on-ramp. Once a brand sees the conversion power of Shopify’s infrastructure, the conversation about transitioning their entire merchant stack becomes much easier. They are doing so again, but this time with agentic shopping features.

Harley Finkelstein explicitly confirmed this on the call. He said the Agentic Plan mirrors the Commerce Components strategy from a couple of years ago. Some brands that initially came to Shopify just for Shop Pay ended up migrating their entire stack. The Agentic Plan is designed to do the same thing. It wants to start a relationship with brands that aren’t ready for a full migration, but don’t want to miss the agentic wave. It’s a wedge product, and Shopify consistently lands enterprise accounts through this tactic.

Shopify is in a transition. It’s in the process of creating the infrastructure of modern commerce and shifting there from “just” a platform. By creating solutions in which all brands use their agentic rails, they ensure that, no matter where an AI transaction occurs, Shopify processes it.

This closely parallels Microsoft in 1999 during the dawn of the internet. During this period, Microsoft established dominance by bundling Internet Explorer with Windows and providing developers with the tools they needed to build IE-compatible sites. They leveraged their existing scale to set the standards (HTML/CSS) for a new era, which is exactly what Shopify is doing now with UCP and agentic commerce.

Source: Web Design Museum

I’m sure you know what happened next: Internet Explorer became the dominant browser and had 95% share of the browser market by 2004.

I’m not saying Shopify will play out exactly this way, but there are similarities. Clearly, they don’t want to just be a player on the board; they want to be the board on which the game is played.

Now, agentic commerce dominated the call but it wasn’t the only thing happening. There were several other product updates that deserve attention because they demonstrate how Shopify is compounding growth initiatives.

Shop Campaigns & the Advertising Flywheel

Shop Campaigns is a pay-for-performance advertising product and it had a breakout year. Revenue doubled and merchant adoption tripled in 2025.

The product now spans 8 channels: Google, Instagram, Facebook, X, Snapchat, Bing, the Shop App, and Shopify storefronts.

The growth comes from a clear value proposition. Merchants only pay when a customer actually converts. No sale, no spend. That’s a genuinely differentiated offering that removes the risk of advertising for smaller merchants who can’t afford to burn cash on awareness campaigns.

The Shopify Product Network was launched. It’s a new opt-in app that automatically surfaces relevant products from other Shopify stores on a merchant’s site. If a shopper buys, the host merchant earns a commission. It’s basically turning the entire Shopify ecosystem into a distribution engine. This is a brand-new offering (launched in December) and one to watch closely.

Sidekick: The AI Co-Founder

While agentic commerce is the external AI play, Sidekick is the internal one. In just 3 weeks after the latest edition drop, Sidekick generated almost 4,000 custom apps, created over 29,000 automations with Shopify Flow, built nearly 355,000 task lists, and edited over 1.2 million photos. Impressive numbers.

The newest feature is Sidekick Pulse. It works in the background and proactively tells merchants what to do next based on their own store data. It’s powered by Shopify’s 2 decades of commerce insights. Finkelstein shared an example: Sidekick Pulse recommended a jewelry brand to bundle 4 products together because it knew they were individually best-sellers and that bundles tend to convert better with higher cart values. That kind of personalized intelligence from hundreds of millions of transactions is extremely valuable, of course.

Shopify also launched SimGym, which simulates real buyer behavior to give merchants feedback on store changes before they ship them. Think of it as A/B testing in real time, powered by AI simulation. The barriers to building a professional store are crumbling before our eyes.

Tobi In Builder Mode

One more thing worth pointing out that isn’t from the earnings call itself but paints an important picture.

Shopify CEO Tobi Lütke’s GitHub activity has exploded. He shipped 94 commits in all of 2024, then 833 in 2025, and as of mid-February 2026, he’s already at 957 commits in just 45 days.

The CEO of a $150B+ company is personally shipping more code than ever, reportedly fueled by Claude (Anthropic’s AI). When the CEO is in builder mode, the whole company tends to follow.

Conclusion

Zooming out, Shopify is clearly re-accelerating. You can clearly see that in the surge in revenue and MRR. More importantly, Shopify is securing the “pole position” in the rising agentic commerce trend. While there is a lot of noise about AI being an existential threat to existing software companies, Shopify’s Q4 results and product roadmap prove they will be in pole position to take advantage of the new wave.

An AI agent can find you the perfect product, but that product still needs to be purchased, shipped, tracked, and potentially returned. Nobody is going to vibe-code a payments flow or a fulfillment system. Shopify already owns that complexity, and AI just adds new surface areas on top of it.

As Jeff Hoffmeister put it:

AI transforms interfaces and accelerates the pace of change, but it doesn’t alter the underlying architecture of commerce.

But what about that post-earnings selloff? Was a -20% drop from the earnings peak justified?

Let’s remember, short-term price action is often a “voting machine” driven by trading and sentiment. The “weighing machine” tells a different story: a company with growing revenue, a debt-free balance sheet, expanding free cash flow, that innovates at a speed as never before.

For those of us riding the Potential Multibagger roller coaster, we have been here before.

So, is Shopify a BUY now? Let’s have a look.

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Here we go again. Adyen (ADYEY) reported its H2 2025 results on Thursday, and the stock promptly dropped as much as 20%. Ouch.

Even more painful, the stock is down 50% from its 52-week high last year.

So many investors view the stock price as the number 1 indicator of what to think. As a consequence, Adyen must be an awful investment from here, right?

My main criteria are not the stock price and the sentiment but the long-term underlying metrics and the long-term investment thesis. And Adyen has a management that thinks the same. Co-CEO Ingo Uytdehaage concluded the conference call with these words (my bold):

But we think that too much focus on the short term is not helping us in that long-term execution. And I think that is potentially something that we can explain better. But in all the decisions that we make as a Management Board, we only take the 3 to 5 years perspective and not this year’s perspective. And I think that’s something that I always like to highlight talking to investors.

That’s candy to my ear, especially since I know the company and its management well enough to know this isn’t just lip service but how they actually think.

But back to the earnings. What was the reason for the big drop? The 2026 revenue guidance of 20% to 22% constant-currency growth came in below the consensus of 22.8%. For H2 2025, processed volumes of €745.3 billion missed the €771 billion estimate.

But who’s wrong here? The company or the analysts? Long-time Multis know I call this The Wall Street Shuffle: the game with the consensus numbers and meeting, missing or beating them. The short-term misses and stock moves, no matter how dramatic, are noise if the company’s fundamentals are intact.

Let’s check the numbers first, then apply the Selling Rules, the Potential Multibaggers Quality Score and the Valuation.

The Numbers

Full-year net revenue came in at €2.36 billion, up 18% YoY on a reported basis, or 21% on a constant currency basis.

H2 saw revenue of €1.27 billion, up 17% reported and 21% in constant currency.

(All images from the Adyen Shareholder Letter)

As you can deduce from the numbers, the currency exchange was a strong headwind for Adyen. The dollar lost quite a bit of ground compared to the euro, as most of you will know.

Processed volume was €1.4T for the full year, up 21% excluding a single large-volume customer. That’s Cash App, as I’ve mentioned in previous articles. Including it, it’s just just 8%. That shows that Cash App brought huge volume but very low profitability. Cash App comps make reported growth look artificially slow, but the margin quality of the remaining business is much higher.

EBITDA was €1,245.7 million for the full year, up 26% YoY, again showing Cash App was not a big loss from this perspective. The full-year EBITDA margin expanded to 53%, up from 50% in 2024.

H2 even saw an EBITDA margin of 55%, showing that the operating leverage inherent in the business model remains extremely strong. EBITDA was up 23% YoY. By the way, a 55% EBITDA margin was the 2028 target

. Let’s put a green check there already in 2025. Impressive!

Just to show you how strong 55% EBITDA margins are, here’s a comparison with PayPal and Block. The H2 results are not in this chart yet, but they are higher, as we just saw.

Free cash flow came in at €1,081.3 million for the full year, up 26%, with an 87% conversion ratio. Very strong again. CapEx remained low, at less than 5% of net revenue.

Net income was €1,062.5 million, up 15% YoY, with EPS at €18.46 for H2 (up from €16.55). The lower net income growth compared to the strong EBITDA growth is entirely due to interest rates, which reduce finance income, not an operational issue.

Point-of-sale volumes were a standout at €311 billion of TPV (total payment volume) for the full year, up 34%. In-store terminal transactions for H2 alone reached €173 billion, up 26% YoY. This is the Unified Commerce story playing out exactly as management has been saying for years. Another green checkmark for its credibility.

The take rate matters, as it has been a part of the bear case for so many years (not completely correct, see the Selling Rules later in this article). The take rate was 17.1 bps in H2, up from 16.2 bps in H2 2024 and 16.8 bps in H1 2025. Then, the lower take rates were viewed negatively by many. I don’t see the growth in take rates being called a strength that much now, while the take rates were the strongest in years (I went back three years). I guess analysts who only emphasize the negative feel that they are considered smarter...

Geographically, EMEA was responsible for 57% of revenue, followed by North America at 27%, APAC at 10%, and LATAM at 6%.

In H2 2025, EMEA revenue grew by 17% YoY, North America grew 17% YoY, or 26% on a constant currency basis, APAC saw 14% growth YoY, or 22% on a constant currency basis and LATAM revenue jumped 34% YoY, or 37% on a constant currency basis.

If Adyen were a private company (and there were no consensus estimate), you’d probably just say the company delivered another solid year of 20%+ revenue growth and improving margins.

The Three Pillars (And Why the Numbers Tell a Different Story Than the Headlines)

Let’s walk through the pillar breakdown, because there’s a lot happening beneath the surface.

Digital, the largest pillar, posted H2 net revenue of €696.1 million, up 10% on a constant currency basis (7% reported).

Before you yawn or get worried, look at the context. CFO Ethan Tandowsky explained that 2025 saw several factors you need to normalize against: currency headwinds, the ongoing Cash App volume drag, and, the most important, more customers moving from Digital into the Unified Commerce pillar in H2 than in previous periods.

That last point is actually a positive. Tandowsky was clear about this during the conference call:

To me, that’s a positive, right? That’s the execution of a broader expansion strategy, being able to support our customers in more sales channels means that they put more trust, we’re able to win more of their share of wallet.”

When your Digital growth looks slow because merchants are trusting you with their in-store payments too, that’s a sign customers are happy about your services, not a negative.

The shareholder letter shared that more and more digital-native businesses are also expanding into physical interactions.

iFood, historically a purely online platform in Brazil, has expanded into in-store payments through its POS solution, Maquinona, powered by Adyen, which currently serves 800 venues in São Paulo and aims to reach 4,000 across Brazil. Netflix and Uber are experimenting with physical experiences too.

For Netflix, that’s “Netflix House.” Those are physical retail and entertainment places that opened in 2025. They’re and immersive fan experiences with themed food, merchandise, and things like a real-life Squid Game obstacle course.

Netflix House in Dallas, Source

They are already in Dallas and Philadelphia and soon in Las Vegas.

More about Uber later in this article.

It’s clear that the lines between “digital” and “physical” are blurring, and Adyen is at the center of that change. One consequence is that the three pillars won’t be as clear-cut anymore, but I’m totally fine with that.

Unified Commerce continues to be a driver of Adyen’s growth. H2 net revenue reached €431.3 million, up 33% on a constant currency basis (29% reported), with processed volume growing 30% YoY.

Transacting Unified Commerce terminals grew to 456,000, adding 92,000 in a year. That’s 25.3% growth for a physical product. Very strong.

The number of Unified Commerce customers processing across channels at scale (defined as €10M+ on both POS and e-commerce, with over €50M total) rose to 467, up 50 YoY.

Unified Commerce customers processing in multiple regions hit 596, up 22.

Growth comes from all sides: retail, hospitality, entertainment, and food & beverage but also more complex industries like airlines, with Lufthansa deepening its partnership and Vietnam Airlines as a new customer.

The Starbucks win deserves special attention and Adyen gave it that attention in its shareholder letter.

Of course, Starbucks is another big name, but the case illustrates something that most investors don’t know or seem to be constantly forgetting about Adyen: how fast the company can execute.

They rolled out in 943 Starbucks stores across the UK, Austria, and Switzerland in just seven weeks, onboarding 120+ stores per week during standard business hours, deploying 2,375 payment terminals. I have studied this industry for years, and I don’t see a single competitor coming even close to that.

Since going live, Adyen has processed more than 20 million coffee sales across these markets. And another important data point: since August 2025, Adyen’s “Store and Forward” offline functionality has saved over 45,000 Starbucks transactions that would have failed due to Wi-Fi issues. When you’re running a coffee shop where every additional coffee matters for your profit, that’s crucial.

The Starbucks story also has a beautiful flywheel element. Adyen first won Alsea, Starbucks’ licensee in Mexico, and, through that relationship, built trust directly with Starbucks’ corporate team, leading to the European rollout. That’s the land-and-expand model Adyen constantly reminds us of. This time, it’s not just across borders, but across companies.

Adyen also expanded its LVMH partnership to support a more unified experience across its “Maisons.” When luxury houses trust you with their point of sale, you know the product is high-quality.

On to the third pillar.

Platforms remains the fastest-growing pillar, with H2 net revenue of €143.3 million, up 49% on a constant currency basis (45% reported).

Processed volume grew 54% if you exclude eBay. Platform customers processing more than €1 billion annually rose to 31, up from 28. Active business customers grew to 220,000, up from 145,000, an increase of 52%.

Here’s a detail that also demonstrates the physical-digital convergence: 31% of Platform’s volume was now on POS (point-of-sale), up from 25% a year ago. Platforms is no longer just about online payments; they’re embedding physical terminals, financial products, and full money management on Adyen’s infrastructure.

The Number That Nobody Is Talking About

Now here’s the number that really stands out for me: two-thirds.

About two-thirds of new enterprise merchants are turning on (parts of) Uplift, Adyen’s AI-powered optimization suite, from day one.

Co-CEO Ingo Uytdehaage shared this on the earnings call:

About 2/3 of our new merchants, they turn parts of Uplift on from the start. So that’s a very important KPI, and that gives us also the support that for existing merchants, it is a matter of time.

This can change the math. If new cohorts start with Uplift activated from the start, that means higher monetization and lower costs from the start. It means revenue per merchant for new cohorts starts higher and compounds faster than it did historically.

For existing merchants who don’t use the risk module yet, it’s a gradual conversation. But when two-thirds of your new customers opt in immediately, the value proposition is clearly obvious to the people actually buying the product.

Let me add a personal story here. Two weeks ago, I was on a train to Amsterdam. Next to me was a woman who was studying. Initially, I thought it was a student, until I saw the Adyen logo on her papers. I started talking to her. She said she was an Adyen account manager and was from the Paris office, heading to HQ in Amsterdam for the customer day. She worked with Lightspeed, the Canadian payments company and had to do a presentation there with someone from Lightspeed. She posted about it on LinkedIn.

On the train, she told me how she loved working for Adyen. They pay well (according to European standards), encourage personal development and working in the other offices (easy as there’s a single company culture) and a great feeling of doing work that matters. She had worked in London for a few months, for the experience and to take her English to a higher level (and it worked; her English was good!).

