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Alphabet sold $85 billion of stock in two days

That’s more than what the largest IPO in history will raise.

SpaceX is about to price the largest initial public offering ever at $75 billion, valuing the company at ~$1.8 trillion. But Alphabet, the parent company of Google, quietly topped that last week by selling new shares — upsizing a planned $80 billion raise to $85 billion after demand poured in. Berkshire Hathaway anchored it with a $10 billion investment, buying shares at a 6–8% discount.

Here’s the paradox. Alphabet sits on well over $120 billion in cash and short-term investments on its balance sheet, just generated $165 billion in operating cash flow last year, and can borrow at rates few companies on earth can match. Firms in that position almost never sell equity. Instead, they use their cash flow to buy back stock. Diluting your own shareholders is the most expensive money there is, a slice of every future dollar of profit, forever.

So why do it? Because the AI buildout has grown so large it requires every available tool. Alphabet expects to spend $190 billion in 2026 alone, and that figure could increase by year-end.

Every company racing to build compute now stands in front of three doors:

• Pay with the cash you already generate.

• Borrow it (issue debt).

• Sell a piece of the company (issue equity).

Each door sends a different signal about how confident you are and how much risk you are willing to take (more on this in a minute).

Today, we are looking at the three ways Big Tech is currently funding the trillion-dollar AI buildout. We’ll review which ones are good or bad for investors and what it says about where we are in this market cycle.

1. 💵 Self-funding

2. 🏦 Debt issuance

3. 📉 Selling more stock

1. 💵 Self-funding

The cleanest way to fund a data center is to pay for it with money the business already makes. No interest, no dilution, no banker fees. For most of this cycle, that’s exactly what Big Tech did.

If you need a reminder, free cash flow (FCF) is the cash generated from the business, less capital expenditures (funds to buy, upgrade, or maintain physical assets). As long as FCF is positive, you are effectively self-funding your business ventures.

Free Cash Flow = [Cash from Operations – Capital Expenditures]

Amazon is the textbook case for how far that model stretches. The company is on track for roughly $200 billion in capital expenditures in 2026, up from a trailing-twelve-month figure of $147 billion (+67% Y/Y).

Meanwhile, trailing-12-month operating cash flow grew to $149 billion (+30% Y/Y) at the end of March. It’s a staggering number that, a few years ago, would have funded the whole thing with room to spare. It no longer does.

Amazon is now spending essentially every dollar it generates. It was already the case in 2021 and 2022, when the company invested in fulfillment to meet pandemic-driven demand. As a result, FCF turned slightly negative in 2021 and 2022. FCF recovered to a record $38 billion in 2024 before the AI buildout cut it to $11 billion in 2025

At the end of Q1 2026, trailing FCF worsened to just ~$1 billion.

“The faster AWS grows, the more short-term CapEx we’ll spend.”

That was CEO Andy Jassy on the Q1 call, and it captures the squeeze. AWS reaccelerated to +28% Y/Y, its fastest in nearly four years, but Amazon has to lay out cash for land, power, chips, and servers 6 to 24 months before it can bill a customer. Growth and free cash flow are pulling in opposite directions.

Self-funding is a position of strength: you don’t need anyone’s permission to build. The catch is that it caps your spend at what the business produces today. The AI bill is now testing that ceiling everywhere. Microsoft, Meta, and Alphabet still fund most of their CapEx from existing operations. The open question is what happens when one great business can no longer feed an even hungrier one.

Takeaway: Free cash flow is the cheapest capital and the proudest signal — it says the core business can pay its own way. But when CapEx consumes more than 100% of operating cash flow, the wallet is empty, and the next dollar has to come from somewhere else.

2. 🏦 Debt issuance

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Today at a glance:

1. 📈 Broadcom: AI Bookings Triple Shipments

2. 🖥️ HPE: AI Demand Pulls Forward

3. 🧑‍⚕️ Veeva: Falcon Targets Agentic Labor

4. 🌐 Samsara: Operational AI Scales

5. 🔷 Rubrik: Agentic Cyber Resilience

6. 🧘🏻 Lululemon: Turnaround Stalls

7. 🛠️ GitLab: AI Pivot With Layoffs

1. 📈 Broadcom: AI Bookings Triple Shipments

Broadcom's Q2 revenue rose 48% Y/Y to $22.2 billion ($70 million beat), with non-GAAP EPS of $2.44 ($0.04 beat).

• Semiconductor solutions as a whole grew 79% to $15 billion, driven by AI semiconductor revenue, which jumped 143% Y/Y to $10.8 billion.

• Infrastructure software grew 9% to $7.2 billion.

Operating margin hit a record 49%, and free cash flow reached $10.3 billion (46% of revenue). Shares still fell nearly 15% post-earnings, giving back most of the $270 billion in market cap added over the prior five sessions.

Broadcom is seen as a major beneficiary of Google's announcement earlier this week that it is raising ~$85 billion in equity to fund its AI infrastructure buildout. Google is one of Broadcom's six core custom XPU customers.

For Q2, Broadcom’s headline metric was order velocity. AI semiconductor bookings exceeded $30 billion, roughly three times what the company shipped, with CEO Hock Tan saying “our visibility runs all the way to 2028.” AI networking accounted for nearly 40% of AI revenue, though Tan expects this to normalize toward 30% as custom XPUs ramp.

Expectations were sky-high ahead of the print:

• Q3 AI semiconductor guidance of $16 billion implies a 200% Y/Y growth, but it missed the $17.2 billion buy-side estimate.

• Tan implied full-year FY26 AI revenue of around $56 billion, which was short of the $57.6 billion consensus.

• The $100 billion FY27 AI target was reiterated during the call, but not raised.

• Multi-year customer commitments are real but back-end loaded into late FY27 and FY28.

Broadcom announced major customer-specific deployments:

• 1.3 GW for OpenAI in 2027 (part of a 10 GW deal through 2029).

• 3 GW for Meta through the end of 2028 (with the first 1 GW starting in H2 2027).

• A $35 billion debt financing deal with Apollo and Blackstone to fund Anthropic's purchase of Google TPU chips that Broadcom helped develop, with Broadcom backstopping the largest portions of the transaction. The arrangement is part of a broader AI XPU Platform targeting 20+ GW of LLM compute capacity through 2028.

Broadcom guided Q3 revenue to $29.4 billion (vs. $28.47 billion consensus), with semiconductor revenue at $20.5 billion (up 124% Y/Y).

The sell-off was primarily about Broadcom failing to raise its $100 billion FY27 AI revenue target, compounded by Tan acknowledging that Google will diversify its TPU supply. Investors are left wondering whether management is staying cautious to set up future beats or whether the strength in bookings is already priced in.

2. 🖥️ HPE: AI Demand Pulls Forward

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Beat. Raise. Sell.

Palo Alto Networks and CrowdStrike are the two largest pure-play cybersecurity companies in the world, and they reported a day apart this week with almost the same script: strong results, higher guidance, and a stock that fell anyway.

Both stocks had rallied more than 50% into earnings as investors embraced the same thesis: AI is becoming a tailwind for cybersecurity.

The trigger was Anthropic’s Mythos, the model judged too dangerous to release widely, which sent enterprises scrambling to reassess their defenses.

The numbers suggest the AI security thesis is real. The problem is that the investors already knew it.

Today at a glance:

1. ☁️ Palo Alto: Buying the AI Security Era

2. 🦅 CrowdStrike: The Mythos Moment

1. ☁️ Palo Alto: Buying the AI Security Era

Palo Alto delivered a strong quarter, but the headline numbers were messy.

Revenue grew 31% Y/Y (or 14% organically) to $3.0 billion ($60 million beat), and non-GAAP EPS landed at $0.85 ($0.05 beat).

The company also reported an unusual $183 million operating loss, but that was mostly deal-related noise from the recent $25 billion CyberArk acquisition and the Chronosphere deal. New acquisitions added roughly $280 million of intangible amortization and $198 million of deal costs this quarter alone.

Cash flow told a cleaner story. Operating cash flow rose 39% Y/Y to $871 million, while adjusted free cash flow hit a record $910 million, up 57% Y/Y. The trailing-12-month free cash flow margin reached 38.5%, up 4.3 percentage points Y/Y.

Management leaned into the early-2026 SaaSpocalypse selloff, spending $1 billion on 6.8 million shares at an average of ~$148 — nearly half today’s price. When you’re that sure the panic is wrong, you buy. That’s also why we built a larger PANW position at the time in App Economy Portfolio.

Did Palo Alto buy its way into the AI security era at the right price?

So far, the answer looks encouraging.

Strip out the acquisition noise, and the organic numbers look healthy:

• Next-Gen Security (NGS) ARR: $8.1 billion, up 28% organically.

• Remaining performance obligation: $18.4 billion, up 22% organically.

Organic growth matters because it shows that the CyberArk deal did not mask a slowdown. The forward-looking metrics show Palo Alto is still signing large customers, expanding its backlog, and converting more of the business to recurring revenue.

CEO Nikesh Arora framed AI as a forcing function. Frontier models are making companies rethink their defenses, especially as AI agents gain access to credentials, data, and internal systems.

The demand signal is already showing up. Roughly 1,000 companies reached out over two months to reassess their cyber posture, and the new Unit 42 Frontier AI Defense offering generated 800+ customer meetings in six weeks.

Palo Alto is also turning the threat into a tool. With early access to frontier models, the company says it can compress a year’s worth of penetration testing into under three weeks.

But Arora’s most important point was more grounded: AI still makes mistakes. Frontier models can hit error rates near 25% and fail at the last mile of complexity. In cybersecurity, that gap matters. Attackers only need to win once, and one wrong enforcement call can take down a production network. In short, AI expands the attack surface, but customers still need a trusted platform to manage the response.

Platformization Pays Off

Palo Alto’s pitch is to replace a dozen point products with one platform, trading upfront discounts for stickier, multi-year commitments.

The strategy is working:

• 110 net new platformizations this quarter, lifting the total to ~2,280.

• 120% net retention with single-digit churn. That’s exactly what justifies large onboarding discounts.

• Firewall bookings rose across appliances (+40% Y/Y, the strongest hardware quarter in a decade) and software (+25%).

The legacy firewall business still matters, but the mix is changing. 46% of trailing-12-month product revenue is now recurring software, up from 22% three years ago. That transition is the key. Palo Alto is using its firewall footprint to pull customers into a broader subscription platform.

Built for the Agent Era

The acquisitions are the clearest sign of where Palo Alto thinks cybersecurity is going. The company is trying to own the full stack before the market fully forms.

• Identity: CyberArk, now rebranded Idira, gives Palo Alto a stronger identity layer for humans, machines, and AI agents. As agents spread, credentials become one of the fastest-growing attack surfaces.

• Security operations: Cortex XSIAM crossed $600 million ARR, up roughly 100% Y/Y, with more than 740 customers as it displaces legacy SIEM tools.

• AI runtime: Prisma AIRS topped 300 customers, tripling sequentially, with a $20 million-plus enterprise deal already signed.

Guidance

Management raised the full-year outlook for the third straight quarter:

FY26 revenue guidance increased to $11.42 billion ($60 million raise), while non-GAAP EPS moved to $3.77–$3.79 (up from $3.65–$3.70).

Longer term, management still expects a 40% free cash flow margin by FY28 and $20 billion in NGS ARR by FY30. CFO Dipak Golechha also flagged rising memory and storage costs, with a 10% increase in hardware prices now baked into the guide.

Takeaway: Palo Alto’s AI security pitch is credible because the organic engine is still strong. The CyberArk deal adds complexity, but it also gives Palo Alto a better shot at owning identity in the agent era. Arora has earned the benefit of the doubt. The risk is valuation: after a nearly 50% rally this year and a stock near 62x forward EBITDA, investors are already pricing in a clean integration.

2. 🦅 CrowdStrike: The Mythos Moment

CrowdStrike delivered the cleanest validation of the AI thesis yet: Q1-record net new ARR and higher guidance on every line.

After surging over 60% in the month leading up to the print, the bar was set for a flawless report, and a merely excellent one wasn’t enough. The stock fell more than 10%.

Revenue grew 26% Y/Y to $1.4 billion ($30 million beat), the fourth straight quarter of acceleration, and non-GAAP EPS landed at $1.10 ($0.03 beat). Margins improved across the board, with the operating loss narrowing to $31 million (from $125 million a year ago).

Free cash flow hit a record $468 million, a 34% margin and an all-time high, lifting CrowdStrike’s Rule of 40 score to 59. Stock-based compensation remains a significant factor, accounting for 21% of revenue and showing little improvement over time.

The recurring-revenue engine is the main KPI:

• Ending ARR rose 24% Y/Y to $5.51 billion, well past the halfway mark toward the $10 billion target set at its 2023 Fal.Con briefing.

• Net new ARR, the quarter’s fresh recurring revenue and the truest read on momentum, hit a Q1-record $256 million (+32% Y/Y). Q1 is the weakest quarter seasonally, making the numbers all the more impressive.

The thesis CEO George Kurtz has pushed for a year is now the customer’s thesis. Enterprises increasingly treat CrowdStrike as AI security infrastructure rather than a line item. Post-Mythos, executive-level inquiries surged, and the company stood up Project QuiltWorks, a coalition that helps large customers find and fix vulnerabilities in real time.

It also created a Chief AI and Autonomous Systems Officer role, poaching Bartley Richardson from NVIDIA. It illustrates where CrowdStrike thinks the platform will head over the next decade.

The Flex Flywheel

With Falcon Flex, customers commit a security budget upfront and then spend it across modules over time. It remains the consolidation flywheel. The company added 300+ Flex accounts, and Flex ARR nearly doubled to $1.9 billion (more than a third of overall ARR).

Customers who burn through their Flex budget early come back and commit more.

• 480 ReFlex customers (~25% of Flex accounts) lifted ARR by an average of 26%.

• 130+ have ‘reflexed’ more than once, for an average 51% uplift over their original commitment.

