Dr. Red Candle

💊 I read the earnings calls and run the valuations so you don't have to
📉 Long-term investor, short-term heart rate
🏥 Building Red Candle Rx Fund. NFA

[Dr. Red Candle @RedCandleRx]

🎙️ $FOUR Q2 EARNINGS CALL RECAP 🎙️

Shift4 beat every number it guided to and the stock is having its worst day of 2026. The CEO spent his prepared remarks selling a path to 50% margins, then admitted in Q&A that the thing that gets him there is losing money this year.

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🚩 THE ADMISSION

Wolfe Research asked Taylor Lauber for structural timelines on Global Blue and Shift4 One. When does the international build actually start moving numbers?

"We're admitting to the drag that this investment causes."

CEOs do not usually volunteer the word drag.

He had already put a shape on it. The merchant sign-ups carry "an economic contribution in 2026 that is more expense than gain because of the cost of building out these teams," and the payoff is annualizing that merchant base through 2027. 2026 pays for it.

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📐 THE RUNWAY

"I do see a path to 50% margins as we scale our international operations."

Prepared remarks, roughly thirty minutes before the admission.

Adjusted EBITDA margin was 46% this quarter. The full-year guide, $1.15 to $1.18 billion of EBITDA on $2.48 to $2.53 billion of gross revenue less network fees, implies about 46.5%.

So the last 350 basis points of that path run straight through the same international build he calls a drag.

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⚠️ THE CATCH

The easy read on an 18% day is that demand broke. It didn't. Gross revenue came in at $1.29 billion against a $1.17 billion guide, adjusted free cash flow at $21 million against a $10 million guide, EPS at $1.32 against $1.24.

The full-year GRLNF midpoint came down about $40 million on $2.5 billion, which is 1.6%. On an FX-neutral basis the growth midpoint fell exactly 100 basis points, 24 to 29% becoming 24 to 27%.

What actually moved was EPS and cash flow, and CFO Chris Cruz said why twice. The revisions are "majority the result of the incremental net interest expense" from the $1 billion Term Loan B raised on July 8 to pre-fund the August 2027 convertible.

Full-year EPS of $5.15 to $5.35 lands roughly 6% under consensus. The equity repriced three times that, on a financing decision the company chose to make.

The part that isn't interest expense is smaller and quieter. Organic GRLNF growth was 11%, the same as last quarter, so most of that headline 51% is bought rather than grown. Subscription and other grew 8% and is guided to low single digits for the year, which means it decelerates from here on their own math.

And $284 million of adjusted EBITDA turned into $21 million of adjusted free cash flow. That is why the buyback was roughly 650,000 shares at about $38, some $25 million, out of a $1 billion authorization with $625 million already spent. Cruz didn't dodge it: "we acknowledge where we are on our pro forma net leverage level at 3.7x."

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🧠 THE TAKEAWAY

This was a good quarter inside an investment year. The guide was trimmed by a team that refuses to forecast a geopolitical conflict more than 60 days out, and the EPS line was taken down mostly to retire a convertible eighteen months early.

The stock is $43.72 at midday, down 30.9% on the year, and it hasn't closed this low since June 23. One session gave back 71% of a six-week, 45% rally off the June lows.

Today's 18.1% drop is the worst single session of 2026 for $FOUR. The second worst was February 26, which is the other earnings marker on that chart.

Is a year of paid-for expansion worth 18% of the company? 👇 NFA

[Dr. Red Candle @RedCandleRx]

🚨 $FOUR Q2 Earnings Recap 🚨

✅ Gross rev less network fees: $624M vs ~$615M est. (+51% YoY, +11% organic)
✅ Adj. EPS: $1.32 vs $1.19 to $1.25 est. (vs $1.10 YoY)
💰 Adj. EBITDA: $284M vs ~$278M guided (vs $205.1M YoY)
📈 Blended spread: 65bps (vs 63bps YoY)
🏦 Adj. FCF: $21M vs ~$10M guided
📉 FY26 Guide: CUT
↳ 💵 GRLNF: $2.50B to $2.60B → $2.48B to $2.53B
↳ 💵 EPS: $5.50 to $5.70 → $5.15 to $5.35
↳ 💵 Adj. EBITDA: $1.165B to $1.215B → $1.15B to $1.18B
↳ 💵 Adj. FCF: $490M to $510M → $465M to $475M

Why the fade? 📉

$FOUR slid from its $53.72 close to $45.32 (-15.11%) on the guidance, not on the printed quarter. They beat every line that closed and cut every line that is still open.