Several of her colleagues were also going to Amsterdam and were in the same train car. They were all very, very enthusiastic about how Adyen uses AI and is experimenting with agents, not just for security (also AI) but also for more personalized solutions for customers that have different needs than others. The company was in the quiet period (a period during which a company cannot communicate before the earnings), and they said they couldn’t share much because of that, but I certainly saw the enthusiasm.

The Personalize pilot is an example. It’s a part of Uplift. With Personalize, merchants saw conversion improvements of up to 6% alongside transaction cost reductions of up to 3%. Mobility provider Hoppy realized 2% payment cost savings while maintaining locally relevant checkout experiences as it expanded into new cities. This is a higher conversion at a lower cost, the holy grail for each and every merchant in the world.

The policy abuse detection pilot with Dynamic Identification uncovered something eye-opening. The shareholder letter detailed how a global luxury group found individual shoppers receiving up to €5,000 in refunds, which was, in some cases, up to 20 times their average basket value. In another case, a large sports and entertainment customer found a shopper with roughly 70% of transactions refunded over several years.

These are material losses that were completely invisible without Adyen’s AI insights. Dynamic Identification made them visible and merchants loved it, as they went to the tool on a daily basis.

Uber Kiosks

Let me talk about the Uber physical expansion here. The Uber relationship tells you a lot about where Adyen is heading. The two have a 14-year partnership. Adyen now supports Uber across 70+ countries, having rolled out in 40 key markets in the past year, integrating local payment methods such as Pix in Brazil, Afterpay in Australia, and WeChat Pay globally.

Adyen also powers Uber Kiosk. It’s a physical terminal now live at LaGuardia Airport (New York). Travelers without the Uber app, with no connection (not uncommon for air travelers), or a charged phone can walk up to the kiosk, enter a destination, tap a card, and get a printed receipt with their driver’s details. Additional rollouts are planned for hotels, ports, and international airports. As you can see, Uber is anoter example of a company transitioning from a purely digital company to a “unified commerce” player, and Adyen is the platform making it happen. Uytdehaage on the call:

It’s an example of a customer we’ve had for well over a decade that again says, ‘Hey, these are my priorities. This is how we’re looking to expand. Can you help us?’ And we’re there to support them.

Agentic Commerce

Agentic commerce... Ah, there we have it, one of the buzzwords of the year 2026 already. More and more, AI agents will buy things for us, but right now, it is still very early. Transaction volumes are immaterial, as Uytdehaage acknowledged. But Adyen has joined the Agentic AI Foundation and is actively shaping protocols with OpenAI, Google, Cloudflare, Visa, and Mastercard. So, it’s good that Adyen is preparing for the future.

The key insight is trust. In a world where AI agents buy things on behalf of consumers, you need to verify who’s behind the agent. That’s exactly what Dynamic Identification was built for. Uytdehaage:

Dynamic Identification is key here. And the reason why it’s key is because it’s ultimately a trust game. So in this new world, we need to know who is the consumer behind the agent and how do we know that we can trust the agent that is indeed acting on behalf of the consumer.

This won’t drive revenues in 2026. But being at the table shaping the standards for how agent-led commerce works is very crucial. That’s why I’m happy Adyen is there. There will be little to no direct benefit, but in 2032 or so, we might look back on this as a crucial decision.

Financial Products Are Inflecting

The shareholder letter revealed something the earnings call only touched on briefly: financial products are reaching an inflection point. Issuing volumes grew 8x YoY as platforms embedded cards directly into their core workflows. Capital loan volume more than doubled, with over 80% of businesses returning for subsequent loans. That’s a repeat rate that tells you the product works. And CashOut, Adyen’s instant payout product, reached a hundreds-of-millions-of-euros annualized run rate while still in pilot. Ok, let me repeat that: hundreds of millions of euros already while STILL IN PILOT! That sounds extremely promising.

Navan, the travel and expense platform, saw its issuing volume increase more than 5x throughout H2 while maintaining a 99.9% transaction success rate. Fresha and YetiPay are using Adyen Capital to embed financing directly into their vertical SaaS platforms. CFO Tandowsky highlighted issuing, capital, and bank accounts as areas where they’re seeing “nice inflection moments” and Adyen will continue investing there.

And then there’s the new product that also didn’t receive enough analyst attention: IMM (Intelligent Money Movement). This unifies money-in, money-out, and money management into a single operating environment for enterprises. This might sound boring, but for enterprises, it’s essential to have insights there.

Research Adyen did with BCG found that the average enterprise manages over 40 bank accounts across five to six banks and approximately 12 payment providers. Among respondents seeking an integrated solution, 74% want a single system that covers the full cash lifecycle, and 88% would consolidate all money management with a single provider.

That’s a gigantic addressable market that Adyen is only beginning to tap and it can do so because it already has its own banking licenses and the full stack to support it.

It would mean another expansion of Adyen’s TAM.

Why the Stock Got Hammered

At the November Investor Day, management gave a preliminary view of “low to mid-20s” growth for 2026. Three months later, the “refined” guidance is 20% to 22%. It’s not a disaster but it’s at the lower end of what was previously indicated, and below the consensus that was based on what management had shared on the Investor Day.

Tandowsky explained that this is based on deeper end-of-year conversations with customers about their 2026 road maps. Customers’ priorities vary each year. Some drive short-term revenue (e.g., the LatAm expansion, the fastest-growing region), while others are longer-term plays (e.g. agentic commerce).

I’m not worried. As long as Adyen helps its customers with their top priorities, they will give more business to Adyen. Management said the 2025 cohort of new customers was the strongest ever, driven primarily by Uplift, Adyen’s AI product. The 2026 pipeline looks like a continuation of that strength, according to management.

Management expects the margins to be about the same as in 2025, so around a 53% EBITDA margin. Adyen also keeps investing and plans 550 to 650 new hires, mainly in the U.S. and also in global tech hubs (Madrid, Bengaluru, Chicago).

The last question on the call was great. It asked what the biggest disconnect is between how Adyen performs internally and how investors perceive the story. Uytdehaage’s answer was revealing:

We’re building the company for the long term. And I think that’s very important because if you ask me, do I have confidence in how we’re building for the long term and do we have a long-term growth trajectory, my answer is a full yes. And I think what I find sometimes difficult to understand is why on the short term, the reaction is so intense, because the long-term perspective for us does not change.

He added that management takes a 3-to-5-year perspective on every decision. That’s the quote I used at the start of this article. That kind of long-term thinking is exactly what you want as a long-term investor, especially when the stock price says otherwise.

Before we go to the conclusion, I want to show you this tweet.

Oh, so having no debt and having a fortress of a balance sheet is a PROBLEM now?

Adyen has always said that in its industry, it’s important to have cash on the balance sheet. It’s a matter of trust, for customers and regulators. On top of that, the stock has never been really cheap, except for a few months. Or maybe now? We will see that in the valuation section.

Adyen has clearly said it won’t do M&A because it wants to keep its lean software. The Starbucks deal again showed where Adyen can do what no other payment provider can at that speed.

I have no problem with the company having $5B in cash (it’s more like €4.5 B, not €5B), to the contrary. It’s a key strength. Of course, if the cash pile keeps growing and at a certain moment there would be €10B, you can look at what’s best to do with that money. If the stock is undervalued then, a buyback would make most sense.

I think this is another example of short-term thinking.

Conclusion

An overwhelming majority of companies would give an arm and a leg for 21% constant currency revenue growth, 53% EBITDA margins expanding toward 55%+, 87% free cash flow conversion, a take rate zooming upward, and the kind of customer relationships that let you roll out 943 stores in seven weeks. The stock dropped because guidance came in 2-3% below expectations.

People who only read the headlines drove the stock down 20% when it opened in Amsterdam. Long-term investors who listened to the conference call later that day (6 hours after the market opened in Amsterdam, so American analysts could follow live) and read the shareholder letter understood that the slight misses and marginally lower guidance are just noise for the long-term story. With AI tailwinds on the horizon, Adyen is in a great place for outstanding growth for the long term.

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Normally, you would expect Anand to write this article, but for now, that’s not the case. Anand is looking for a new job. If you can use his services, feel free to reach out to him.

Anand has experience in architecting, designing, and implementing cloud strategy. DevOps, cloud infrastructure, automation, CI/CD pipelines, and security are all areas where he has more than 10 years of experience. He is twice Google Cloud Certified.

Anand is seeking a role as a senior or lead DevOps engineer, Site Reliability Engineer, or Cloud Engineer.

You can find more details on his Linkedin Profile.

If you know someone looking for someone with Anand’s profile, please recommend him. I can testify from first-hand experience that he’s very hardworking, dutiful, and committed.

Let’s hope Anand can join the PM Team again soon.

In the meantime, Zack (aka Kappachino) wanted to jump in for Anand to analyze the CrowdStrike earnings.

Hi Multis

Zack here to cover CrowdStrike’s (CRWD) Q3 2026 FY earnings. I know it’s been a while since the earnings, and the stock is down roughly 12.5% as of now.

Overall, a 12.5% dip isn’t that bad considering how hard other SaaS names have been hit recently. Perhaps that speaks to the solid results from this report (spoiler!). So, now that I’ve given away the conclusion, I’m sure you want to know the details. Let’s jump right in.

One more thing before we jump in: the next earnings are still out about a month and a half. CrowdStrike is always one of the last to report.

The Numbers

Revenue: +22% year-over-year to $1.23 billion, beating estimates by 1.6%. Annual Recurring Revenue (’ARR’): +23% year-over-year to $4.92 billion.

For SaaS companies, ARR is often a better measure of performance than revenue because it provides insight into current and future obligations. Revenue, by contrast, is backward-looking and sometimes includes one-off items that may not repeat in future periods.

Net New ARR: Came in at $265.3 million, an impressive 73% year-over-year growth, which signals clear sales acceleration. Of course, that also has to do with the rebates CrowdStrike gave last year for the big outage.

The remaining metrics are steady and solid across the board.

Margins: GAAP subscription gross margin was 78% and held flat year-over-year. Non-GAAP subscription gross margin was 81%, compared to 80% in Q3 last year.

Operating Income: GAAP loss from operations was $69.4 million, compared to $55.7 million in Q3 last year. Non-GAAP income from operations was a record $264.6 million, compared to $200.7 million in Q3 last year.

Free Cash Flow: came in at $295.9 million, compared to $230.6 million in Q3 last year. Free cash flow margin was 24%.

The costs associated with the July 2024 outage incident are also nearly behind them. This quarter, those expenses impacted free cash flow negatively by $53M, with another $33M expected in Q4. After that, they will be concluded, and FY 2027 should have a nice year-over-year comp tailwind going forward.

Guidance remains on track. For Q4 FY2026 (fiscally, CrowdStrike is one year ahead of the calendar year), CrowdStrike expects $1,295M at the midpoint (22% growth year-over-year) and slightly raised full-year FY2026 guidance to $4,802M at the midpoint (21% growth year-over-year).

CEO George Kurtz expressed strong confidence in the pipeline through FY2027:

“Our revenue guidance includes the following assumptions: low to mid-teen sequential net new ARR growth Q3 to Q4, bringing ending ARR growth for FY26 to 23% year-over-year. At the midpoint of our net new ARR assumptions, we expect second-half net new ARR growth of at least 50% year-over-year, well above our previously provided assumptions of at least 40% year-over-year, driven by our strong Q3 outperformance and record pipeline. Additionally, we continue to expect FY 2027 year-over-year net new ARR growth of at least 20% from our now increased FY 2026 net new ARR assumptions.”

Product Updates

Module Adoption continues to move up and to the right:

When customers use more products, it increases “stickiness” (higher switching costs) and facilitates vendor consolidation, allowing CrowdStrike to capture more market share.

Increasing module adoption demonstrates that enterprises aren’t just viewing CrowdStrike as a one-time solution; they are ripping out other point products and consolidating into the Falcon platform, further solidifying CrowdStrike’s position as the operating system for security.

Two quotes from George Kurtz highlight this shift:

“In addition, EY brought us into a Fortune 500 healthcare account where in just a few months we were able to modernize the endpoint, cloud, and SIM environments in an eight-figure end-to-end Flex expansion deal where we displaced two SIMs, Defender for Endpoint, and a point cloud security product.”

“Deloitte announced Next-Gen SIEM in their MXDR practice, replacing their legacy SIEM provider, and Wipro, too, has standardized security delivery and incident response on Falcon.”

Falcon Flex also showcased strong numbers this quarter. It’s CrowdStrike’s way of offering a more flexible licensing model, where customers commit to purchasing a set of credits that can be applied to any module. This has been more effective than traditional, rigid models that require a new procurement cycle every time a customer wants to add a feature.

Source: CrowdStrike

ARR attributed from Flex more than tripled (!) year-over-year and Re-Flex customers (renewals) are spending significantly more than they did previously.

George Kurtz reiterating the benefits of Falcon Flex:

And I think that’s the biggest piece that everybody on the call should just remember is that that’s exactly what Flex was designed to do. Make it easier for customers to buy, make it very easy for us to be able to deploy, and be able to give value and lower TCO. That’s how we think about it. And the benefit is that we’re seeing bigger deals and longer deals. And that’s all good for us, and it’s great for the customers.

Moving on to product highlights, CrowdStrike’s next-gen products continue to lead innovation for the cloud and agentic era.

SIEM (Security Information and Event Management), had a record new ARR this quarter, and was highlighted multiple times on the call.

“Next-Gen SIEM has become a scale disruptor in a market that has historically been slow to evolve as customers embrace the speed and efficiency advantages versus legacy competitors.”

Source: CrowdStrike

SIEM is the analytical heartbeat of modern security operations. With the sheer amount of data in this new generation of cloud, IoT, and remote work, legacy providers (e.g., IBM, on-premise Splunk) are drowning in data and unable to process it efficiently.

CrowdStrike is positioned to disrupt the legacy SIEM market similarly to how it disrupted traditional Antivirus. Because the platform already gathers data in its cloud, switching to its next-gen solution is as simple as flipping a switch.

SIEM has been out for only a year but has already been getting recognition. Gartner recently named CrowdStrike a “Visionary” in the latest 2025 Magic Quadrant for Security Information and Event Management.

Source: CrowdStrike

While they are slightly lower on the “Ability to Execute” axis than some incumbents, to be expected for a newer offering, their “Completeness of Vision” exceeds that of half of their competitors. Given more time, I expect SIEM to work its way up the quadrant.

For comparison, their more mature Endpoint Protection platform remains firmly in the “Leader” quadrant.

Source: CrowdStrike

On the topic of endpoint protection, Kurtz also highlighted how AI has served as an accelerant for businesses to adopt CrowdStrike solutions, with a very long runway ahead given that 50% of the market is still using legacy Antivirus (’AV’) solutions.

And that’s, I believe, is going to be a massive market opportunity for us. So that’s where we see that. And overall, as I always say, 50% of the market is still legacy AV, and there’s still a long runway in the endpoint business to be able to take that legacy market share.

Beyond SIEM, there were also a couple of other product performance milestones.

Net New ARR quarter for Falcon Shield was up 50% QoQ (yes, quarter-over-quarter, not year-over-year!) Falcon Shield secures the SaaS stack, including Microsoft 365, Salesforce, and Slack, by running continuous vulnerability checks across both human and non-human (’AI’) identities.

