Earnings Season Capital

Buyside analyst. It's always earnings season.

[Earnings Season Capital @CapitalCold]

A great long idea setup is when next 12-24 month numbers are obviously going higher but when/by how much/what multiple to pay for that is up for debate. Typically by the time the numbers role in the easy money has been made. Tactically, set-ups like this tend to provide something of a “shield” heading into earnings prints where the market will look through most near-term choppiness given hopes for better things going forward.

[Earnings Season Capital @CapitalCold]

$GOOG transition feels similar to META Reels/stories here… copy new engagement form factor, boost engagement, then monetize.

Stock probably going to suck near-term as everyone grave dances on search decel (that is also part comps/FX) but if queries growth continues or accelerates further could set up a pretty interesting opp on the other side especially if we get back near trough multiple on this dynamic (which would actually be lower implied multiple on search given incremental mix shift to GCP)

[Earnings Season Capital @CapitalCold]

If it’s not “over” upside here could be pretty juicy. If it is NT you obv will take more pain but these probably end up fine at worst LT even if highs in for the cycle

[Earnings Season Capital @CapitalCold]

Vibes definitely bad but think interesting spot to start defending is durable names in SOXX that have completely reversed move from April $AVGO $LRCX etc.

[Earnings Season Capital @CapitalCold]

"Generals get shot last" and if you are bearish here (vibes definitely bad) that's probably the trade. Still I find that ironic given recent developments in the AI trade (more competition at the model layer, financing drying up for lower quality credits) are unambiguous positives for the hyperscalers.

[Earnings Season Capital @CapitalCold]

We quite literally went from “pacing the frontier” to “personal superintelligence 🚀” to “credit contagion” in the span of a few weeks. Looking forward to the next narrative.

[Earnings Season Capital @CapitalCold]

Very interesting crosscurrents here:

- Lab ARR accel on a combined basis + likely more to come on Opus 5.5 (really good/cheap).

- New form factor and TAM unlocked with computer use + product scaffolding/virtual machine provisioning. From coding = solved moving to anything on a computer = solved.

Yet now have tangible evidence product > model in consumer and I speculate we may see the same in enterprise.

[Earnings Season Capital @CapitalCold]

Holy trinity for me is basically:

- Good print dynamics (accel, conservative numbers setup) essentially as a proxy for fundamental momentum
- Incrementally positive high level terminal value narrative (especially if can dream the dream), ideally just burgeoning
- Compelling r/r (ideally both absolute but relative usually is fine enough).

3/3 is tough to find. And usually each point can be debated (judgement/that's the job).

[Earnings Season Capital @CapitalCold]

To the extent “software is back” (at least in certain pockets) first stop here should be filling the Kimi gap

[Earnings Season Capital @CapitalCold]

$CDNS looks interesting again here:
- biz clearly accelerating/coming off largest FY guide raise ever in 2Q
- accel should be sustainable with multiple concurrent tailwinds that have clearly strengthened in the last 12 months (multi foundry, demand broadening across classic semis/hypers/labs/analog/now startups and from simply accelerators to CPU, et al on agentic)
- Agentic AI driving more core tool usage and compressing design timelines
- fwd multiple just bouncing off near 3Y low/2 st dev below mean w/ forward numbers that have upside bias on the above + still conservative looking model setup

[Earnings Season Capital @CapitalCold]

$CDNS looks interesting again here:
- biz clearly accelerating/coming off largest FY guide raise ever in 2Q
- accel should be sustainable with multiple concurrent tailwinds that have clearly strengthened in the last 12 months (multi foundry, demand broadening across classic semis/hypers/labs/analog/now startups and from simply accelerators to CPU, et al on agentic)
- Agentic AI driving more core tool usage and compressing design timelines
- fwd multiple just bouncing off near 3Y low/2 st dev below mean w/ forward numbers that have upside bias on the above + still conservative looking model setup

[Earnings Season Capital @CapitalCold]

This was wrong but think it works much better from here… r/r is attractive vs. many other areas of the value chain/arguably very little to no value is being ascribed now for incremental lease signings/expansions (vs. significant pricing-in at recent highs) some of which may come by year end... $WULF $CIFR $HUT.

Pushback is might still be early as these names have been among the most “obvious” narrative shorts into midterms.

[Earnings Season Capital @CapitalCold]

Miner/colo names could be interesting again in a momentum bounce back.

- Getting back close to NPV of signed deals for the few I track
- Sold off w/ the neo's on competitive developments (e.g. META) despite likely no or even +ve impact
- Bouncing a hair off key technical levels

[Earnings Season Capital @CapitalCold]

Mix disclosures this quarter (reported + description of bookings) offer strong support for this thesis. Think you can look at this as 70/30 ODM (lower margin volume GPU server to SPCX/neos)/OEM (higher margin enterprise/CPU server, etc) on a revenue mix basis (closer to 50/50 on gross profit/EPS mix basis). Former continues to grow strongly while latter (higher margin and less working capital intensive) has inflected on agentic applications/well timed GTM investments/enterprise broadening. Stock still trading below where ODM only framework would mark it on sales basis despite the slight earnings mix bias to the “OEM like” business.