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📉 THE DROP

This is the same movie as February. Shift4 beat on the quarter and the stock went down anyway, because this name has never traded on the printed number.
They took down all four full year metrics at once. EPS from $5.50 to $5.70 all the way to $5.15 to $5.35. That is about 6% off the midpoint in a quarter they supposedly beat.

Now look at the cash. First half adjusted free cash flow is $109M, $88M in Q1 and $21M in Q2, against a full year guide of $465M to $475M. That is roughly 77% of the year's cash still to come in the back half. 🧐
Q2 free cash flow alone fell 82% year over year. Management points to seasonal cash needs and refund cycles tied to Global Blue.

And strip the acquisition out: reported growth was 51%, organic was 11%. 😳

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🟢 THE BULL CASE

The take rate story just reversed. Blended spread came in at 65 basis points against 63 a year ago and 61 last quarter. Everyone spent two years warning that spread compression would eat this business. It is expanding.

They beat every single quarterly line. GRLNF $624M against $615M expected, EPS $1.32 against $1.19 to $1.25, EBITDA $284M against $278M guided, and free cash flow of $21M against roughly $10M guided.

EBITDA margin held 46% on $61B of volume, up 22%. The roll up still converts.

The growth optics get worse before they get better and that is already known. Global Blue closed July 3, 2025, so this was the last easy comp.

At roughly 10x the new EPS midpoint you are not paying for growth here. And 36% of the float is short at 9.5 days to cover. That cuts both ways violently.

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🧠 THE TAKEAWAY

Shift4 keeps delivering quarters the market shrugs at, because the debate was never about this quarter. The spread question just got answered in their favor. The cash flow question did not.

Hold them to that $465M to $475M free cash flow guide. $109M in the first half means the back half has to do more than four times what the front half did. That is the one number they cannot adjust their way around.

Value or trap at 10x? 👇 NFA

[Dr. Red Candle @RedCandleRx]

@DudeWhoInvests I love Zuck but he just can't beat it, its too goated

[Dr. Red Candle @RedCandleRx]

Top 10 Weekly Gainers, S&P 500 $SPY

🟢 Coherent $COHR +49%
🟢 Palantir $PLTR +36%
🟢 Lumentum $LITE +30%
🟢 Zebra Tech $ZBRA +27%
🟢 Corning $GLW +23%
🟢 Marvell $MRVL +21%
🟢 Newmont $NEM +21%
🟢 Gartner $IT +19%
🟢 Leidos $LDOS +17%
🟢 Airbnb $ABNB +16%

Dr. Red Candle's got eyes on all of 'em. 👀 NFA

[Dr. Red Candle @RedCandleRx]

bro............that is them already projecting companies using their api credits/ad revenue/contracts and everything.............even their CFO was worried about their spending in respect to keeping it up with the revenue they are generating. I never once said I was an OpenAI naysayer.....I said they couldn't keep going at this pace with their spending to revenue. They are an amazing company who has been a trailblazer; but you cannot keep dominating if you do not have money. And everything I stated came from OpenAI, not an outside projection. Like I do not think you understand what I have been saying at all. It is not me not having faith in their models and success; it is that they cannot keep growing if they do not have money for what they want to do. Like literally every number I said is from openAI; you can't keep buying stuff when you can't afford it and do not have a solid plan to afford it. If they come out with a plan to do it that would be amazing, but they have not. And their internal team is literally worried about it. They have insane potential for the future but are capped by their capital access which they are simply running out of at their spending pace.

[Dr. Red Candle @RedCandleRx]

@lynk0x need a fourth one of the dude who's sad because he has no more money to buy the dip😫

[Dr. Red Candle @RedCandleRx]

@DudeWhoInvests

[Dr. Red Candle @RedCandleRx]

Bro OpenAi has projected $280 Billion in TOTAL revenue through 2030 while already committing roughly $750 Billion through 2030 only on computing infrastructure. Plus they don't even plan on breaking even on FCF until 2030, not even being profitable. Like that is a deficit of roughly $470 Billion. And that is all of OpenAi's projections too. And this is after they already cut their capex from an estimated $1.4 Trillion because they couldn't sustain their original plans. Like that is just not sustainable whatsoever, no matter who they are. It doesn't matter about influence at this point, they literally cannot pay for what they have planned which means they cannot keep up with their innovation over time. And on top of it too AI models keep on coming out that are getting better and better forcing AI companies to get better and better costing more and more money. And already they are almost at a $500 Billion deficit assuming everything went perfect for them through 2030. Like the math ain't mathing