AIDR, the Next EDR

CrowdStrike is racing to own the attack surfaces AI is creating.

• AIDR (AI Detection and Response): Ending ARR grew +250% sequentially, with a Q2 pipeline above $50 million. Kurtz called the ramp the fastest of his career and pegged AIDR as a market potentially larger than endpoint detection itself, as AI agents multiply.

• Next-Gen SIEM: Ending ARR topped $600 million, and combined with cloud and identity now exceeds $2 billion.

• FalconShield: ARR nearly quadrupled Y/Y as customers scramble to secure AI agents operating inside their SaaS apps.

Guidance

Management raised the full year on every line. FY27 ARR is now expected to grow +25% Y/Y. Net new ARR guidance rose by more than $50 million, which Kurtz framed as the AI tailwind in action. The Q2 guidance came just in line, though.

Takeaway: AI is turning cybersecurity from a defensive budget line into a strategic priority. Palo Alto is buying its way deeper into identity and agent security, while CrowdStrike is expanding Falcon into AI-native infrastructure. The thesis is working. The stocks are the hard part. After massive rallies, expectations have caught up with the story, and the valuations leave little room for error.

That’s it for today!

Happy investing!

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Disclosure: I own PANW and CRWD in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.

Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.

Over 300,000 subscribers turn to us for business and investment insights.

🔥 The May report is here, with over 100 businesses visualized!

All the key earnings from the past month in one report.

• ✔️ Cut through the noise with clear, concise financial snapshots.

• ✔️ See revenue trends, profit margins, and key takeaways instantly.

Download the full report below or log in to your account.

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What to expect in our monthly report?

🤖 Big Tech & AI

• New IPO: SpaceX

• Chip Design: NVIDIA, AMD, ARM.

• Infrastructure: Arista, Cisco, CoreWeave, Dell.

• Hardware: HP, Lenovo.

💳 Fintech & Commerce

• Crypto: Circle, Coinbase.

• Gig Economy: Uber, DoorDash, Airbnb, Grab, Instacart.

• Payments: Intuit, PayPal, Block, Nu, Klarna, Affirm, Toast.

• Global Commerce: MercadoLibre, Alibaba, PDD, Sea, Shopify.

🧠 Enterprise & Data Intelligence

• Data & AI: Palantir, Snowflake, Datadog, Elastic.

• Cybersecurity: Cloudflare, Zscaler, Fortinet.

• Productivity: HubSpot, Zoom, Monday.

• Software Stack: Salesforce, Workday, Atlassian, Figma.

🍿 Media & Entertainment

• Gaming: Tencent, NetEase, Nintendo, Sony, Take-Two.

• Social & Ads: Reddit, Snap, The Trade Desk, Applovin.

• Streaming: Disney, Warner, Paramount.

• Sports betting: DraftKings, Flutter.

🛍️ Consumer Brands

• Retail & Apparel: Walmart, Target, Best Buy, Amer Sports, On.

• Travel: Airbnb, Expedia, Marriott, Tripadvisor.

• Restaurants: McDonald’s, RBI.

• FMCG: Hershey, Kraft.

Download the full report👇

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Today at a glance:

1. 🛒 Costco: Fuel Powers A Record Quarter

2. 💻 Dell: AI Demand Breaks The Model

3. 📦 PDD: The Pivot Bites

4. 🧠 Synopsys: Elliott Joins The Board

5. 🏗️ Autodesk: Buying Its Way Into Operations

6. ☁️ Zscaler: Guidance Spooks Investors

7. 🌱 MongoDB: Atlas Holds The Line

8. 🔐 Okta: Identity For The Agent Era

9. 🖨️ HP: Memory Cost Bites

10. 🛒 Best Buy: Sales Turn Positive Again

11. ☁️ Nutanix: Supply Headwinds

12. 🤖 UiPath: Agentic AI Pays Off

13. 🔍 Elastic: AI Drives The Beat

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1. 🛒 Costco: Fuel Powers A Record Quarter

Costco’s Q3 FY26 (May quarter) revenue rose 12% Y/Y to $70.5 billion ($0.9 billion beat), and EPS rose 15% Y/Y to $4.93 ($0.01 beat). Comparable sales blew past expectations at 9.8% (vs. 7.8% consensus), outpacing the recent prints from Walmart, Target, and Best Buy.

Adjusting for gas and FX, core comps still grew 6.6% worldwide, with traffic up 2.4% and average ticket up 4.2%. The real standout was gasoline. Costco posted all-time volume records in every four-week period of the quarter, and ancillary comps surged in the high 20% range as fuel-price-sensitive members drove first-time visits to the pump. Costco usually sells gasoline 20–50 cents per gallon below local stations.

Digital is quietly building momentum:

• Digitally enabled comp sales grew 20.8%, with personalized recommendations alone generating nearly $5 billion in e-commerce sales.

• Conversion rates on those recommendations ran triple the site average.

• AI-sourced traffic posted triple-digit growth and the highest conversion rate of any channel, though absolute volume is still small.

Shares dropped nearly 5% after earnings, a sign that 47x forward earnings now requires more than stellar execution to move the stock.

Membership fee income reached $1.37 billion (up 11%), executive memberships hit 41.2 million (up 10%), and the US/Canada renewal rate ticked up 10 basis points to 92.2%. But total paid member growth slowed to 4%, which CFO Gary Millerchip explicitly called “a more normal rate,” with no new country launch to juice sign-ups.

Gross margin compressed by 21 basis points due to softer margins across fresh foods and packaged groceries. Costco also made deliberate price investments.

The tariff story is now the swing factor. Costco has begun submitting Section 301 refund claims to US Customs, with processing expected to take 2 to 3 months, and member returns contingent on how the legal timeline resolves. Management also trimmed FY26 warehouse openings to 26 (from 28), pushing two into FY27.

The question for the coming quarters is whether the gasoline-driven traffic halo will translate into stickier basket growth once fuel comps normalize.

2. 💻 Dell: AI Demand Breaks The Model

Dell shares just surged nearly 30% post-earnings, and they have now more than tripled so far this year.

The legacy hardware company most investors wrote off years ago is now one of the best-performing stocks of 2026. The numbers behind the story are even more striking than the chart.

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• 🔎 Google: The Anthropic Paradox

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Software is splitting in two

AI is forcing investors to rethink which software models deserve a premium.

Two enterprise software giants reported earnings on the same evening this week.

Snowflake surged 38% after hours.

Salesforce kept sliding, extending a painful year-to-date decline.

The market is drawing a new line in software between companies that get paid more when AI works harder and companies built around seat licenses for humans who may no longer need as many seats. Consumption businesses can grow as usage rises. Traditional SaaS companies must prove AI can replace seat expansion rather than erode it.

Today at a glance:

• ☁️ Salesforce: AI Metrics Bury the Lede

• ❄️ Snowflake: The Clean Sheet Advantage

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☁️ Salesforce: AI Metrics Bury the Lede

Salesforce buried its earnings announcement under an avalanche of AI metrics. Tokens processed. ‘Agentic Work Units’ delivered. Records ingested. Big numbers, but still no clear consumption revenue line.

Agentforce ARR crossed the $1 billion mark in roughly 18 months, making it one of the fastest ramps in enterprise software history. But management slightly raised the low end of full-year revenue guidance.

The market has not given the company the benefit of the doubt, with the stock already cut in half from its previous peak. That probably explains why Salesforce announced the largest accelerated share repurchase in company history, valued at $25 billion.

The number that matters to shareholders is harder to find. Strip out Informatica, acquired for $8 billion in November, and organic revenue grew roughly 9% Y/Y. Nothing to write home about.

There’s a lingering disconnect. Salesforce sells the apps that AI agents are supposed to operate on top of, and the market is no longer sure whether that makes the company indispensable or expendable.

The quarter in numbers:

• Revenue +13% Y/Y (9% organic) to $11.1 billion ($70 million beat).

• Operating margin reached 21% (+1pp Y/Y).

• Non-GAAP EPS jumped 50% to $3.88 ($0.75 beat).

• Current RPO +14% Y/Y $33.6 billion, missing the $34+ billion consensus.

FY27 guidance:

• Revenue: $45.9–46.2 billion (low end raised by $100 million).

• Operating and free cash flow growth: cut to 4–5%, from 9–10%, due to debt issuance for the buyback.

• Q2 revenue guide: $11.27–11.35 billion, with a midpoint below the $11.36 billion consensus.

So, what to make of all this?

• 🤖 Agentforce is real, but still small: Agentforce ARR reached $1.2 billion, up 205% Y/Y, with net new ARR inflecting to roughly $400 million from $260 million and $100 million in the prior two quarters. At most enterprise software companies, that would be the headline. At Salesforce, it’s a footnote because the legacy base is so large.

• 📉 The second half remains a show-me story: Salesforce needed current (next 12 months) RPO growth above 15% to validate the pitched re-acceleration story. It came in at 13% in constant currency. Agentforce is ramping fast, but the broader growth inflection is still a second-half promise.

• 🛒 Marketing, Commerce, and Tableau are dragging: Management explicitly cited “ongoing weakness in Marketing and Commerce and increased softness in Tableau bookings and renewals.” These are products Salesforce paid billions to acquire. They are now the drag offsetting Agentforce momentum. The product portfolio looks more fragmented every quarter.

• 💸 The $25 billion buyback came with a financing cost: Salesforce used debt to accelerate its repurchases, deploying half of its $50 billion authorization at once. Diluted share count fell 10% Y/Y, but higher interest expense led management to cut operating and free cash flow growth guidance. Borrowing to buy back stock can be smart if the shares are cheap and the business re-accelerates. If growth keeps slowing, it adds leverage without solving the core growth problem.

• 🔍 Usage metrics dazzle but monetization is unclear: Salesforce disclosed 28.6 trillion tokens processed (+152% Q/Q), 3.8 billion Agentic Work Units (+111% Q/Q), and 52 trillion records ingested into Data 360. These are strong signs of adoption, but they still leave investors wondering how much of this usage will turn into durable revenue, and on what terms.

The New Segmentation: Two Buckets Instead of Six

This was the first quarter under Salesforce’s new disclosure framework.

The old six-cloud breakdown collapsed into two buckets:

• Applications: +9% Y/Y or +7% Y/Y in constant currency.

• Infrastructure & Data: +25% Y/Y or +23% Y/Y in constant currency.

Management says Agentforce is now embedded across every application, so the old cloud-level view no longer reflects how customers buy. That’s defensible. It’s also convenient.

Marketing Cloud weakness and Tableau softness used to be easier to track. Now they show up as call commentary while Informatica helps lift the broader Infrastructure & Data bucket.

Less granularity makes the portfolio look cleaner, just as investors need more visibility.

The Headless 360 Question

The most revealing exchange on the call was Goldman’s Gabriela Borges asking how Salesforce will charge for Headless 360, a new offering that lets external AI agents, including Anthropic’s Claude Code, access data stored in Salesforce apps.

Headless 360 is Salesforce’s response to the agentic threat. If agents are going to access customer data anyway, sell them the sanctioned door.

There are already signs of demand. Wedbush noted that Anthropic is one of Salesforce’s largest customers, with usage reportedly rising fivefold in Q1 due to Headless 360.

The problem is pricing. Management did not give a clear answer. President Miguel Milano said Salesforce would “work together with our customers and partners to find a fair way to monetize” the product. That answer is the whole problem in one sentence.

Usage is rising, but Salesforce has not yet explained how Headless 360 becomes a durable revenue stream. The risk is what Borges called “value abstraction”: Salesforce becomes the data store behind the agent instead of the interface where work happens.

That may still be valuable, but it requires a different pricing model. Salesforce has not fully figured it out yet.

That pricing challenge is harder because Salesforce carries so much legacy surface area. Sales Cloud, Service Cloud, Marketing Cloud, Commerce Cloud, Tableau, MuleSoft, Slack, and Informatica all come with different renewal cycles, pricing models, and competitive threats. Agentforce has to lift the entire portfolio at once. That may work over time, but the bull case needs proof faster than the product cycle can deliver it.

Takeaway: The issue is no longer whether Agentforce is real. It is whether AI makes Salesforce more essential or turns it into the data layer behind someone else’s agent. Until cRPO re-accelerates and Headless 360 has a clear pricing model, the stock might stay in the penalty box.

❄️ Snowflake: The Clean Sheet Advantage

Snowflake walked into earnings as a consensus AI loser in software. It walked out with a 38% after-hours rally that erased its 20% year-to-date drawdown in a single session.

Product revenue grew +34% Y/Y to $1.33 billion, accelerating from +30% Y/Y in the prior quarter and beating management’s own projection by seven percentage points. Management raised full-year product revenue guidance to $5.84 billion (+31% Y/Y), up from $5.66 billion three months ago. Snowflake also doubled down on AWS with a five-year, $6 billion commitment.

The bear case was that agents would route around the data layer. The print suggests agents need the data layer more than humans ever did.

The quarter in numbers:

• Revenue +33% Y/Y to $1.39 billion ($70 million beat).

• Product revenue +34% Y/Y to $1.33 billion.

• Operating loss margin -23% (+19pp Y/Y).

• Non-GAAP operating margin: 12% (+3pp Y/Y).

• Non-GAAP EPS: $0.39 ($0.07 beat).

• Net revenue retention: 126%.

FY27 guidance:

• Product revenue: +31% Y/Y $5.84 billion (up from $5.66 billion).

• Non-GAAP operating margin: 13.5% (up from 12.5%).

• Q2 product revenue guide: $1.415–1.42 billion (+30% Y/Y), ahead of the $1.38 billion consensus.

So, what to make of all this?

• 🔮 Growth outlook gets a real boost: The Q1 beat is only one part of the story. Management raised full-year guidance by $180 million and lifted the implied growth rate from 27% to 31%.

• 💵 The $1M+ cohort is the real signal: 46 customers crossed the $1M trailing-revenue threshold this quarter, nearly double the 26 a year ago. NRR at 126% confirms existing customers are spending more, not just new logos arriving. The consumption model is working.