Falcon Cloud Security had a record Q3 Net New ARR. As the cloud security market has matured, merely having “posture” (checking and alerting if security settings are correct) is no longer sufficient. Companies need “active” defense delivered at runtime, so that if a hacker attempts to execute a malicious command, it can be stopped immediately. Citing the Frost and Sullivan CWP Report, CrowdStrike was named the leader for Cloud Workload Protection.

Source: CrowdStrike

From the report:

Deep integration with XDR, MDR, and world-class threat hunting delivers unmatched end-to-end visibility and protection across cloud, endpoint, and identity.

It is very clear that CrowdStrike products are seeing increasing success and adoption. With a single-platform infrastructure paired with flexible terms via Falcon Flex, clients can seamlessly enable and test new features with minimal friction.

Acquisitions and Partnership News

There was a lot happening on the acquisition front. It’s been stated in previous articles, but to reiterate again, CrowdStrike often expands its product offering through smaller “tuck-in” acquisitions. So instead of buying established companies, they acquire small, high-tech, innovative startups that they can rebuild and integrate to run on CrowdStrike’s single cloud database.

This contrasts with Palo Alto Networks (PANW), which takes a more aggressive “serial acquirer” approach, buying best-of-breed companies and stitching them together into a full-stack solution, but this often can lead to more complexity.

CrowdStrike’s latest acquisitions are fitting in its approach again. It’s worth noting that only Pangea was mentioned in Q3 earnings, the other two happened in the timesince then. A quick summary of the three:

Pangea (acquired in Sept 2025) provides AI detection and response (’AIDR’) serving a security layer between a user prompt and AI response. It serves to prevent an AI model from revealing proprietary data (via hacker prompt injection) or redacting sensitive information in the case that an employee accidentally pastes it into an AI prompt.

SGNL (acquired in Jan 2026) is a zero-trust solution for AI agents. Typically, once identity tools authorize access, the agents are free to perform actions unhindered, SGNL constantly checks authorization even after initial acceptance, and if the agent acts suspiciously, access could be revoked immediately.

Seraphic (acquired in Jan 2026) provides web browser security. Nowadays, more work occurs in the browser than in installed applications, creating another vulnerable endpoint to secure. Seraphic enables CrowdStrike to treat the browser as a secure enterprise browser, preventing data leaks and malicious extensions.

Viewing these three solutions together, we see that CrowdStrike is expanding its product portfolio to protect the modern AI-driven enterprise.

There were also a few major partnerships updates to highlight:

AWS selected CrowdStrike as the first cybersecurity partner to deliver an integrated SIEM through AWS Marketplace.

Earlier, we mentioned the accelerating adoption of the new SIEM solution, and AWS’s integration of it into its marketplace further reduces friction in the buying process. Being offered through the AWS marketplace is great for product visibility, given that AWS is the #1 cloud provider in the world. Additionally, it’s much less cost-intensive, requiring fewer S&M resources.

On a related note, AWS awarded CrowdStrike Security Partner of the Year (beating Splunk and SentinelOne) and won the Marketplace Partner of the Year (beating Splunk and Salesforce), which lends further to CrowdStrike’s excellence in this space.

EY US has selected Falcon Next-Gen SIEM as the foundational platform powering its global cybersecurity managed services. This makes CrowdStrike the standard for SIEM managed service clients, replacing competitor solutions. Every client who needs managed SIEM services will be funneled into the Falcon ecosystem and with the current single platform structure, additional modules will be upsold in the future. So like AWS, this turns one of the largest consulting firms into a massive sales engine for CrowdStrike.

Conclusion

Quarter after quarter, CrowdStrike continues to execute. With accelerating ARR, continuous module adoption, and product innovation tailored to the AI revolution, they’ve proven again why they are the cream of the crop and show no signs of slowing down.

That said, it’s no surprise that it trades at a premium, personally I have not added in over a year.

However, I’ll be curious if Kris has a different take once he updates his quality score and valuation.

Hi Multis

Kris here. Let’s start with the Quality Score before we go to the valuation and the final conclusion: Is CrowdStrike a buy now?

Do you want to see whether CrowdStrike is a buy?

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I have to confess something. Zack sent me his Shopify analysis a month ago... And I missed it. This weekend, Zack pointed it out to me. I’m very sorry this one had such a long delay. So, let’s not lose more time and start right away.

Hi Multis

Zack here, sharing my analysis on Shopify’s Q3 2025 earnings.

For those who don’t know, Shopify (SHOP) holds a special place in the community because it was the first Potential Multibagger pick at $ 7.74, and it’s appreciated a whopping 1,767% (as of the market close on January 20, 2026).

I’m guessing most of you weren’t holding your breath for this earnings release. I’ll openly admit that I often forget Shopify’s in my portfolio. There’s not much mention of the company on my social channels compared with the more dynamic, up-and-coming names or the companies with dramatic positive or negative price catalysts that tend to dominate retail investor conversations.

Shopify just quietly executes quarter after quarter, and spoiler alert: this quarter was more of that same consistent excellence. We’ll first take a look at the numbers for Q3 2025, and later in the article, I address what I think is the biggest bear case on the company.

The numbers

Q3 GMV (gross merchandise value, the total dollar amount of everything sold on the platform) was $92B, up 32% YOY. That shows that sales continue to grow fast.

GPV (gross payment volume, everything that was paid through Shopify’s payment solution) was $60.2B, up 40% YOY. Again, this shows very strong growth. It’s not only coming from higher sales volume (GMV) but also from greater Shopify Payments penetration, as the graphic below shows:

Source: Shopify Q3 2025 presentation

A higher percentage of sales using Shopify Payments leads to more revenue for the company but slightly lower gross margin. Gross margin came in at 48.9% this year versus 51.7% percent last year. The reason that payments have lower margins is clear. Many players in the payment chain have to be paid: Stripe (or Adyen), Visa and Mastercard, etc.

The CFO, Jeff Hoffmeister, on gross margin:

This year-over-year change in gross margins is driven by the mix shift from subscription solutions to merchant solutions this year that I have mentioned above and on prior calls, coupled with the continued strength of payments overall. Increase in payments penetration will generally drive lower margins initially, but payments is often the on-ramp for merchants to adopt other merchant solutions products.

As a reminder, Payments, which sits within Merchant Solutions, has a lower gross margin (around 39%) than Subscription Services (around 80%). Subscriptions, so the fee merchants pay, have not been growing nearly as fast as Merchant Solutions for the past few years.

Grab your 15% discount for great charts like this at Fiscal.

Merchant Solutions continues to account for a larger share of total revenue over time. But to be clear, this is not an issue at all. As Jeff Hoffmeister said, payments are the on-ramp for future revenue-generating opportunities. Merchant Solutions still generates sizable gross profit, and more importantly, has a strong operating margin because of minimal incremental costs (e.g., headcount), benefiting from economies of scale.

Revenue came in at $2.844B, 32% growth YOY, beating the revenue estimates by 3%. This is very strong topline growth, the fastest of the last 15 quarters.

Grab your 15% discount for great charts like this at Fiscal.

MRR (monthly recurring revenue) was $193M, up 10% YOY.

MRR is a more accurate measurement of merchant value because it removes revenue volatility tied to recognition rules, variable fees, and one-time items. MRR is calculated by taking the aggregate value of all subscription plans at the end of the period, assuming merchants renew the following month. As a result, MRR provides insight into future revenue expectations and demonstrates the stickiness of the product.

At first glance, 10% MRR growth might seem underwhelming, but Jeff Hoffmeister gave helpful context on the call:

We had two headwinds impacting our year-over-year growth rates in MRR. MRR for Q3 last year benefited from the one-month paid trial, which drove MRR higher and made for a tougher comparison this year. Second, we are also lapping the plus pricing changes, which went into effect in Q2 of 2024. We will have some year-over-year comparability headwinds on MRR until Q2 of next year, as our rollout of the three-month trials happened in Q4 of last year and Q1 of this year.

The noise from these changes should clear up by Q2 2026.

Free Cash Flow came in at $507 million, up 20% YOY, with an 18% margin. Again CFO Jeff Hoffmeister:

As I’ve mentioned consistently, we believe that these free cash flow margins strike the right balance between profitability, discipline, and investment in future growth.

To me, this sounds like Shopify could be far more profitable and cash flow positive if it wanted to, but instead chooses to keep investing heavily in the business.

On the expense side of the business, Shopify continues to flex its operating leverage, managing lower expense growth despite higher revenue growth.

Operating expenses were 37% of revenue this year versus 39% last year. The graphic from their quarterly presentation illustrates this continued operational excellence:

Source: Shopify Q3 2025 presentation

CFO Jeff Hoffmeister also explains that headcount is the main source of cost reduction:

Our discipline on headcount has been the key force behind our increased operating leverage. For over two years, total headcount has consistently been flat to down, both sequentially and year-over-year, as we redeploy talent to the highest impact work. Our team’s productivity is rising through automation, better tooling, and the reflexive use of AI, so we can build, ship, and deliver more for our merchants.

Kris had this great chart a few months back:

As you can see, revenue efficiency began to jump significantly with the advent of AI in 2023 and 2024. Shopify is taking full advantage of AI to get the most out of its workforce.

Guidance

For Q4 2025, management expects revenue to grow in the mid to high 20% range YOY, in line with analyst estimates. It is a noticeable step down from the 30%+ growth the past few quarters but management explained this is due to tough comps from last year tied to the expanded PayPal partnership and also FX tailwinds. And of course, let’s not forget that management usually underpromises and overdelivers. Exactly how we like it.

The Big Picture

Taking in all the key metrics as a whole, we see beautiful reacceleration of growth over the last twelve months, with the exception of MRR, which we addressed earlier in the article.

Grab your 15% discount for great charts like this at Fiscal.

Despite a dip in growth rates in 2022 and 2023, growth began to pick up again, especially in the last three quarters of 2025. Combined with reduced operational expenses, Shopify continues to be a fundamentally fantastic company to own.

It’s charts like this that counter the biggest bear case against Shopify…

VALUATION

Most investors plug company metrics into forecasting models that assume decelerating growth over time. As a result, high-growth companies like Shopify often look overvalued.

And it makes intuitive sense. As companies scale, it becomes harder to grow 25% or more from an increasingly larger base.

But investors need to think deeper than surface-level valuation math. Shopify benefits from three advantages that break traditional DCF valuation models: pricing power, optionality, and durability.

Starting with pricing power, Shopify has made substantial increases over the past couple years:

Despite these price increases, there have been no clear signs of merchant attrition. That is what you call a MOAT with high switching costs, every investor’s dream. The price increases led to this:

Grab your 15% discount for great charts like this at Fiscal.

Good luck trying to factor that into a traditional DCF.

Of course, they cannot raise prices constantly. There is a fine line between corporate greed and preserving merchant goodwill. But it is very clear that Shopify can raise prices meaningfully every few years without much adverse effect.

Next comes optionality.

Shopify has meaningful geographic expansion ahead:

Grab your 15% discount for great charts like this at Fiscal.

The United States still accounts for the majority of revenue, but the smaller base and higher growth in other regions show the significant opportunity ahead.

Shopify is also expanding the types of merchants it serves. It is no longer just e-commerce B2C retailers. In the past few years, Shopify expanded into B2B commerce, which opens up higher ticket items and more recurring revenue. Even after two years of triple-digit growth, B2B GMV nearly doubled again in Q3 at 98% YOY.

Shopify has also expanded its offline solutions for merchants with both online stores and physical locations by integrating POS, payments, and back-office tools.

Through these tools, Shopify is creating as many on-ramps as possible so that its platform becomes the default solution for any merchant.

That said, the biggest prize is acquiring Enterprise merchants:

Source: Shopify Q3 2025 presentation

When Enterprise brands join, Shopify is not just collecting higher subscription fees. The real value is the gross payment volume across the entire brand, which Shopify can monetize through payments, B2B tools, POS, and other services that scale alongside the merchant.

In Q3 2025, Shopify announced another big acquisition:

Just last week, the Estée Lauder Companies announced they’re coming to Shopify. This is a global beauty empire with 80 years of heritage and more than 20 iconic brands under one roof: Clinique, MAC, La Mer, Bobbi Brown, and more. And now they’re trusting us to power their next chapter, so why are industry legends like Estée Lauder, Mattel, Aldo, Hunter Douglas all moving to Shopify?

Whether big or small, countries or merchants, Shopify is gaining incremental revenue by catering its product towards a diverse set of markets.

Another source of optionality is new product development, where Shopify has been innovating at a blazing pace.

Of course, not all will be a smashing success. If you remember, Shopify acquired Deliverr in 2022 to expand its logistics capabilities, then sold it a year later after realizing it did not fit its high-margin software model.

Shopify reminds me of Amazon. Ex-CEO Jeff Bezos repeatedly said the company needs big, visible failures because the few massive successes (Prime, AWS) outweigh the many misses (Fire Phone, anyone?). Shopify is similar, constantly experimenting, innovating, and shipping new products that deliver value to merchants.

Here are a couple of their latest initiatives:

Agentic Commerce

Shopify has built tools that make it easier for AI agents to transact on their platform by improving product visibility for agents and creating a seamless checkout experience within conversations.

Source: Shopify.com

If this scales, it unlocks an entirely new channel of incremental GMV for merchants.

Sidekick

Sidekick is a personalized AI assistant that empowers merchants to accomplish various e-commerce tasks more efficiently, such as generating marketing content, automating store operations, editing themes, and providing business insights all through natural language chat.

Source: Shopify Q3 2025 presentation

In Q3 2025 alone, more than 750k merchants used Sidekick for the first time.

The company clearly wants to be at the forefront of e-commerce and AI, and Shopify has been on a steady upward trajectory in terms of both new product development and TAM expansion.

Source: Shopify Q3 2025 presentation

Now we get to the last point, which is durability, specifically in terms of revenue growth.

DCF models often assume companies grow for a set period, usually around 10 years, before dropping to a low terminal growth rate. But some companies with strong moats can compound at double digits for 15 to 20 years or longer. Even at more moderate rates, long runways dramatically change valuation math.

Take Costco as an example. It reported only 8% revenue growth last quarter, yet it trades at a P/E of 50. Investors know Costco is not going anywhere and can continue to steadily compound revenue because the brand and business model have proven durable for decades.

Costco’s historical revenue growth is steady, rarely flashy, but consistently in the high single digits or low teens. And what did the stock do over the last 20 years?

Yes, that’s over a 27-bagger from moderate growth over 20 years.

To make this point clearer, here is an illustration of two scenarios:

Scenario 1: 25% free cash flow growth rate for 10 years and then 2% terminal rate, using a 10% discount rate.

Scenario 2: 15% free cash flow growth rate for 20 years and then 2% terminal rate, using a 10% discount rate.

Believe it or not, both scenarios yield similar present values! Even with 10 percentage points of lower annual growth, the extra 10 years makes up the difference. The power of compounding over long periods is often understated.

So what about Shopify? It is the clear leader in e-commerce and, from my own experience, the go-to solution for anyone wanting to start an online store.

Kris recently posted this:

In addition, take a look at this chart illustrating Shopify’s dominance in the e-commerce platform space:

Source

Shopify is clearly one of the top digital commerce solutions and if we look historically at how they have executed and innovated year after year, I don’t think it isn’t too far-fetched to consider Shopify being around for another 20+ years.