I shake out ~$5 for NTM (~40% above where street was into the print… albeit likely stale for the pre-announce) using managements' punitive share count methodology. Stock still only a bit over ~7x that despite the move post print vs peers in low teens to ~20x range.

[Earnings Season Capital @CapitalCold]

If these $SMCI numbers are true/remotely sustainable it’s hard to see how the bear case isn’t dead (famous last words for SMCI I know)

- Gross margins ~2x the guide at 16% midpoint vs. 10% last Q (commoditization/rev inflated from low margin neocloud deals)
- $60B orders in 4Q alone (vs fears of customers moving away on legal/fraud concerns)

At $30 stock is around 4x annualized earnings if you believe margins/rev hold at these levels (assuming some longer dated backlog).

I’m skeptical and don’t fully understand the WHY behind the uplift so curious to hear if anyone has a view on why this is a 1x uplift and not sustainable. I.e. after last Q print and this preannounce why shouldn’t we be modeling at least LDD GM vs street 8% next few years.

As such think r/r is asymmetric here and you don’t even need to believe that 16% sticks (not my base case at all rn) to think this is dirt cheap vs comps + everyone is fevered about on prem rn (look at DELL multiple)

They just raised a big slug of $ too so probably (?) won’t get rugged there at least for a bit…

[Earnings Season Capital @CapitalCold]

The idea of thesis creep I think has only lost me $. Market doesn’t care what your thesis was or how you were positioned into print. Sometimes you should sell, sometimes you should flip short. Sometimes double down, sometimes do nothing. All depends on r/r and likely forward path. Clean slate.

[Earnings Season Capital @CapitalCold]

Strong parallels between this $MSFT print and $GOOG's 1Q25 print.

- Scaled threat in enterprise (consumer) with real adoption magnitude evidenced by massive accel in lab ARR (ChatGPT user base explosion) being met with an improved product (after some clear initial stumbles) expanding the TAM and driving an acceleration in the core biz that was feared to be impaired (365, search).
- Landing at a time of general market/QQQ weakness
- Stock not quite as cheap as $GOOG was during the trough on absolute basis but close to it on historical st dev basis vs. own multiple.

Obviously + big Azure accel... still think an added kicker to come here if market changes its perception on hyperscaler ROIC (think numbers will prove this out).

[Earnings Season Capital @CapitalCold]

If these $SMCI numbers are true/remotely sustainable it’s hard to see how the bear case isn’t dead (famous last words for SMCI I know)

- Gross margins ~2x the guide at 16% midpoint vs. 10% last Q (commoditization/rev inflated from low margin neocloud deals)
- $60B orders in 4Q alone (vs fears of customers moving away on legal/fraud concerns)

At $30 stock is around 4x annualized earnings if you believe margins/rev hold at these levels (assuming some longer dated backlog).

I’m skeptical and don’t fully understand the WHY behind the uplift so curious to hear if anyone has a view on why this is a 1x uplift and not sustainable. I.e. after last Q print and this preannounce why shouldn’t we be modeling at least LDD GM vs street 8% next few years.

As such think r/r is asymmetric here and you don’t even need to believe that 16% sticks (not my base case at all rn) to think this is dirt cheap vs comps + everyone is fevered about on prem rn (look at DELL multiple)

They just raised a big slug of $ too so probably (?) won’t get rugged there at least for a bit…

[Earnings Season Capital @CapitalCold]

@RHouseResearch Idio not bad, outperforming peers ~20 % pts on the week

[Earnings Season Capital @CapitalCold]

Price of the tools going up

[Earnings Season Capital @CapitalCold]

not trading really with the AI or power baskets today but I think that likely changes in NTM especially for those with smaller legacy businesses

[Earnings Season Capital @CapitalCold]

Think the OFS/BTM power plays are getting interesting again here. $LBRT $PUMP $AESI etc.
- Reversed blow off top Hormuz/Iran levels with oil exps coming down
- BTM power deployments increasing by an OOM from '26-'28 with '27-'28 the real large ramp periods
- Services contract lead times suggest 2H26/1H27 will be likely be very fruitful from a deal announcement perspective

[Earnings Season Capital @CapitalCold]

Miner/colo names could be interesting again in a momentum bounce back.

- Getting back close to NPV of signed deals for the few I track
- Sold off w/ the neo's on competitive developments (e.g. META) despite likely no or even +ve impact
- Bouncing a hair off key technical levels

[Earnings Season Capital @CapitalCold]

@viggy_krishnan @stevehou Meta last quarter...