• 🤖 AI products are now monetizing data that doesn’t even live in Snowflake: Cortex Code (CoCo) reached over 7,100 active accounts. Snowflake Intelligence accounts more than doubled quarter over quarter. Crucially, CEO Sridhar Ramaswamy noted that customers are using these tools to access data sitting inside Microsoft, Salesforce, and SAP apps (not just Snowflake’s own databases). That’s a wider moat than the original pitch.

• 📈 Operating leverage is finally showing up: Operating loss margin is still deep in the red but hit a new high of -23%. Non-GAAP operating margin expanded +3pp Y/Y to 12%, and full-year guidance went from 12.5% to 13.5% — despite carrying a ~150bp headwind from the Observe acquisition.

• 📉 RPO has a footnote: While RPO surged 38% Y/Y to $9.21 billion, it actually missed the $9.43 billion consensus. Worth tracking, but not the main story. Snowflake is a consumption business, so committed backlog matters less than actual usage.

The $6 Billion AWS Handshake

The headline number is the $6 billion AWS deal over five years.

The deal gives Snowflake heavier access to AWS Graviton chips and custom AI accelerators, helping lower compute costs as AI workloads scale. CFO Brian Robins said the agreement was structured to support AI growth without pressuring gross margins.

That matters because Snowflake is guiding to a 75% product gross margin while AI usage expands. In other words, the company is trying to turn AI demand into consumption growth without sacrificing the economics investors care about.

AWS gets more AI workloads. Snowflake gets cheaper compute, better margins, and a stronger pitch to enterprise customers already building on AWS.

The Natoma Acquisition

Easy to miss next to the AWS number, Snowflake announced the acquisition of Natoma, an enterprise-grade implementation of the Model Context Protocol (MCP).

Snowflake wants to govern not only what AI agents can read, but what they can do.

MCP is the wiring that lets AI agents securely take actions on behalf of an enterprise. That matters because agents that act consume far more compute than agents that simply retrieve answers.

Snowflake spent a decade becoming the governed home for enterprise data. Natoma extends that governance into the agentic workflow.

Databricks, Microsoft Fabric, and Google BigQuery all want the same role. Snowflake’s bet is that enterprise security and identity, not just model quality, will decide who controls the agentic data layer.

Takeaway: Snowflake’s quarter flipped the AI narrative. Agents are not routing around the data layer. They appear to be increasing the need for governed data, secure workflows, and scalable compute. That is exactly where Snowflake wants to sit. The 35%+ rally reflects how washed-out sentiment had become, but the bigger lesson is structural. For the right software model, AI can turn rising usage into rising revenue.

That’s it for today!

Happy investing!

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Disclosure: I own CRM and SNOW in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.

Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.

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🚀 SpaceX is going public

The rocket company is now an AI company too.

The IPO filing landed last week, with xAI, Grok, and X folded inside. SpaceX aims for a $1.5–$2 trillion valuation with up to $75 billion raised, which would make it the largest IPO in history by both measures.

The pitch writes itself in three lines.

• Starlink generates the cash.

• Rockets bend the cost curve.

• AI and Mars are the moonshots.

This may be the most ambitious story ever brought to public markets.

It’s also the messiest.

I condensed 300+ pages of S-1 into a clean breakdown, supported by our signature visuals. By the end, you'll have a sum-of-the-parts framework for SpaceX, and a view on whether the IPO price makes sense.

Today at a glance:

1. Overview

2. Business Model

3. Financial highlights

4. Risks & Challenges

5. Management

6. Use of Proceeds

7. Future Outlook

8. Personal Take

1. Overview

SpaceX is no longer just a rocket company. It‘s the world’s dominant launch provider, the operator of the largest satellite network ever built, the Pentagon's primary access to orbit, and now the corporate home of xAI, Grok, and X following a February 2026 merger.

One framing note before we dig in: The S-1's financials have been retroactively rewritten. Every prior period now includes xAI and X as if they'd always been part of SpaceX. So all financial data is a consolidated view that bakes in AI, X advertising, and data licensing.

The basics:

• Headquarters: Starbase, Texas (reincorporated from Delaware in 2024)

• Founded: 2002 by Elon Musk

• Ticker: SPCX (Nasdaq)

• Mission: Make life multiplanetary

You probably have heard of SpaceX’s two main rocket programs:

• Falcon 9 is the medium-lift workhorse that flies today.

• Starship is the next-generation fully reusable super-heavy vehicle still in development, designed to carry roughly 5x more payload per launch.

The railroad to space

The cleanest way to think about SpaceX is as a railroad to space. Before SpaceX, rockets were discarded after launch — the equivalent of scrapping a 747 after every flight. That was the entire industry.

Reusability changed the economics. NASA estimates Falcon 9 brought launch costs to ~$2,700 per kilogram, against a historical industry average of $18,500 — an 85% reduction. One Falcon 9 booster has now flown 34 times. Starship is designed to take another 99% off that figure if it works at scale.

At its core, SpaceX is an infrastructure story. Cheap, reliable access to orbit turned launch from a bespoke government project into something closer to a utility. Once orbit is cheap, businesses that were never economically viable suddenly are. Starlink, SpaceX's satellite internet service, is the proof. AI compute in orbit may be the next. Mars is the eventual destination.

Three segments under one roof

The S-1 presents SpaceX in three segments:

• 🚀 Space: Falcon, Dragon, Starship, and the launch business that serves NASA, the Pentagon, intelligence agencies, and commercial customers

• 🛰️ Connectivity: Starlink consumer, enterprise, government, and direct-to-mobile

• 🤖 AI: xAI, Grok, X, and the compute infrastructure underneath all of it

Each segment has a different economic profile, and the gap between them is the most important thing to understand about this filing. We’ll break that down next.

Scale, in numbers

Launch dominance

• ~650 orbital launches, >540 on flight-proven boosters

• >80% of everything launched into orbit since 2023, by weight

• 165 Falcon launches in 2025, up from 96 in 2023 — a 30%+ annual cadence

• >99% Falcon mission success across ~7,400 metric tons cumulatively to orbit

Network scale

• ~9,600 Starlink satellites in orbit — roughly 75% of all active maneuverable satellites worldwide

• 10.3 million subscribers across 164 countries

Financials

• $18.7 billion in FY25 revenue (+33% Y/Y)

• $20.7 billion in FY25 CapEx (nearly 5x in two years)

At this stage, SpaceX spends more than it makes. The IPO story comes down to one question: Does each new dollar of AI CapEx create a wider moat or just a bigger cash burn?

2. Business Model

Read more

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Today at a glance:

1. 🛒 Walmart: Fuel Pressures the Flywheel

2. ⚙️ Analog Devices: Cyclical Becomes Secular

3. ✅ Intuit: Tax Season Stumble

4. 🎮 NetEase: Live-Service Games Deliver

5. 🎯 Target: Turnaround Finds Traction

6. 🎮 Take-Two: GTA VI Date Locked

7. 👔 Workday: Flex Credits Take Root

8. 🖥️ Zoom: AI Companion Nearly Triples

9. ⛷️ Amer Sports: Salomon Growth Inflection

10. ⚡️ NIO: Margin Expansion Continues

1. 🛒 Walmart: Fuel Pressures the Flywheel

Walmart reported its Q1 FY27 (April quarter), and revenue grew 7% Y/Y to $177.8 billion ($2.9 billion beat). Adjusted EPS was $0.66, in line with expectations. The operating margin contracted slightly due to higher fuel costs.

Walmart US comps rose 4.1%, slightly ahead of consensus, driven by a 3% increase in transactions and a 1.1% higher average ticket. Sam’s Club comps rose 3.9%, also ahead of expectations.

International sales jumped 18% to $35.1 billion, reflecting broad-based strength across key markets such as Walmex, China, and Flipkart in India, as well as continued e-commerce momentum. The segment is increasingly adopting the Walmart US playbook: more marketplace volume, more digital engagement, and more high-margin services layered on top of retail.

The steady shift toward digital continued:

• Profit diversification: High-margin streams keep scaling. Global advertising grew 37%, Walmart US advertising grew 36%, while global membership fee revenue rose 17%. The broader “membership and other income” line grew faster, but it includes miscellaneous items beyond subscriptions. Commerce solutions, including ads, membership, and marketplace, now represent roughly one-third of operating income.

• AI integration: Sparky, Walmart’s AI shopping assistant, saw weekly active users more than double sequentially. Customers using the tool have an average order value about 35% higher than non-users.

• E-commerce momentum: Global e-commerce sales grew 26%, now representing nearly a quarter of total revenue. In the US, delivery grew 45%, marketplace sales rose nearly 50%, and Walmart can now reach 60% of the US population within 30 minutes.

The main pressure point was fuel. Walmart absorbed roughly $175 million in higher fuel costs during the quarter to keep prices competitive. Management noted that lower-income consumers are becoming more budget-conscious, with gas station customers buying less than 10 gallons per visit for the first time since 2022. If fuel prices stay elevated, Walmart may eventually need to raise prices.

Despite the sales beat, shares fell after guidance came in light:

• Q2 adjusted EPS: ~$0.73 vs. $0.75 consensus.

• FY27 adjusted EPS: ~$2.80 vs. $2.92 consensus.

Management still expects sales to trend toward the high end of its 3.5% to 4.5% annual growth range, with operating income growth improving through the year.

Walmart remains a share-gainer in a pressured consumer environment. Its value proposition is attracting shoppers, while e-commerce, ads, membership, and marketplace are improving the profit mix. But higher fuel costs are testing how much margin the company can protect while keeping prices low.

2. ⚙️ Analog Devices: Cyclical Becomes Secular

Read more

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• 💵 Free Cash Flow Explained

• 💰 Wall Street's Top Stocks in Q1

• 🔎 Google: The Anthropic Paradox

• 🕵️ Palantir: Tokens Are the New Coal

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🚀 SpaceX just published its S-1 filing, so we’ll spend the next few days digging into what could become the biggest IPO ever. Stay tuned for our full breakdown next week with the signature visuals you know and love.

“Demand has gone parabolic.”

That was Jensen Huang’s closing message after NVIDIA’s Q1 FY27 earnings call.

His explanation was simple: agentic AI has moved from promise to production, turning token generation into a revenue stream.

That’s the clearest expression yet of NVIDIA’s token economy thesis. Compute is no longer just infrastructure spending. It is becoming the raw material for AI revenue.

Let’s break down the quarter.

Today at a glance:

1. NVIDIA’s Q1 FY27

2. Business highlights

3. Key quotes from the call

4. What to watch moving forward

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This is a paid advertisement for Miso Robotics’ Regulation A offering. Please read the offering circular at invest.misorobotics.com

1. NVIDIA Q1 FY27

NVIDIA’s fiscal year ends in January, so the April quarter was Q1 FY27.

Data Center revenue remains off the charts, as illustrated below.

Income statement:

• Revenue accelerated +85% Y/Y to $81.6 billion ($2.6 billion beat).

  • Data Center +92% Y/Y to $75.2 billion.

  • Edge Computing +29% Y/Y to $6.4 billion.

• Gross margin was 75% (+14pp Y/Y).

• Operating margin was 66% (+16pp Y/Y).

• Non-GAAP EPS $1.87 ($0.10 beat).

Cash flow:

• Operating cash flow +84% Y/Y to $50.3 billion.

• Free cash flow +86% Y/Y to $48.6 billion.

Balance sheet:

• Cash and cash equivalents: $80.5 billion.

• Debt: $8.5 billion.

Q1 FY27 Guidance:

• Revenue +11% Q/Q and +95% Y/Y to $91.0 billion ($3.0 billion beat).

• Gross margin 75% (flat Q/Q).

So, what to make of all this?

• ⚙️ Data Center is still the whole story: Data Center revenue surged 92% Y/Y to $75.2 billion and now represents 92% of the business. NVIDIA also changed its breakdown (previously Compute vs. Networking), shifting the focus from what it sells to who is building AI factories:

  • Hyperscale surged 115% Y/Y to $37.9 billion, driven by customers like AWS, Azure, and Google Cloud.

  • AI Clouds, Industrial, and Enterprise was nearly as large, rising 74% Y/Y to $37.4 billion. This segmentation helps counter the notion that NVIDIA relies solely on a handful of Big Tech buyers. Demand is broadening across neoclouds, sovereign AI, industrial deployments, and enterprise customers.

• 🧠 Inference is becoming the engine: NVIDIA’s growth is no longer just about training bigger models. As AI apps move from chatbots to agents, every query, image, video, and coding task requires real-time compute. That is why Jensen keeps framing AI infrastructure around tokens, not chips.

• 📈 Margins remain the lie detector: Gross margin stayed at 75% despite the complexity of the Blackwell ramp, higher memory content, and the shift toward full rack-scale systems. If competition were biting or demand were softening, margins would likely show it first.

• 💰 Cash flow is becoming absurd: Free cash flow nearly doubled to $48.6 billion in a single quarter. NVIDIA is not just growing revenue. It is converting that growth into cash at a scale that provides strategic flexibility for supply-chain investments, partnerships, and ecosystem support.

• 💼 Investment gains flattered reported profits: Net profit of $58.3 billion included nearly $16 billion in equity investment gains. NVIDIA did not break them out by company, but the large publicly disclosed holdings include Intel, CoreWeave, and Coherent, with Intel likely the biggest contributor in Q1.

• 🔮 The $91 billion guide raises the bar again: Guidance implies an 11% sequential increase and 95% Y/Y growth. The bigger NVIDIA gets, the harder it should be to keep compounding at this pace. Yet guidance still implies faster Y/Y growth.

Big picture: NVIDIA’s Q1 FY27 results support the same message Jensen delivered at GTC. The AI boom is moving from training clusters to full AI factories built for inference, agents, and token generation. The numbers suggest the cycle is still expanding, not digesting.

2. Business highlights

🇨🇳 China becomes a call option

China is no longer a clean zero, but it is not back either.