In summary, these factors show why valuing high-quality growth companies is so difficult. It is easy to assume linear or slowing growth, as happens with many mature companies, but Shopify has the characteristics to exceed traditional valuation assumptions.

To further support the point, look at how much analysts revised their estimates over time:

Grab your 15% discount for great charts like this at Fiscal.

In 2025, analysts expected $10B of annual revenue back in 2023, but they revised that up to $11.5B, which is 10% higher. Repeat this dynamic over many years and the compounding of constant beats leads to upside that no valuation spreadsheet can fully capture.

I don’t want to steal Kris’ thunder in his valuation scoring later in the article, but a quick look at historical ratios shows Shopify has always looked expensive:

Some ratios look extreme, with price-to-earnings and free cash flow in the hundreds. Price to gross profit tracks more closely with the stock price but still looks expensive on the surface. A traditional investor could easily argue overvaluation at nearly any point in time.

BUT look at the stock price…

You could have bought at most points in time and still come out ahead. Yes, there were periods of clear overvaluation during the pandemic-era ecommerce boom, but most investors do not go all-in at the top. If you dollar-cost averaged, you would likely be up today, especially if you bought at the 2022 lows.

Reading this now, you might wonder what it means for today with Shopify at the current price. Is it a buy?

I’ll hand it over to Kris for his take on the quality score and the current valuation.

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Let’s take a look at Global-e’s (GLBE) Q3 results.

David wrote this one, but as always, I edited, changed a few things and while David gave the basis for the PM Quality Score and the Valuation, I changed a few things there as well.

Hi Multis, David here. I’m happy to provide you with the earnings analysis of Global-e. Of course, as the company reported over a month and a half ago, this is not a red-hot subject. But with the way this is structured, with the Quality Score and the Valuation, this is still a very valuable article, I hope. Let’s go!

The Numbers

Revenue totaled $220.8 million, up 25.5% year over year and beating estimates by $2.92. The two main revenue components, service fees and fulfillment services, contributed $103.5 million and $117.3 million, respectively. Both segments grew by roughly 25% year over year.

As a reminder, service fees are charges for using the platform and are calculated as a percentage of the gross merchandise volume (’GMV’) processed through it. The more volume flows through the platform, the higher the service fee revenue for Global-e.

Fulfillment services operate differently. Under this model, Global-e manages the full scope of international operations, including shipping, logistics, customs clearance, and returns.

Gross profit came in at $99.6 million, up from $80.0 million last year—an increase of $19.6 million.

Gross Merchandise Volume grew by 33% year-over-year to $1.512 billion, bringing the total GMV for 2025 to $4.208 billion.

Overall, Global-e’s results were solid and the stock surged following the earnings release.

The Shopify Partnership

Global-e and that other Potential Multibagger, Shopify (SHOP), recently renewed and strengthened their strategic partnership. In October, they announced that Shopify’s Shop Pay will now be available to Global-e merchants. Shopify merchants can now offer one-click checkout with pre-filled customer details.

Atlee Clark, VP, Partnerships at Shopify:

Shop Pay offers merchants an accelerated checkout experience that drives conversion and enhances customer loyalty. By making Shop Pay available on Global-e’s platform, brands using Global-e can now offer a consistent, seamless checkout experience to their international shoppers.

This announcement further deepens the partnership, demonstrating that both companies are committed to working together. Shopify also owns about 12% of the shares of Global-e. This reflects more than a simple collaboration. Both want cross-border e-commerce to become a standardized, scalable solution. For merchants, it reduces barriers to international expansion. For Global-e, it reinforces its role as the backbone of Shopify’s cross-border commerce.

Business Growth

Global-e is expanding its business on multiple fronts.

The company recently announced new customer acquisitions, including Everlane, Aritzia, Coach, D1 Milano, October’s Very Own, and Le Coq Sportif. While not all brands are household names, consistently adding new customers is essential to keep the growth alive.

The expansion of its existing merchant base is strong. Bang & Olufsen and Tom Ford entered new European markets, Helmut Lang and JPY Entertainment expanded into Japan, and Vuori extended into over ten countries, demonstrating that Global-e’s services enable clients to seamlessly enter new markets.

Observing the impact of these customers on revenue is particularly insightful. While overall revenue has increased, it is interesting to identify which segments are driving this growth.

Revenue geography remained largely stable, with approximately 53% generated from the United States. Nevertheless, growth in non-U.S. markets should not be underestimated. Global-e remains primarily U.S.-focused but has significant potential for international growth.

Another key area to consider is sales and marketing, particularly the company’s investment in expanding revenue streams through targeted efforts. Notably, the company spent $146.2 million during the first nine months of this year, down from $179.7 million over the same period last year.

This indicates that aggressive marketing spend is not necessary to drive revenue growth. The company highlighted this as a positive development, noting its use of AI-powered tools to improve demand generation and outreach programs.

Adjusted Guidance & Future

Global-e raised its full-year outlook.

Overall, Global-e has provided a stronger outlook across key metrics, including GMV, revenue, and adjusted EBITDA, reflecting confidence in the company’s performance. The company is on track to achieve its first profitable year in 2025. And with strong cash flows coming in, Global-e’s got the firepower to keep investing in growth.

Conclusion

Global-e delivered a solid Q3 2025, with good revenue growth, driven by GMV. The company continues to benefit from its strategic partnership with Shopify, which strengthens its position as a backbone for cross-border e-commerce. It helps merchants to expand globally with reduced friction.

The addition of high-profile clients and the expansion of existing merchants into new markets demonstrate the scalability and effectiveness of Global-e’s platform. While the U.S. remains the largest revenue contributor, growth in non-U.S. markets shows meaningful international potential, signaling that the company’s expansion strategy is already yielding tangible results.

Looking forward, Global-e’s outlook remains positive. With robust growth, expanding international presence, and a strong partnership ecosystem, the company has the tools and strategy in place to sustain its momentum and capture further market share, while navigating the complexities of global commerce.

The Potential Multibaggers Quality Score

Let’s look at the Quality Score and the Valuation Score, to see whether Global-e is attractive to buy now.

After Q2, Global-e scored high on the Valuation Score and it’s up 20% since. Don’t miss the next opportunity.

And now, for just a few days, there’s a 20% discount. Grab that discount now before it’s gone!

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The Q3 earnings season is over and Q4 is already almost knocking on the door. There are a few companies left that we haven’t covered the Q3 results yet, and that’s something we will do now. Celsius Holdings (CELH) is one of these. David analyzed the earnings. The stage for you, David!

Hi Multis

Without much ado, let’s dive right into the numbers.

The Numbers

Q3 2025 Revenue: BEAT

Q3 revenue reached $725.1 million. Although slightly lower than Q2’s $739.3 million, it surpassed analyst expectations of approximately $720 million.

Celsius posted 173% year-over-year growth, primarily driven by the inclusion of Alani Nu’s results. Alani Nu generated $332 million in sales, its strongest quarter to date, supported by successful limited-time offerings.

As noted last quarter, the Alani Nu acquisition continues to pay off. With two quarters now reported, Alani Nu is clearly sustaining overall revenue growth for Celsius.

Gross Profit

Gross profit totaled $372.3 million, up from $122.2 million the previous year, representing an increase of $250.1 million.

Gross Margin:

A year ago, Celsius operated with significantly lower gross profit margins: 46% in Q3 2024. This quarter, the company again delivered solid results with a 51.3% margin, slightly below Q2’s 51.5%. Very few beverage brands have 51% margins while continuing to expand market share.

Celsius posted solid numbers across the board for Q3. Let’s take a closer look at what else they accomplished.

The PepsiCo Connection

Celsius maintains a strategic partnership with PepsiCo focused on the energy drink category. In August, the two companies announced a deeper partnership.

PepsiCo is expanding its distribution network for Celsius Holdings, including Alani Nu, across the U.S. and Canada. PepsiCo purchased $585 million in newly issued convertible preferred stock from Celsius. Celsius, in its turn, acquired the Rockstar Energy brand from PepsiCo in the U.S. and Canada.

This is already a significant partnership. Celsius also appointed Garrett Quigley, formerly President and SVP of PepsiCo and the man behind Pepsi Max, to lead the company’s expanding footprint.

Integrating Alani Nu into PepsiCo’s distribution network should accelerate its reach and support its positioning as the fastest-growing brand in the energy drink category.

This appears to be a mutually beneficial partnership. Celsius can further leverage PepsiCo’s scale and expertise, especially in North America.

Meanwhile, adding Rockstar to the Celsius portfolio may not materially change results today, but it signals that PepsiCo is leaning into Celsius’s understanding of the energy drink market and prefers partnership over competition.

PepsiCo clearly does not want to lose ground in the energy drink space. Increasing its investment in Celsius allows PepsiCo to benefit from category growth without directly competing against Celsius, creating a strategic, non-competitive alignment.

CEO John Fieldly emphasized this:

Stepping into the role of PepsiCo’s strategic energy drink captain in the U.S. is expected to be a pivotal milestone in our journey to shape the future of modern energy and grow our brands within a leading beverage distribution system.

With a proven functional beverage portfolio and a stronger long-term partnership with PepsiCo, we believe that Celsius Holdings is well-positioned to deliver greater innovation, sharper execution and sustained brand growth. Together, we will reach more people, in more places, more often, with a total energy portfolio that offers options for every consumer and creates greater value for all our stakeholders.”

Looking back at the Q2 data, Rockstar held only 2.4% market share. No surprise, then, that PepsiCo is comfortable letting Celsius manage the brand.

Strengthened partnership for Celsius, extended reach, and a stronger brand growth of Alani Nu, and for PepsiCo, a bigger foothold in the growing energy drink market. That all sounds good.

Historically, similar partnerships succeed when both parties stay aligned over the long term. The key questions now are:

• How far can Celsius expand with PepsiCo’s support?

• How committed is PepsiCo to the partnership over time?

While the upside is significant, the risk of dependency is real. Switching costs are another consideration. Celsius must pay a $246 million termination fee to move Alani Nu into PepsiCo’s distribution system. PepsiCo, however, has agreed to cover the entire fee, which reduces the financial risk for Celsius.

Transitioning distributors always comes with operational challenges, but the long-term benefits—improved shelf placement, distribution scale, and better execution—should outweigh the near-term friction. So far, PepsiCo appears genuinely committed.

Expansion

In our Q2 analysis, we highlighted Celsius’s expansion strategy. In Q3, the full portfolio represented 20.8% of the market, up from 17.3%. Excluding Rockstar’s 2.4% share, core CELH/Alani Nu market share increased 1.1%, driven largely by Alani Nu’s rapid rise. Alani Nu held a 3.6% share in Q4 2024 and has nearly doubled to 7.2%.

As noted earlier, Celsius appointed ex-Pepsi President Garrett Quigley to oversee international operations, which is a clear signal that global expansion is a priority.

Last quarter, I mentioned that I couldn’t find any Celsius products in my area. During a recent trip through several European countries, however, I noticed that Celsius products are much more widely available there.

In France, the brand now reaches 88% of shoppers through offerings in Carrefour, E. Leclerc, Intermarché, and many others. In Belgium and Luxembourg, it expanded through Delhaize and Intermarché. And this is only part of the expansion I’ve seen.

Planning international expansion is one thing; executing it efficiently is another. A brief shopping tour revealed that Celsius products are still not as prominently displayed as Monster or Red Bull. In several cases, my partner and I had to ask whether the stores carried the products, and employees directed us to their locations. The cans were often placed very high or low on the shelves, rather than in the premium positions typically occupied by Monster and Red Bull. Below is an image of what I found at a Delhaize in Belgium:

It will be interesting to see the results of their increased expansion. For the full year, Celsius reported international revenue of $70.6 million, a 30% increase from the same period last year. For the quarter, I calculated revenue of $23 million, which is slightly lower than the previous quarter’s $24.8 million.

Conclusion

Celsius delivered another strong quarter, supported largely by the continued absorption of Alani Nu’s revenue and steady margin improvement. The PepsiCo partnership remains the most important long-term catalyst, expanding distribution for both Celsius and Alani Nu while signaling PepsiCo’s deeper strategic alignment through its additional investment. The handoff of Rockstar and the transition of Alani Nu into PepsiCo’s system reinforce that PepsiCo sees Celsius as a core player in its energy portfolio rather than a short-term experiment.

At the same time, Celsius is executing on international expansion faster than expected. Shelf placement and visibility still lag the leaders in many markets, but distribution breadth is increasing meaningfully, particularly across Europe. That early presence gives Celsius room to scale as the brand gains recognition.

Key risks remain execution-related: dependence on PepsiCo for distribution, the integration and expansion of Alani Nu, and potential slower-than-expected international sell-through. Nevertheless, the growth narrative remains intact. With increasing market share, strong margins, and an expanding footprint, Celsius appears well-positioned to continue outpacing the broader energy drink category.

The Potential Multibaggers Quality Score

Let’s look at the Quality Score and the Valuation Score, to see if Celsius is attractive to buy now.

Back in Q4 2024, Celsius scored 9/10 at $25. It’s up +105% since. Don’t miss the next opportunity.

And until Saturday, there’s a 20% discount. Grab that discount now before it’s gone!

Yes, I want this!

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Baurzhan here to cover Sea’s (SE) third-quarter results.

Before I start, I should confess: as a relatively new writer on the Multibaggers service, it’s a special pleasure to write quarterly updates on this company! The reasons are simple: the “nerd-level” detail in the business trajectory (yes, I am a proud nerd since high school), leadership’s pragmatic “we do what we said” approach, and the gaming division, which still amazes me with its creativity. Hope you’ll enjoy this article as much as I enjoyed writing it.

The company reported Q3 earnings on November 11, and the stock initially reacted well but then gave it all back and dropped.

The stock is down 37.5% since October 8.

Get 15% off for Fiscal with this link.

Is this the perfect Christmas gift from Mr. Market? Kris will tell you at the end of this article.

Before the Q3 update, let’s quickly recap the previous quarter, the Q2 quarter.

In Q2, the company surprised the market with revenue acceleration, but slightly missed the EPS consensus. The results confirmed the business caught another wave of growth and began to press harder on operating leverage. All three segments delivered: Shopee showed resilient GMV and improving profitability; Monee scaled fast with strong loan growth and stable credit quality; and Garena rebounded with renewed engagement and monetization momentum. Does the story keep rolling? Let’s see.

In the 3rd quarter, Sea crushed the revenue consensus again, this time by roughly $370 million, to $5.99 billion or a whopping 6.5% higher than the consensus. Poor analysts, beaten up big time for the second quarter in a row.

On GAAP EPS, Sea missed the consensus by $0.15, delivering $0.59. It may be the main reason for the negative price action. That’s not a tiny miss this time but management has been very clear: the priority is competitive moat and long-term growth, and that requires investments. Once they reach comfort on scale and moat, they can prioritize and deliver profitability. Sea did it before, they will do it again, no doubt here.

Let’s start with the overall group results.

Group Key Financial Highlights

• Gross profit rose 43.4% YoY to $2.6B (+7.8% QoQ);

• Margin expanded 14.3 pp YoY and dipped 2.4 pp QoQ.

• Operating income surged 135% YoY to $476M, but dipped 2.4% QoQ.

• Net income surged 135% YoY to $375M, but fell 9.4% QoQ

• Total adjusted EBITDA was $874.3M, up 67.7% YoY and 5.4% QoQ.