[Dr. Red Candle @RedCandleRx]

@CNBC

[Dr. Red Candle @RedCandleRx]

@ayaangazali Blame Scam Altman......we must protect Claude at all costs

[Dr. Red Candle @RedCandleRx]

@uday_devops So what I feel like because of that will be:
1. Claude
2. Gemini
3. Grok
4. ChatGPT

[Dr. Red Candle @RedCandleRx]

@uday_devops As of right now:
1. Claude
2. Grok
3. ChatGPT
4. Gemini

BUT; lowkey I got faith in Google on the turn around play long term and low key feel like ChatGPT is going to start going down hill because they just can't sustain all their spending without more actual revenue generation

[Dr. Red Candle @RedCandleRx]

@blackbeardXBT as long is it wasn't from getting rug pulled on solana:6p6xgHyF7AeE6TZkSmFsko444wqoP15icUSqi2jfGiPN coin then you are still a legend in my eyes king

[Dr. Red Candle @RedCandleRx]

@JonBuildsHQ the fact you put it along the wall too is real commitment

[Dr. Red Candle @RedCandleRx]

@NoLimitGains @grok how much damage (fun) could I do in Argentina with my last $58 USD

[Dr. Red Candle @RedCandleRx]

The true real struggle🥲

[Leo @Leooweb3]

We’re tired

[Dr. Red Candle @RedCandleRx]

@Polymarket partying in the first semester about to go crazy in michagan now

[Dr. Red Candle @RedCandleRx]

@unusual_whales Bro wtf is me-maxxing😭

[Dr. Red Candle @RedCandleRx]

@ericmmatheny If it wasn't for the fact it is THEM this pic would of been tough...... What a waste😔

[Dr. Red Candle @RedCandleRx]

@DudeWhoInvests Wizard

[Dr. Red Candle @RedCandleRx]

@ToolySOL Damn so real tho

[Dr. Red Candle @RedCandleRx]

@zwfisXI Which two you holding??

[Dr. Red Candle @RedCandleRx]

💀 2026 10 Worst Performers 💀

Large caps only. Through Friday's close.

🥇 $TTD -63.7%
🥈 $FLUT -55.9%
🥉 $CSGP -55.0%
4️⃣ $RBLX -53.4%
5️⃣ $EPAM -52.5%
6️⃣ $INTU -50.9%
7️⃣ $PODD -50.4%
8️⃣ $STLA -49.4%
9️⃣ $APP -48.5%
🔟 $BSX -48.3%
📈 $SPY YTD: +13.7%
The worst name in the index is 77 points behind the index. 🧐
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🩸 THE DIAGNOSIS
Six of these ten sell software, data, or professional services. That is not a coincidence and it is not a sector rotation.

The market spent 2026 repricing anything an AI agent might replace. Seat-based software, IT consulting, licensed data.

The fear does not need to be right to cost you half your equity value.

Look at the median of the 50 worst large caps this year: -34.5%.

The index is up 13.7%.

Underneath a strong tape there is a very deep hole, and most of it has one theme.

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⚠️ THE CATCH

The two worst names on this list did not break for AI reasons.

$TTD missed a floor it set for itself. It guided Q2 to at least $750M and printed $715M, then guided Q3 to $650M against $739M a year ago. That is the first year over year revenue decline since Q2 2020, and the CEO said out loud on the call that the second reason was execution.

$CSGP is a spending story.

https://t.co/RA25fMhwxv is the line item, not the algorithm.

Two of the ten are ordinary corporate failure wearing an AI costume. Worth knowing which is which before you buy any of them. 🧐

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🧠 THE TAKEAWAY

A 13.7% index year hid a 34.5% median drawdown across the fifty worst large caps. Breadth is a story you only see from the bottom of the table.

The question is not whether AI eats software. It is whether the market already charged these names for a meal that has not been served.

Which one of these ten is the bounce and which one is the value trap? 👇 NFA

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Source: ChartRow, total return incl. dividends, through the Aug 7, 2026 close.

Universe: S&P 500 plus a curated large-cap set.