The US has reportedly cleared H200 sales to roughly 10 Chinese companies, including Alibaba, Tencent, ByteDance, and JD.com. But the chips have not shipped yet because Beijing has not given the green light, partly because it wants local companies to rely more on domestic alternatives.

NVIDIA is still assuming no China Data Center compute revenue in its outlook. That creates an unusual setup. The business is accelerating without China, while any actual restart would become incremental upside.

The key point is that NVIDIA is winning without China. If China reopens even partially, it becomes a call option on top of an already booming business.

🧠 Vera opens a new growth layer

The most surprising development from the call may have been NVIDIA’s CPU ambitions.

Management said Vera opens a $200 billion TAM and that NVIDIA has visibility to nearly $20 billion in standalone CPU revenue this year. That would push NVIDIA into a market it has never meaningfully addressed before.

Vera is more than a companion chip for Rubin. It could become a new growth pillar across AI factories, storage, security, and confidential computing.

🏭 AI factories go physical

NVIDIA announced a strategic partnership with IREN to support the deployment of up to 5 gigawatts of NVIDIA DSX-aligned AI infrastructure across IREN’s data center pipeline. NVIDIA also received a five-year right to buy up to 30 million IREN shares at $70. Since the stock trades below that level, this is less a near-term investment than an upside kicker if IREN becomes a major partner.

This is the AI factory thesis in action. The bottleneck is no longer just access to GPUs. It is power, land, cooling, networking, deployment speed, and operating know-how.

The deeper NVIDIA moves into the factory layer, the more its moat depends on the entire deployment stack rather than any single chip.

3. Key quotes from the earnings call

Check out the earnings call transcript on Fiscal.ai here.

CEO Jensen Huang:

On the token economy:

“AI can now do productive and valuable work. Tokens are now profitable. Model makers are in a race to produce more. In the AI era, compute capacity is revenue and profits.”

Jensen says the AI boom has shifted from experimentation to monetization. If tokens can be produced profitably, compute becomes the constraint on revenue growth. Bears see hyperscaler spending as a cost. Jensen sees compute as the input required to generate AI revenue.

On the CPU opportunity:

“The world has billions of human users. My sense is that the world is going to have billions of agents. [...] Every one of those agents are going to spin off sub-agents, and every time they spin these off, you're going to need to do inference. That's where the thinking happens. All of the thinking happens on GPUs. All of the orchestration essentially runs on CPUs.”

This is the simple mental model for Vera: GPUs do the thinking, while CPUs coordinate the work. As agents use tools, browse the web, call compilers, manage memory, and spin up sub-agents, NVIDIA sees a growing need for CPUs built specifically for agentic AI.

4. What to watch next

NVDA is up nearly 20% YTD, still outperforming the S&P 500 by a wide margin. The index is less than 8%. The latest 13F filings for Q1 2026 showed that some funds were still buying, such as Altimeter and Tiger Global. The stock remains one of the most widely held names, although many funds are still underexposed relative to its 8% weight in the S&P 500.

At ~27x forward earnings, NVIDIA continues to trade mostly in line with the rest of Big Tech. With adjusted EPS surging 140% Y/Y, you could certainly argue it looks cheap. NVIDIA’s growth is supply-constrained. That means quarter-to-quarter noise matters less than understanding how long this cycle can run and what the business looks like when demand normalizes.

Here’s what I’m watching:

• ACIE growth: NVIDIA’s new disclosure shows that AI Clouds, Industrial, and Enterprise are nearly as large as Hyperscale, and growing faster sequentially. If this continues, it would support the idea that the AI buildout is broadening beyond hyperscaler CapEx.

• Rubin cadence: Vera Rubin production shipments are expected to begin in Q3 and ramp into Q4. A clean handoff from Blackwell to Rubin would support NVIDIA’s $1 trillion Blackwell and Rubin revenue outlook through 2027. A delay could create the demand air pocket that bears have been waiting for.

• Token economics: Jensen says tokens are now profitable, but the real test is whether AI labs and AI-native companies can turn token revenue into durable profits after compute, R&D, and customer acquisition. NVIDIA is proving the infrastructure demand. Some customers still need to prove the business model.

📉 The bear case is that AI infrastructure demand eventually normalizes.

📈 The bull case is that agentic AI turns compute into a new industrial base.

NVIDIA is building for the latter.

That’s it for today!

Happy investing!

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Disclosure: I own AAPL, AMD, AMZN, GOOG, META, MSFT, and NVDA in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.

Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.

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It’s 13F season again!

Every quarter, funds managing over $100 million must disclose their portfolios, offering a rare glimpse into the minds of elite investors.

The latest 13F filings capture trades from January 1 to March 31.

In Q1, the AI trade moved down the stack.

Big Tech kept raising the stakes with massive AI infrastructure commitments, but investors started questioning the payoff timeline. That tension reshaped the market: semis, power, and physical infrastructure became cleaner expressions of the buildout.

Software told a different story. The category faced one of its sharpest sentiment resets in years as investors questioned how AI agents could pressure traditional SaaS models.

At the same time, hopes for rate cuts faded and oil prices jumped, prompting funds to rethink crowded positions.

Against that backdrop, super investors had to make some calls: chase the AI buildout, buy the software reset, rotate into durable compounders, or trim crowded winners.

Let’s see where the smart money leaned.

Today at a glance:

1. Hedge funds’ strategies

2. Top buys and top holdings in Q1

3. Fund picks that were not on your bingo card

4. Implications for individual investors

Before we dive into 13Fs, a quick reminder: blindly copying hedge fund trades is a terrible strategy.

Investing is like shooting 3-pointers. Even Steph Curry, the greatest shooter ever, misses more than half the time. There are no guaranteed outcomes, even for the pros.

Your behavior matters more than your portfolio. As Peter Lynch said, “Know what you own and why you own it.”

Conviction is what helps you hold through volatility. And conviction comes from doing your own work, not borrowing someone else’s.

As Ian Cassel puts it:

“You can borrow someone else’s stock ideas but you can’t borrow their conviction. […] Do the work so you know when to sell. Do the work so you can hold. Do the work so you can stand alone.”

Some limitations of 13F filings:

• Omit short positions and cash reserves.

• Offer a partial view, leaving out smaller funds.

• Exclude non-US equities, bonds, and commodities.

• Can be dated, given their submission 45 days after the quarter.

With all this said, let’s see what top funds were buying and holding in Q1.

1. Hedge funds’ strategies

Hedge funds are financial powerhouses known for flexible, aggressive strategies designed to beat the market.

Here’s what typically shapes their moves:

• Market conditions: Long in bull markets, defensive in bear markets.

• Sector trends: Shifts in regulation or consumer behavior steer capital.

• Fundamentals: Strong earnings, free cash flow, and leadership matter.

• Macro factors: Rates, inflation, and geopolitics influence positioning.

• Quant models: Some lean on proprietary algorithms to find an edge.

• Risk management: Diversification, hedging, and position sizing.

• Investor sentiment: Fear and greed create mispriced opportunities.

Still, it doesn’t always work out.

The Global X Guru ETF (GURU), designed to track top hedge fund holdings, has underperformed the S&P 500 since its inception in 2012. And that comparison still leaves out the classic hedge fund fee drag.

And those fees matter. The classic “2 and 20” model (2% of assets + 20% of gains) can significantly reduce returns. It's no wonder that many individual investors are opting for simpler, lower-cost strategies.

2. Top holdings and top buys in Q1

Our partners at Fiscal.ai gather the data on Super Investors and visualize their portfolio for you. Pick your favorite investors and see how their holdings have evolved.

In early 2020, just before the COVID market turmoil, I curated a list of 20 top-performing hedge funds using TipRanks data. The selection focused on alpha relative to the S&P 500, and I also included a few funds frequently featured in my social feeds and podcast rotation. It’s not perfect, but it remains a solid directional filter.

Top 5 holdings end of March 2026:

The 12 stocks below represent over half of the top holdings listed:

• 🤖 AI infrastructure: TSM, NVDA, AVGO, ASML, MU, GEV.

• ☁️ Hyperscalers: AMZN, MSFT, GOOG, META.

• 📦 Global commerce: MELI, V.

Amazon remains the most widely held stock, making the top 5 holdings of half of these funds, followed closely by Taiwan Semiconductor and Alphabet.

Also, note that Apple is entirely absent despite being the third-largest company by market cap globally. You also won’t find Tesla here, despite its popularity with individual investors.

This list of holdings doesn’t change much from one quarter to the next, so let’s turn to the more actionable insights with the new movements in Q1.

Top 5 buys in Q1

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Today at a glance:

1. 🛢️ Aramco: Pipeline Holds the Line

2. 📱 Tencent: AI Catch-Up Cost

3. 🌐 Cisco: AI Orders Nearly Double

4. ⚙️ Applied Materials: AI Tailwind Accelerates

5. 🏦 Nubank: Credit Costs Bite

6. 🚚 JD.com: Food Delivery Losses Narrow

7. 🪙 Circle: Arc Steals the Show

8. 🧊 Dynatrace: ARR Crosses $2 Billion

9. 👟 On: Premium Strategy Compounds

10. 🎨 Figma: AI Monetization Lands

11. 💊 Hims & Hers: GLP-1 Comedown

12. 🛍️ Global-e: AI-First Margin Lift

13. 💳 Klarna: Profit Pivot Lands

14. 📆 Monday.com: AI Pricing Pivot

15. 🌎 DLocal: Volume Outpaces Margin

1. 🛢️ Aramco: Pipeline Holds the Line

With Brent hovering near $100, the Strait of Hormuz still effectively closed, and nearly a billion barrels of regional supply already lost to the blockade, Aramco's Q1 print landed in the middle of the most disruptive oil supply shock in decades.

Q1 adjusted net income jumped 26% Y/Y to $33.6 billion ($2.4 billion ahead of consensus) on revenue of $115.5 billion (+7% Y/Y). Aramco's realized crude price climbed to $76.90/bbl from $64.10 in Q4, with Brent rising 95% over the quarter. The $21.9 billion quarterly dividend held — but free cash flow of $18.6 billion came in below the payout for the first time in years, dragged by a $15.8 billion working-capital build tied to crisis-driven inventory and logistics shifts.

The story remains the East-West pipeline, which hit its full 7 million bpd capacity in Q1. CEO Amin Nasser called it a “critical supply artery.” Crude sales volume rose Y/Y but fell sequentially, reflecting the loss of Strait of Hormuz throughput. CapEx of $12.1 billion supports the ongoing $50-55 billion FY26 spending plan. Gearing rose to 4.8% from 3.8% at year-end as the dividend exceeded free cash flow.

Nasser gave a stark warning. If Strait of Hormuz traffic resumes today, oil markets will need a few months to rebalance — but if the disruption persists beyond a few more weeks, the market won’t normalize until 2027. The question for the coming months is whether Hormuz traffic recovers enough to ease working-capital pressure, and whether Aramco can keep crude flowing at pipeline capacity without compromising the dividend if free cash flow continues to run below the $21.9 billion payout.

2. 📱 Tencent: AI Catch-Up Cost

Tencent Q1 revenue rose 9% Y/Y to 196.5 billion yuan (~$29 billion) — its slowest pace in six quarters and a miss versus the 199 billion yuan consensus. Net profit climbed 21% to 59.4 billion yuan, beating expectations. The revenue miss was partly due to a later Lunar New Year, shifting some gaming revenue to Q2. Shares are down over 20% YTD as investors weigh whether Tencent can monetize AI fast enough.

• Gaming grew 8%. Domestic gaming grew just 6% on the holiday shift, while International gaming rose 13%, boosted by League of Legends, Wuthering Waves, and Brawl Stars.

• Marketing services surged 20% (accelerating from 17% last quarter), the clear bright spot, driven by an upgraded AI-driven ad recommendation model.

• FinTech and Business Services rose 9%. Tencent Cloud’s international business (part of this segment) grew over 40%.

• Social Networks declined by 2%, primarily due to the later timing of the Spring Festival. Wexin and WeChat now have a combined 1.43 billion Monthly Active Users (MAUs).

Capex jumped 63% sequentially to 31.9 billion yuan (~$4.4 billion), with management pledging “a substantial increase” in H2 as China-designed AI chips become available. CEO Pony Ma candidly explained: “A year ago we thought we were on the boat, then we found it was leaking” — a rare acknowledgment that Tencent is playing catch-up.

The Hy3 preview model launched in April climbed to the top of OpenRouter’s token-usage leaderboard, with WorkBuddy now positioned as China’s most widely used productivity AI agent. Tencent confirmed it’s working to integrate agents into WeChat’s mini-program ecosystem, but gave no timeline. Tencent’s 36 billion yuan ($5 billion) AI spend in 2026 remains conservative versus the $700+ billion combined US hyperscaler budget. The next question is whether agentic AI integration into WeChat starts generating measurable engagement before competitors like ByteDance and Alibaba lock in distribution.

3. 🌐 Cisco: AI Orders Nearly Double

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You have to spend money to make money

This week, Alibaba and Sea Limited reminded investors what that looks like.

Both missed profit expectations. Both stocks rallied anyway.

That’s the paradox of an investment cycle. The income statement gets worse before the underlying business gets better. Alibaba is pouring money into AI infrastructure. Sea is spending to widen its e-commerce moat.

To be sure, the bar was very low. After all, these two stocks have been down in the past five years, while the S&P 500 has nearly doubled.

But investors may forgive ugly earnings today if the spending creates better earnings tomorrow. The question is whether these companies are building moats or just burning cash.

Today at a glance:

• 🐉 Alibaba: The AI Trade-Off

• 🌊 Sea Limited: Moat Over Margins

🐉 Alibaba: The AI Trade-Off

Alibaba just delivered one of the strangest earnings reactions of the season.

Revenue grew only 3% Y/Y to $35.3 billion ($1.1 billion miss), while adjusted EBITA fell 84% to $0.7 billion. The company turned to an operating loss for the first time in five years.

And yet, the stock jumped 8%. Why? Because investors looked past the income statement and focused on the AI trajectory.