• Sales & marketing expense rose 30.9% YoY to $1.15B and up another $150M QoQ, but stayed within 19% of revenue.

Hey, operating in 8 core highly competitive markets (Indonesia, Taiwan, Thailand, Vietnam, Singapore, Malaysia, The Philippines, and Brazil), deeply localizing in each and still delivering 38%+ revenue growth… that’s hell of a challenge. Hats off to the team.

Now let’s dive into segment results.

Business Segment Results in Q3 2025

Starting with Shopee, launched as a “side project” to Garena in 2017, it’s now nearly 72% of the group’s revenue. Talking about a successful side project.

E-commerce (Shopee)

The first course in our three-course meal.

Revenue of $3.8B, up 34.9% YoY and +13.9% QoQ.

GMV (Gross Merchandise Volume) grew 28.3% YoY to $32.2B, +8% QoQ. The company now expects full-year GMV growth of more than 25%. Core marketplace revenue (from transaction fees and advertising) increased 55% to $3.1B.

The management continues the disciplined execution of its multi-market playbook:

Step 1 – probe the market with low-value orders and gather deep market insights (e.g., Mexico, Chile, Colombia), then make a fast “go/no-go” call (e.g., exited multiple European countries).

Step 2 - build “critical mass” in logistics (MELI sends a high five here) and localize deeply to deliver a superior user experience (e.g., Indonesia, Brazil) — the long-term moat foundation.

Step 3 – scale and monetize, moving upmarket (e.g., VIP membership in Indonesia, Thailand, Vietnam).

Step 4 – Repeat steps 1–3 in adjacent markets to leverage logistics infrastructure and regional learnings.

The result: a record-setting quarter, with new highs in quarterly GMV and gross order volume.

Let’s unpack what’s driving the numbers. I’ll quote CEO Forrest Li below (bolding is mine):

We launched SPX Express in 2018 when we recognized that reliable and cost-effective delivery was the most urgent logistics demand in our market due to wide differences in geography and in structure.

Over the years we have learned how to deliver packages by truck, plane, boat, motorbike, and more.

We deliver well in dense, congested, and high-rise cities. We also deliver well in rural areas where we need to cross rivers, navigate rice fields, and locate homes without formal addresses or postal codes.

This experience has given us a very deep understanding of every region in our market.

Our delivery capability has now developed to the point where we can identify and deploy service quality improvements addressing specific user needs in different markets. This helps us to serve more user baskets better while improving our operational efficiency even further.

In Indonesia (a country of 6,000 (!) inhabited islands, a logistic nightmare), Shopee saw strong urban demand for ultra-fast delivery, rolled out same-day and instant options (under two hours), and drove 35% YoY growth in fast-delivery orders in Greater Jakarta (the capital).

For rural areas, they introduced a lower-cost delivery solution, cut cost per order by 20%, and grew orders outside Java (the largest and most populated island) by 45% YoY in Q3.

In Taiwan, demand looked different: many buyers prefer self-pickup, so Shopee scaled its automated locker network to 2,500+ locations in under three years. It’s the only e-commerce player at that scale in Taiwan and lockers now account for 70%+ of deliveries. This made customers happier and reduced costs: lockers run at 30% lower per-order cost and also serve as last-mile hubs, a big reason Taiwan delivered double-digit GMV growth.

This management team is also excelling in logistics from the other angle. Here’s another example from Forrest Li on doing it smartly:

In previous calls, I have shared updates on initiatives such as Intelligent Demand Forecasting where we pre-ship commonly ordered products closer to where we anticipate buyer demand will be.

This helps us reduce buyer waiting time and fulfill orders more cost efficiently. For instance, in Indonesia, if we wait until an order comes in from a remote island before shipping the item out from Java, we must rely on more expensive forms of transport such as airplanes to get it there quickly.

In Brazil, logistics also continued to shine (and with MELI investing heavily there, you have to): average delivery time improved by about 2 days YoY, and Shopee Mall GMV grew more than 2x YoY.

The cherry on top (from Forrest Li):

We are investing in this capability in a capital efficient way, for instance by mostly leasing rather than buying land and warehouses. The most intense investment comes not in the form of money, but in time and effort.

It’s a costly game, but Shopee is keeping it profitable as scale kicks in.

So logistics, one of the core advantages in this business, is a priority, as you can clearly see. And the company succeeds.

What about the monetisation progress? Pretty good, it seems.

Ad revenue rose 70%+, and ad take rate expanded by 80+ bps YoY in Q3. The number of sellers using ad products rose 25%+, and average ad spend per seller rose 40%+ YoY (compounding growth). This is helped by smart partnerships with YouTube: Shopee orders driven by YouTube content across Southeast Asia grew 30%+ QoQ.

This worked great, right? So, of course, they’re pushing it further: announcing a Meta partnership that enables seamless product promotion and checkout between Facebook and Shopee accounts and extending YouTube to Brazil. No wonder purchase frequency across markets rose 12% YoY and average monthly active buyers rose 15% YoY. Both are clear signs of more compounding growth, music to long-term investor ears.

And premium expansion is moving fast, too. The Shopee VIP membership, comparable to Amazon Prime, grows fast. Another great nugget from Forrest Li on the earnings call:

“Our subscription-based Shopee VIP membership program is a great example and it has continued to gain strong traction. By the end of September, VIP members across Indonesia, Thailand, Vietnam surpassed 3.5 million, up more than 75% from the previous quarter.

Given the price sensitivity of many customers in our market, the success of our VIP program shows the high value we are delivering to our customers.

VIP members are demonstrating higher engagement in Indonesia. These members spend around 40% more after subscribing to the program. Shopee VIP members also buy three times more frequently and spent five times more than non subscribers in the third quarter, accounting for about 10% of total GMV in Indonesia.”

So, this was the first course. Let’s move to the second course, Sea’s “crown jewel,” as Kris calls it: Monee, followed by dessert: Garena.

Digital Financial Services (Monee)

• GAAP revenue:$989.9M, up 60.8% YoY and 12.1% QoQ.

• Consumer and SME loans outstanding: $7.9B, up 71.7% YoY and 14.5% QoQ.

Credit expansion drove growth while risk stayed under control: NPL 90+ rose 0.1pp QoQ to 1.1%, but improved 0.1pp YoY.

Keep in mind: this is far more conservative than Mercado Pago, where similar delinquency metrics can run much higher (e.g., high teens), partly because Mercado Pago’s credit book is broader and includes different risk buckets (like credit cards).

Monee key highlights in Q3 2025

The idea behind Monee is is simple. Shopee has a big (and growing) e-commerce customer base, and the goal is simple: make payments seamless and remove friction. If they have the money, let them pay fast with the most convenient methods (easy, not very profitable). If they don’t, offer credit.

On the seller side, if a merchant needs working capital to stock up and sell more, give it to them fast. This can be an even bigger opportunity in emerging markets. The reason is simple: many SMEs (small and medium-sized businesses) are underserved by traditional banks because underwriting still leans on “official” financial statements and rigid rules. Of course, many SMEs in emerging markets don’t have those. Even when they do, traditional bank processes can take weeks (or even months) and “time-to-yes” / “time-to-cash” is often a matter of life-or-death for a small business.

This is where digital finance platforms like Monee win. They can underwrite using alternative data (e.g., transaction signals from Shopee) and fund almost instantly.

The results speak for themselves.

The credit portfolio continues to grow on the back of cross-selling to Shopee’s buyer and seller base. Monee added >5 million first-time borrowers this quarter. This helped active users across consumer and SME loan products reach 34M, up 45% YoY.

Thailand’s loan book surpassed $2B as of the end of September. In Brazil, the loan book grew 3x YoY in Q3, driven by improving portfolio quality and stronger user performance.

On-Shopee SPayLater GMV penetration ranges from single digits in early markets to 30%+ in mature ones and it’s still deepening.

So, SEA clearly nails the cross-sell. But the ideal outcome is when the product is so good that people want to use it outside Shopee, too, right? This is exactly what the management team has achieved. The numbers speak clearly there:

Off-Shopee SPayLater / BNPL grew 3x YoY and 40%+ QoQ — and it’s still <10% of the total loan book. In Brazil, personal cash loans grew by ~50% QoQ.

Forrest Li also framed it nicely:

Range of merchants is a key pillar of our strategy to grow our money businesses of Shopee in payments. It offers users a faster and more seamless experience, giving them direct access without having to go through the Shopee app.

Beyond payments, it helps us unlock more use cases, positioning ShopeePay as a one stop platform for users, broader financial needs of Shopee credit, insurance, wealth management and more. The app has launched in Indonesia, Thailand, Vietnam and Malaysia and is showing strong traction. More than 20% of our ShopeePay monthly transacting users are using the standalone app.

Scaling with risk control is the formula and you can see it in the EBITDA.

Just be patient and enjoy the show. Monee should keep shining for years, like a proper crown jewel. Now, please enjoy your dessert.

Digital Entertainment (Garena)

GAAP revenue rose 28.4% to $559.1M. Bookings accelerated to +51% YoY, reaching $840.7M. Growth was supported by record user scale and higher paying-user penetration.

This was Garena’s strongest quarter since 2021 and we all know 2021 had COVID tailwinds with everyone stuck at home. Nowadays, without such tailwinds, Garena managed to achieve similar bookings by building the intrinsic interest in its digital entertainment. Quarterly active users even surpassed the COVID era, and paying users got very close to those levels too.

You get more insights like these with Fiscal. I took it with Kris’s link (15% off!), and I’m very happy with the subscription.

As a result, ARPU also grew 15.3% YoY to $12.8 (and 19.6% QoQ).

Outstanding performance. The key driver is the cash cow, Free Fire, launched about eight years ago. Garena didn’t just squeeze the hell out of it and let it die. It kept breathing new life into it with creativity and sharp IP collaborations.

Remember last quarter. I got excited about Squid Game (the Netflix phenomenon) and Naruto (the iconic anime). This quarter showcased exactly why.

Just listen to Forrest Li:

“Free Fire anchored this strong performance with two high impact campaigns, Squid Game and Naruto Shippuden Chapter 2. The campaigns received a huge positive response, accelerating our growth momentum from the previous quarter.

Our Squid Game collaboration incorporated iconic challenges from the blockbuster Netflix TV series such as Red Light, Green Light and the Glass Bridge. The event drove strong participation with the Red Light Green Light Challenge being played more than 300 million times in the quarter.

And then about the even deeper, more creative Naruto collaboration:

Our Naruto Shippuden Chapter 2 event expanded on the resounding success of Chapter 1 in the first quarter of this year.

Based on gamer feedback and performance insights, we identified new fan favorite ninja characters, new attack mechanics, highly sought after collectible items, and a new one-on-one mode letting players use signature abilities from the series.

Chapter two went on to surpass Chapter one in both engagement and revenue. We saw an extremely high social media share rate for Chapter two, double the already high bar set by our eighth anniversary event.”

As a former semi-serious gamer (and a Naruto fan), this sounds incredible and I see where the magic is. Incorporating new attack mechanics and items, not just ninja characters... Honestly, I envy the kids playing this.

And when Forrest Li explains how they do it, it all makes sense:

This strong focus underpins how we take IP collaboration to the next level, and it is driven by Garena’s core creative culture.

First, we require every major IP partnership to be led by a team of genuine super fans of Dart IT within Garena to ensure authenticity and respect for the original work.

Naruto fans loved how closely the gameplay mirrored small but important details from the anime. For instance, one key storyline from the original anime was about rogue ninja returning to desecrate the ninja village they had been exiled from.

In Chapter one, we had built this ninja village into our map and introduced iconic attack skills from the main anime characters.

In Chapter two, we introduced attack skills that were specifically from the rogue ninja characters like fireballs, black fire and exploding birds, and redesigned the map to feature a destroyed version of the ninja village.

Zooming out, it’s the same formula again: deep localization + investment in the moat. Here it is applied to creativity, not logistics, but it shows SEA’s strength.

Beyond Free Fire, the team has also published other mobile titles.

For instance, they launched EA SPORTS FC Mobile in Vietnam and it became the country’s most downloaded mobile game in October.

These initiatives should push profitability even further. Digital Entertainment adjusted EBITDA grew 51% YoY, about 20pp faster than GAAP revenue.

And there might be more title hits to come, although Forrest didn’t throw much light on the 2026 pipeline, but promised to provide more details for the fourth quarter.

I hope you enjoyed the dessert as much as I did.

But the house wants to offer you a digestive drink. Maybe a few words on AI, since we’re living in an (imaginary?) AI bubble?

SEA is super pragmatic and AI is no exception. Forrest Li:

We try to focus on the applications and how to connect those fantastic technology to people’s daily life from every corner of the world. We believe we’ll see some similar pattern of AI revolution.

Probably we believe this impact and the value creation will be much, much bigger at this moment. We’re like the things you mentioned. Okay. We probably were not going to do what the big tech is going to do. We’re not going to like develop the... trying to make some fundamental large language model breakthrough. We’re not going to build data centers.

Sea is using AI in a practical, ROI-driven way: better search and recommendations, more personalized discovery, generative tools for sellers (images/video/text), and AI-driven customer service. It will partner with existing AI leaders rather than build its own data centers or foundation models. That is also a legit strategy.

Conclusion

It’s time for the conclusion. This quarter looked even better for the long-term trajectory than the previous one, despite slightly weaker margins. The market punished the stock, but for long-term investors.

I’m as curious as you about how Kris’s Quality Score and Valuation insights will turn out.

Hi Multis

Kris here. I think you will agree with me that Baurzhan did a great job with his earnings analysis. Let’s go to the Quality Score and the Valuation to see if the stock’s op opportunity now.

Here, the free part ends.

Do you want to know if SEA is a buy now?

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Read more

I know many of you have been waiting for this one, Karan’s analysis of the Nu Holdings (NU) earnings.

It even sparked this fun conversation in our Slack group.

So, let’s go to the analysis. For those who don’t know Karan yet, he is a banking insider working for one of the Big Four US banks. So, he’s perfectly placed to analyze Nu Holdings.

And let me tell you already, it will have been worth the waiting! This is the perfect weekend read.

The floor’s yours, Karan.

Alright, folks, it’s time to check in everyone’s least interesting bank, NU Holdings.

I would have said everyone’s least interesting Potential Multibaggers pick, but that title belongs to Kinsale. Why do I call it “least interesting bank”? Because it rarely gives us a reason to panic when it comes to fundamentals.

Now let me begin with a mea culpa. Kris first asked me to cover this name on 14th November, so there’s been a 2-week delay on my part because of life, etc.

Apologies for the delay, but the fault is entirely my own. Fortunately, the stock has been up since then. :-)

So just by delaying this article, the price has gone up, you’re welcome. But more crucially, we need to understand where this leaves the stock from a price vs value perspective.

Since we’ve covered NU at length for several years now, there’s already a solid foundation in place as to its key drivers, so here we will focus on the highlights to see if there are any red/yellow flags we should worry about, when it comes to:

• Financial Performance (Revenue, Costs, Profitability)

• Credit Performance

• Future Growth Plans

After this, Kris will amend his Quality and Valuation Scores so you can get a sense of how attractive the stock is right now. So, let’s get into it.

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Financial Performance

Revenue: $4.17 billion, up 41.8% YoY, which was a beat by $130 million. That’s 3.2%.