CEO Eddie Wu said Alibaba’s AI work has moved from “incubation to commercialization at scale.” The company now expects to spend even more than its previous $52 billion three-year AI investment plan, with management prioritizing growth and market share over near-term margins.

In short, Alibaba traded profit for AI growth.

Income statement

Revenue breakdown:

• 🛒 China E-commerce: $17.7 billion, up 6%.

• ☁️ Cloud Intelligence: $6.0 billion, up 38%.

• 🌍 International commerce: $5.1 billion, up 6%.

• 🧩 All others: $9.6 billion, down 21%, distorted by disposals.

Excluding disposed businesses such as Sun Art and Intime, group revenue actually grew 11% Y/Y.

The main problem was profitability. Group operating margin turned slightly negative. Adjusted EBITA margin dropped to 2% from 14%. Sales and marketing expenses rose to 22% of revenue as Alibaba funded subsidies for quick commerce and user acquisition for the Qwen AI model family. Free cash flow swung to a $6.8 billion outflow as AI infrastructure spending ramped up.

Alibaba is no longer managing the business for clean quarterly margins. It is managing for a strategic position.

FY27 commentary

Management expects Cloud Intelligence’s external growth to keep accelerating beyond +40%. Annual recurring revenue from AI models and applications is expected to surpass 30 billion yuan (~$4.4 billion) by year-end. CapEx will rise from already elevated levels, as management warned of much higher-than-expected AI spending.

☁️ Cloud accelerates

Cloud Intelligence was the bright spot thanks to AI.

Revenue grew 38% Y/Y to $6 billion, while external cloud revenue accelerated to 40% growth. AI-related product revenue grew triple digits for the 11th consecutive quarter and now accounts for 30% of external cloud revenue. Alibaba expects that mix to exceed 50% within about a year.

That matters because Cloud is the business that can change Alibaba’s multiple. The core marketplace is mature, quick commerce is expensive, and international commerce remains competitive. But if Cloud keeps accelerating with AI demand, Alibaba starts to look less like a slow-growth e-commerce giant and more like China’s AI infrastructure champion.

Wu’s key point is that AI tokens are becoming a production input, not just another line in the IT budget. If companies use AI to run workflows, serve customers, build software, and automate operations, demand scales with business activity.

That is the bull case for Alibaba Cloud.

🛒 E-commerce is still paying the bill

China E-commerce reported revenue growth of 6% Y/Y, but the underlying marketplace looked healthier than the headline suggests.

Customer management revenue grew only 1% on paper, but that was distorted by an accounting change in how Alibaba records merchant subsidies. On a like-for-like basis, management says it grew 8%, though still increasingly supported by subsidies.

The pressure came from quick commerce. Taobao Instant Commerce is Alibaba’s push into food, grocery, and local delivery. It gives Alibaba another way to increase frequency and defend the customer relationship against Meituan, JD.com, PDD, and Douyin.

But it is expensive. China E-commerce adjusted EBITA fell sharply as Alibaba subsidized users and merchants. Management says the unit economics are improving and expects quick commerce to turn profitable on a per-order basis by FY27.

So the e-commerce story is a trade-off: Alibaba is using today’s profits to defend tomorrow’s traffic.

🤖 Qwen is the consumer AI swing

The most interesting long-term move is Qwen.

Alibaba is integrating Qwen into its broader ecosystem, including e-commerce experiences such as shopping assistance. That gives Alibaba something most AI companies would love to have: distribution.

A standalone chatbot has to acquire users from scratch. Alibaba can put Qwen in front of hundreds of millions of shoppers, merchants, and cloud customers.

That does not guarantee adoption. Consumer AI habits are still forming, and ByteDance, Tencent, Baidu, and other Chinese platforms are all fighting for the same user behavior.

But the strategic logic is clear: Alibaba wants AI to connect the full stack:

• Models through Qwen.

• Infrastructure through Alibaba Cloud.

• Applications through shopping, merchant tools, and enterprise agents.

• Distribution through Taobao and Tmall.

That is why investors were willing to look past the profit collapse. Alibaba is trying to prove it can be more than China’s e-commerce incumbent. It wants to be one of China’s core AI platforms.

Bottom Line: Alibaba traded a quarter of profit for a quarter of AI growth. The 84% EBITA decline was ugly, but the 40% external cloud growth was the signal investors cared about. Eddie Wu is telling the market that margins are secondary to building China’s AI stack. That can work if Cloud growth keeps accelerating and quick commerce losses narrow. But the spending has to translate into durable AI revenue, not just a bigger CapEx bill.

🌊 Sea Limited: Moat Over Margins

Sea Limited just delivered an impressive Q1, with the top line topping even the Q4 record, despite a quarter typically weaker seasonally.

Revenue grew +47% Y/Y to $7.1 billion, its fastest pace in years, while operating income rose just 30% to $0.6 billion. That gap tells the story: Sea is leaning back into investment mode.

CEO Forrest Li called 2026 a year to “deepen our competitive moats.” Translation: Sea is spending to widen its lead in e-commerce, fintech, and gaming.

The market liked it. The stock jumped as much as 12% after the print, helped by low expectations following a 50% slide from its September high. Investors had grown worried about margin pressure and rising competition across Southeast Asian e-commerce. This quarter showed the trade-off clearly. Growth is accelerating, but profits are being reinvested.

Income statement

Revenue breakdown:

• 🛒 Shopee: $5.1 billion (+45% Y/Y).

• 💳 Monee: $1.2 billion (+58% Y/Y).

• 🎮 Garena: $697 million (+41% Y/Y).

Margins moved the other way:

• Gross margin fell to 44%, down 2 points.

• Operating margin fell to 8%, down 1 point.

• Shopee adjusted EBITDA fell 16% despite record GMV.

FY26 guidance

Management reiterated Shopee GMV growth of ~25% Y/Y, with Shopee’s full-year adjusted EBITDA expected to at least match 2025 in absolute dollar terms.

🛒 Shopee is buying scale

Shopee remains Sea’s engine and burden.

GMV reached a record $37.3 billion, up 30% Y/Y, while gross orders rose 29% to 4.0 billion. Core marketplace revenue, including transaction fees and advertising, surged 61% to $3.8 billion.

That’s the good news: Shopee’s take rate is improving.

The bad news: cost of revenue rose 55% as Sea poured money into logistics and instant delivery. Shopee’s adjusted EBITDA fell to $223 million from $264 million a year ago.

This is the Amazon playbook we are all familiar with. Sacrifice near-term margin to build infrastructure that competitors struggle to match. TikTok Shop and Temu can compete on price. But a regional fulfillment network is harder to replicate.

Management still targets a long-term 2%-3% e-commerce EBITDA margin. For now, Sea appears willing to let margins compress if it means strengthening Shopee’s logistics moat.

💳 Monee is becoming a real bank

Monee, formerly SeaMoney, is no longer a side hustle.

The loan book jumped 71% to $9.9 billion, the main driver of revenue growth for this segment. Non-performing loans past 90 days remained flat at 1.1%, a reassuring sign for now.

That matters because Monee has better unit economics than e-commerce, but also more downside if credit quality cracks. Sea is increasingly a marketplace, a gaming company, and a lender, all in one.

The opportunity is powerful. Shopee gives Sea transaction data that most banks never see. That can improve underwriting and deepen customer relationships. But the credit cycle has not been fully tested at this scale.

🎮 Garena is still funding the empire

Garena delivered its best quarter since 2021. Bookings grew 20% Y/Y to $931 million, and adjusted EBITDA rose 25% to $574 million. Bookings represent the money spent by users during the quarter, which is recognized into revenue over time. It’s the representation of the business momentum.

The surprise is that Garena is not growing by adding many new users. Quarterly active users were roughly flat at 667 million. Instead, paying users grew 12%, and average bookings per user increased.

In plain English: the funnel is mature, but monetization is improving.

Free Fire remains the workhorse, supported by strong live events and partnerships. Garena was once written off as a fading one-hit business. Now it is back to doing what it did during Sea’s first growth wave: generating the cash that funds everything else.

Sea is becoming a three-engine compounder:

• Shopee is building the logistics moat.

• Monee is monetizing the user base through credit.

• Garena is funding the reinvestment cycle.

The bull case is that these three engines reinforce each other. Shopee acquires the users, Monee deepens monetization, and Garena provides high-margin cash flow.

The bear case is just as clear: TikTok Shop, Lazada, and Temu are not going away. Credit risk and logistics costs could pressure margins for longer than investors expect.

Bottom Line: Sea is buying growth again, but this time from a stronger position. Q1 delivered record revenue, record GMV, record adjusted EBITDA, and a cleaner three-engine story than Sea has had since 2021. The next test is whether Shopee’s logistics spend turns into operating leverage and whether Monee’s fast-growing loan book holds up at scale. For now, Sea is choosing moat over margin. That can be a winning strategy, but only if the moat hardens before the bill gets too large.

📊 Stay tuned for our PRO coverage tomorrow, including Tencent, Cisco, Nubank, Figma, and more

That’s it for today!

Stay healthy and invest on!

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Disclosure: I own BABA, NU, SE, and TCEHY in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.

Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.

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Are gaming giants missing an AI story?

The market is punishing tech companies that can’t tell a grand AI story. Few examples are clearer than Sony and Nintendo, the world’s two top console makers, which reported earnings last Friday.

Sony’s stock is down 23% YTD. Nintendo is down ~50% over the past 12 months. Both are facing a memory crunch driven by AI demand for data centers. Both are raising console prices to defend margins.

Meanwhile, Alphabet, Amazon, Meta, and Microsoft can announce $100+ billion CapEx plans and watch investors come back after a brief selloff. Spending on AI infrastructure is treated as an expanding moat. Higher memory costs for consoles are just margin pressure with no upside.

That’s the strange setup for gaming in 2026.

Sony tried on the AI vocabulary this quarter, with physical AI and creator tools. Nintendo stayed quiet and focused on shipping games.

Both companies are executing well in their own ways.

But both are being valued like they’re missing the only story that matters.

Today at a glance:

• 🎮 Sony: Beyond PlayStation

• 🍄 Nintendo: The Price Test

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🎮 Sony: Beyond PlayStation

Sony just had its most profitable year ever. But the market focused on what comes next.

FY25 revenue (ending in March 2026) grew 4% Y/Y to ¥12.48 trillion (~$80 billion), while operating income rose 13% Y/Y to ¥1.45 trillion. Yet the March quarter was messy: net profit fell 63% Y/Y to ¥83 billion, far below consensus, dragged down by impairments at Bungie and Pixomondo plus a loss tied to the wound-down Honda EV venture.

The headline miss was ugly, but the underlying story is more interesting.

Sony is becoming a cleaner company: less hardware-heavy, more IP-driven, and more disciplined with capital. The new roadmap is built around gaming services, music catalogs, image sensors, and fab-light manufacturing.

👾 Gaming: Fewer consoles, better economics

The PS5 sold 1.5 million units in Q4, down from 2.8 million a year ago and the lowest quarter on record for the console. Lifetime shipments reached 93.7 million.

As a result, the revenue for the largest segment of the company was flat Y/Y. That sounds alarming, but the PlayStation business is healthier than the hardware numbers suggest.

Game & Network Services (G&NS) segment operating income fell 42% Y/Y to ¥54 billion in Q4, mainly because Sony booked an ¥88.6 billion Bungie impairment. The write-down reflects weaker future cash-flow expectations after softer engagement in Destiny 2 and delays around Marathon. Sony paid $3.6 billion for Bungie in 2022, making this a costly reminder that live-service games are harder to scale than they look. Strip out one-time charges, and full-year G&NS operating income would have grown 45% Y/Y instead of the reported 12%.

The gaming shift is clear:

• Hardware is slowing.

• Engagement is holding up.

• Software and services are carrying more weight.

PSN monthly active users reached 125 million, up only 1% Y/Y, but still near record levels. Playtime grew along with the user base.

That is the key takeaway. Sony may sell fewer consoles late in the cycle, but the installed base remains deeply engaged. At this stage of the cycle, software it the profit center, while hardware is more of a distribution channel.

The FY26 guide confirms it: G&NS revenue is expected to decline 6% Y/Y, while operating income is expected to grow 30% Y/Y as the Bungie impairment rolls off. Hardware profitability is expected to be roughly flat. The growth comes from software, services, and lower costs.

🧠 Sensors: Going fab-light

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Today at a glance:

1. ↗️ AMD: CPU Reawakening

2. 📱 Arm: AGI CPU Demand Doubles

3. 🌐 Arista Networks: Demand Beats Supply

4. 🍟 McDonald’s: Value Plays Through Anxiety

5. 🛍️ Shopify: Growth Deceleration Ahead

6. 📱 AppLovin: Axon Opens to the World

7. 🚖 Uber: Bookings Accelerate

8. 🇩🇰 Novo Nordisk: Oral Wegovy Boost

9. 💉 Pfizer: Defining Period

10. 🏨 Marriott: US Demand Reaccelerates

11. ☁️ Cloudflare: Shrinking To Grow Faster

12. 🤝 MercadoLibre: Growth Over Margins

13. 🛖 Airbnb: Guidance Goes Higher

14. 🥡 DoorDash: Demand Offsets the Misses

15. ☁️ CoreWeave: Backlog Near $100B

16. 🏎️ Ferrari: Scarcity Holds Up

17. 🔒 Fortinet: AI-Era Demand Surge

18. 📈 Coinbase: Crypto Winter Continues

19. 🐶 Datadog: AI Becomes the Engine

20. 💳 PayPal: Lores Lays Out the Cuts

21. 🔲 Block: AI Bet Pays Off

22. 🎤 Live Nation: Antitrust Bill Lands

23. 🇰🇷 Coupang: Recovery Takes Time

24. 💳 Fiserv: Transformation Strain

25. ⚡️ Axon: AI and Counter-Drone Inflection

26. 👽 Reddit: Profitability Tier Unlocked

27. ✈️ Expedia: B2B Carries The Load Again

28. 💬 Twilio: Voice AI Reaccelerates

29. 🌭 Kraft Heinz: Early Traction

30. 🌈 Affirm: Card Engine Keeps Roaring

31. 🌎 Global Payments: Worldpay Era Begins

32. 🏈 Flutter: Howe Out, Predictions In

33. 🍞 Toast: Agentic Platform Hits Stride

34. 🍔 RBI: Burger King's Inflection

35. 📢 HubSpot: Another Pricing Pivot

36. 🌊 DigitalOcean: AI Capacity Surge

37. 👻 Snap: Restructure & Reset

38. 🏠 Zillow: Profit Outlook Spooks Street

39. 🗞️ NYT: Ad Engine Reaccelerates

40. 👑 DraftKings: Predictions Push Goes Live

41. 🧬 Tempus AI: Pharma Brings Visibility

42. 🔥 Match Group: Tinder Rebounds

43. ⚡️ Celsius: Portfolio Plays the Hits

44. 📺 The Trade Desk: Guide Disappoints Again

45. 🚲 Peloton: Turnaround Finds Its Footing

46. 🏴 Klaviyo: Agents Find Leverage

47. 🍿 AMC: Box Office Leverage

1. ↗️ AMD: CPU Reawakening

AMD’s Q1 revenue rose 38% Y/Y to $10.3 billion ($0.3 billion beat), and non-GAAP EPS was $1.37 ($0.08 beat).

Data Center revenue surged 57% Y/Y to $5.8 billion, ahead of expectations, as EPYC CPUs and Instinct GPUs became the primary growth engine. Free cash flow more than tripled to a record $2.6 billion, showing the AI ramp is already flowing through the model.

The biggest shift was not just GPUs. AMD doubled its server CPU market outlook, now expecting the TAM to grow at a 35%+ annual rate to more than $120 billion by 2030, up from its prior 18% CAGR view. The logic is simple: inference and agentic AI require more CPU compute for orchestration, data movement, parallel execution, and head nodes for accelerators. AMD now expects server CPU revenue to grow more than 70% Y/Y in Q2, with robust growth continuing into the second half and 2027.

The accelerator story also strengthened. AMD said that MI450 and Helios customer forecasts now exceed initial expectations, with production shipments still on track to ramp in the second half. The company pointed to multi-generation partnerships with Meta and OpenAI, plus additional large-scale customer interest, as evidence it can generate tens of billions in annual data center AI revenue in 2027. That matters because AMD is no longer pitching itself as a distant NVIDIA alternative. It’s trying to become the second strategic AI platform for hyperscalers that need more supply and leverage.

Outside Data Center, the picture was less explosive. Client and Gaming revenue rose 23% Y/Y to $3.6 billion, with Client up 26% and Gaming up 11%. Ryzen demand remains strong, especially in commercial PCs, but management warned that higher memory and component costs could pressure second-half PC and gaming demand. Embedded returned to growth, up 6% Y/Y to $873 million, helped by test, aerospace, defense, communications, and broader x86 adoption.

Management guided Q2 revenue to $11.2 billion (a massive $0.7 billion beat at the midpoint), implying 46% Y/Y growth, with adjusted gross margin expected to improve to 56%. The setup is increasingly about execution under constraint: securing enough wafers, back-end capacity, memory, and data center power to meet demand. The next test is whether AMD can turn MI450 and Helios into large-scale 2027 deployments while keeping gross margins in the 55%–58% long-term range.

2.📱 Arm: AGI CPU Demand Doubles

Arm Q4 FY26 (March quarter) revenue rose 20% Y/Y to $1.5 billion ($20 million beat), and non-GAAP EPS was $0.60 ($0.02 beat).

• Licensing surged 29% to $819 million, $43 million ahead of consensus.

• Royalties grew just 11% to $671 million — a $22 million miss as memory chip shortages weighed on smartphone production.

ACV (Annualized contract value), a metric for normalized license and other revenue, rose 22% Y/Y to $1.7 billion.

Shares fell over 10% as the smartphone slowdown overshadowed AI data center momentum.

The headline story is the Arm AGI CPU, Arm’s first homegrown data center chip and a direct competitive shift against its own customers. Demand more than doubled to over $2 billion across FY27 and FY28, but Arm held its revenue forecast at $1 billion citing TSMC advanced-node wafer constraints. Meta is the lead partner and co-developer. Data center royalty revenue more than doubled Y/Y, with Neoverse CSS holding ~50% market share among top hyperscalers.

CEO Rene Haas saw smartphone unit growth “flip to negative,” though the weakness was concentrated in low-end phones where Arm earns lower royalty rates. The cost of building chips directly is showing up in margins: operating margin fell to 29% from 33% a year ago.

For Q1 FY27, Arm guided revenue to ~$1.26 billion (vs. $1.25 billion consensus) and non-GAAP EPS of ~$0.40 (vs. $0.36 consensus), with both royalty and licensing growing ~20%. Long-term FY31 targets remain intact at $25 billion revenue ($15 billion from AGI CPU, $10 billion from IP) and $9+ EPS. The next quarter test is whether royalty growth reaccelerates as the smartphone memory squeeze eases, and whether TSMC capacity loosens enough to let Arm convert the full $2 billion in AGI CPU demand into revenue rather than the $1 billion currently guided.

3. 🌐 Arista Networks: Demand Beats Supply

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🏆 The Live Sports Trade-Off

Comcast called it “Legendary February.” For 17 days, the Winter Olympics, Super Bowl, and NBA All-Star Game all aired across NBCUniversal, generating over $2 billion of incremental revenue.

Disney got its own Super Bowl boost on ABC. Paramount leaned on the NFL and UFC. Roku benefited as tentpole events pulled more ad dollars into connected TV.

The takeaway from media earnings is clear: live sports are one of the few remaining forces powerful enough to reshape an entire quarter.

But the same quarter also showed the trade-off. Comcast’s Media EBITDA swung to a $426 million loss as NBA rights hit the P&L. Disney’s Sports operating income fell 5%. Warner, having walked away from the NBA, saw linear ad revenue dropped 8%.

The bill for being in sports keeps rising. The bill for sitting out may be even higher.

Today at a glance:

• 🏰 Disney: Streaming Finally Scales

• 🦚 Comcast: The Sports Bill Arrives

• 🎥 Warner: Paramount’s Inheritance

• ⛰️ Paramount: The Easy Part Is Over

• 📺 Roku: The CTV Toll Booth

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🏰 Disney: Streaming Finally Scales

Disney’s fiscal year ends in September, so the March quarter was Q2 FY26.

• 📸 Big picture: Revenue rose +7% Y/Y to $25.2 billion ($0.3 billlion beat), and adjusted EPS grew +8% to $1.57 ($0.07 beat) in new CEO Josh D’Amaro’s first quarter at the helm. Total segment operating income rose +4% to $4.6 billion, with all three segments beating expectations. Disney also guided FY26 adjusted EPS growth to ~12% and raised its buyback target to at least $8 billion.

• 📈 Streaming hits double-digit margins: DTC profitability inflected meaningfully. Disney+/Hulu profits jumped +88% Y/Y to $582 million on subscriber growth, January’s price hike, and ad improvements — delivering Disney’s first-ever double-digit DTC margin. Disney has also stopped reporting subscriber counts, mirroring Netflix’s playbook.

• 🍿 Entertainment swings up: Entertainment revenue grew +10% Y/Y, helped by the Fubo transaction and a stronger film slate. Avatar: Fire and Ash, Zootopia 2, and Pixar’s Hoppers have generated more than $3.7 billion combined at the global box office. Streaming now generates more than 2x the revenue of linear at Disney Entertainment.

• 🏰 Experiences keep cruising: Experiences revenue rose +7% to $9.0 billion, with operating income up +5% to $2.6 billion. Cruise capacity remains the growth engine, with the fleet set to expand from 8 to 13 ships by 2031. Domestic park attendance dipped -1% on softer international visitation, but global attendance grew +2%, and per-guest spending rose.

• 🏈 Sports stuck in transition: Sports revenue grew just +2%, while ESPN operating income fell -5% to $652 million on lower ad revenue and higher rights costs. Q3 sports operating income is guided to fall -14% on rights timing. CFO Hugh Johnston also shut down the linear-spinoff debate, calling it “highly complex” and unlikely to create value.

• 🤖 D’Amaro’s vision: In a 3,000-word shareholder letter, D’Amaro positioned Disney+ as the company’s “digital centerpiece” — a single hub for streaming, games, parks bookings, and merchandise. AI is also being deployed for ad targeting and labor forecasting at the parks.

Bottom Line: D’Amaro inherited a better setup than Iger did, and his first move gives Disney a strategy investors can finally model: Disney+ as the front door to streaming, sports, games, parks, and commerce. ESPN and parks remain pressure points, but the quarter made the bull case cleaner.

🦚 Comcast: The Sports Bill Arrives

• 📸 Big picture: Revenue rose +5% Y/Y to $31.5 billion ($1.1 billion beat), or +11% pro forma post-Versant. Adjusted EPS fell -27.5% to $0.79 ($0.06 beat), and adjusted EBITDA declined -9% to $7.9 billion as NBA rights costs hit the P&L for the first time.

• 📉 Broadband losses moderate: Comcast lost only 65,000 domestic broadband customers, far better than the ~170,000 analysts feared and the first Y/Y improvement since Q4 2020. The catch: domestic broadband revenue still fell 5% to $6.3 billion as $45/month price guarantees and free wireless bundles compress ARPU.

• 📱 Wireless sets a record: Xfinity Mobile posted its best net additions quarter ever, with domestic wireless service revenue up +15% to $977 million. The real test arrives in 2H 2026, when bundled free lines hit their one-year mark and convert to paid. Early cohorts are seeing “a significant majority” roll over.

• 🦚 Peacock breaks $2 billion: Peacock added 5 million paid subscribers to reach 46 million, with revenue up +71% Y/Y to $2.1 billion. EBITDA losses widened to $432 million on NBA costs, but management called Q1 the “peak dilution” and guided Peacock to “approach profitability” in Q2.

• 🎢 Epic Universe keeps printing: Theme parks revenue jumped +24% to $2.3 billion, with EBITDA up +33% to $551 million, fueled by Epic Universe’s first full year in Orlando. International parks softened, but US parks show no concerning pullback.

• 📺 ‘Legendary February’ comes at a cost: The 17-day Olympics/Super Bowl/NBA All-Star stretch generated $2.2 billion in advertising alone, more than doubling Media ad revenue. Yet Media EBITDA still swung to a $426 million loss as NBA costs hit the segment.

Bottom line: Comcast’s pivot is working, but the trade-off is visible: lower broadband ARPU today in exchange for better retention and a larger wireless base tomorrow. If free lines convert to paid in 2H, the strategy starts to compound. If not, Comcast just bought stability at a steep price.

🎥 Warner Bros: Paramount’s Inheritance

• 📸 Big picture: Revenue dipped -1% Y/Y to $8.9 billion ($10 million beat), or -3% in constant currency. GAAP EPS came in at -$1.17 ($1.08 miss), with the $2.9 billion net loss almost entirely driven by the $2.8 billion Netflix termination fee Paramount paid on WBD’s behalf, plus acquisition-related amortization and restructuring. Excluding those items, the results were broadly in line.

• 🍿 Studios still on a roll: Studios revenue surged +35% Y/Y to $3.1 billion, with adjusted EBITDA up +199% to $775 million. Wuthering Heights anchored the slate, and CEO David Zaslav reaffirmed the goal of at least $3 billion in WB Studios EBITDA for the year. The “Warner Bros.” side is doing exactly what the bull case requires.

• 📈 Streaming crosses 140 million: HBO Max launched in the UK, Germany, Italy, and Ireland, helping the company “meaningfully exceed” its prior 140 million subscriber target. Streaming revenue rose +9% to $2.9 billion, and EBITDA grew +29% to $438 million. Management now expects to exit 2026 with more than 150 million subscribers globally.

• 📺 Linear keeps bleeding: Global Linear Networks revenue fell -8% Y/Y to $4.4 billion, with EBITDA down -9% to $1.6 billion. Ad revenue declined -8% in constant currency, with the absence of the NBA accounting for 7 points of the drop. CFO Gunnar Wiedenfels said the company has “long stopped viewing our linear networks as linear networks” — a tacit acknowledgment that the segment is being managed for cash, not growth.

• 🪧 The deal is almost done: WBD shareholders approved Paramount Skydance’s $31/share cash offer in April. Closing remains targeted for the end of Q3, pending foreign regulatory approval. WBD ended the quarter with $30.1 billion in net debt, or 3.4x leverage — Paramount’s inheritance.

Bottom Line: WBD’s quarter was good enough underneath the accounting noise, but the stock is no longer trading on operations. With Paramount’s offer locked in, investors are effectively underwriting deal timing, regulatory risk, and the ticking-fee sweetener. The operational story is real, but the trade is no longer about WBD.

⛰️ Paramount: The Easy Part Is Over

• 📸 Big picture: Revenue rose +2% Y/Y to $7.4 billion ($70 million beat) in Paramount Skydance’s second quarter under new ownership. Adjusted EPS came in at $0.23, down from $0.29 a year ago, while adjusted EBITDA jumped +59% to $1.2 billion. The company reaffirmed its 2026 outlook of $30 billion in revenue and $3.8 billion in adjusted EBITDA.

• 📉 TV Media keeps sliding: Linear remains the drag, with TV Media revenue down -6% Y/Y to $3.7 billion, better than the -9.5% Wall Street feared. Affiliate and ad revenue both declined, though total advertising improved versus Q4, and management expects ad growth to return in 2H 2026.

• 📈 Streaming holds up: Direct-to-Consumer revenue grew +11% Y/Y to $2.4 billion, with Paramount+ revenue up +17% to $2.0 billion on a +14% ARPU lift from January’s price hike. Paramount+ ended with 79.6 million subscribers after exiting low-value international hard-bundle subs, and management expects near-term subs to stay “flattish” as more bundles roll off.