Costs: Operating expenses climbed to 697.1 million (up from 667.6M in the previous quarter). I couldn’t find any specific management commentary around this either in the ER or the earnings call, but given that we have overall efficiency and return metrics climbing, the important thing to note is that these are growing slower than revenue, so NU is clearly showing operating leverage, as we will see.

Other Key Metrics of Note:

Total customers now stand at around 127 million, with 4.3 million new additions (representing growth of 3.5% Q/Q and 16% Y/Y), and the activity rate remains at 83%.

This breakdown is spread across Brazil (110 million, 60% of adults), Mexico (13 million, 14% of adults) & Colombia (4 million, 10% of adults)

Monthly average revenue per active customer of $13.4 increased from $12.2 in the previous quarter and $11.2 in the year-ago quarter.

Deposits increased 48% YoY FXN to $38.8 billion

Total receivables across Nu’s credit card and loan portfolios expanded 40% YoY FXN and 8% quarter-over-quarter FXN to $30.4 billion, while its total Interest-Earning Portfolio increased 62% YoY FXN to $13.8 billion on March 31, 2025.

Purchase volume (so all the money transacting on the platform) increased to $36.5B (vs. the Visible Alpha consensus of $35.8B), from $33.3B in the previous quarter. Total originations (new money flowing in) grew to $4.2B from $3.6B in Q2 and $2.9B in last year’s Q3.

Honestly, all good news here and signs of healthy growth everywhere across both assets and liabilities

Profitability

The efficiency ratio improved to an outstanding 27.7%%.

The efficiency ratio in banking measures how much a bank spends to generate one dollar of revenue. You can calculate it like this: Operating expenses ÷ Net revenue. So, you understand: the lower, the better.

Excluding a one-off impact related to deferred tax assets, the efficiency ratio would be an impressive 26.7%. As a reminder, an efficiency ratio below 60% is world-class. Nu is twice as good as the definition of World Class.

Other key metrics:

Gross Profit - $1.8 billion, down 3% sequentially but up 32% YoY FXN.

GAAP net income for Q1 was $783 million, marking a tremendous 74% YoY increase FXN.

Adjusted net income surged to $606.5 million.

GAAP EPS of $0.16 came in one cent higher than the expectations of $0.15, up from $0.13 YoY & QoQ’25

Return on equity remained robust at 31%%, despite maintaining an arguably over-capitalized position with more than $4.3 billion in excess capital across geographies. In other words, it keeps $4.3 billion more on its books than it has to. I believe the technical term for this is “Crazy.” Or “Opportunity.”

The monthly average cost to serve per active customer remains “ridiculous.” Ridiculously low, just to be sure.

• $0.90 per customer in Brazil, a 4% year-over-year reduction and a 12% quarter-over-quarter decline on an FX-neutral basis.

• $1.0 in Mexico, 25% CAGR reduction on an FXN basis since 2021

• Colombia has not broken out yet because it’s still very new but I suspect it’s lower than the competition, whatever it is.

Again, truly elite levels of efficiency.

I want to make a quick comment on why NIM (net interest margin) seems to have declined since I saw it referenced and this exchange was very helpful in understanding the overall context.

I’ve highlighted the important bits if you want to skim through quickly.

Jorge Kuri Morgan Stanley, Research Division

My question is around your net interest margin. I heard what Lago said about the mix of credit being responsible for the decline in NIM. I have -- I’m looking at just the nominal numbers and your interest income was up 14% quarter-on-quarter versus a loan book in total that was up 11%. So, it doesn’t seem that you’re growing your income less than the assets, which would be sort of like a signal of mix deterioration. It’s actually the other way around.

But on the flip side, your interest expense was up 24% quarter-on-quarter versus your deposits up 6%. And so, you talked about the cost of deposits coming down, but it’s just in this -- in dollar numbers, it’s kind of like doesn’t add up. And so, I’m just wondering if you can walk us through these dynamics and exactly what explains that NIM contraction.

Guilherme Marques do Lago Chief Financial Officer

Sure, Jorge. Look, 2 things on this. So first on the revenue and then on the cost. I think on the revenue side, we have seen the growth being kind of more heavily weighted into less risky assets, not only asset classes per se. For example, you can see that if you go to Slide 12, you can see that, for example, secured lending has outpaced the rest of the portfolio. Secured assets have, everything else constant, lower kinds of yield levels.

But even within lending and within credit card, Jorge, we are seeing kind of a faster growth on a balanced basis. towards less risky customers that would have, all else equal, kind of lower yields.

So that is one of the things that would justify, but you correctly pointed out that we have also seen an increase in interest expenses, and that has come entirely from Brazil. So, our average funding cost in Brazil has gone up and the average funding cost in Mexico and Colombia have been coming down.

So, the combination of lower asset yield because of the mix with a slightly more expensive funding base in Brazil has compressed net interest margins in the quarter, which is what you see on Slide 15 that has gone from 17.7% to 17.3%.

What I would, however, point out is, when you’re taking into account the asset quality or the cost of risk, you actually see an expansion in margin. And that is what is shown on the subsequent slide, which is Slide 16. Our risk-adjusted margin has actually gone up from 9.2% to 9.9%, which goes to show that even though we have kind of increased the growth towards less risky assets that has come at the expense of slightly lower asset yield. This has been more than offset by much lower cost of risk, which has led to the expansion of risk-adjusted NIMs.”

Overall, NIM is down because they’re trying to improve credit quality, leading to a better risk-adjusted NIM. That definitely makes sense to me.

Credit Quality

If bad, these lines go up. NPL = non-performing loan, so a loan that’s not paid back on time.

15-90 continues to go lower, 90+ goes higher. Why does this happen? Interest snowballs mostly, but the front end (15-90 NPLs) coming down means the back end (90+ NPLs) will eventually come down as NU burns those off. The key is that total coverage ratios remain broadly stable and very elevated. Or in other words, even if none of these loans were paid back, Nu has more than enough cash to cover them and then some.

I see lines that are flat to down, let’s not overthink it: credit remains essentially stable.

The home-run slide from the deck, however, was this: props to the IR team for putting this together:

They’re basically comparing Mexico to where Brazil was at a similar stage about 6 years ago, to show that Mexico is growing much faster and is close to an inflection point where Mexico’s growth will drive NU’s future. Very exciting times if your time horizon stretches out to 2030.

Brazil has more inhabitants than Mexico, but the GDP per capita is higher in Mexico, so that means that the economic opportunity in Mexico is as big as in Brazil.

It’s 2025, and everyone must talk about AI, but did you know NU has its own LLM? Not only do they have their own LLM, but they also published this chart of scaling vs some better-known ones you may recognize.

To make drool all of you, tech nerds:

“To reach this level of performance, the first generation of our nuFormer model was built with 330 million parameters and trained on approximately 600 billion tokens, an unprecedented scale of data by financial industry standards. Yet that represents only a fraction of our full data set, which spans trillions of tokens and reflects the vast scale and diversity of Nubank’s platform.

Our business model with principality at its core generates a deep repository of high-quality transactional and behavioural data, giving us a distinctive edge by enabling nuFormer to learn from richer context and continuously strengthen its predictive power.

Historically, gains in credit performance have come from our main fronts, incorporating more and better data sources into models, expanding training samples or reducing bias within them, optimizing positive frameworks, including the use of complementary models that evaluate different dimensions of credit risk, and finally, refining modelling techniques from definition of targets to model architecture and feature engineering.

The adoption of foundation models represents a radical expansion of this last frontier. It brings a research-driven approach that moves the needle through advances in model architecture and training processes, enabling rapid and continuous improvement as AI researchers push the boundaries of what’s possible.

When we applied this approach, the models were built to deliver an average improvement about 3x higher than what’s typically observed in successful machine learning model upgrades. Translating this into business outcomes, our initial models enable a major upgrade to credit card limit policies in Brazil, allowing us to meaningfully increase limits for eligible customers while maintaining the same overall risk appetite.

This successful breakthrough within an already robust underwriting model, like Credit Card Brazil, underscores the significant potential of these advanced approaches.

We’re now focused on scaling this innovation beyond Brazil, already in motion in Mexico and extending them across every part of Nubank from personalization and cross-sell to fraud and collections, further reinforcing both the strength of our model and our ability to execute at scale.

That said, we’re still just scratching the surface. As always, at Nubank, it’s still day 1, but we believe that embedding AI into our business represents a once-in-a-lifetime opportunity to further differentiate Nubank from traditional banks.

A 3x increase in credit performance for an industry-leading company is outstanding. Very, very impressive for them to have built this using their own datasets, and it gives them an enormous advantage vs. third-party or general models that don’t have the context and delinquency history NU has.

All that being said, NU is still sitting on a fortress of cash and continues to be conservatively managed from a capital standpoint.

So, again, an excellent quarter from NU and we must now ask ourselves if NU is a screaming buy.

The Rules Of Thumb of Bank Valuation

I don’t want to steal Kris’ thunder but I will spend a bit of time expanding on a question from fellow Multi-BK who asked this in the Slack channel:

This is an excellent question and I love that BK asked it. It’s also extremely relevant because most Potential Multibaggers stocks are software-related tech companies, while NU is an exception as a (tech-) bank. So, I will spend some time unpacking these metrics and how to read them in the context of a bank, which are important to keep in mind whether you’re thinking of NU or JPM.

I call these the rules of thumb of bank valuation:

Rule 1: Never use the cashflow statement, it’s irrelevant for a bank that’s essentially a box of revolving cash built on massive leverage.

Rule 2: Metrics like NIM (net interest margin) or ROE (return on equity) help us understand the drivers of a bank’s income, as a standalone they are useless. They must always be combined with leverage, capital and asset quality if you plan to use them for any analysis

NIM is a measure of profitability as a function of asset-liability matching, and as we saw for NU above, it can be “noisy,” i.e., a high value for NIM doesn’t mean it’s a good thing; credit quality matters. You can lend a lot of money in quarter one to everyone and calculate a ridiculous amount of interest, only to watch your credit portfolio crumble in 6 months. So, we should keep an eye on it versus its own history, but NIM is usually more relevant for a mature bank where it drives the majority of revenues, less for one growing as rapidly as NU that’s still acquiring customers and increasing penetration.

Furthermore, remember that a bank is a cash box built on enormous leverage. Most banks operate at around 10%. Even NU, being conservative, operates at about 14%. Which means for every 100 dollars of lending, only 14 is at the bank at any point in time. Welcome to fractional reserve banking.

In other words, assume NU is making 5 dollars on a loan of 100, but it used only 14 of its own money, so to speak, its ROE would be ~36% (5/14) and not 5%, but that’s because it used 86 dollars of leverage that wasn’t counted.

Hence, any metric that excludes the impact of leverage is misleading without context. This also extends to PE or PEG, because the denominator is earnings or EBIT, which doesn’t include total debt. PEG becomes even worse because in theory, you could reduce the amount of equity and juice your earnings in the short term, leading to a high ROE, low P/E and low PEG, but that’s a bank about to blow up.

In a bank, equity is the capital that absorbs losses, so ROE for a bank is better thought of as a measure of how much return investors get for bearing that loss-absorbing risk. Regulators require minimum capital ratios, so ROE must always be against capital and liquidity rules. And as we can see, ALL Brazilian banks have good double-digit ROEs; NU went from “worst” to “best” as a function of its growth.

In summary, a high ROE could mean an efficient, well-run bank, or it could just mean the bank is taking more risk or running with too little capital, so ROE must be read together with leverage, capital, and asset quality metrics.

In conclusion, if you use “standard” metrics that we typically employ for companies, you get junk like this.

If you don’t understand banks, you’d think this was an overvalued “shitco”, not perhaps the best-run banks on the planet.

So, what should we use to value a bank? The safest measure is Price to Book, preferably with adjustments to intangibles (which fortunately NU doesn’t have much of, but it is relevant if a company does lots of acquisitions). Other measures that are commonly used in banking include ROTCE (Return on Tangible Common Equity, which excludes preferred and normalizes the impact of leverage) or RAROC (Risk Adjusted Return on Capital). But as a simple exercise let’s focus on P/B on what NU’s current P/B valuation says about it.

Imagine a bank’s “book value” as the net worth of its assets: cash, loans receivable minus bad debts, office or branch buildings, and deposits owed after subtracting liabilities; it’s like the liquidation value if the bank sold everything today. P/B is simply the stock market price divided by the book value per share, showing if investors are paying a premium (P/B >1) for growth prospects or intangibles like brand, or a discount (P/B <1) due to worries over asset quality or risks.​ So again, P/B<1 means “cheap” but you have to check why.

For banks, P/B is powerful because most value is in loans and deposits (not factories or data centres), which fluctuate with economic health; a fast-growing bank might trade at P/B of 1.2-1.5 if assets look solid, but drops below 1 signal fears of hidden losses or regulation hits. For Non-bankers: Think of it like buying a house. P/B tells if the price matches the appraised land and structure value, adjusted for neighbourhood risks, instead of the owner’s income or growth prospects.

If we apply PB to NU, suddenly the picture changes dramatically:

I added JPM because it’s the best-run large US bank and trades at a premium, reflecting its asset quality and durable growth. It clocks in at a pretty expensive book value of 2.37. INTR, the other Brazilian neobank, is at 2.2; most of the traditional Brazilian banks are much lower, with 2 trading below book.

I would say NU deserves the premium valuation based on everything we’ve seen it do and it’s runway, remember the second S curve incoming, but the market seems to have priced this in based on the P/B.

At the same time, P/B may not be the correct measuring stick for NU. The reason is that it’s a bank, yes, but it’s also not a bank. It has no branches, no expensive (sub)regional lush buildings etc. In other words, the reason it looks expensive on a P/B is definitely also because it just operates much more cost-efficiently. Not having a network of bank branches is a huge asset, but in a P/B valuation, NU is punished for that, not rewarded, which it should.

None of the traditional metrics make much sense so it becomes hard to value Nubank. Neobanks are a new concept. Without much historical comparative material, the analyst community hasn’t really figured out yet a way to value them compared to traditional banks.

Based on traditional metrics that are widely available, PB makes the most sense because NU is a bank after all, but the composition of the book is very different from a traditional bank, so it’s simultaneously also not a great metric to use.

Hope that helped to understand the context around NU a bit more, now off to Kris for his PM Quality Score and his valuation verdict.

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Mercado Libre reported its earnings already at the end of October, and Baur sent me his earnings analysis already a few days later, but I didn’t have the time yet to edit it. I’m sorry for the delay. On the other hand, we are long-term investors and I have written quite a bit about Mercado Libre, for example, in the most recent Best Buys Nows article.

This is what the stock has done since the earnings.

As you can see, it first went up, then dropped (to -18.5%) and now it’s still down 9% compared to the pre-earnings price.

With that context, let’s go to Baurzhan’s analysis.

Hi Multis

Baurzhan here with an earnings update on Mercado Libre (MELI). For long-term investors, what matters most is the business trajectory and that’s what we’ll analyze here.

In the previous quarter (Q2, so not Q3 that we are analyzing in this article), Mercado Libre made several moves that Wall Street didn’t like. It announced aggressive reinvestment in logistics and user acquisition, with lower margins as a result.

Essentially, it gave up short-term earnings to drive higher long-term profits, a decision the market dislikes, but we, as long-term investors, love. Let’s see what this quarter tells us.

At McKinsey, we used to say, “Strategy without numbers is poetry.” So, let’s start with the key numbers to understand the overall business trajectory and then dive deeper.

The Numbers

Revenue: $7.4B (+39% YoY), beating estimates by $200M (27th quarter or almost 7 years of >30% growth, as the only public company worldwide, out of 83,000), see the Best Buys Now article for more context.

EPS: $8.32, missing estimates by $0.98 (-10.5% YoY)

Operating margin: 9.8% (-2.4pp QoQ, -0.7pp YoY)

Free cash flow margin: 35.1% (+9.2pp YoY)
Gross margin: 43.3% (-2.6pp YoY)

FCF margin should be taken with a grain of salt because of Mercado Pago, but I wanted to give it anyway.

Marketplace

Commerce revenue $4.2B (+33% YoY)

GMV: $16.5B (+28% YoY, +35% FX-neutral) (GMV= gross merchandise volume, the total sum of everything sold on the platform)

Items sold: 635M (+39% YoY)

Unique active buyers: 77M (+26% YoY)

Commerce take rate: 25.3% (+1pp YoY)

Mercado Pago

Fintech revenue: $3.2B (+48.9% YoY, +65% FX-neutral)

TPV: $71.2B (+41% YoY, +54% FX-neutral) (TPV = Total Payment Volume, the total value of all transactions processed through the platform)

Monthly active users: 72.2M (+29% YoY)

Credit portfolio: $11.0B (+83% YoY)

Regional Breakdown

Brazil: $4.0B (+38% YoY, 54% of total revenue)

Argentina: $1.44B (+40% YoY, 19% of total revenue)

Mexico: $1.65B (+44% YoY, 22% of total revenue)

Other (combined): $0.3B (+39% YoY, 4% of revenue)

More Insight

E-commerce

This quarter brought several positive shifts in Mercado Libre’s business trajectory.

The platform achieved its fastest user growth since 2021, adding 7 million new active buyers, a 10% increase, in one quarter. 4 million come from Brazil, where free shipping thresholds were reduced.

This user growth clearly shows a strong short-term response to MELI’s investments in logistics and marketing. (Quick recap for new readers: MELI made a key move in Brazil in Q2 2025, cutting the free shipping threshold from R$79 to R$19 — roughly $14 to $3.50.)

CFO Martin de Los Santos also mentioned record-high NPS levels in Brazil during the earnings call, supporting this positive trend. NPS stands for Net Promoter Score and ranges from -100 to +100. It measures how much customers liked the product and experience.

Attracting new customers in a market as competitive as Brazil shows the strength of MELI.

At the same time, engagement per user continues to rise, and items sold per buyer have reached an all-time high. Another impressive sign of deeper platform stickiness.

This shows a deepening moat for Mercado Libre. More users and engagement drive data advantages and scale efficiencies. Kris has used this visual for Scale Advantages Shared. Mercado Libre is a perfect example of this.

You have to make sure you understand how important Mercado Libre is for many people. Have you heard of David Gardner’s snap test? It means that you snap your fingers and the company’s gone. Would many people notice? Mercado Libre is used by many consumers daily, to pay or to buy. A habit is emotional, and once it’s formed, it makes retention much better.

The habit is formed by improving and optimizing the customer journey across:

1. UX/UI for search, comparison, and purchase

2. Broad assortment and competitive prices

3. Smooth checkout and payment experience, with access to credit (credit cards and BNPL with high approval rates)

4. Fast, reliable delivery and smooth claims handling

MELI is simultaneously advancing and leading in all these areas (point 3 will be covered in the next section on Mercado Pago). On point 1, incoming CEO Ariel Szarfsztejn shed some light on how MELI is leveraging AI:

We are extremely excited about the potential of agentic AI to enhance discovery, surveys, and productivity within our ecosystem. We’ve just launched our own Seller Assistant, a conversational tool that gives sellers personalized advice and recommendations on managing their activity on our platform.

Some critics focus on the margin impact of the free shipping initiative in Brazil, seeing it as a form of price cut. In a sense, they’re right, but it’s short-sighted.

The move has bigger long-term advantages. Fulfillment is critical for e-commerce in any market. It involves high fixed costs (warehouses, trucks, planes, etc.), and since MELI doesn’t charge for it now, efficiency becomes essential. CFO Martin de Los Santos confirmed this on the call:

Higher transaction volumes helped us reduce unit shipping costs in Brazil by 8%, with slow deliveries enabling us to leverage on the unused capacity. Brand preference scores reached new record highs across the region, helped by our marketing investments and free shipping policies.

Higher volume also makes the model more sustainable for the long term. On top of that, this competitive advantage is difficult to replicate because it requires substantial capital investments in fulfillment hubs and fleet, geospatial intelligence to identify the most efficient locations, and strong execution and operational excellence. Or, to put it differently, this is why Mercado Libre has been beating Amazon since it entered the Brazilian market in 2012. Even in Mexico, which is so close to the US, Mercado Libre beats Amazon in market share.

On point 2, MELI also lowered seller fees for items priced between R$79 and R$200 (roughly $15–$37), attracting more sellers to the platform.

The company also continues to invest in and improve its first-party (1P) operations, where revenue grew 70% year over year to $0.9 billion. IMELI remains primarily a third-party (3P) platform, but in categories where it underperforms, it directly buys and sells goods (1P) itself.

1P is an addition, not the main activity. It’s meant to improve assortment, quality, and price in those categories MELI chooses. 1P is a different model altogether, as it requires inventory management and exposes MELI to reputational risk if product quality falters. MELI is approaching it smartly and selectively.

Finally, as mentioned on the call, MELI partnered with Casas Bahia, a major Brazilian retailer specializing in furniture, home appliances, and electronics.

The agreement involves Casas Bahia opening an “Official Store” on the Mercado Libre platform to list appliances, electronics, and furniture. Casas Bahia has extensive expertise in handling bulky logistics but will use MELI’s general logistics network for smaller items. The home appliances and electronics are some of the biggest markets for e-commerce.

Fintech: The Crown Jewel Continues to Shine Bright

Kris has always said that he started investing in Mercado Libre because he saw the potential in Mercado Pago, the fintech division of Mercado Libre. It has become the crown jewel.

Mercado Pago’s monthly active users (MAUs) reached 72 million, up 29% year over year.

The credit portfolio grew 83% YoY to $11 billion.

83% is an impressive pace.

Assets Under Management (customer cash, deposits, and investments held in MELI accounts) are rising even faster at +89%. These assets generate both short-term revenue (overnight interest returns) and long-term revenue through lending.

Mercado Pago is rapidly growing the share of users who treat it as their main financial account, especially in Brazil and increasingly in Mexico. “Principal” users, those channeling at least half of their income through the platform, already benefit from yield-bearing accounts and credit products. The next milestone is enabling salary deposits, pending a banking license in Mexico, which could significantly boost engagement and monetization. As CFO Martin de Los Santos said on the call:

“What we don’t have yet is the ability to collect your salary in the Mercado Pago account. In the case of Mexico, this is because we are not yet a bank. We are in the process of obtaining a banking license, and that is a requirement.”

Credit cards now make up 44% of the portfolio, growing 20% quarter-over-quarter and 106% year-over-year. CFO Martin de los Santos on the call:

Our credit card, which plays a key role in NPS and principality, is growing very rapidly, driven by higher usage and share of wallet.

MELI is also gaining share of wallet: average credit card exposure rose to US $406, up 9% QoQ. Finally, a new credit card was launched in Argentina this quarter.

This is another exciting pocket of growth for AuM of Mercardo Pago, because higher debit card activity (of course, driven by e-commerce) drives higher remaining balances, and it’s logical. If you spend more on your card, you keep more money on that card to minimize top-up friction (this is also empirically proven by my analysts at Mastercard Data & Insights when I worked there).

Such aggressive credit-portfolio expansion usually carries risk, which should be treated carefully. However, the 15-90-day NPL ratio stood at 6.8%, up 0.1 pp QoQ but down 1 pp YoY. Note: NPL = non-performing loan, so a loan that’s not fully paid back.

The 90-plus-day NPL ratio also improved slightly to 17.6%, down 0.9 pp QoQ and 0.3 pp YoY. (These loans are fully provisioned through regular P&L charges, which accumulate as reserves on the balance sheet: 15-90-day NPLs are covered at 100%+, and 90-day-plus NPLs at 150%+, reflecting their higher default risk.)

Given such rapid credit expansion, maintaining stable or even slightly better default rates is a strong outcome.

A 17–18% NPL ratio on 90-day-plus loans might sound high, but in high-inflation regions like LatAm, that’s within the normal range. The NIMAL (net interest margin after losses) chart explains why.

From the chart above, two things stand out:

(1) the NIMAL trend is decreasing

(2) it might look unusually high.

For example, Nu Holdings reports a risk-adjusted NIM of 8–9%. However, most of that is driven by macro conditions, so external factors are largely beyond MELI’s control. The 2 pp QoQ and 3.2 pp YoY decline mainly reflects higher funding costs (market deposit rates) in Argentina, where the central-bank rate hit 29%, as management explained.

In high-inflation environments like this, central banks maintain high rates to cool inflation and support the local currency. Where I live, in Kazakhstan, the situation is similar: the central bank rate is 18.5%, savings earn around 19–20% (USD rates capped at 1%), and cash loans reach 40–50%.

Acquiring volume (total payments processed) rose 32% YoY. That’s strong and it’s the result of accelerated merchant adoption and deeper integration within the MercadoLibre e-commerce ecosystem.

Once more, off-platform acquiring (transactions outside of the marketplace) is growing faster. That underlines Mercado Pago’s move toward being a full payment solution, not just a checkout option.

Take-rates (merchant fees) remain stable, meaning volume growth is translating largely into revenue expansion.

The credit-backed acquiring model (acquiring + lending) is proving effective: as merchants accept cards and wallets, Mercado Pago is concurrently growing its credit book and building “stickiness”.

The Advertising Opportunity

Mercado Libre’s advertising revenue surged 56% year over year (63% FX-neutral) versus 38% in USD terms in Q2 2025. So, that’s a clear acceleration. Display and video ads are nearly doubling. Management attributed this acceleration to new strategic initiatives, especially the April 2025 integration with Google Ad Manager and partnerships with Roku and HBO. The advertising opportunity for MELI remains substantial, backed by its vast data ecosystem and user insights.

Kris has shared this chart already a few times but I think it remains impressive that Mercado Libre is beating Amazon on advertising as well.

Looking Forward: Secular Tailwinds Intact

Last quarter, Kris showed that the top 10 e-commerce markets had online penetration rates of 26–28% of total retail sales in China and Europe. I found similar insights in Euromonitor’s forecasts, which confirm the strong growth potential of Latin America’s online retail market.

According to Euromonitor, total Latin American retail sales (online and offline together) are expected to grow at a 6% CAGR between 2024 and 2028. Over the same period, online retail is projected to grow at an 11% CAGR versus 5% for offline retail. Online’s share of total retail sales in Latin America should rise from 12.3% in 2023 to 15.9% by 2028.

Another perspective: MELI’s 72–75 million active users across e-commerce and fintech still represent only about 25% of Latin America’s ~300 million bankable population (people at the bankable age). That leaves a substantial headroom for expansion.

I also wanted to share this interesting McKinsey article on payments market trends in LATAM region ( McKinsey article). Latin America’s payments landscape is undergoing a structural transformation, moving from cash-dominated to digital-first at an unprecedented pace. Debit and credit cards now lead everyday transactions, but the real breakthrough lies in mobile payments. They are easy to use, low-cost, and increasingly accepted across markets from Argentina to Peru.

This shift shows that millions of previously unbanked consumers are joining the formal financial system thanks to companies like Mercado Libre (and Nu, of course). As you can see, in 2023, cash accounted for roughly 30% of payments, but that share continues to shrink. That leaves plenty of room for digital growth. For comparison, in Kazakhstan, cash payments are estimated at just 10–15% today.

Platforms like Mercado Pago are perfectly positioned to capitalize on this shift. They can leverage the company’s data and ecosystem insights for better credit quality.

Governments are promoting interoperability (like Brazil’s Pix) and consumers favor seamless experiences. That’s why the region’s fintech companies are strong and growing fast. The next decade could see players such as Mercado Pago evolve from payment enablers into full-service financial platforms.

Earnings Conclusion

This quarter’s report once again demonstrates consistent execution of MELI’s long-term strategy.

Mercado Libre continues to strengthen its long-term investment case, driven by a broader ecosystem and sustained growth across e-commerce, fintech, and advertising. The company is steadily converting short-term cost pressure from logistics and credit expansion into durable competitive advantages. Its scale, technology stack, and data assets form a defensible moat that becomes harder for competitors to replicate over time.

With deepening user engagement, new monetization levers, and disciplined capital allocation, MELI’s profitability trajectory continues to improve year after year. Overall, the business looks structurally stronger today than it did even a year ago.

It took me time to build conviction in MELI, and my position is currently up about 20%. Indeed, the stock’s price action over the past six months hasn’t been particularly exciting.

P.S.: I’m a happy Fiscal.AI user thanks to Kris’s recommendation and his promo link. Highly recommend it to all Multis!

Kris made this meme about Mercado Libre’s stock price.

MELI is already my second-largest holding by invested capital (and Kris’ biggest), and I remain optimistic about this “money tree” in my Potential Multibaggers garden. While the stock price doesn’t move much now, the company continues to become stronger and stronger.

Here, the free part ends.

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Anand here with the Datadog (DDOG) Q3 2025 earnings result. Datadog reported beat-and-raise Q3 results on November 6, 2025. Sorry for the delay; I was traveling and couldn’t find a chance to write this earlier.

The stock price shot up more than 23% after the earnings and even to 28.9% a few days later. Finally, investors and the market recognized the position of Datadog, it seemed...

But for one reason or another, the stock nosedived again and it’s now even 2.3% below the price before the earnings. The fickle stock market...

We first go through the earnings, and then Kris will take over for the Quality Score and Valuation Score updates.

The Numbers

Datadog reported total revenue of $886 million, an increase of 28% year-over-year, above the high end of the guidance range. The main reason was the broad-based positive trends in the demand, with an ongoing strength of cloud migration and digital transformation. It was not just AI. The management team saw year-over-year revenue growth accelerate across the non-AI customers. There is more to double-tap later in the article.

Source: Fiscal.ai, follow this link to get a 15% discount.

Datadog ended Q3 2025 with about 32,000 total customers, up about 9.5% from about 29,216 a year ago.

Source: Fiscal.ai, follow this link to get a 15% discount.

There were 4060 customers with an ARR (Annual Recurring Revenue) of $100,000 or more, an increase of 16.3% from 3610 a year ago. These customers generated about 89% of annual recurring revenue. Management didn’t provide numbers for the total number of customers with more than $1 million in ARR.

Source: Fiscal.ai, follow this link to get a 15% discount.

The dollar-based net retention rate remains steady at 120%, a positive indicator; expansion into existing customers seems to be at a normalized level.

Source: Fiscal.ai, follow this link to get a 15% discount.

Datadog’s platform adoption is growing steadily. Datadog’s land-and-expand model is working as management expected.