• 🎬 Studio finds its footing: Filmed Entertainment revenue grew +11% to $1.3 billion, anchored by Scream 7 — now the highest-grossing entry in the franchise’s history. Ellison reaffirmed the target of 30 theatrical films per year, with 15 on the 2026 calendar. Landman also became the most-watched series in Paramount+ history.

• ♟️ WBD closing in Q3: Paramount drew $2.2 billion on its credit facility to help pay Netflix’s $2.8 billion breakup fee, ending Q1 with $1.9 billion in cash and $15.5 billion in gross debt. The $110 billion WBD deal cleared a shareholder vote in April and remains targeted to close by the end of Q3, pending regulatory approval.

Bottom Line: Ellison’s team delivered the kind of clean quarter Paramount needed before taking on WBD. But this was the easy part: cost cuts, better execution, and a cleaner streaming story are only the opening act. The real test begins when Paramount inherits WBD’s debt, linear decline, and integration complexity.

📺 Roku: The CTV Toll Booth

• 📸 Big picture: Revenue grew +22% Y/Y to $1.25 billion ($50 million beat), and EPS swung to a $0.57 profit ($0.24 beat) versus a $0.19 loss a year ago. Adjusted EBITDA jumped +165% to $148 million, and free cash flow hit $148 million — the second-highest on record.

• 📈 Platform accelerates: Platform revenue grew +28% Y/Y to $1.1 billion, lifted by the Olympics and Super Bowl. For the first time, Roku broke out Platform into two segments: Advertising revenue grew +27% to $613 million, while Subscriptions grew +30% to $519 million. Roku said its video ad growth outpaced both the broader US CTV and digital ad markets.

• 📉 Devices stay a loss-leader: Devices revenue fell -16% Y/Y to $118 million, with a -16% gross margin on lower player unit sales and promotional pricing. The strategy hasn’t changed: hardware exists to seed the platform.

• 📊 100 million households: Roku passed 100 million streaming households globally, with its devices used by more than half of all US broadband households. Streaming hours rose +8% Y/Y to 38.7 billion, and Q1 was Roku’s best quarter ever for new Premium Subscription sign-ups.

• 🔮 Guidance raised again: Roku lifted full-year Platform revenue guidance to ~+21%, raised adjusted EBITDA to $675 million, and reiterated the path to $1 billion in free cash flow by 2028 “if not sooner.” Q2 guidance calls for Platform revenue growth of +20% Y/Y.

Bottom Line: Roku doesn’t need to own sports rights to benefit from them. As tentpole events pull more ad dollars into connected TV, Roku acts like a toll booth on the shift. The H2 caution matters, but it sounds more macro than company-specific.

📊 Stay tuned for nearly 50 companies visualized tomorrow in our PRO coverage!

That’s it for today!

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Disclosure: I own AAPL, AMZN, GOOG, NFLX, and ROKU in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.

Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.

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🗓️ It’s peak earnings season!

This week, we’ll visualize more than 50 reports ranging from Airbnb to Zillow.

Today, we break down some of the companies that already reported on what was an unusually busy Monday.

Today at a glance:

• 🕵️ Palantir: Tokens Are the New Coal

• 🦉 Duolingo: Top of Funnel Goes Flat

• 🛵 Grab: The Indonesia Overhang

• 📌 Pinterest: Buyback for the Ages

🕵️ Palantir: Tokens Are the New Coal

Palantir’s US business doubled in twelve months, and CEO Alex Karp says the company cannot meet demand.

CTO Shyam Sankar gave the framing of the quarter:

“Tokens are the new coal; AIP is the train.”

Inference costs are collapsing. GPT-4-equivalent performance is now roughly 1,000x cheaper than three years ago. As a result, the universe of agent workflows that make economic sense is expanding fast. That’s Jevons paradox. But it also comes with the risk of unreliable model output.

Now, Palantir’s AIP (Artificial Intelligence Platform) and the underlying ontology are the harness that makes raw model output safe enough to put into production. Every agent action is governed, attributed, and traceable. In short, the more abundant cheap tokens become, the more valuable the layer that turns them into deployable work.

Q1 revenue grew 85% Y/Y to $1.63 billion ($90 million beat), Palantir’s fastest growth as a public company, and the 11th consecutive quarter of acceleration. Adjusted EPS came in at $0.33 ($0.05 beat). The Rule of 40 score hit 145, up from 127 last quarter, putting Palantir in rarefied air alongside NVIDIA, Micron, and SK Hynix.

Net dollar retention jumped to 150% (up from 139% in Q4 FY25), and adjusted free cash flow hit $925 million at a wild 57% margin.

The US is the story

The US now accounts for 79% of total revenue and surged +104% Y/Y.

• 💼 US Commercial: $595 million (+133% Y/Y, +18% Q/Q).

• 🪖 US Government: $687 million (+84% Y/Y, +21% Q/Q).

Management noted US Commercial growth would have been +143% Y/Y absent a large customer transitioning from commercial to government. International commercial, by contrast, grew just +26% Y/Y to $179 million — Europe remains the laggard, and Karp’s call commentary made clear he has limited patience for it.

The pipeline behind the print

Bookings matter more than revenue at this stage of the curve.

RDV (Remaining Deal Value) is Palantir’s total committed but not yet recognized revenue, indicating the visible runway. RDV nearly doubled to $11.8 billion. US Commercial RDV alone surged 112% Y/Y to $4.92 billion. That’s the cushion under FY26 guidance and the reason management keeps raising its outlook.

FY26 revenue is now expected to grow 71% Y/Y to $7.7 billion (compared to 61% previously). That includes a 120% growth to $3.2 billion for US Commercial.

Bottom Line: Palantir fundamentals have improved so much that even the nosebleed valuation has come down to ~70x forward EBITDA. That’s still high compared to the rest of the market, but not outrageous for a company expected to nearly double free cash flow this year.

🦉 Duolingo: Top of Funnel Goes Flat

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🔥 The April report is here!

All the key earnings visuals from the past month in one place.

• ✔️ Cut through the noise with clear, concise financial snapshots.

• ✔️ See revenue trends, profit margins, and key takeaways instantly.

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Here’s a sneak peek of the 70+ companies included. 👀

• ☁️ Mega-Caps: Apple, Alphabet, Microsoft, Amazon, Meta, Tesla.

• 🧬 Pharma: Lilly, AbbVie, Merck, Sanofi, Amgen, AstraZeneca.

• 💊 Healthcare: J&J, UnitedHealth, Abbott, Intuitive Surgical.

• 🧩 Semis: TSMC, Intel, KLA, Texas Instruments, Qualcomm.

• 🏦 Banks: JPMorgan, BofA, Wells Fargo, Citigroup, Schwab.

• 💻 Software: IBM, SAP, ServiceNow, Atlassian, AppFolio.

• 💰 Wealth: Morgan Stanley, Goldman Sachs, BlackRock.

• 🥤 Beverages: Coca-Cola, PepsiCo, Constellation.

• ✈️ Airlines: American, Delta, Southwest, United.

• 📡 Telecom: AT&T, T-Mobile, Comcast, Verizon.

• ☕ Restaurants: Starbucks, Chipotle, Domino’s.

• 🛡️ Defense: Boeing, Airbus, Lockheed Martin.

• 🍿 Entertainment: Netflix, Roku, Spotify.

• 💳 Payments: Amex, Visa, Mastercard.

• 🔬 Equipment: ASML, Lam Research.

• 📲 Hardware: Samsung, SanDisk.

• 📈 Brokers: SoFi, Robinhood.

• 🚗 Autos: Rivian, GM, Ford.

• 🏨 Travel: Hilton, Booking.

• Plus Modelez, UPS, P&G, GE Vernova, Tilray, and more.

Download the full report below!👇

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Today at a glance:

1. 📱Apple: The Ternus Setup

2. ☁️ Microsoft: The AI Bottleneck

3. 🕶️ Meta: CapEx Spooks Wall Street

4. 📱 Samsung: AI Chip Profits Explode

5. 💊 Eli Lilly: GLP-1 Volume Engine Roars

6. 💳 Visa: Fastest Growth Since 2022

7. 💳 Mastercard: Cross-Border Cracks Show

8. ⏳ AbbVie: Skyrizi and Rinvoq Deliver

9. 🥤 Coca-Cola: Affordability Momentum

10. 🧬 AstraZeneca: Oncology Carries Again

11. 🦠 Merck: Bridge Drugs Show Traction

12. 🔬 KLA: Demand Visibility Extends

13. 📶 T-Mobile US: Accounts Over Lines

14. 📡 Verizon: Schulman's Early Win

15. 🧬 Amgen: Growth Outrun Patent Cliff

16. 🛩️ Airbus: Engine Shortage Bites

17. 📲 Qualcomm: Data Center Lights Up

18. 💾 Sandisk: Memory Trade

19. 🏝️ Booking: Middle East Cuts the Cycle

20. 🎧 Spotify: Guidance Hits the Skip Button

21. 💡 Cadence: Hexagon Mutes the AI Tailwind

22. 📦 UPS: Transition Quarter

23. 🏨 Hilton: US Demand Snaps Back

24. 🪶 Robinhood: Crypto Drag, Prediction Surge

25. 🍪 Mondelez: Cocoa Cost Hangover Lingers

26. 🚗 GM: Iran Cost Spike

27. 🚙 Ford: One-Time Boost Lifts Guide

28. ☕️ Starbucks: The Turn Arrives

29. 🌯 Chipotle: Comps Turn Positive Again

30. 👾 Roblox: Safety Hits New Users Growth

31. 🏦 SoFi: Strong Quarter Wrong Reaction

32. ☁️ Atlassian: Cloud Reaccelerates Hard

33. ⚡ Rivian: R2 Production Begins

34. 🦷 Align: Volume Holds But US Softens

35. 🍕 Domino’s: Macro Bites Into Comps

36. 📦 Etsy: Marketplace Returns to Growth

37. 🩺 Teladoc: BetterHelp Insurance Scales

1. 📱Apple: The Ternus Setup

Apple's Q2 revenue rose 17% Y/Y to $111.2 billion ($1.6 billion beat) and adjusted EPS was $2.01 ($0.07 beat). These were March quarter records despite supply constraints.

• iPhone revenue grew 22% to $57.0 billion.

• Services accelerated 16% to a record $31.0 billion.

• China rebounded 28% to $20.5 billion.

As we covered last week, CEO Tim Cook will step down on September 1, with hardware chief John Ternus taking over.

Two structural shifts arrived alongside the print:

• First, Apple ended its "net cash neutral" capital return policy. It was a 2018 pledge to return every excess dollar to shareholders until cash on hand matched debt. That commitment shrank Apple's net cash from $151 billion in 2018 to $62 billion today. Going forward, Apple will manage cash and debt independently and will no longer be obligated to return excess cash. The board still authorized $100 billion in fresh buybacks and a 4% dividend hike, but Q2 buybacks were cut in half despite free cash flow growing 28% Y/Y, signaling Apple wants to deploy its cash differently for the first time in years.

• Second, R&D spending jumped 34% Y/Y. Historically, Apple has run lean on R&D, and the surge suggests the company might be ready to ramp up its spending.

Cook said memory costs will be “significantly higher” in Q3 (June quarter) and worsening beyond, a growing margin headwind. He didn’t commit to whether Apple will raise prices. Mac supply constraints (Mac Mini, Mac Studio, MacBook Neo) are expected to last “several months.” Despite all that, Apple guided Q3 revenue growth to 14%–17%, well above the ~9% consensus.

The setup for the Ternus era is becoming clearer. Apple has a record installed base of 2.5+ billion devices, a balance sheet with more flexibility, and a growing need to catch up in AI. Ending the net-cash-neutral policy gives the company more room to maneuver. The obvious question: is Apple preparing to deploy more capital toward AI, M&A, or a broader product reset?

The next iPhone cycle may reset expectations, but only if the Gemini-powered Siri overhaul convinces users that Apple’s AI gap is finally closing.

2. ☁️ Microsoft: The AI Bottleneck

Microsoft’s quarter was strong, but the AI story is shifting from demand to deployment. Q3 revenue rose 18% Y/Y to $82.9 billion ($1.5 billion beat), and GAAP EPS was $4.27 ($0.22 beat).

• Azure grew 39% Y/Y in constant currency, narrowly ahead of consensus.

• The AI business reached $37 billion in ARR, up 123% Y/Y.

• Copilot paid users rose to 20 million, still only ~4% of Microsoft’s 450+ million paid M365 commercial seats.

OpenAI stake: Unlike Alphabet and Amazon, Microsoft didn’t show a massive “other income” windfall from its private equity bets this quarter. OpenAI’s historic $122 billion round valuing the company at $852 billion closed too late to be booked in the March quarter. This means Microsoft’s 27% stake is due for a massive upward adjustment that will likely distort GAAP net income in the June quarter, similar to the “Anthropic bump” Alphabet and Amazon just booked.

The CapEx story is the dominant narrative. Q3 CapEx was $31.9 billion, 8% below projections due to timing, not lower ambition. Management also disclosed a ~$190 billion CapEx outlook for calendar 2026, including $25 billion tied to higher component pricing. The implied ramp is steep, raising a simple question: Can Microsoft turn spending into usable capacity fast enough?

Two strategic shifts occurred this quarter.

1. Microsoft and OpenAI signed a revised agreement that ends OpenAI's revenue-share payment to Microsoft after 2030, in exchange for extending Microsoft's royalty-free access to OpenAI's frontier models through 2032. It resolves months of tense negotiations that had led OpenAI to consider antitrust action.

2. CEO Satya Nadella signaled a structural pricing model shift: per-seat licensing is migrating toward “per user and usage”, with GitHub Copilot already transitioning. This could be a boon for monetization.

The company is also adapting its organization. Hood flagged ~$900 million in Q4 one-time costs from a voluntary retirement program covering ~7% of US-based employees.

Microsoft guided Q4 revenue growth of 13–15%, with Azure expected at 39–40% in constant currency. The contrast with cloud peers matters: AWS and Google Cloud both reported stronger acceleration this week, so at face value, it makes Microsoft look like an AI laggard.

The nuance lies in capacity. Nadella and Hood were explicit: demand for AI and cloud services continues to exceed supply. Microsoft appears sold out in several key regions, so Azure’s ~40% growth may be less a demand ceiling than a physical ceiling. The company can’t plug in GPUs and open data centers fast enough. That’s the AI Power Grid problem.

The bull case remains intact. Microsoft has $627 billion in remaining performance obligations, nearly doubling Y/Y. But the next phase depends on execution: converting backlog into revenue, bringing capacity online, and proving that AI monetization can outpace the infrastructure bill.

3. 🕶️ Meta: CapEx Spooks Wall Street

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In case you missed it:

• 📱 Apple Enters a New Era

• 🚖 Tesla: $25 Billion AI Pivot

• 🔎 Google: The Anthropic Paradox

• 📊 PRO: IBM, Lam Research, ServiceNow…

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Three months ago, Amazon committed $200 billion in CapEx to bankroll the AI gold rush. Now AWS is selling the gold itself.

Amazon’s OpenAI deal is no longer just a financing headline. It is becoming an AWS product roadmap. OpenAI models are landing on Bedrock. Codex is moving into the AWS developer workflow. And Bedrock Managed Agents, powered by OpenAI, are designed to run production-scale agents directly on Amazon’s infrastructure.

That matters because agentic AI changes the cloud equation. Training models is one workload. Running millions of persistent agents with memory, tools, orchestration, and real-time reasoning is another.

Jassy framed the demand shift clearly:

“AI is commonly seen as a GPU story, but the rise of agentic workloads, real-time reasoning, code generation, learning, and multi-step task orchestration is driving massive CPU demand as well.”

Amazon says its chips business has topped a $20 billion annual revenue run rate, including Graviton, Trainium, and Nitro. In other words, AWS is moving up the stack with agents and down the stack with custom chips.

Now let’s see what stood out this quarter.

Today at a glance:

1. Amazon Q1 FY26.

2. AWS moves up the stack.

3. Key quotes from the call.

4. What to watch moving forward.

1. Amazon Q1 FY26

Income statement:

• Revenue rose +17% Y/Y to $181.5 billion ($4.3 billion beat).

• Gross margin was 52% (+1pp Y/Y).

• Operating margin was 13% (+1pp Y/Y).

  • AWS: 38% margin (-2pp Y/Y).

  • North America: 8% margin (+2pp Y/Y).

  • International: 4% margin (+1pp Y/Y).

• Net profit included a $16.8 billion non-operating gain from the valuation markup of Anthropic. This was triggered by the $30 billion Series G round in February, which established a new valuation benchmark of $380 billion. Amazon recently doubled down on its investment as we covered here.

Cash flow:

• Operating cash flow TTM was $148.5 billion (+30% Y/Y).

• Free cash flow TTM was $1.2 billion (-95% Y/Y), driven by the operating cash flow growth, offset by a 67% rise in Capex to $147.3 billion.

Balance sheet:

• Cash, cash equivalent, and marketable securities: $143 billion.

• Long-term debt: $119 billion.

Q2 FY26 Guidance:

• Revenue +16% to 19% Y/Y.

• Operating income ~$22 billion or +15% Y/Y in the mid-range.

So, what to make of all this?

• ☁️ AWS accelerates: AWS revenue grew 28% Y/Y to $37.6 billion, its fastest growth in 15 quarters and a clear step-up from 24% last quarter. Operating income reached $14.2 billion, implying a nearly 38% margin, while Amazon’s chips business topped a $20 billion revenue run rate (annualized) and is growing triple digits. AWS is finally showing the AI acceleration investors were waiting for.

• 💵 The AI bill comes due: Free cash flow collapsed to just $1 billion over the past 12 months, down from $26 billion a year ago, as Amazon doubled down on AI infrastructure. It will stay that way as management still expects roughly $200 billion of CapEx in 2026, mostly tied to AWS, AI, chips, robotics, and satellites. Jassy’s message is simple: near-term cash flow takes the hit, but these assets should monetize for decades. It’s still ‘Day 1’ after all.

• 📦 Retail is still compounding quietly: North America revenue grew 12% to $104.1 billion, with the operating margin for the region improving to 8%. Worldwide paid units grew 15%, the fastest pace since the COVID lockdown era, and Amazon has already delivered more than 1 billion same-day or overnight items in 2026.

• 📢 Advertising keeps climbing: Advertising revenue accelerated 24% Y/Y to $17.2 billion, pushing the business to $72 billion in revenue in the trailing 12 months. This remains one of Amazon’s cleanest margin levers, benefiting from sponsored ads, video ads, and Prime Video monetization. The more Amazon grows retail volume and Prime engagement, the larger the ad flywheel gets.

• 🔮 Guidance says growth first, margins second: Q2 guidance calls for revenue to grow 16% to 19% Y/Y, with operating income rising 15% in the mid-range. It reflects the strong demand, but also the continued pressure from new bets and infrastructure spending.

2. AWS moves up the stack

👔 From infrastructure to software

Amazon is moving up the stack to compete for the enterprise seat. With agents, Amazon wants AWS to own the workflow layer.

• Amazon Quick: This is the front-end service. It’s a unified AI workspace for Business Intelligence, research, and task automation. At $20/user/month, it is a direct, cheaper alternative to Microsoft’s Copilot.

• Connect Suite: Think of Connect as the operational engine. Amazon has expanded Connect from a contact center tool into four agentic pillars: Customer, Decisions, Talent, and Health.

By bundling these agentic services into existing AWS accounts, Jassy wants to make AWS the operational OS of the company, significantly raising switching costs and driving high-margin SaaS revenue.

🧠 OpenAI lands on Bedrock

As of this week, the latest OpenAI frontier models and Codex are officially in limited preview on Amazon Bedrock. OpenAI has committed to spending $100 billion on AWS over eight years and using 2 gigawatts of power specifically for Amazon’s Trainium chips.

• Codex integration: Bringing Codex (with its 4 million weekly users) into the AWS environment allows developers to build and deploy agents without ever leaving the Amazon ecosystem.

• Bedrock Managed Agents: This service provides a managed harness for OpenAI models to handle memory, tool orchestration, and long-running tasks. By providing the orchestration layer, Amazon ensures the business logic stays within the AWS perimeter.

Amazon wants to become the Switzerland of enterprise AI. By hosting OpenAI alongside Anthropic and Meta, Jassy is ensuring that no matter which model wins, the infrastructure, security, and data reside on AWS.

3. Key quotes from the earnings call

Check out the earnings call transcript on Fiscal.ai here.

Andy Jassy on custom silicon:

“If our chips business was a standalone business and sold chips produced this year to AWS and other third parties as other leading chip companies do, our annual revenue run rate would be $50 billion. As best as we can tell, our custom silicon business is now one of the top three data center chip businesses in the world.”

A $50 billion standalone run rate would place Amazon's silicon arm in elite company — behind only NVIDIA and Broadcom in data center chip revenue. The $225 billion Trainium backlog, with Trainium2 sold out and Trainium3 nearly fully subscribed, is what gives Jassy room to speak with such confidence. A decade of vertical integration is now the moat that makes Bedrock price-competitive against pure NVIDIA stacks.

On the future of agents

“I think the future of using these models is a stateful model, a stateful API. [...] The Bedrock managed agents that we collaborated with and invented with OpenAI [...] I think that is the future of how these agents are going to be built. It is something that nobody else has.”

Stateless inference is a commodity. Stateful runtime is a platform. Jassy is staking the next phase of Bedrock on the bet that enterprise AI will live inside persistent, multi-step agent sessions — and that running those sessions inside AWS will be stickier than swapping models behind a chatbot. If he's right, OpenAI on Bedrock is less about access to GPT-5 and more about who owns the agent runtime.

On the memory shortage:

“One of the interesting things that we see right now with the change in price and supply on things like memory is that it is a further impetus pushing companies who have on-premises infrastructure into the cloud. [...] We have seen a number of conversations we have been having with enterprises for many months—where it has just been slower in getting the transformation plan to move to the cloud—accelerate rapidly just because we have a lot more supply than what others have.”

The memory squeeze is doing AWS a favor. Growth accelerated to its fastest pace in 15 quarters — and one underrated reason is that hyperscalers got priority allocation from suppliers while on-prem buyers were left waiting. A supply shock is converting wait-and-see migration plans into signed contracts.

On AI inside Amazon:

“If you look at one of our services, we swapped out the engine of the service while we were also running the service full tilt. Normally, that would have taken 40 or 50 people about a year to do. We took five really smart, AI-forward-thinking people building on agentic coding tools, and those five people rebuilt it in 65 days.”

That ratio explains Amazon’s broader efficiency push in plain English: more software shipped with fewer engineers. It explains Project Dawn's 30,000 corporate layoffs.

4. What to watch moving forward

☁️ AWS market share and margins

Total cloud infrastructure market spending grew by 35% Y/Y to $129 billion in Q1 2026, the ninth consecutive quarter of accelerating growth. Synergy Research Group estimates it was the fastest growth since 2021.

AWS maintained its leading 28% market share, compared to 21% for Microsoft Azure and 14% for Google Cloud.

All hyperscalers remain supply-constrained, so I try to refrain from analyzing the quarter-to-quarter changes too closely. But it’s hard not to notice a clear inflection point for Google Cloud (with TPUs playing a role) and impressive acceleration for AWS at this scale (boosted by Trainium), while Azure growth has plateaued.

🧠 Challenging NVIDIA

Jassy disclosed that the custom silicon portfolio (Graviton, Trainium, Nitro) has reached a $20 billion annual revenue run rate (or $50 billion if AWS were counted as a customer).

• Triple-digit growth: If this trajectory holds, the chips business could approach a $25–$30 billion run rate by year-end.

• Meta Catalyst: Meta’s recent multibillion-dollar deal for tens of millions of Graviton5 cores (CPUs) validates the scale. While Meta is building its own chips (MTIA), its reliance on Graviton for general-purpose compute shows that Amazon’s vertical integration is a structural cost advantage Meta can’t ignore.

• NVIDIA pricing power: As Trainium3 (the new 3nm chip) becomes fully subscribed, AWS can offer AI training at a 30-40% lower cost than NVIDIA-based instances. If Trainium3 delivers the promised price-performance advantage, AWS can pressure NVIDIA pricing inside its own ecosystem.

Jeff Bezos famously said, “Your margin is my opportunity.” This playbook can apply to the chip business, as most Fortune 500 companies optimize their cost per token.

🏗️ The CapEx Payoff

In Q1 2026, the leading hyperscalers (Google, Microsoft, dAmazon, Meta) grew their trailing-12-month operating cash flow by 30% to $617 billion.

This represents the cash engine they can tap to fund the AI CapEx ramp without leaning on leverage. Amazon has even more flexibility because it continues to avoid stock buybacks and dividend payments.

The CapEx ramp is likely to keep absorbing more of that cash flow in the coming quarters, compressing free cash flow toward zero.

To be sure, that will spook some investors. But the rising backlogs and untapped opportunities suggest the bigger mistake would be failing to seize the moment.

Amazon is spending like crazy, but the spend is not random. AWS is building the stack for enterprise AI: custom chips underneath, Bedrock as the model layer, and managed agents on top. The free cash flow hit is real, but so is the strategic logic.

That’s it for today!

Stay healthy and invest on!

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Disclosure: I am long AMZN, GOOG, and META in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with members.

Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.

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• 🧠 Anthropic Leapfrogs OpenAI

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Google just went bigger on Anthropic

Alphabet plans to invest up to $40 billion in the company: $10 billion upfront, $30 billion more tied to milestones, and 5 gigawatts of computing capacity over five years. This deal was struck at a $350 billion valuation, a fraction of the $1 trillion secondary-market price Anthropic commanded this week.

Anthropic’s Claude may compete directly with Gemini, but Alphabet is backing it anyway because the infrastructure layer matters more than model loyalty.

Claude is becoming one of the defining products of the AI era, especially in coding, and Anthropic’s annualized revenue run rate reportedly jumped from $9 billion at the end of 2025 to $30 billion by April 2026. Yet Google is still leaning in, because every major winner in AI will need enormous compute, cloud, and networking capacity to operate at scale.

Google wants to win that layer. Q1 FY26 made the case.

Here’s what stood out this quarter.

Today at a glance:

1. Alphabet Q1 FY26.

2. The full-stack AI bet.

3. Key Insights from the call.

4. What to watch moving forward.

1. Alphabet Q1 FY26

Income statement:

Alphabet just saw a $37.7 billion paper gain from its private equity investments, nearly as much as its entire operating profit for the quarter. If you have been reading this newsletter carefully, you were not surprised by this number (more on this in a second).

Revenue grew 22% Y/Y to $109.9 billion ($2.9 billion beat). In constant-currency, revenue grew 19% Y/Y.

• 🔎 Advertising: $77.3 billion (+16%).

  • Search: $60.4 billion (+19%).

  • YouTube ads: $9.9 billion (+11%).

  • Network: $7.0 billion (-4%).

• 📱 Subscriptions, platforms, and devices: $12.4 billion (+19%).

• ☁️ Cloud: $20.0 billion (+63%).

Margin trends:

• Gross margin: 62% (+3pp Y/Y).

• Operating margin: 36% (+2pp Y/Y).

  • Services (Advertising & Other): 45% (+3pp Y/Y).

  • Cloud: 33% (+15pp Y/Y).

Cash flow:

• Operating cash flow TTM was $174 billion (+32% Y/Y).

• Free cash flow TTM was $64 billion (-47% Y/Y).

With CapEx now expected to reach ~$185 billion in FY26, most of Alphabet's operating cash flow will be plowed back into AI spending.

Balance sheet:

• Cash, cash equivalents, and marketable securities: $126.8 billion.

• Long-term debt: $77.5 billion.

So, what to make of all this?

Read more