By the end of the third quarter, 84% of Datadog’s customers had adopted 2 or more products, up from 83% a year ago. Furthermore, 54% of Datadog’s customers used 4 or more products, up from 49% a year ago. 31% of the customers were using 6 or more products, an increase from 26% a year ago. Finally, 16% of the company’s customers were using 8 or more products, up from 12% last year.

Source: Fiscal.ai, follow this link to get a 15% discount.

Datadog reported a GAAP net income of $0.1 per diluted share, while the non-GAAP net income was $0.55 per diluted share.

For Q2 2025, the company’s operating cash flow was $251 million, with a free cash flow of $214 million and a free cash flow margin of 24%.

By the end of Q2 2025, Datadog had cash and cash equivalents totaling $4.1 billion.

Source: Fiscal.ai, follow this link to get a 15% discount.

Guidance

Q4 2025 Outlook:

Management guided for revenue between $912 million and $916 million, up more than 24% year over year. I still think it is conservative, and the company will beat the guidance. That’s more or less a tradition for Datadog. But 24% is already strong, of course. Non-GAAP operating income is expected to be between $216 million and $220 million, which translates to non-GAAP EPS from $0.54 to $0.56 per share.

Full-Year 2025 Outlook

For the full year, the management team guided revenue to be between $3.386 billion and $3.390 billion, or 25% up year over year on the midpoint. The company raised its full-year revenue guidance range $3.312 billion to $3.322 billion from the last quarter. Non-GAAP operating income is expected to be between $754 and $758 million, which is an increase from the previously guided range of $684 to $694 million. Non-GAAP net income per share ranges from $2.0 to $2.02, increased from $1.80 to $1.83.

At the beginning of the year, the management team indicated that demand is growing and that they are seeing a positive trend. We can actually confirm that, in all three consecutive quarters, the numbers have been better than expected, and guidance has been raised each quarter.

Insights from the conference call

Product Updates:

Digital experience product suites are where the rapid pace of innovation is delivering tangible value to their customers.

Datadog digital experience products include RUM, or real user monitoring, to observe and improve application behavior in mobile and web apps, synthetics, to simulate user flows and proactively detect user-facing issues, and product analytics, to help users connect application behavior to business impact.

These digital experience products together exceed $300 million in ARR. It is one of the fastest-growing product analytics platforms, with more than 1,000 customers already adopting it.

For the second year in a row, Datadog has been named a leader in the Gartner Magic Quadrant for Digital Experience Monitoring.

Source: Datadog investor presentation

Datadog’s security suite of products is executing well and accelerating growth. Co-founder, CEO and Director Olivier Pomel on the earnings call:

Security ARR growth was in the mid-50s as a percentage year-over-year in Q3, up from the mid-40s we mentioned last quarter. We’re starting to see success in including Cloud SIEM in larger deals, and we’ll get back to that in a bit in our customer examples.

And we’re seeing positive trends beyond Cloud SIEM, including fast uptake of good security and an increasing number of wins in cloud security. Overall, we saw year-over-year growth acceleration in each one of our Security products.

Datadog’s security agent product is in preview but gaining traction. Security agent looks at vulnerabilities and looks at security signals, and does triage, basically trying to investigate what might be benign or what might be a real issue. These innovations and mature products are helping the company win some large lenders for our Cloud SIEM products.

Datadog announced Bits AI agents at the DASH user conference in June. The management team is seeing high customer interest in Bits AI. They have now onboarded thousands of customers for preview access to the Bits AI SRE agent.

That’s not just about Bits AI, Datadog is double-tapping on the Bits AI opportunity. They are seeing significant demand for the Bits AI, and wanted to go further into the resolution. The team is working on the breadth of the product, making sure it is trained on many more types of data, many more types of sources, and sometimes even systems that are not observed by Datadog. Olivier Pomel:

As one customer recently told us, with Bits AI SRE being on-call 24/7 for us, the mean time resolution for our services has improved significantly. For most cases, the investigation is already taken care of well before our engineers sit down and open their laptops to assess the issue. This is not an isolated comment.

That’s a jaw-dropping customer feedback and a real-life use case of agentic AI. I see the potential here for agents to radically transform observability and operations. Many executives simply use the term “agentic AI,” while Datadog is integrated into the product, providing real benefits to its customers.

Comprehensive updates on AI-native and non-AI customers

The management team gave comprehensive updates about its customers and demand.

Datadog supports over 1,000 integrations, an unparalleled number in the observability space.

Datadog’s customers are highly interested in next-gen AI observability, with over 5,000 customers sending AI data through one or more of our AI integrations to the Datadog platform. More than 32,000 customers use more than 50 integrations on average, while customers spending over $1 million annually with us use more than 150.

It’s not practical to actually go and manage those integrations separately. A consolidated, unified platform is mandatory, not optional. Those are really commendable numbers, and that also shows why switching costs will be higher as the tech stack is evolving.

The management team continues to see the AI-native group grow in both number and size, with more than 500 AI-native companies in the group, about 100 of which spend more than $100,000 annually with Datadog, and more than 15 of which spend more than $1 million annually with Datadog.In Q3, the AI-native group represented 12% of the revenue, up from 11% last quarter and about 6% in the year-ago quarter.

Datadog’s year-over-year revenue growth also accelerated amongst our non-AI-native customers. In Q3, the revenue growth, excluding the AI-native customer group, was 20% year-over-year, accelerating from 18% year-over-year in Q2.

The management team saw sequential usage growth from existing customers in Q3 that was higher than expectations and the strongest in 12 quarters in the non-AI native customer base. In Q3, Datadog’s revenue growth, excluding the AI-native customer group, was 20% year-over-year, accelerating from 18% year-over-year in Q2.

The market opportunity in cloud and AI is expected to grow rapidly into the trillions of dollars, and companies of every size and industry are looking to adopt AI to deliver value to their customers and drive positive business outcomes. Datadog is a direct beneficiary and ready to capture the demand.

Updates on LLM observability

Datadog recently launched LLM experiments and playgrounds for general availability, helping customers to rapidly iterate on LLM applications and AI agents. They also launched a custom LLM as a judge evaluations for general availability, which lets customers write evaluation prompts to assess application quality and safety. In the past three months, the number of customers adopting LLM observability has more than quadrupled.

Conclusion

Datadog reported strong quarterly results, beat earnings expectations, and raised full-year guidance. I am confident that the Datadog team will deliver strongly. Datadog is a GAAP-profitable company with large opportunities ahead. AI is the fastest-growing segment, and scale is massive. They are investing in capturing growth, delivering new products, and remaining profitable. That is the recipe for success, and that’s what investors love about Datadog.

PS: I don’t like to brag about my winners, and I don’t feel overly sad about my losers. Investing is a long game, and there will be days when I am right and days when I am wrong.

I just wanted to share humbly. I got a spiffy pop for a Datadog. For those who don’t know what a spiffy pop is, it’s a term that Motley Fool co-founder David Gardner gives to a stock that jumps more on one day than your (initial) cost basis.

Disclosure: I personally own the shares of Datadog ( DDOG) since October 2019.

If you like the article, please share your feedback in a comment on the article and follow me on X@anandkhatri.

Now to Kris for the PM Quality Score and the valuation.

The free part stops here. If you want full access to Potential Multibaggers, here’s what you’ll get:

✅ The rest of this article, with the Quality Score (which is surprising for HIMS!) and the valuation, so you know if the stock’s attractive or not.
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Baurzhan here with an earnings update for Hims & Hers (HIMS). On Monday, November 3, Hims & Hers reported its Q3 2025 earnings and the market didn’t know again how to react to the results, as last quarter.

Let’s quickly recap last quarter’s developments.

The company is also in a transition period for sexual health. It’s shifting from on-demand to premium daily subscriptions. This pressured short-term growth but should improve long-term retention and lifetime value.

Now let’s look into this quarter's results and insights, starting with the key numbers first.

The Numbers

• Revenue: $599M, +49% YoY, beating expectations by 2.9%

• Operating Margin: 2%, vs 5.6% last year in Q3

• EPS: -81% YoY to $0.06, a miss by $0.03

• Subscribers: 2.47M, +21% YoY and just +30K QoQ, mainly caused by the GLP-1 headwinds and transition in the sexual health category from on-demand to subscription-based offerings. Excluding that, subscribers grew +40% YoY

• Monthly ARPU: $80, up from $74 in Q2 due to growing personalized subscriptions, +50% YoY.

• Adjusted EBITDA: $82M vs. $72M expected, 15% EBITDA margin

• Free Cash Flow: $79M, flat YoY, 13.2% FCF margin

• Guidance:

Q4 $605-625M revenue, $55-65M EBITDA;

FY25 revenue narrowed from $2.3-2.4B to $2.34-2.36

The numbers weren’t spectacular, but the quarter showed resilience and progress through the current transition.

Hims & Hers returned to sequential revenue growth (+10%) and positive free cash flow, just as promised.

If you want to make such beautiful charts as well, you can get a 15% discount here.

In the previous quarter, Q2 2025 (so not the one we are analyzing here), Hims & Hers results showed the first revenue miss since going public, revealing slowing core growth and temporary GLP-1 headwinds after the FDA lifted the shortage status.

That marked the start of a transition period, shifting from on-demand to premium daily subscriptions in sexual health, which pressured short-term growth but should improve long-term retention and lifetime value.

So, the Q2 results made me want to monitor the rebound in core revenue, GLP-1 revenue, and early traction from new initiatives, such as hormone therapy and AI-driven healthcare tools.

Important, management also reaffirmed its $725M full-year 2025 GLP-1 revenue target. It reported strong adherence and low churn among its GLP-1 patients. Based on this trajectory, Q3 GLP-1 revenue likely landed near $205 million.

The company is investing heavily in vertically integrated, FDA-registered compounding facilities to control quality. The scale should make it cheaper for Hims & Hers and its customers at the same time.

In early November, the Trump administration announced agreements with Novo Nordisk and Eli Lilly to lower prices for GLP-1 drugs and expand access. For example, via Medicare, you pay as low as $50 co-pay, cash-price programs around $350/month, and oral versions starting at ~$150/month.

The price-and-access shift means the cost base and competitive dynamics for GLP-1 weight-loss therapies are changing. If the company’s infrastructure investments aim to help scale and reduce costs, then they may be better positioned in this new landscape.

On the other hand, the pressure on drug pricing could squeeze margins or force faster cost improvements, which makes the company’s claims of “greater efficiency” and “verticalisation” more relevant. But there’s also more pressure to deliver.

But if we look at Hims & Hers, that execution seems to be good. Online revenue grew to $589.1m, +50% YoY and +10% QoQ. That’s strong.

The core business, excluding GLP-1, was up an estimated 5% to 10% QoQ to an estimated $385–395 million. The “sexual health rotation” that depressed growth earlier in the year began showing payoff.

As founder and CEO Andrew Dudum stated:

At the end of the quarter, subscribers using personalized solutions grew 50% year-over-year, helping drive nearly 50% in year-over-year revenue growth.

ARPU (average revenue per user) increased to $80 from $74 last quarter, driven by growth in premium subscribers across specialties.

Gross margin declined to 73.8%, down 5 points year-over-year and about 2 points sequentially, as shorter GLP-1 shipping cycles reduced per-order revenue.

Investments across specialties also pressured the operating margin this quarter to 2%. It was down 3.6 pp from 5.6% last year in Q3 and down 3 pp QoQ.

As commented by CFO Yemi Okupe:

G&A costs were also pressured as a result of the Zava integration as well as additional expenses related to the hiring of new leadership talent. G&A as a percentage of revenue increased 2 points year-over-year. A similar dynamic was seen in operations and support costs. Technology and development costs as a percentage of revenue increased nearly 2 points year-over-year to 7%, reflecting ongoing investment in engineering and product talent across the organization.

As HIMS stated in its last quarter presentation (for Q3, unfortunately, no presentation), the 5 pillars of HIMS’ future growth are deepening personalization (strengthened with home diagnostics), expansion into new specialties, elevated follow-up care, international expansion, and strategic partnerships.

Hormone Therapy Rollout Begins

Hims launched its hormone-therapy lines this fall. Men’s low-testosterone treatments were launched in September and women’s (peri)menopause care in October 2025.

International Expansion: ZAVA Integration

The integration of ZAVA continues, expanding Hims’ reach across the U.K., Germany, France, and Ireland; the acquisition added over 160 million adults to the company’s addressable market.

Management also reiterated plans to explore Brazil and Canada as next-stage markets, aligned with future generic GLP-1 entry. In the meantime, Canada started yesterday.

Looking Ahead: Q4 and 2026

Guidance for Q4:

• Revenue: $605–625M (+1–4% QoQ, +27% YoY at mid point)

• EBITDA: $55-65M (implying 10% margin at mid point)

• Subscribers: >2.7M expected, implying 9% growth QoQ and 23% YoY

This guidance reflects expectations for another transition quarter.

But with hormones ramping, AI tools scaling, and international expansion contributing, 2026 could mark the reacceleration phase after this year’s “plateau of patience.”

Apart from the key numbers guided by the company, what I would expect from HIMS in Q4 and 2026:

• Whole-body diagnostic testing launches before year-end, with a longevity specialty coming in 2026.

• The company’s facility footprint will expand from 400,000 to over 1 million sq ft by year-end 2025

• International operations (via the ZAVA acquisition) are contributing meaningfully and expanding into Brazil.

• Gross-margin pressure is expected to normalize by mid-2026 as verticalization improves efficiency.

Conclusion: Transformation in Motion

Q3 showed incremental but real progress on three fronts:

1. Core business stabilization after the Q2 rotation drag.

2. Regained momentum in GLP-1 and subscriber growth.

3. Execution on new verticals and technology integration.

Long-term investors should appreciate the steady progress and transformation Hims & Hers is going through. Yes, margins are a bit under pressure but that comes because the company prioritizes the long term over the short term.

The improving revenue quality, stronger retention, and higher ARPU suggest the underlying business model remains strong. This positions Hims & Hers for future operating leverage once the transition phase is complete.

Kris will continue with PMQS and valuation updates.

Hi Multis

Kris here. Thanks, Baur, for the analysis. Before we go to the Quality Score and the valuation of Hims & Hers, let’s first look at the Selling Rules.

Selling Rules

These are the Selling Rules I made for Hims & Hers.

The first two rules are based on what management has promised. I want management to execute on their promises. But of course, we can’t evaluate them right now.

The third is important to me. If Hims & Hers has serious misconduct that causes health problems for its customers, it will lose customers’ trust and then it will be almost impossible to gain it back. Beware, I’m talking about a serious issue here, not a minor problem.

Revenue growth is always extremely important for growth companies, of course, so that’s the fourth criterion. You may wonder why I take four quarters. The reason is that I don’t want a one-off. Q1 this year was particularly strong because of the shortage of GLP-1 drugs, so HIMS could sell its compounded version freely. That means Q1 2026 will have extremely tough comps and revenue growth will probably be under 20%.

Andrew Dudum has the profile of a visionary CEO: whip smart, unconventional, slightly arrogant, willing to change his mind, ready to jump on every opportunity, etc. That’s why he’s crucial for me in the investment thesis.

Up to now, there are no Selling Rules violated.

The free part stops here. If you want full access to Potential Multibaggers, here’s what you’ll get:

✅ The rest of this article, with the Quality Score (which is surprising for HIMS!) and the valuation, so you know if the stock’s attractive or not.
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